Author(s):
Jake Schmidt, Riyaz Dattu, Gajan Sathananthan
Apr 15, 2019
On April 3, 2019, the Canadian International Trade Tribunal (the Tribunal) released its report in the Safeguard Inquiry into the Importation of Certain Steel Goods (the Inquiry). The Inquiry concerned the imposition of global safeguard measures on seven different classes of steel products, including energy tubular goods (ETG) which play a critical role in building pipelines and drilling activities in the Canadian energy sector. Following the Inquiry, the Tribunal found that the imposition of safeguards on ETG, along with four other steel products examined (of the seven), was not justified under Canadian law and applicable international trade law principles.[1]
Background
This report follows the Government of Canada’s decision to impose provisional safeguard measures on the steel products and its simultaneous call for the Tribunal to conduct the Inquiry into whether long-term safeguard measures are warranted. The provisional safeguards came into force on October 25, 2018, and may remain in place for 200 days, expiring May 12, 2019 (unless the government decides to terminate the measures earlier based on the Tribunal’s report).
The provisional safeguards and the Inquiry are part of the protectionist responses taken by Canada and other countries following the U.S. imposition of duties on steel and aluminum imports for national security reasons that came into effect on March 23, 2018. As a result of these claimed “changed circumstances” concerning global steel trade, Canadian steel producers alleged that imports destined for the U.S. market were diverted into Canada and that these increased imports were causing serious injury, or threatening to cause serious injury, to the domestic steel industry.
Safeguards are extraordinary measures used to restrict imports that comply with fair-trading rules. There are a number of extremely stringent legal and factual pre-conditions that countries must satisfy in order to impose such measures under the World Trade Organization's Agreement on Safeguards. This is in large part due to the fact that, unlike trade remedies such as anti-dumping and countervailing duties that are applied on unfairly traded goods, safeguard measures are placed on goods that are traded in compliance with international trade obligations.
Among the requirements for the implementation of measures that extend beyond a 200-day provisional period, is a determination by an investigatory body (the Tribunal in Canada) of a dramatic and unexpected increase in the rate of imports that is causing, or threatening to cause, serious injury to the domestic industry. The causation requirement is that of imports being a “principal cause” of the serious injury, not just “a” cause as in anti-dumping and countervailing duties proceedings. Without such a determination, the federal cabinet is restricted from imposing safeguards that extend beyond the provisional measures set to expire next month.
As noted by the Tribunal, this inquiry was one of the most complex inquiries ever conducted by the Tribunal. There were 119 participants, including Canadian and foreign steel producers, steel importers, trade unions and governments. Over 38,000 pages of documents were submitted. The Tribunal conducted hearing sessions for each class of steel goods covered by the above Order in Council. The Tribunal heard submissions on injury and remedy together.
Tribunal’s determination and implementation
As a result of the Tribunal’s determination in the Inquiry, the Government of Canada should authorize the refunding of any duties collected on the five of the seven steel products where the Tribunal recommended that the long-term imposition of safeguards were not warranted. Duties will, however, continue to be collected on these goods pursuant to the provisional measures until their expiration or termination. In addition, the Government of Canada will need to assess whether long-term measures, beyond the provisional duties, should be imposed as a result of the Tribunal’s recommendations on two of the seven products (i.e., heavy plate and stainless steel wire).
Despite the Tribunal’s findings, the Canadian Steel Producers Association has been lobbying the Finance Minister to keep safeguards in place for on all seven products, as opposed to just the two recommended by the Tribunal. If this were to happen, it is our view that this would be a violation of Canada’s obligations under the WTO agreements. Nevertheless, intense lobbying by the Canadian steel industry is causing uncertainty on how the government will proceed based on the Tribunal’s report, particularly in relation to the five products for which the Tribunal determined that additional safeguard measures could not be justified.
Given the various interested parties and significant impact such measures could have on the Canadian steel and upstream industries including the oil and gas sector, we can expect significant focused interest over the next few weeks on the final decision of the Government of Canada.
Osler successfully acted for a number of clients in opposition to the safeguard measures on ETG at the Tribunal’s Inquiry. The Osler team was led by Riyaz Dattu, with the assistance of Gajan Sathananthan and Jake Schmidt.
[1] The Tribunal recommended the imposition of safeguard measures on heavy plate and stainless steel wire, and made a finding that such measures were not justifiable on concrete reinforcing bar, hot-rolled sheet, pre-painted steel, wire rod and ETG.