Posted by Gordon LaFortune on Mar 9, 2015

The recent procurement decision by the Canadian International Trade Tribunal (CITT) in 2040077 Ontario Inc. o/a FDF Group, CITT File Nbr. PR-2014-058 (FDF Group) raises the question of how long a complainant must wait for Public Works and Government Services Canada (PWGSC) to respond to an objection before filing a procurement complaint with the CITT, but provides no clear answer. In this case, FDF Group filed a bid in response to PWGSC procurement of urethane dumbbells for the Department of National Defence.  FDF Group considered that the contract, which was awarded to another supplier on January 28, 2015, did not meet the mandatory requirements in the Request for Proposals.  FDF objected to PWGSC on February 2, 2015 and asked that the bids be re-evaluated.  PWGSC responded on February 4, 2015 by saying that it was “looking into this”, but noted that it “[could not discuss the matter] any further at this time.”  Having received no further response from PWGSC, FDF Group filed a complaint with the CITT on February 19, 2015; 10 working days after PWGSC’s February 4, 2015 reply.  The CITT dismissed the complaint on February 27, 2015 finding that the complaint was premature because FDF Group had not properly waited for PWGSC to respond to its objection before filing its complaint. In its Statement of Reasons, the CITT noted that a potential supplier may file a complaint or object to the relevant government institution within 10 working days of the date on which it became aware of the basis for the complaint.  If the potential supplier chose to file an objection, it would then have ten working days from the date that the government institution denied the relief requested in its objection to file a complaint.  In this case, the CITT noted that PWGSC’s initial response indicated that it was looking into the matter, but that it could not discuss the matter with FDF Group at that time.  Based on this reply, the CITT found that PWGSC was looking into the matter and intended to respond at some future date.  Therefore, the CITT found that FDF Group’s decision to file the complaint prior to receiving a final...

Posted by Michael Woods on Feb 27, 2015

In parts I and II of our review of Canada’s defence of the supply management system, we reviewed details of Canada’s supply management system, including its origins, how it works, and the rationale for keeping it in place. We also looked back to the original GATT trade pact which established the provisions for the co-existence of open and freer trade with the import barriers necessary to ensure the survival of Canada’s regime for the production of dairy, poultry and other products.   We saw that as part of the package that created the World Trade Organization (WTO) in 1995, GATT negotiators agreed to convert agricultural trade restrictions on a wide range of products into tariffs – very high, prohibitive tariffs at the outset with the objective of having them negotiated down over time.  The NAFTA, which took effect in 1994, effectively eliminated tariffs between the three Parties (Canada, Mexico and the U.S.). However, less than a year after the agreement was signed, the United States challenged the “new” Canadian tariffs claiming that they were incompatible with NAFTA and further claiming that the old import restrictions – abandoned for all WTO partners including the United States – could not be re-introduced In the Matter of Tariffs Applied by Canada to Certain U.S.- Origin Agricultural Products [NAFTA Secretariat No. CDA-USA-1995-2008-01]. The reaction in Canada at the news of the NAFTA challenge’s initiation was quick and included predictions that a U.S. win could result in unlimited American imports and that “ … rural Canada could be devastated …” with a loss of 138,000 jobs and $16 billion in government revenues  by the year 2000. [Francis Russell, “Canada’s Lame Defence” Winnipeg Free Press, February 5, 1995, A6].  However, up against the simple logic of the U.S. claim that Canada had “gambled and lost” in the Uruguay Round, Canada’s response included a complex defence that relied upon the provisions of the 1988 Canada –U.S. Free Trade Agreement (FTA), arguing that the FTA exception that provided for the supply management exception had been carried forward into the NAFTA  and that the “WTO tariff equivalent” for supply managed products had been incorporated by reference into the NAFTA by...

Posted by Gordon LaFortune on Feb 20, 2015

The recent decision by the Canadian International Trade Tribunal (“CITT”) in Photovoltaic Modules and Laminates from China (CITT File Nbr. PI-2014-003), the “Solar Panels” case, has raised an apparent inconsistency in the Special Import Measures Act (“SIMA”), which begs the question whether it is time to review and amend the Act. In its Decision, the CITT found that the evidence disclosed a reasonable indication that the dumping and subsidizing of solar panels from China “have caused or are threatening to cause injury to the domestic industry”.  Having made that determination, the CITT noted, at paragraph 93 of its Statement of Reasons, that if the Canada Border Services Agency (“CBSA”) makes a preliminary determination that Chinese solar panels are dumped or subsidized, it will initiate an inquiry pursuant to SIMA Section 42 to determine whether the dumping or subsidization of the solar panels has caused or is threatening to cause injury to domestic producers in Canada. The purpose of the Preliminary Injury Inquiry is to allow the CITT to determine whether there is sufficient evidence to justify proceeding to a full Injury Inquiry.  The CITT applies the “reasonably discloses” threshold to determine whether the evidence presented by parties “reasonably discloses” that the imported subject goods caused or threatened to cause material injury to domestic producers in Canada.  If the CITT makes this finding, it will proceed to a full Injury Inquiry to determine whether those products actually caused or threaten to cause injury.  The “reasonably discloses” threshold applied in the Preliminary Injury Inquiry is significantly lower than the threshold applied in the Injury Inquiry and should be so; a complaint that is not supported by enough evidence to pass the “reasonably discloses” threshold could not meet the higher threshold applied in the Injury Inquiry.  Assessing the evidence on the basis of this lower standard allows the Preliminary Injury Inquiry process to be used as a gatekeeper to control which cases proceed to an Injury Inquiry. The apparent inconsistency raised by this case becomes obvious when we look behind the CITT’s Decision to the underlying findings set out in the CITT’s Statement of Reasons.  At paragraph 79 of the Statement of...

Posted by Michael Woods on Feb 17, 2015

In the second part of our examination of Canada’s defence of the supply management system in international trade disputes, we will take a closer look at the NAFTA Panel, In the Matter of Tariffs Applied by Canada to Certain U.S. – Origin Agricultural Products [NAFTA Secretariat No. CDA-USA-1995-2008-01] In its Report, the NAFTA Panel recalled that “… the United States has argued that Canada ‘gambled’ that it could convince participants in the Uruguay Round to preserve the right to maintain agricultural quotas …” and that Canada lost both that gamble and the right to impose the tariffs that replaced them on U.S. products as a result of the subsequent NAFTA deal.  At this particular point in time, many Canadians whose livelihoods where tied to supply management, where concerned about this U.S. attack which went to the heart of the system and represented, “the most serious threat Canada has experienced since free trade with the United States began …” [Francis Russell, “Canada’s Lame Defence” Winnipeg Free Press, February 5, 1995, A6] In Part I, we briefly summarised Canada’s supply management system, which has grown significantly since the 1930’s into a large and complex program that is founded on three pillars:  Domestic production control, based on demand and administered  through a program of government administrated quotas; Set prices based on cost of production and negotiated between the government and producers; and Import controls designed to plan domestic production and avoid pressure on pricing. For the system to work, there must be strict limits on imports of supply-managed products.  Following the GATT Article XI:2(c)(i)  provision, Canada instituted a system of import controls which prevent imports of any of the supply managed commodities over a set volume or quota. Imports above the annual set quota were prohibited and set through a complex process that establishes total demand and total Canadian domestic supply, with a low, pre-determined global volume of imports to be allowed. These import quotas were allocated to individual importers through an import permit system. Until 1995, import quotas, which operated through quantitative restrictions (or import bans for any product beyond the authorized amount), were permitted.  As part of the conclusion of...

Posted by Michael Woods on Feb 12, 2015

Canadian trade negotiators appear to be under a great deal of pressure from our trade partners with respect to supply management.  In fact, that may be an understatement as reports and analytical pieces on the progress of the Trans Pacific Partnership (TPP) negotiations continue to surface. This post will be the first of a series looking back at some of the international trade disputes (GATT, WTO, and NAFTA) in which some elements of Canada’s supply management system have come under scrutiny.   Both partners at Woods, LaFortune LLP were heavily involved in some of Canada’s big trade disputes during their tenure at External Affairs (now the Department of Foreign Affairs, Trade, and Development or DFATD). Since 1947, Canadian trade policy and trade lawyers have been called upon to defend the system as advocates in international dispute resolution as well as through various negotiation tables. One of the first large trade disputes focused on access to Canada’s dairy, poultry, egg, barley, and margarine market and attempted to attack the competitive advantages Canadian producers enjoyed in those respective sectors [The NAFTA Panel in the Matter of Tariffs Applied by Canada to Certain U.S. Origin Agricultural Products (Secretarial File No. CDA-95-2008) December 2, 1996]. In this case, the U.S. alleged that Canada increased tariffs for a range of agricultural products contrary to Canada’s NAFTA undertakings. More technically what was being litigated was a sub-clause of a provision of the General Agreement on Tariffs and Trade (GATT).  The term “supply management” does not appear in the GATT, instead, the sub-clause in question appears in GATT Article XI which prohibits quantitative restrictions (import prohibitions). In 1947, the original 23 GATT members (Contracting Parties) agreed to both the general principals of liberalized trade and the need for a series of exceptions.  Professor John Jackson who wrote the original “GATT bible” in 1969 (Word Trade and the Law of GATT)  recalls that the exceptions to export restrictions and prohibitions set out in Article XI reflected an original draft proposal  by the United States, that the need for exceptions in the agricultural sector created a dynamic that weakened the ability to achieve a greater level of free trade...

Posted by Gordon LaFortune on Feb 6, 2015

The Canadian International Trade Tribunal (the “Tribunal” or “CITT”) has been taking steps to address the evidence required to grant a product exclusion, as well as the burden of proof that applies between the parties.  Although the Tribunal has made some comments on the subject, their explanation of the requisite evidence has not quite gone far enough.  It would be beneficial to all parties if the Tribunal used its decisions to more clearly outline the type of evidence required to support a product exclusion request. The right to impose anti-dumping and/or countervailing measures on imported goods is an exception to the rule that imported goods may not be subject to duties in excess of the bound rate.  Anti-dumping or countervailing measures can only be imposed if the Tribunal finds that dumped and/or subsidized imported goods have caused or threaten to cause injury to domestic producers of like products.  The Tribunal’s implicit authority to grant product exclusions, which allows those goods to enter Canada free of anti-dumping or countervailing measures, arises in the context of the right to impose those measures on dumped or subsidized goods.  Specifically, since goods subject to product exclusions have been found to not cause or threaten to cause injury, there is no reason to apply anti-dumping or countervailing measures on those goods.  Thus, product exclusions are an important element of the trade remedies system that allows non-injurious imports that fall within the product definition set by the Canada Border Services Agency to continue to enter Canada subject only to ordinary customs duties. The Tribunal only grants product exclusions in exceptional circumstances, when it considers that the exclusion will not cause material injury to the domestic industry.  In making this determination, the Tribunal usually considers whether the domestic industry produces, actively supplies or is capable of product a substitutable or competing product.  The Tribunal obviously needs evidence to determine whether or not to grant a product exclusion, but the difficulty with the current process arises in the burden of proof imposed on parties requesting a product exclusion. In Aluminum Extrusions (RR-2013-003), the CITT clarified its approach to the burden of proof, at paragraph 192, by saying, “there...