When it comes to international trade, anti-dumping laws in Canada are designed to stop unfair trade practices before they snowball. If imported goods are priced too low, Canadian companies lose out, prompting the government to take action.
In this article, we will discuss the basics of dumping and the laws that protect businesses. We will also share insights from an international trade expert from one of the country's leading law firms.
What is the law on anti-dumping in Canada?
“Dumping occurs when a good is imported into Canada at a price lower than the selling price of a comparable good in the country of export or where the good is sold into Canada at an unprofitable price,” says Orlando Silva.
Silva is a partner in the international trade practice of Cassels Brock & Blackwell LLP.
When this happens, it can hurt Canadian businesses and local industries by forcing them to lower prices or lose sales. As a result of dumping, a domino effect can occur, with businesses laying off workers and eventually closing operations.
Silva highlights the other impacts that dumping has on Canada’s businesses:
- dumping can be used to gain a competitive advantage or as a predatory trade practice to supply surplus goods into Canada at unfair prices
- Canadian producers of the same goods can be financially harmed by dumping (e.g., forced to lower prices or lose sales)
To crack down on dumping, Canadian laws not only prohibit dumping but also provide remedies for those affected by it.
“The anti-dumping law in Canada is contained in the Special Import Measures Act (SIMA), and it is intended to protect Canadian industries from material injury caused by the dumping of imported goods,” Silva says.
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Example of dumping
Imagine Company X from a foreign country who makes steel rods. In the country where it operates, it sells each steel rod for $100. However, when it exports rods to Canada, it offers them to Canadian buyers for only $60 each, way lower than what they charge domestically.
The reduced price does not come from improved efficiency or lower expenses. Instead, Company X is trying to capture more of the Canadian market. By offering steel rods at $60, it underprices Canadian producers, who cannot sell at that rate without taking a loss. This leads local companies to lose customers, lay off staff, or worse, shut down operations.
In other words, the foreign company (Company X, in our example) sells goods in Canada for less than the price in its own country, harming the Canadian industry.
Subsidizing, as related to dumping
Subsidizing is another activity regulated by SIMA. This happens when imported goods going to Canada benefit from the financial assistance of their foreign government. This assistance can come in many forms, including:
- government grants
- loans at special rates
- tax breaks or tax incentives
While it may seem harmless, subsidizing becomes a problem when it gives foreign companies an unfair advantage and causes economic injury to Canadian producers.
As a remedy, countervailing duties are imposed if it is found that subsidizing happens, which is in violation of SIMA. This contrasts with the anti-dumping duties that are imposed when unfair dumping occurs.
How do investigations under Canada’s anti-dumping law work?
Canadian businesses and producers have several legal remedies against dumping. One of these is to start an investigation, so that violators can be penalized under the SIMA. Here’s a summary of the investigative process of Canada’s anti-dumping law:
- investigation is initiated by the affected businesses or by the government
- imposition of:
- provisional duties after the investigation’s preliminary decision
- anti-dumping and countervailing duties after final determination
We’ll discuss these steps below.
Dumping investigation
A dumping investigation, Silva says, is a bifurcated process jointly administered by these two bodies, each having different roles:
- Canada Border Services Agency (CBSA): determines if the goods are dumped
- Canadian International Trade Tribunal (CITT): determines if the dumping has injured or threatens to injure Canadian producers
“Where a finding of injury or threat of injury is made by the CITT, the CBSA will levy anti-dumping duties on the goods being imported into Canada,” Silva adds.
Starting a dumping investigation
“The process begins with the filing of a written complaint to the CBSA by a Canadian producer of goods that are identical or similar to the imported goods,” Silva says. According to the CBSA, the following can file a written complaint to start an investigation:
- association of Canadian producers
- individual firms
- trade unions whose members are engaged in the production of like goods
Provisional duties
While the final investigation is ongoing, Canada’s anti-dumping law allows the imposition of provisional duties on alleged violators.
“In the event of a negative determination by the CBSA or the CITT at any point during the investigations, the case will be terminated,” Silva says.
“The CBSA may also impose provisional duties on dumped goods following a preliminary decision of injury by the CITT and the CBSA’s preliminary decision of dumping. The provisional duty will be in place until the CITT makes its final injury decision.”
Anti-dumping and countervailing duties
Finally, duties will be imposed on violators after the investigation is completed.
Silva says that “[i]f the CBSA finds that the goods are dumped or subsidized and the CITT ultimately finds that those dumped or subsidized goods are causing injury to Canadian producers of those goods, then anti-dumping or countervailing duties can be applied on importers of the goods into Canada from the export country for up to five years.”
The goals of these duties are to:
- remove the unfair price benefit created by dumping or subsidizing
- help Canadian businesses compete on equal footing with imported products
From another perspective, Canadian exporters may also be the receiving end of anti-dumping duties, especially in light of current events on international trade:
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Time frame of a dumping investigation
Silva says that “[t]here are preliminary and final investigations by both the CITT and the CBSA that take place under strict legislative timeframes.” Here’s how these timeframes look under SIMA:
- 21 days from receiving the complaint: CBSA determines whether the complaint has been properly documented, i.e., if it states the facts upon which the allegations are based and includes the evidence of dumping or subsidizing
- 30-45 days from determining that the complaint is properly documented: CBSA will decide whether to initiate an investigation:
- if it does, the CITT will start its preliminary injury inquiry
- otherwise, the proceedings will end
- 60 days from CITT’s initiation: CITT will either:
- make a preliminary finding of injury
- terminate the inquiry, including CBSA’s investigation
- 90-135 days from CITT’s initiation: CBSA will make a preliminary determination if the goods are being dumped or subsidized
- 90 days after CBSA’s preliminary determination:
- provisional duties may be imposed by the CBSA
- injury inquiry will be initiated by the CITT
- price undertakings may be accepted by the CBSA, and both the CBSA investigation and CITT inquiry could be suspended; otherwise, CBSA will either terminate its investigation or make a final determination
- 120 days after CBSA’s preliminary determination:
- if CBSA makes a final determination: CITT will make its “final injury finding”
- if CBSA terminates the investigation or CITT finds out that there is no injury: all proceedings are terminated, and the provisional duties are returned
How can lawyers help clients when it comes to Canada’s anti-dumping law?
Silva says that trade remedy lawyers can assist domestic producers, importers, exporters, and end users in trade remedy investigations in a manner that best protects and promotes their interests.
Silva outlines the following areas where trade lawyers can assist clients:
- initiating an investigation: the preparation of the complaint by a domestic producer to the CBSA to initiate the trade remedy proceeding
- giving a legal perspective: the calculation and legal analysis of dumping and subsidy calculations during the CBSA investigation
- legal representations:
- representation before the CITT, including the evaluation and presentation of material injury arguments and requests for product exclusions
- representation before the Federal Court in the judicial review of dumping and subsidy determinations issued by the CBSA and CITT
Anti-dumping in Canada: taking out the trash from Canadian markets
The rules on anti-dumping in Canada are there to make sure that trading activities stay fair for everyone. With clear steps and strong enforcement, Canadian producers –whether large companies or small businesses – have tools to defend against unfair pricing.
As global trade continues, knowing how these laws work can help businesses plan and plan and protect themselves against unfair practices. For legal support, international trade lawyers are there to help with anti-dumping matters.
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