The Federal Court of Appeal (“FCA”) recently released a decision in Canadian Hardwood Plywood and Veneer Association v Canada (Attorney General), 2023 FCA 154. This decision affirms the Canadian International Trade Tribunal’s (“CITT”) approach to several aspects of the injury analysis in trade remedies proceedings under the Special Import Measures Act (“SIMA”). The case provides additional certainty and guidance on the CITT’s injury standard to companies and their counsel considering cases against imports into Canada that are harming their businesses.
The FCA upheld the CITT’s decision that there was no injury and no threat of injury in a case brought by Canadian producers of decorative and non-structural plywood. In so doing, the FCA confirmed a somewhat narrower approach to both past injury and the threat of injury analysis in SIMA proceedings. On balance, while the Plywood decision provides welcome clarity on the injury analysis, it may result in a heightened burden for domestic producers who seek relief against unfairly traded imports.
Background and Summary of Outcome
This application for judicial review arose from a finding by the CITT that the dumping and subsidizing of decorative and other non-structural plywood from certain Chinese exporters did not cause injury and did not threaten to cause injury to the domestic industry. The domestic industry sought judicial review of the CITT’s decision before the FCA.
The applicants argued that the CITT erred in three notable respects. First, that the Tribunal applied an unreasonable test by requiring that there be increasing or intensifying injury during the period of inquiry (“POI”), and disregarding injury sustained by the domestic industry outside of the POI. Second, that the Tribunal erred by requiring a “change in circumstances” after the POI to find a threat of injury. And third, that the Tribunal erred in finding that the imported subject goods did not compete with domestic like goods to a significant degree because they were so inexpensive.
Justice Rivoalen, writing for the Court, dismissed the application in its entirety. Applying a reasonableness standard of review, she held that the CITT was reasonable in conducting the past injury and threat of injury analysis, and had not made unreasonable finding that the imported goods did not compete with the domestic like goods. In the remainder of this article, we explore in greater detail each of these findings and discuss their implications.
Issue 1: Injury Caused by Dumping or Subsidization Must Crystallize During the POI
As regards past injury, the FCA upheld the CITT’s determination that dumping or subsidizing of the subject goods did not cause injury to the domestic industry. In trade remedies cases, the CITT typically selects a three-year period where it analyzes data and trends to assess whether the imports caused injury to the domestic industry. Here, the CITT conducted its analysis using such a three-year POI and considered volume, price and impact effects during that period. While the CITT agreed that there is no legal requirement that injury must have started or worsened during the POI, it deemed that the statutory framework requires that dumping or subsidizing caused the injury during the POI and necessarily focused its analysis exclusively on injury occurring during the POI.
In upholding the CITT’s reasoning, the FCA expressly confirmed that injurious effects must have “crystalized during the POI”, as a finding of injury requires that “the injury was caused by the dumping and subsidizing of the subject goods during the POI.” Justice Rivoalen noted that it was indeed impossible for the CITT to have found that injury sustained by the domestic industry prior to the POI was caused by dumping or subsidizing, as there was no commensurate finding by the CBSA that dumping or subsidization had occurred prior to the POI. She stated that “{t}he Tribunal cannot examine a POI set much earlier than the one used by the CBSA, since there was no finding that the subject goods were dumped and subsidized at that time. For the same reason, the Tribunal cannot set a much longer POI starting several years before the start of the period of investigation considered by the CBSA.”
The FCA’s finding that the Tribunal cannot set a POI “much earlier” than the CBSA’s own POI creates an issue when arguing “causation”—i.e., that the imports caused injury to the domestic industry during the POI. The CBSA typically selects a one-year POI whereas the Tribunal sets a three-year POI. For example, in the underlying decision, the CBSA chose a period of investigation of April 1, 2019 to March 31, 2020 (12 months) to examine whether plywood imports were dumped while the CITT chose a period of investigation of January 1, 2017 to June 30, 2020. As this shows, there are usually at least two years of the Tribunal’s POI for which there is no corresponding determination by CBSA that imports were dumped during that period. This mismatch could pose challenges for domestic producers arguing that injury occurred early in the POI, and may force the CBSA to consider longer periods of investigation to ensure that the domestic industry can meet the CITT’s causation standard.
It is also notable that the FCA dismissed the argument that the CITT erred by effectively requiring that injury be increasing or intensifying during the POI. The FCA highlighted a number of findings of fact made by the CITT—including on price undercutting, investment delays, and closures by domestic producers—where it did not rely exclusively on factors that required a deteriorating trend. Rather, the FCA noted that some, but not all, factors relevant to an inquiry involve trends, and that the applicants here merely object to the fact that the CITT gave greater weight to those trend factors in its analysis. The FCA confirmed that its role is not to engage in re-weighing of evidence. While not conclusive, the FCA’s statement in this regard suggests that it would have been an error for the Tribunal to require injury be increasing or intensifying during the POI and leaves open the possibility for bringing cases where companies can demonstrate injury on the non-trend factors only.
Issue 2: A Threat of Injury Finding Requires a “Change in Circumstances”
Likewise, the FCA found that the CITT’s determination on threat of injury was reasonable. In the decision under review, the CITT had stated that there cannot be a threat of injury where the situation in the future will be same or similar to the retrospective period for which no injury was found. Rather, the domestic industry must show with a high degree of probability that a “change is circumstances” will occur such that the subject goods would threaten injury in the absence of SIMA protections. The FCA’s holding on this point is notable because the SIMA does not contain a requirement to find a “change in circumstances” to substantiate a threat of injury; this principle was previously adopted by the CITT merely to mirror jurisprudence at the World Trade Organization.
The FCA upheld the CITT’s reasoning as regards the need for a “change in circumstances” to find a threat of injury. Notwithstanding that “change in circumstances” does not appear in the SIMA, Justice Rivoalen agreed that the structure of the SIMA implies that a change of circumstances is necessary: “It would be illogical for the circumstances of the POI (which were found not to cause injury) to threaten to cause injury in the future, absent some change in circumstances.” Moreover, and contrary to the submissions of the applicants, Justice Rivoalen found that the CITT reasonably relied on Article 3.7 of the Anti-Dumping Agreement in its interpretation of subsection 2(1.5) of the SIMA, and did so in a manner consistent with binding jurisprudence on the use of international treaties in conducting statutory interpretation. In sum, the Court found that the CITT’s interpretation was internally logical, supported by the text of an international treaty that is not inconsistent with the domestic legislation, and was consistent with the CITT’s past approach to assessing the threat of injury. The Court thus declined to find that the CITT’s determination in this regard was unreasonable.
Going forward, the decision in Plywood means that companies and their counsel arguing threat of injury will need to ensure that they can point to some market changes that show that subject imports will cause injury when they previously did not. Looking at previous CITT cases, the FCA noted that this can be done by identifying foreseeable changes in the market between the POI and the following period of up to 24 months. The added requirement may therefore have heightened the standard to show the existence of a threat of injury and made it more difficult to bring a successful threat of injury case.
Issue 3: A Significant Price Differential Supports a Finding that the Imported Subject Goods do not Compete with the Domestic Like Goods
Third, Justice Rivoalen disagreed with the applicants’ submission that it was unreasonable for the Tribunal to find that the like goods and the subject goods did not compete, due to the existence of a significant price difference between them. The Tribunal had found that Chinese imports were primarily lower-grade plywood, whereas the domestic industry sold higher-grade products, and found that the evidence showed that the domestic industry’s loss of market share was attributable to non-subject goods rather than the subject goods. Given its deference to findings of fact and in the absence of unreasonableness, the FCA declined to intervene with the CITT’s findings in this regard.
Justice Rivoalen made a further series of findings that will be of interest to practitioners. First, she cautioned that the Tribunal is not required to explain why subject goods did not compete with the like goods where there is evidence supporting the absence of competition. Such a requirement would improperly “impose a presumption that the subject goods compete with the like goods” in the face of evidence showing the contrary, and could lead to illogical results. Second, she found that a finding that a lack of competition between products that fall within a single class of goods is not internally contradictory, and merely reflects some stratification in the market. When bringing cases against imports, business and their counsel will need to ensure that they have concrete evidence that the subject imports compete with the domestically-produced goods or that the subject imports can otherwise impact sales volumes and selling prices of the domestically-produced goods.
Conclusion
As noted above, the decision in Plywood provides trade remedies practitioners greater certainty in regards the temporal scope of the injury analysis in SIMA proceedings, on the requisite elements for establishing a threat of injury, and the degree of competition needed between subject imports and domestically-produced goods. While in some respects it appears to have confirmed heightened requirements on the domestic industry, this decision provides greater clarity for companies and counsel to know if and when they have a viable trade remedies case against injurious imports.