Regulations Amending the Special Import Measures Regulations: SOR/2023-26

Canada Gazette, Part II, Volume 157, Number 5

Registration
SOR/2023-26 February 15, 2023

SPECIAL IMPORT MEASURES ACT

P.C. 2023-140 February 14, 2023

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, makes the annexed Regulations Amending the Special Import Measures Regulations under subsection 20(1)footnote a and paragraph 97(1)(a) of the Special Import Measures Act footnote b.

Regulations Amending the Special Import Measures Regulations

Amendment

1 Section 17.1 of the Special Import Measures Regulations footnote 1 is amended by striking out “and” at the end of paragraph (b) and by adding the following after paragraph (c):

Coming into Force

2 These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

Recent trade remedy determinations and reports by the United States (U.S.) Department of Commerce, the European Commission, and the Canada Border Services Agency (CBSA) reveal evidence of significant government intervention and price distortions in the Russian and Belarusian economies. Since the CBSA has limited flexibility to take into account in its anti-dumping investigations whether goods from Russia and Belarus are produced under non-market economy conditions, anti-dumping duties protecting Canadian producers against dumped imports from these countries are less likely to reflect the full amount of dumping.

Background

In the context of World Trade Organization (WTO) trade rules, dumping occurs when goods are sold to another country at prices that are lower than the selling price of comparable goods in the country of export, or when goods are sold to another country at below their cost of production. If it is found that dumped imports are causing injury to domestic producers’ operations in the importing country, the amount of dumping may be offset by the application of anti-dumping duties on the imported goods. The duties are meant to offset the price advantage caused by dumping and to give domestic producers an opportunity to compete fairly with the imported goods.

For exports from a market economy, these duties are normally calculated based on the exporter’s home market prices and costs. In “non-market economy” (NME) situations (i.e. when domestic prices are substantially determined by the government and are not substantially the same as they would be if they were determined in a competitive market), anti-dumping duties may be calculated based on substitute prices and costs from a third country with an undistorted market.

In Canada’s trade remedy system, the conditions for the application of a NME calculation methodology are that the President of the CBSA forms a positive opinion that (1) the government of the country under consideration has a monopoly or substantial monopoly of its export trade; and (2) domestic prices are substantially determined by the government and are not substantially the same as they would be if they were determined in a competitive market.

However, for countries included in section 17.1 of the Special Import Measures Regulations (SIMR), only the second condition must be met before applying a NME methodology to calculate margins of dumping. This is currently the case for China, Tajikistan, and Vietnam.

Canada currently has anti-dumping measures in force on concrete reinforcing bar (rebar) from Russia and Belarus. The measure on rebar from Russia does not reflect a NME methodology, while the measure on rebar from Belarus is based on a NME methodology the CBSA was able to use because of evidence that, for the rebar market, the Belarusian government had a substantial monopoly in its export market and had substantial control over domestic prices.

Evidence of government intervention

Russia

In November 2022, the U.S. Department of Commerce designated Russia as an NME country based on evidence of expanding government activity that has both widened and deepened its impact on the Russian domestic market, especially since Russia’s invasion of Ukraine in early 2022. The U.S. Department of Commerce’s findings highlighted a demonstrable growth in Russian government control over the economy, an increase in government control over prices, and a deterioration in workers’ rights and freedom of information. The U.S. determination also noted that Russia’s prior liberalization initiatives on currency convertibility and foreign investment have reversed course. Accordingly, the U.S. found that prices and costs in Russia are no longer predictably set by free-forming supply and demand factors, and that the accompanying economic distortions render any cost or sales information that could be used in anti-dumping investigations unrepresentative of market-determined outcomes.

Prior to that, in October 2020, the European Commission published a Report on significant distortions in the economy of the Russian Federation for the purposes of trade defense investigations, which highlighted a high degree of state interference in Russia’s economy through weak legal institutions and strong presidential power, high level of ownership concentration, substantial state ownership of major companies, state control of strategic economic sectors (e.g. energy, transport, communications, mining, and fabricated metal products), increased government control of the financial sector through state-owned banks, and restrictions in the public procurement market caused by restrictions for foreign companies, non-competitive methods, corruption and lack of transparency.

Belarus

Since April 2017, Canada has been imposing anti-dumping duties on imports of rebar from Belarus. As part of its original investigation, the CBSA concluded that the conditions for the application of a NME methodology were met for the sector under consideration.

In October 2020, the U.S. Department of Commerce concluded that Belarus was a NME country, based on the fact that its economy does not primarily operate on market principles. Factors considered included convertibility of currency, wage rates determined by labour’s free bargaining, extent to which joint ventures or other investments by foreign firms are permitted, extent of government ownership or control of the means of production, extent of government control over the allocation of resources, and over the price and output decisions of enterprises.

Objective

Substantial evidence of pervasive non-market economy conditions throughout the economies of Russia and Belarus warrants an approach to using NME methodologies that require a less stringent burden of proof at each investigation. The amendments facilitate this approach by eliminating the requirement to demonstrate that these countries have a monopoly or a substantial monopoly over their export trade in a given sector. This will mitigate the risk of unfairly traded imports from Russia and Belarus entering Canada and causing injury to domestic producers by ensuring adequate levels of protection which reflect market conditions in these countries.

Description

The Regulations Amending the Special Import Regulations (the Regulations) add Russia and Belarus to section 17.1 of the SIMR, which specifies the countries with which the CBSA requires a reduced burden of proof to use a NME methodology for the purpose of calculating margins of dumping.

Regulatory development

Consultation

The Regulations are exempted from prepublication, as the views of major users of the trade remedy system (e.g. domestic steel producers) are well known, based on their support for measures to strengthen Canada’s trade remedy system, including the addition of prescribed countries in the past.

The Regulations should also not raise significant concerns from importers, since the number of Canadian imports from Russia and Belarus affected by anti-dumping duties is minimal (Russia: in 2021, rebar imports were valued at $215,000; Belarus: no rebar import since 2019) and the likelihood of new investigations involving imports from these countries is low as a result of recent trade measures against these countries (notably the withdrawal of most favoured nation tariff preference on virtually all goods that originate from Russia and Belarus and sets a 35% tariff since March 2, 2022, as per SOR/2022-35 and SOR/2022-209). Therefore, prepublication was unlikely to provide novel views or alter the Regulations.

Modern treaty obligations and Indigenous engagement and consultation

No impacts have been identified in respect of the Government’s obligations in relation to Indigenous rights protected by section 35 of the Constitution Act, 1982, modern treaties and international human rights obligations.

Instrument choice

The Regulations amend the SIMR. This can only be accomplished through regulations and as such, no other instruments were considered.

Regulatory analysis

Benefits and costs

The Regulations are not expected to result in significant additional costs to the Government, business, consumers, or Canadians. While the use of the NME methodology involves some additional work for the CBSA to demonstrate price distortions in the foreign market, anti-dumping investigations involving goods from Russia and Belarus are not frequent (in the last 20 years, there have been only four Canadian trade remedy investigations involving goods from Russia and one involving goods from Belarus).

Canada currently has anti-dumping measures in force on rebar from Russia and Belarus. The Regulations could eventually lead to higher anti-dumping duties on these products, which would represent an additional cost for the importers of these products. That said, the cost would be low as Canadian imports of rebar from Russia and Belarus are minimal (Russia: in 2021, rebar imports were valued at $215,000; Belarus: no rebar import since 2019). The likelihood of Canada imposing new anti-dumping measures against Russian and Belarus goods in the near future is also mitigated by Canada’s recent trade measures against Russia and Belarus, including the application of the 35% general tariff on virtually all goods imported from Russia and Belarus, which has significantly reduced imports from those countries.

In terms of benefits, Canada’s trade remedy system will have more flexibility to take into consideration whether industrial sectors in Russia or Belarus are operating according to market conditions, and if they were not, will provide Canadian domestic producers with adequate levels of protection reflective of market distortions in those countries. This will allow for Canadian manufacturers to be able to benefit from similar protection as their competitors in the U.S. and the European Union.

Small business lens

Analysis under the small business lens concluded that the Regulations will not impact Canadian small businesses.

One-for-one rule

The one-for-one rule does not apply as there is no incremental change in administrative burden on business and no regulatory titles are repealed or introduced.

Regulatory cooperation and alignment

While anti-dumping duties impact trade openness, these measures are expressly allowed under WTO rules when the domestic industry is injured as a result of dumped imports. The Regulations will further align Canadian practice with the U.S. and the European Union. It will also align with the March 2022 WTO Joint Statement on Aggression by the Russian Federation Against Ukraine, and Canada’s and its allies’ broader public repudiation of Russia’s most favoured nation status at the WTO. In accordance with WTO rules, the WTO will be notified when the Regulations are made.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that the Regulations will not have positive or negative effects on the environment; therefore, a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for these Regulations.

Implementation, compliance and enforcement, and service standards

The Regulations will come into force on the day on which they are registered. Canada’s trade remedy system is administered by the CBSA and the Canadian International Trade Tribunal. No significant changes to the procedures and processes of these organizations are needed.

Contact

Marie-Hélène Cantin
International Trade Policy Division
Department of Finance Canada
Ottawa, Ontario
K1A 0G5
Telephone: 343‑550‑6119