Copyright 2009, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on International Trade & Investment–China Focus, December 2009

OVERVIEW

In 2009, the People's Republic of China (PRC) continued to be a focus of Canadian manufacturers who complain that Chinese exporters are selling "dumped" or "subsidized" goods into Canada, thereby causing "material injury" to Canada's domestic industries. This article discusses a number of the actions involving Chinese exports which were initiated or concluded in Canada over the course of the year.

Chinese exporters may want to remain mindful of the duties that have been imposed on certain exports from the PRC because these additional duties can significantly add to the costs of doing business in Canada. Moreover, Chinese exporters should be conscious of the possibility that they, too, may find themselves subject to such investigations in the future. In order to avoid the imposition of additional duties, exporters should first take care to ensure that they do not dump products into Canada and, second, in the event that an investigation is initiated, consideration should be given to full participation in the process.

Aluminum Extrusions

The Canada Border Services Agency (CBSA) initiated its dumping and subsidy investigation on August 18, 2008 and the investigation was finally concluded in 2009. In its final determination, the CBSA determined that the estimated overall weighted average margin of dumping was 72.6%. The CBSA made its determination based on section 20 of the Special Import Measures Act (SIMA). The margin of dumping assigned to non-co-operative exporters was 101% of the export price. Moreover, the CBSA found that subject goods benefited from subsidies which were found to be on average equal to 47% of the export price of the goods. On March 17, 2009, the Canadian International Trade Tribunal (CITT) concluded that these dumped and subsidized goods caused material injury to the domestic industry. Accordingly, antidumping and countervailing duties were imposed although the CITT did grant a number of the 119 product exclusion requests made.

Subsection 45(1) of the SIMA provides that the CITT shall, on its own initiative or on the request of an interested person, initiate a public interest inquiry if it is of the opinion that there are reasonable grounds to consider that the imposition of antidumping and countervailing duties, or the imposition of such duties in the full amount, would not or might not be in the public interest. The CITT received such requests for a public interest inquiry; however, the CITT ultimately found that there were no reasonable grounds to consider that the imposition of antidumping and countervailing duties would not or might not be in the public interest. Accordingly, in a decision released on June 30, 2009, the CITT decided not to initiate a public interest inquiry into the matter.

Subsection 76.01(1) of the SIMA provides that the CITT may conduct an interim review of a finding or order and that such an interim review may concern the whole finding or order, or any aspect of it. The onus is on the requester to establish that an interim review is warranted. The CITT received a request as early as June 9, 2009 for an interim review of the CITT's finding issued just a few months earlier. The requester sought to have excluded from the scope of the finding certain extruded aluminum shapes used solely as components in the requester's proprietary lines of shower enclosures. In an order issued on July 24, 2009, the CITT decided not to conduct an interim review of its findings.

Waterproof (Rubber) Footwear

The CBSA initiated an investigation into the alleged dumping of waterproof (rubber) footwear from the PRC (and Vietnam) on February 27, 2009. In its final determination, the CBSA determined that the estimated overall weighted average margin of dumping was 36.6%. In this case, the "normal value" (one of the components of the margin of dumping) could not be based on the domestic selling prices of like goods in the PRC pursuant to section 15 of the SIMA, because all exporters sampled are export-oriented firms which do not sell the goods in their domestic market. Instead, the CBSA calculated a "constructed normal value" pursuant to section 19(b) of the SIMA on the basis of the aggregate of the cost of production of the goods, a reasonable amount for administrative, selling and other costs, and a reasonable amount for profits. The margin of dumping assigned to goods shipped by exporters who were sampled but who failed to co-operate was 43.8% of the export price.

Those exporters who were not sampled were assigned a margin of dumping of 11.8% of the export price. On October 13, 2009, the CITT issued its finding that the subject waterproof footwear had not caused, nor threatened to cause, material injury to the Canadian industry. As a result, the provisional duties assessed by the CBSA ceased to apply and no further duties would be collected in future. Central to the "no injury" finding was the CITT's view that despite an increase in imports of the subject goods from 2007 to 2008, the domestic industry was able to increase its production, sales and market share despite the removal, in 2007, of antidumping duties on a large portion of the subject goods. With respect to its "no future injury" finding, the CITT's view was that the co-existence of complementary imported and domestically produced waterproof footwear offerings largely responds to different market needs, which is consonant with retailers' desire to offer a wide range of products and price points to their customers and therefore the evidence did not support an imminent future threat of injury.

Wood Slats

The CITT had made its material injury finding concerning imported wood slats from the PRC (as well as from Mexico) on June 18, 2004. An expiry review of the finding was initiated by the CITT on November 7, 2008 and was concluded on July 15, 2009. On March 6, 2009, the CBSA determined that expiry of duties would likely result in the continuation or resumption of dumping of the subject goods by exporters from the PRC. Following a public hearing by the CITT to consider the issue of whether the resumption of dumping would likely result in injury or retardation to the Canadian industry, the CITT decided to renew the finding for an additional period of five years. The CITT was influenced, in part, by the current economic conditions where producers in the subject countries have increasing overcapacity to use and a greater incentive to sell.

Laminate Flooring

The CITT had made its material injury finding concerning imported laminate flooring from the PRC (as well as from France) on June 16, 2005. As part of the enforcement of the finding, in 2009 the CBSA concluded a re-investigation of normal values, and the CITT issued a notice of expiry seeking submissions on whether an expiry review of the finding was warranted. On August 11, 2009, the CITT issued Notice of Expiry No. LE-2009-001 respecting its finding on Laminate Flooring. The CITT received no submissions in support of an expiry review and a continuation of the finding. As a result, since the Canadian industry expressed no interest in having the finding continue, the CITT declined to initiate an expiry review, with the result that the original finding will expire on June 15, 2010.

Fasteners

The CITT had made its material injury finding concerning imported fasteners from the PRC (as well as from Chinese Taipei) on January 7, 2005. As part of its enforcement of the finding, the CBSA initiated a reinvestigation of normal values on September 15, 2008 that was concluded on February 23, 2009. As a result of representations from the parties about significant changes affecting the industry, the CBSA embarked on a new re-investigation on September 24, 2009 that is scheduled to be completed on March 24, 2010.

Meanwhile, an expiry review of the finding was initiated by the CITT on April 22, 2009 and is still ongoing. As a result of the commencement of the expiry review, the President of the CBSA initiated an investigation on April 23, 2009, to determine whether the expiry of the finding is likely to result in the continuation or resumption of dumping and/or subsidizing of the goods. The CBSA's investigation was concluded on August 20, 2009. The President of the CBSA determined that the expiry of the findings is likely to result in the continuation or resumption of dumping of the goods from the PRC and Chinese Taipei, and the subsidizing of such product from the PRC.

The CITT held a public hearing in Ottawa commencing on November 16, 2009 and had set aside time for oral testimony and argument by parties who filed requests for product exclusion. The CITT's decision in the expiry review is scheduled to be issued on January 6, 2010.

Oil Country Tubular Goods

The CBSA initiated an investigation into the dumping and subsidizing of oil country tubular goods on August 24, 2009. At the time of writing, the CITT had issued a positive preliminary determination of injury on October 23, 2009, and the CBSA issued its preliminary determination of dumping and subsidizing on November 23, 2009. A detailed statement of reasons had not yet been published by the CBSA as of the date of writing.

In its preliminary determination, the CBSA issued estimated margins of dumping and amounts of subsidy for 11 exporters. The estimated margins of dumping ranged from 33.94% to 110.69%. The estimated margin of dumping assessed on "all other" exporters is 167%. With respect to the subsidy investigation, the estimated amounts of subsidy ranged from 0.050% to 2.47%. The estimated amount of subsidy assessed on "all other" exporters is 15%. As a result, an exporter who was not assigned specific normal values has been assigned a total provisional duty rate of 182%.

Mattress Innerspring Units

The CBSA initiated an investigation into the dumping of mattress innerspring units on April 27, 2009. At the time of writing, the CITT had issued a positive preliminary determination of injury on June 26, 2009 and the CBSA issued its preliminary and final determinations of dumping on July 27 and October 26, 2009 respectively. In addition, the CITT issued a positive material injury finding on November 23, 2009. At the date of writing, a detailed statement of reasons had not yet been published by the CITT.

In its final determination of dumping, the CBSA found that Chinese exporters were dumping the goods with an estimated overall weighted average margin of dumping of 57%. The margin of dumping assessed against non-co-operative exporters was 147.4%.

Copper Pipe Fittings

The CITT had made its original material injury finding on February 19, 2007. On November 12, 2009, the CBSA initiated a re-investigation of the normal values and export prices of certain copper pipe fittings originating in or exported from the PRC (as well as from Korea and the USA). The CBSA is not initiating a re-investigation of the amount of subsidy respecting certain copper pipe fittings from the PRC at present. It is anticipated that the re-investigation will be concluded on or before April 1, 2010.

Waterproof (Plastic) Footwear and Bottoms

Antidumping duties on waterproof (plastic) footwear and bottoms from the PRC were the subject of the CITT's initial injury finding on December 8, 2000. The original finding was renewed on December 7, 2005 for another five-year term. On October 21, 2009, the CBSA initiated a "re-investigation" of the normal values and export prices of the subject goods. The re-investigation is scheduled to be completed on February 23, 2010 following the opportunity for interested parties to file submissions and reply submissions.

COMMENTS

The foregoing indicates that in 2009, the PRC has continued to be a focus of Canadian manufacturers who complain that Chinese exporters are selling "dumped" or "subsidized" goods into Canada, thereby causing "material injury" to Canada's domestic industries. In fact, 2009 has been a very active year for trade remedy investigations generally. This may suggest that Canadian manufacturers are becoming more accustomed to the antidumping and subsidy complaint/investigation process and will in future increasingly treat the filing of such complaints as another arrow in their quiver of options to deal with import competition.

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.