Canada: Canadian International Trade Tribunal Report Recommends Final Safeguard Measures For Imports Of Two Categories Of Steel Goods

In a report affecting steel manufacturers and importers, the Canadian International Trade Tribunal recently recommended final safeguards in the form of a tariff rate quota on imports of heavy plate and stainless steel wire from subject countries. The report did not recommend final safeguard measures with respect to other steel products and excludes imports from some countries, notably the U.S., South Korea, Israel, Chile and Mexico as well as countries benefiting from the General Preferential Tariff.

Key Points

  • On April 3, 2019, the Canadian International Trade Tribunal (“CITT”) issued its report (the “Report”) in connection with a safeguard inquiry directed by Order in Council on October 10, 2018 concerning the importation into Canada of certain steel goods (the “Inquiry”). The Inquiry, which was among the most complex ever conducted by the CITT, covered the following classes of goods: (i) heavy plate, (ii) concrete reinforcing bar, (iii) energy tubular products; (iv) hot-rolled sheet, (v) pre-painted steel, (vi) stainless steel wire, and (vii) wire rod (collectively, the “Steel Goods”).
  • The Report concluded that heavy plate and stainless steel wire from subject countries – other than goods originating in South Korea, Panama, Peru, Columbia, Honduras, or countries whose goods were eligible for general preferential tariff treatment – were being imported in a way that could cause serious injury to the Canadian steel industry. As a consequence, the CITT recommended a tariff rate quota on imports of these goods. It did not recommend a remedy for the other categories of Steel Goods.
  • Excluded from the Inquiry were imports from the United States, Israel, and other Canada-Israel Free Trade Agreement (CIFTA) beneficiaries, Chile and Mexico (except energy tubular products and wire rod from Mexico).

Background

Initial consultation period

In August 2018, the Government of Canada held a 15-day consultation on the potential implementation of global safeguard measures with respect to imports of the Steel Goods. After the consultation determined that safeguard action – including the imposition of provisional safeguards – was warranted, the Government referred the issue to the CITT for a global safeguard inquiry.

Safeguards: provisional and final

International trade rules permit countries to impose provisional safeguards immediately for up to 200 days if there is objective evidence of “critical circumstances”. In other words, to prevent imminent harm to an industry, provisional safeguards can be imposed prior to a formal inquiry by a body such as the CITT. Those provisional measures, which automatically trigger a CITT inquiry, remain in force during the inquiry. The CITT is then tasked with deciding whether the safeguards should be continued past the 200-day provisional period. If the CITT decides in the affirmative, and the Government of Canada agrees, the provisional safeguards will then become final safeguards.

The Order referring the matter to the CITT

In the case at hand, the Governor in Council (essentially, the federal Cabinet) issued the Order Referring to the Canadian International Trade Tribunal, for Inquiry into and Reporting on, the Matter of the Importation of Certain Steel Goods (the “Order”) on October 10, 2018. The Order directed the CITT to conduct a safeguard inquiry concerning the importation into Canada of the Steel Goods. Provisional safeguard measures were also imposed, effective October 25, 2018, consisting in a 200-day tariff rate quota (reflecting historic import volumes and trade patterns), in excess of which a surtax of 25% was applicable.

The Order specifically instructed the CITT to determine whether the increased imports were a principal cause of serious injury or threat thereof, and, if so, to make recommendations to the Governor in Council on the most appropriate remedy to address such injury over a period of three years.

The Report

On April 3, 2019, on completion of the Inquiry, the CITT issued the Report. It recommended specific tariff rate quotas on imports of heavy plates and stainless steel wires from subject countries (other than goods originating in South Korea, Panama, Peru, Columbia, Honduras, or countries whose goods were eligible for general preferential tariff treatment). However, the CITT determined that the other five classes of Steel Goods did not require any remedy.

As indicated above, imports from the United States, Israel, and other Canada-Israel Free Trade Agreement (CIFTA) beneficiaries, Chile and Mexico (other than energy tubular products and wire rod from Mexico) were to be excluded from the CITT’s consideration. Notwithstanding that exclusion, it should be noted that imports of U.S. steel are still subject to specific countermeasures that were implemented separately as of July 1, 2018. 

Specific recommendations: heavy plate and stainless steel wire

Recommendation on Remedy for Heavy Plate (tonnes)

In-quota Volume*

Above-quota Surtax

First Year

100,000

20%

Second Year

110,000

15%

Third Year

121,000

10%

* The CITT recommended that the Governor in Council consider alternative methods of allocation of the quotas regarding heavy plates, such as quota allocation based on country-specific considerations, or on a historical exporter share basis.

Recommendation on Remedy for Stainless Steel Wire (tonnes)

In-quota Volume

Above-quota Surtax

First Year

2,800

25%

Second Year

3,080

15%

Third Year

3,388

5%

Excluded Steel Goods

The CITT determined that although there had been an increase in imports of concrete reinforcing bars and energy tubular products from subject countries, this did not cause or threaten to cause serious injury to the domestic industry. The CITT also determined that there had not been any increase of imports of hot-rolled sheets, pre painted steel and wire rods in such quantity as to cause or threaten to cause serious injury to the domestic industry. Accordingly, no remedies were recommended.

The Finance Department’s Response

On April 26, 2019, following the issuance of the Report, Canada’s Department of Finance announced that it intended to enact final safeguards on heavy plates and stainless steel wires. It also announced that it would initiate an intensive 30-day consultation with industry and workers to identify what further protections could be required with respect to the additional five classes of Steel Goods that the CITT excluded from its remedy recommendation (the “Excluded Steel Goods”).

The Government further announced that it would conduct a targeted review of dumping cases, strengthen Canada’s collection of import data, increase the flexibility of the Canada Border Services Agency (“CBSA”) to address price and cost distortions and take other measures to support domestic producers and incentivize the use of Canadian-made steel products.

The Department of Finance also confirmed its intention to refund any provisional safeguard duties imposed on the Excluded Steel Goods. The CBSA will likely publish a notice about the refund mechanism shortly.

Looking Ahead

Those with an interest in the trade in steel products will need to pay special attention over the coming months, as the Government of Canada determines what its next steps will be. The evolving landscape for Canadian steel imports remains uncertain and, at present, it is unclear how far the final safeguard measures will reach and what the outcome of the consultation will be with respect to the Excluded Steel Goods. However, the Canadian Steel Producers Association has already expressed its support for final safeguard measures and requested that the Department of Finance simply ignore the CITT’s recommendations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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