In this third edition of the Canadian Trade Law Year in Review, the team at CLK Canada has reviewed key judicial and administrative decisions from 2024 that will be of interest and use to practitioners in Canadian trade law. These decisions are divided according to their subject area, with this year's review covering decisions pursuant to the Special Import Measures Act, the Customs Act, the Customs Tariff, the Special Economic Measures Act and Canada's free trade agreements.
THE SPECIAL IMPORT MEASURES ACT
This year featured two judicial decisions dealing with Canada's trade remedies regime under the Special Import Measures Act, R.S.C., 1985, c. S-15 [SIMA], both pertaining to the administration of existing anti-dumping Orders. In the first, the Federal Court of Appeal ("FCA") dismissed an appeal and allowed a cross-appeal of a Canadian International Trade Tribunal ("CITT") decision regarding the methodology by which the Canada Border Services Agency ("CBSA") calculated export prices for sales occurring between related parties and tested the reliability of such transactions. In the second, the Federal Court granted a motion to strike an application for judicial review of the outcome of a CBSA re-investigation, finding that this type of administrative action was not a "decision" amenable to judicial review.
Both decisions will be of interest to practitioners as they provide guidance on the methodology for the calculation of export prices in related party transactions and confirm that parties cannot bypass the statutory appeal mechanism by seeking judicial review of the CBSA's procedures for the review of normal values and export prices, irrespective of whether they are exporters, imports, or the domestic industry.
Remington Sales Co. d.b.a, Hyundai Heavy Industries (Canada) v. Canada (Border Services Agency, 2024 FCA 25[Remington]
In this first decision, the FCA dismissed an appeal and granted a cross-appeal from a decision of the CITT, brought by Remington Sales Co. ("Remington"), and the CBSA and Hitachi Energy Canada Inc. ("Hitachi Energy"), respectively. The FCA reversed the CITT's decision that the CBSA's long-standing "reliability test" was not a proper basis for forming an opinion of reliability under section 25 of the SIMA, holding that the CBSA has broad discretion to determine whether an export price is reliable and that the agency's "reliability test" was an appropriate means of doing so.
This statutory appeal arose from the redetermination of anti-dumping duties assessed on large power transformers imported by Remington from South Korea. The CBSA formed the opinion that section 24 export prices were unreliable based on a quantitative reliability test that compared export prices calculated under section 24 and section 25 of the SIMA. Remington appealed the redetermination to the CITT. The CITT granted the appeal in part, finding that the CBSA's exclusive reliance on a quantitative methodology for assessing reliability contravened the SIMA, and remanded the matter for a reconsideration of reliability according to an array of qualitative factors.
Remington appealed two facets of the CITT's decision to the FCA. First, it challenged the CITT's authority to remand the matter of reliability for redetermination by the President. Second, it challenged the CITT's finding that revenues for ancillary services were properly excluded from the calculation of export prices. Both heads oFirst, the Court held that it was not an error of law for the CITT to remand the matter to the President for a redetermination of reliability. Notwithstanding that appeals to the CITT under section 61 of the SIMA are conducted de novo, the FCA found that subsection 61(3) of the SIMA gives the CITT broad discretion in fashioning a remedy, which includes the power to remand. f Remington's appeal were dismissed.
First, the Court held that it was not an error of law for the CITT to remand the matter to the President for a redetermination of reliability. Notwithstanding that appeals to the CITT under section 61 of the SIMA are conducted de novo, the FCA found that subsection 61(3) of the SIMA gives the CITT broad discretion in fashioning a remedy, which includes the power to remand.
Second, the Court found that CITT did not commit an error of law in calculating export prices exclusive of revenues associated with ancillary services listed separately in customer contracts. Given that the SIMA focuses on determining the price of goods, the FCA saw no reason why the export price should include an amount for profit realized on the sale of an ancillary service where that ancillary service was separately priced.
On the cross-appeal, the Court agreed that the CITT committed an error of law in rejecting the CBSA's methodology on the basis that it was exclusively mathematical. As the Court observed, the "SIMA is a numbers-based statute" and contains several other concepts that are determined by way of mathematical calculation (e.g., dumping and normal values). The Court saw no merit in the CITT's concern that the President was effectively using section 25 export prices first as a comparator to ascertain whether section 24 prices were reliable and second to calculate export prices if the section 24 prices were found to be unreliable. Instead, the Court noted that "to determine whether a particular amount is reliable, it would be logical to compare that amount to an amount that is reliable." In this sense, the FCA acknowledged the "dual role" which can be played by section 25 of the SIMA.
Moreover, the Court found that the CBSA has broad discretion in selecting the methodology for forming an opinion on the reliability of section 24 export prices. The SIMA's silence on factors that the President must consider in forming an opinion on reliability leaves that choice with the CBSA. The Court recognized that the President had selected a quantitative methodology properly within the scope of her discretion and that the CITT therefore erred in imposing mandatory non-quantitative factors on the CBSA "in a statutory scheme that is quantitative."
The decision in Remington is notable in that it vindicates the CBSA's long-standing reliability test, and thereby provides stakeholders with considerably greater certainty than the qualitative factor-based assessment which had been called for by the CITT. Remington also provides valuable guidance for trade practitioners on two other important issues. First, it confirms that the CITT—in an appeal under section 61 of the SIMA—has the authority to remand matters to the CBSA for redetermination. Second, the decision confirms that it is appropriate for the CBSA to exclude from the starting point of export price calculations the prices paid by customers for ancillary services that are separately itemized in sales contracts and which do not contribute to the value of the goods.
Çolakoğlu Metalurji A.S. v. Altasteel Inc., 2024 FC 831 [Çolakoğlu]
In this decision, the Federal Court granted the respondents' motion to strike an application for judicial review brought by a group of Turkish exporters and a Canadian importer of concrete reinforcing bar ("rebar") in respect of a re-investigation of normal values by the CBSA. The Court struck the application because the outcome of a CBSA re-investigation is merely a "preliminary step" and is therefore not a "decision" subject to judicial review within the meaning of section 18.1 of the Federal Courts Act.
The underlying application for judicial review arose from a re-investigation by the CBSA in the course of administering anti-dumping duties against rebar originating from Türkiye. In response to material changes in the market, the CBSA initiated a re-investigation of the normal values of four Turkish exporters. The CBSA concluded the re-investigation in May 2023, finding that a particular market situation ("PMS") existed in Türkiye, and assigned new normal values to be used prospectively. The Applicants—an importer of Turkish rebar, five exporters of Turkish rebar, and one industry group—sought judicial review of the outcome of the CBSA's re-investigation on two grounds: first, that the CBSA lacks legal authority to conduct a reinvestigation; and second, that the CBSA's conclusion on the existence of a PMS in Türkiye was unreasonable. The respondent domestic industry brought a motion to strike.
The Court granted the motion, finding that a re-investigation "does not affect legal rights, impose legal obligations or cause prejudicial effects" and therefore is not an administrative action that triggers the right to bring an application for judicial review. She followed binding precedent which found that CBSA re-investigations and normal value reviews, in their "nature and substance", are "simply preliminary steps that may lead to an assessment of anti-dumping duties", akin to advance rulings which are not subject to judicial review. The nature of the applicant—importer, exporter, or otherwise—does not affect this analysis. The Court also followed Husteel Co. Ltd v Canada (Attorney General), 2020 FC 430 and found that a loss of sales or business by the importers is not a legal effect or consequence that transforms the reinvestigation into a decision subject to judicial review.
The Court likewise dismissed the Applicants' argument that the motion to strike should be denied because a novel issue was raised, namely the vires of the CBSA's statutory authority to engage in re-investigations. Notwithstanding that this issue indeed had not previously been considered by the Courts and was a valid ground of review in administrative law, the Court found that the application was fundamentally flawed because there was no decision subject to review and as such did not state a "cognizable administrative law claim".
By way of obiter in the event she was incorrect in finding that a CBSA re-investigation is not subject to judicial review, the Court applied the three-part test from JP Morgan Asset Management (Canada) Inc. v. Canada (National Revenue), 2013 FCA 250 in assessing whether an adequate alternative remedy is available to the Applicants such that the Court should decline to hear the application. Of note, she found that while importers have an adequate alternative remedy under the redetermination scheme at sections 56-62 of the SIMA, exporters are not similarly situated because they do not have the right to trigger the redetermination scheme in their own right. It was therefore not "plain and obvious" that exporters have an adequate alternative remedy. That said, in conducting this analysis, the Court dismissed the Applicants' argument that questions going to the CBSA's jurisdiction to engage in re-investigations or going to the reasonableness of the CBSA's finding on the existence of a particular market situation could not be adjudicated by the CITT under the statutory appeal mechanism under the SIMA. On these grounds, the Court held that if the CBSA's re-investigation is found to be a reviewable matter, she would decline to strike the application in respect of the Applicant exporters, but would strike application in respect of the Applicant importer, who would be entitled to avail itself of an appeal at the CITT and raise all necessary issues in that venue.
Finally, the Court noted the Supreme Court's decision in Yatar v TD Insurance Meloche Monnex, 2024 SCC 8 entails that judicial review of a CITT decision under section 62 of the SIMA "may be available" but declined to opine on the effect of privative clauses because the issue was not raised as a basis for striking the motion. The availability of judicial review from CITT decisions under section 62—due to the applicability of the privative clause at section 18.5 of the Federal Courts Act and since the SIMA does not expressly contemplate judicial review of those decisions at section 96.1—thus remains a question to be addressed in a future case.
The decision in Çolakoğlu contains several elements that will be useful to trade practitioners going forward. Of greatest importance, this case bolsters existing jurisprudence foreclosing the availability of judicial review of the CBSA's procedures for reviewing and issuing prospective normal values, irrespective of the ground of review or the applicant's identity. Çolakoğlu is under appeal to the FCA and will be heard on February 5, 2025. Practitioners will be well served by reviewing the eventual decision.
SIMA DETERMINATIONS BY THE CITT & CBSA
In addition to the foregoing decisions in the Federal Courts, the CITT this year made affirmative findings in two antidumping and countervailing investigations. In Certain Wire Rod, the CITT held that dumped imports originating from or exported from China, Egypt and Vietnam injured the domestic industry during the period of investigation ("POI"). Likewise in Certain Pea Protein, the CITT held dumped and subsidized pea protein originating from or exported from China injured the domestic industry during the POI.
This past year also featured the initiation of a series of new cases, namely Concrete Reinforcing Bar 5 from Bulgaria, Thailand and the United Arab Emirates and Sucker Rods 2 from Argentina, Brazil and Mexico, along with a highly unusual CBSA-initiated case targeting a sole exporter in Corrosion-Resistant Steel Sheets from Türkiye. In addition, the CBSA initiated the first ever anticircumvention investigation under subsection 72(1) of the SIMA, targeting subject goods under Container Chassis from China assembled or completed in Vietnam. The conduct and outcome of this anti-circumvention case will be one to watch given its precedent-setting nature. Decisions in these four cases will be published in 2025.
Finally, trade practitioners and interested parties should note that the CBSA overhauled its administrative procedures for the updating of normal values, export prices, and amounts for subsidy in November 2024. Under the auspices of the new Market Watch Unit—a Budget 2024 initiative—the CBSA has moved away from an ad hoc system of re-investigations and normal value reviews in favour of an annual review process termed "Administrative Review". While the CBSA has so far initiated three administrative reviews, uncertainty remains as to how these reviews will be conducted. Practitioners should monitor how these reviews are conducted as well as forthcoming updates to D Memorandum D14-1-8 and the SIMA Handbook, which will hopefully provide more details on this new system.
Certain Wire Rod (October 4, 2024), NQ-2024-001 (CITT) [Wire Rod]
On October 4, 2024, the CITT found that dumped wire rod imported from China, Egypt and Vietnam injured the domestic industry and that anti-dumping duties should be levied.
The CITT's past injury determination relied on the following findings of fact in respect of imports of subject goods and their impact on the domestic industry. Notwithstanding that there was no increase in absolute volumes of subject imports during the POI, the CITT found that the overall market for wire rod in Canada shrank, meaning that the volume of subject goods relative to the domestic consumption of goods had increased during that period. As regards price effects, the CITT found that the subject imports undercut domestic like goods, and "exercised pressure" to depress prices in the Canadian market. Subject goods were used in negotiations by customers to "drive down" domestic industry prices, illustrating that the subject goods— rather than general market forced—were responsible for pricing pressure facing the domestic industry. The CITT therefore found that the domestic industry was adversely impacted in the form of reduced profitability on otherwise steady sales volumes during the POI. Price undercutting and price depression by imports meant that "the domestic industry held on as best it could in order to maintain volume and market share, and the employment of their workforce, through sales made at depressed prices", leading it to an "existential brink".
The CITT's injury analysis is particularly informative for trade practitioners in four respects. First, the CITT followed established practice by conducting its injury analysis only in respect of the domestic industry's merchant market sales, to the exclusion of captive sales to affiliated entities, but then went on to assess the materiality of that merchant market injury as against the domestic industry's production of like goods as a whole (i.e., inclusive of captive sales and export sales). Materiality of injury was a central issue in dispute in this inquiry, and the CITT's adherence to consistent past practice in cases involving sales to affiliates (i.e., a captive market component) therefore has brought further clarity and predictability on this point. Second, the CITT accepted that adverse impacts on the domestic industry's profitability and ability to raise capital were alone sufficient to substantiate a finding of injury, notwithstanding that the domestic industry did not experience negative effects on market share, sales volumes, employment, or capacity utilization. Third, as regards materiality, the CITT accepted that a severe loss in profitability in only one segment of the domestic industry's business—i.e., in its merchant market sales, as opposed to affiliate sales—was sufficient to support the conclusion that the injury sustained by the domestic industry was of a material extent and that injury was deemed material "when considered in relation to the domestic production as a whole." Fourth, the CITT accepted that injury occurring only during a "6 to 12 month" period at the tail end of the POI was of sufficient duration to be considered material.
While ultimately not determinative, the CITT also addressed the interplay between duties imposed on certain Chinese steel and aluminum products pursuant to section 53 of the Customs Tariff and an anti-dumping Finding. Because the section 53 duties were not in place during the retrospective period during which injury was found to have occurred, the CITT held these duties were not relevant, and that the domestic industry was entitled to SIMA protection "notwithstanding other measures that may be taken by the Government of Canada and that may impact the importation of Chinese wire rod in the future." However, to the extent that the CITT had engaged in a forward-looking threat of injury assessment, it would have been properly considered the effect of these duties in its analysis.
On balance, the CITT's decision in Wire Rod will be of use and interest to trade practitioners in that it provides helpful guidance in ascertaining the degree and duration of injury necessary to meet the threshold of materiality to support the imposition of trade remedies. Practitioners will also note that the Government of Egypt has filed a properly documented request for a public interest inquiry in respect of the Wire Rod Finding. In the event the CITT decides to conduct a public interest inquiry, this would mark the first such inquiry since Concrete Reinforcing Bar (December 22, 2015).
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