Originally published in Blakes Bulletin on International
Trade & Investment–China Focus, December
Producers and importers of Chinese and Vietnamese goods, and
their competitors, take note: the analysis of whether the goods are
being dumped in Canada may take on a whole new complexion following
the decision of the Federal Court of Appeal in Tianjin Pipe
(Group) Corporation v. TenarisAlgomaTubes Inc.
International and domestic law prohibits injury caused by the
"dumping" of goods, which occurs when imported goods are
sold at less than "normal" value. Under Canada's
Special Import Measures Act (SIMA), the Canada Border
Services Agency (CBSA) usually determines normal value by assessing
the fair costs of production of the actual goods in question, with
reference to other producers in the same country.
However, section 20 of the SIMA provides that where goods are
imported directly from a prescribed country (currently only China
and Vietnam), if in the CBSA's opinion the price of the goods
is "substantially determined" by the government of that
country, then normal value is determined by reference to goods
produced in another country, other than Canada.
The significance of this section is apparent. Under the default
regime, normal value may be quite low if the goods are produced in
a country where macroeconomic conditions have a significant
downward effect on the costs of production, such as inexpensive
labour and limited government regulation. Under the alternative
analysis prescribed by section 20 of the SIMA, the normal value of
the goods may not reflect those macroeconomic conditions. Thus,
Chinese and Vietnamese goods stand to lose significant price
advantages if the CBSA is of the opinion that the price of the
goods is "substantially determined" by the
The question in the Tianjin Pipe case was whether the
CBSA had erred in its opinion that the price of certain carbon or
alloy steel oil and gas well casing had been "substantially
determined" by the Chinese government. The CBSA concluded that
the cumulative effect of the Chinese government's
administrative, regulatory, and tax measures had a considerable
impact on the Chinese steel industry through means other than
competitive market forces. First, the CBSA found that the
government exerted significant control of the sector through state
ownership, including control of buyers, suppliers, and other
industry participants. Second, the CBSA found that the government
exerted significant control through the China Iron and Steel
Association. The CBSA found that the association was a government
body because its functions replaced a government ministry, the
Communist Party Secretary was a member of its top management, and
its stated purpose included strengthening the government's
control and administration of the sector. Last, the CBSA found that
the Chinese government exerted significant control of the sector
through the China National Iron and Steel Industry Development
Policy. The CBSA found that the policy was more than a mere
guideline, as the administration and enforcement of the policy
included penalties for its violation and a long list of parties who
would be held accountable for such violations.
Before the Federal Court of Appeal, the producer, supported by
the Chinese government as intervener, argued that the phrase
"substantially determined" could only apply if the
Chinese government had directly caused the price of goods
to be set at a certain level, below the cost of production. The
court dismissed this argument, holding that the phrase
"substantially determined" captures the various ways in
which governments could exert a determinative influence on pricing,
directly or indirectly. The court also noted that by
granting the CBSA the power to decide in its "opinion"
whether prices have been substantially determined, Parliament gave
the CBSA discretion which ought to be given considerable deference
by the court. As such, the court dismissed the challenge to the
This case may have significant ramifications for allegations of
dumping of Chinese and Vietnamese goods in Canada. The court has
affirmed the CBSA's authority to take a broad view of whether
the government of China or Vietnam (or any other country that is
prescribed in future) has substantially determined the domestic
price of goods. In coming to that opinion, the CBSA is empowered to
look behind what foreign governments say about their domestic
policies, and to consider a broad range of evidence concerning
measures that directly or indirectly affect the price of the
subject goods. If the CBSA applies this analytical framework more
frequently to the swelling imports of Chinese and Vietnamese goods,
determinations of dumping of such goods may become more common in
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