2012 federal budget shakes up Canada's trade remedy system 


April 2012

International Trade Bulletin

In a surprise move, the federal government announced as part of its 2012 Budget Speech, its intention to introduce legislation to consolidate Canada's trade remedy investigation functions into one organization, the Canadian International Trade Tribunal ("CITT"). As the motivation for the move, the Budget identified the need to create efficiencies and cut red tape, making it less cumbersome for Canadian businesses to take action against unfair trade.

Currently, the Canada's trade remedy inquiries are split between the CITT and the Canada Border Services Agency's Anti-dumping and Countervailing Directorate (the "CBSA Directorate"). The CBSA Directorate's mandate is primarily investigative, and is focused on the determination of whether there has been dumping or unfair subsidization of goods imported into Canada. The CBSA Directorate is charged with gathering of information from the domestic complainant in the pre-investigation stage, receiving data based on requests for information from importers and exporters during the investigation, and conducting independent fact finding as to the existence and magnitude of dumping and unfair subsidies. The CITT's duties are more adjudicative and focused on whether a dumping or subsidy investigation should take place, and whether the dumped and/or subsidized goods have caused, or threaten to cause, material injury to the domestic industry

While the details of the proposed legislative change are not yet known, some important questions are already being raised.

While the Budget speaks of creating efficiencies, trade practitioners are hopeful that the CITT, with its new combined mandate, will continue to benefit from the expertise gained by CBSA Directorate staff on anti-dumping and countervailing investigations.

It is also unclear whether the consolidation will affect all functions currently performed by the Directorate, including those which are performed prior to the initiation of a complaint and during the five-year period when anti-dumping and countervailing duty orders are in place. If all of the CBSA Directorate's functions are being moved to the CITT, the government will have a delicate task in meshing, within the same organization, the investigative and adjudicative functions, without compromising the judicial autonomy of the CITT. In particular, it will be interesting to see how the legislation deals with the fact that, in performing its investigative functions, the CBSA Directorate frequently deals with domestic complainants, importers and exporters on an ex parte basis. These types of functions, the authors suggest, will be difficult to maintain within the CITT, which, as a designated "court of record", is subject to high standards of judicial independence and transparency

The Budget did not specify a timetable for the consolidation, but it is expected that legislation will be tabled soon, perhaps even as part of the Budget Implementation Act.

other trade issues

In addition to the bombshell consolidation news, the Budget also includes the following issues which will impact on Canada's international trade agenda.

  • The Budget looks to ramp up its implementation of the Action Plan on Perimeter Security and Economic Competitiveness, and the Action Plan on Regulatory Cooperation, each of which are aimed at facilitating trade and investment flows with the United States.

  • The Budget also speaks to the desire to strengthen ties with China, such as the recently signed Foreign Investment Promotion and Protection Agreement, which provides a more stable and secure environment for investors. The Budget will actively engage China to explore the growing bilateral trade and economic relations.

  • For Canada-India trade, the Government pointed out that it is committed to building on the strong ties with India, with the eventual goal of tripling bilateral trade with India to $15B annually by 2015.

  • Canada reiterates its intention to conclude a free trade agreement with the European Union.

  • The Budget speaks to maximizing opportunities in the Asia-Pacific region, particularly by attempting to join the negotiations on the Trans-Pacific Partnership ("TPP"). Other than the TPP, the Budget mentions other initiatives such as free trade negotiations with Japan, exploratory discussions with Thailand, the recently signed Joint Declaration on Trade and Investment with the Association of Southeast Asian Nations, and the issuance of a 20-year licence to export liquefied natural gas from BC to the Asia-Pacific region.

  • For the Americas, the Government is moving ahead with exploratory discussions with South America's common market (Mercosur) made up of Argentina, Brazil, Paraguay and Uruguay.

  • The Budget also expressed an interest in deepening Canada's commercial presence in Africa in such industries as telecommunications, agriculture, energy, transportation, infrastructure, natural resources and education. And, as of October 2011, Canada began negotiations on its first African free trade agreement with Morocco.

  • The Budget proposes to restore the duty-free status of certain imported fuels used as manufacturing inputs in energy and electricity production, which recently became subject to a 5% tariff due to a CBSA ruling. This measure is expected to lower business costs by $30M and improve the competitiveness of the energy industry.

  • There will be an increase to the value of goods that may be imported duty and tax free by Canadian residents from the U.S. ($200 for 24 hour visit; $800 for 48 hour visit), harmonizing them with US levels. This change will be effective June 1, 2012.

  • Canada plans to review the General Preferential Tariff Regime in place since 1974.

by Martin G. Masse and Michael Flavell

1 The authors wish to recognize the important contribution of Phillip Ajah-Plante, who is finishing up his articles and joining the Ottawa office of McMillan LLP as an associate in May, 2012.

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2012