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The Canadian International Trade Tribunal’s inquiry on steel safeguards – What you need to know

Author(s): Shalu Atwal, Riyaz Dattu, Gajan Sathananthan

Oct 24, 2018

In this international trade brief, we explain what you need to know about the Canadian International Trade Tribunal’s inquiry on steel safeguards, and why stakeholders that are likely to be  impacted by these safeguards should file a notice of participation with the Tribunal on or before the October 29, 2018 deadline.

As discussed in our last international trade brief, the Government of Canada has announced that it will be imposing provisional safeguard measures starting on October 25, 2018 on imports of seven steel products:

  • heavy plate;
  • concrete reinforcing bar;
  • energy tubular products;
  • hot-rolled sheet;
  • pre-painted steel;
  • stainless steel wire; and
  • wire rod.

These provisional safeguard measures (which we outlined in more detail in our previous international trade brief) will be in place for 200 days pending the results of the inquiry conducted by the Canadian International Trade Tribunal (Tribunal) which will issue a report on whether some of these measures should be extended for an additional period of time. Should the safeguard measures be extended, one can expect price increases and potential shortages for certain types of products that are not produced within Canada in sufficient quantities.

The requirements for an inquiry and the pre-conditions for imposing safeguards are prescribed  by Canada’s obligations under the World Trade Organization’s Agreement on Safeguards. The Tribunal, in conducting its inquiry, will assess whether the importation into Canada of these seven products are occurring in such increased quantities and under conditions as to be a principal cause of serious injury or threat thereof to Canadian producers of like or directly competitive goods. If the Tribunal determines this question in the affirmative in the case of one or more of these products, it will recommend the most appropriate remedy to address the injury or threat of injury over a maximum period of three years.

The Tribunal commenced the inquiry on October 11, 2018 and the final report is due April 3, 2019. The Tribunal will hold public hearings in January 2019 in Ottawa, with two days of hearings reserved for each class of goods. The deadline to file a notice of participation is Monday, October 29.

There are a few key differences between inquiries into safeguard measures against fairly traded products, which have been conducted by the Tribunal only in exceptional circumstances and usually at the direction of the Canadian government, and the Tribunal’s domestic producer complaints-initiated inquiries into unfairly traded products (i.e., anti-dumping and countervailing duties). These key differences should be taken into consideration by potential participants when making the decision whether to participate in this inquiry:

  1. There is a significantly higher evidentiary burden on the domestic industry in a safeguards inquiry, as it requires demonstration of “serious” present or future injury, not just injury, and that the imports be a “principal” cause, not just “a” cause of the injury.
  2. Given the tight timeline, participants will not be subject to requests for information from other parties, making involvement in this proceeding less burdensome.
  3. Participants are also not able to request specific products be excluded from the results of this inquiry, even if they are not produced by the domestic industry, making it all the more important that participants seek to challenge whether the exceptional circumstances required for the imposition of safeguards do in fact exist.
  4. The Tribunal does not order the implementation of duties, but rather makes a recommendation in a report to Governor-in-Council, which can either accept or reject it. The Canadian government has, in past safeguard inquiries, been unwilling to follow all of the Tribunal’s recommendations, and indeed most safeguards cases have not resulted in long-term measures being imposed.

This last point is particularly important as, unlike in an anti-dumping inquiry, the federal cabinet (Cabinet) can choose to ignore the Tribunal’s recommendation. This provides an avenue for further consultations by the government with stakeholders beyond the Tribunal process. For example, in the last steel safeguards inquiry, which took place in 2002, the Tribunal recommended the implementation of safeguards for some steel products. Cabinet, however, ultimately decided not to implement any of the recommended safeguards, instead forming a committee with the United States and Mexico to discuss and resolve the issue. Similarly, safeguard inquiries into the importation of bicycles and barbecues in 2005 led to the Tribunal recommending the implementation of safeguards but the federal government refused to implement the Tribunal’s recommendations, finding that the safeguards would not serve as a competitive long-term solution and would increase costs for both Canadian retailers and consumers.  

For stakeholders that might be impacted by these safeguards, there are several advantages to filing a notice of participation with the Tribunal on or before Monday, October 29, even if their level of participation, if any, is uncertain at this time:

  • It will entitle the stakeholder to receive materials that are being submitted to the Tribunal, so it can review the arguments being made and decide whether it wishes to respond in a substantive way.
  • It would allow the stakeholder to discuss the Tribunal’s recommendation with the government prior to its implementation. Participating in these discussions would likely be practically difficult if a party had not taken advantage of the process for making views known to the Tribunal in its inquiry.
  • Costs related to a stakeholder’s participation can be managed by adjusting the stakeholder’s level of involvement in the Tribunal’s inquiry. For example, to reduce costs, the scope of submissions made can be limited and attendance at the hearing can be minimized to what is absolutely essential.
  • Once a notice of participation is filed, it can be withdrawn without incurring additional costs.

For the above-noted reasons, we would encourage stakeholders who are considering what their level of participation in the Tribunal’s inquiry may be to file a notice of participation by Monday, October 29, ensuring that they maintain the flexibility to take part in this process in the event they subsequently commit to do so.