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McMillan LLP’s CUSMA Dispute Settlement Scoreboard

March 11, 2022 - Last Updated on November 27, 2023 Regulatory Law Bulletin 4 minute read

Introduction

The Canada-United States-Mexico Agreement (“CUSMA”) [1] entered into force on July 1, 2020, replacing the two and a half decade-old North American Free Trade Agreement (“NAFTA”).

Despite remaining one of the largest and deepest trade relationships in the world, [2] various prominent trade disputes have arisen between Canada, Mexico and the United States under the CUSMA.

We are pleased to introduce the “McMillan LLP CUSMA Dispute Settlement Scoreboard”, which provides overview and analysis of ongoing and concluded CUSMA disputes. The Scoreboard keeps a running tally of who has scored “points” in dispute settlement under CUSMA.

The Scoreboard provides the views of McMillan LLP International Trade Group. Points are granted based on which side ultimately prevailed in the dispute (ie, the country whose position the decision-maker ultimately favoured), in conjunction with the decision’s broader impact. [3]

The views expressed through this Scoreboard are those of the authors, and do not necessarily represent those of the firm more broadly, nor does this constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

Background on the relevant dispute settlement mechanisms contained in the CUSMA [4] can be found below the Scoreboard.

The Score

As of November 27, 2023, nineteen disputes have been initiated under CUSMA and five have been decided by panels.[5] The score stands at United States: 1, Canada: 4, Mexico: 1. Click on the expandable table below for more information and analysis on each dispute. McMillan LLP will update this resource as information on CUSMA disputes becomes available.

CUSMA TOTAL Score

Canada Mexico U.S.A.
Wins 4 1 1
Losses 1 3
Total Disputes 15 7 18

Chapter 31 (General Dispute Settlement) Disputes

Dairy TRQ Allocation Measures (CDA-USA-2021-31-01)

The United States challenged Canada’s dairy tariff rate quota (“TRQs”) allocation under several CUSMA provisions, including Article 3.A.2.11(b), which prohibits allocating a portion of a quota to processors.

Dispute
Complaining Party: United States
Responding Party: Canada
Timeline
Panel Request: May 25, 2021
Final Report: December 20, 2021
Total Length of Panel Proceedings: 209 days
Result
The Panel found that Canada’s practice of reserving access to 85 to 100% of its 14 dairy TRQs exclusively to processors and further processors was inconsistent with Canada’s obligations under CUSMA. Canada announced new dairy TRQ allocation and administration policies on May 16, 2022, which ended the use of processor-specific TRQ pools.

Point to: United States

Crystalline Silicon Photovoltaic Cells Safeguard Measure (USA-CDA-2021-31-01)

Canada challenged the United States’ application of safeguards on solar products from Canada as a violation of, among other provisions, Article 10.2.1. That obligation prevents the application of safeguards to a Party unless imports from that Party “account for a substantial share of total imports” and “contribute importantly to the serious injury.”

Dispute
Complaining Party: Canada
Responding Party: United States
Timeline
Panel Request: June 21, 2021
Final Report: February 15, 2022
Total Length of Panel Proceedings: 239 days
Result
The Panel found that the United States’ imposition of a safeguard tariff on Canadian solar products violated its commitments under Article 10.2.1 and 2.4.2 of CUSMA. On July 8, 2022, the United States and Canada agreed to a resolution under which the US suspended the application of solar safeguards to Canadian CSPV products, effective retroactively to February 1, 2022.

Point to: Canada

Automotive Parts and Vehicles – Rules of Origin

Mexico challenged the United States’ approach to determining regional value content for certain vehicles under CUSMA’s rules of origin (Article 4.2). It argued that regional value content should include 100% of the value of “core parts” that are found to be originating in a CUSMA Party, even when part of the value of the core part does not originate in a CUSMA Party. Canada joined Mexico in the dispute.

Dispute
Complaining Party: Mexico (joined by Canada)
Responding Party: United States
Timeline
Panel Request: January 6, 2022
Final Report: December 14, 2022
Total Length of Panel Proceedings: 342 days
Result
The panel held in favour of Mexico and Canada, clarifying that the entire value of originating core parts could be included in the regional value content calculation for the vehicle. The US, Mexico and Canada have 45 days from the date of the decision to reach a resolution, and for the US to bring itself into conformity with CUSMA. Alternatively, if the US does not bring itself into conformity, Canada and Mexico could legally retaliate against the US, and could target its automotive sector.

Point to: Mexico and Canada

Dairy TRQ Allocation Measures 2023 (CDA-USA-2023-31-01)

The United States challenged Canada’s dairy TRQ allocation policies for the second time, alleging that Canada breached its CUSMA obligations by: (1) limiting allocations to processors, further processors and distributors, thus making certain types of importers (e.g., retailers) ineligible to apply; (2) limiting eligible applicants and their allocation based on a market share allocation system with different criteria for different types of applicants; (3) requiring an entity to be active in the relevant Canadian sector for 12 months in order to be eligible for an allocation; and (4) restricting importers’ ability to utilize their TRQ quantities fully by requiring them to return unused allocations four months prior to the end of the year.

Dispute
Complaining Party: United States
Responding Party: Canada
Timeline
Panel Request: January 31, 2023
Final Report: November 10, 2023
Total Length of Panel Proceedings: 283 days
Result
A majority of the Panel found that CUSMA permitted Canada to apply these criteria or methods in its allocation or reallocation of dairy TRQs. As all of Canada’s measures were found to be consistent with CUSMA, there is no further obligation on the Parties to reach a resolution, and Canada may maintain the challenged measures.

Point to: Canada

Mexico Energy

Canada and the United States allege that 2021 amendments to Mexico’s energy laws prioritize electricity produced by Mexico’s state-owned entities over electricity produced by private producers in the dispatch of electricity to Mexico’s electricity grid. They allege that this is in violation of CUSMA’s non-discrimination obligation (Article 2.3), among other provisions.

Dispute
Complaining Party: Canada and United States
Responding Party: Mexico
Timeline
Panel Request:
Final Report:
Total Length of Panel Proceedings:
Result
Dispute ongoing.

Point to: –

Mexico Genetically Engineered Products

The United States alleges that Mexico is effectively banning imports of certain genetically engineered products, namely corn, canola, cotton and soybean, in violation of the sanitary and phytosanitary measures chapter of CUSMA (Chapter 9) as well as CUSMA’s prohibition on import restrictions (Article 2.11).

Dispute
Complaining Party: United States (joined by Canada)
Responding Party: Mexico
Timeline
Panel Request: August 17, 2023
Final Report:
Total Length of Panel Proceedings:
Result
Dispute ongoing.

Point to: –

Chapter 31 (Dispute Settlement) Total Score

Canada Mexico U.S.A.
Wins 3 1 1
Losses 1 0 3
Total Disputes 6 3 6

Chapter 10 (Trade Remedies Binational Panel Review)

Gypsum Board (CDA-USA-2020-10.12.01)

The complainant (CGC Inc.) challenged the Canadian International Trade Tribunal’s decision not to conduct an interim review of its 2017 injury determination with respect to gypsum board. It argued that the test the CITT applied to find a “regional market” was erroneous.

Dispute
Importing Party: Canada
Other Involved Party: United States
Timeline
Panel Request: November 26 2020
Final Report: June 14 2022
Total Length of Panel Proceedings: 565 days
Result
The Panel upheld the CITT’s decision not to conduct an interim review under the reasonableness standard.

Point to: Canada

Softwood Lumber CVD AR (USA-CDA-2020-10.12-01)

The complainants, a group that includes the Government of Canada, several Canadian provinces, lumber associations and producers, challenge the US Department of Commerce’s final CVD determination in the first administrative review in Certain Softwood Lumber Products from Canada.

Dispute
Importing Party: United States
Other Involved Party: Canada
Timeline
Panel Request: December 10, 2020
Result
Dispute ongoing.

Softwood Lumber AD AR (USA-CDA-2020-10.12-02)

The complainants challenge the US Department of Commerce’s final AD determination in the first administrative review in Certain Softwood Lumber Products from Canada. Canada, one complainant, challenges (1) Commerce’s application of the “differential pricing methodology” to determine the method of calculating weighted-average dumping margins, and (2) Commerce’s use of “zeroing” in its comparison methodologies.

Dispute
Importing Party: United States
Other Involved Party: Canada
Timeline
Panel Request: December 22, 2020
Result
Dispute ongoing.

Carbon and Certain Alloy Steel Wire Rod AD AR (USA-MEX-2021-10.12-01)

The complaint alleges that the US Department of Commerce’s final AD determination in the administrative review of the AD order in Carbon and Certain Alloy Steel Wire Rod from Mexico is unsupported by substantial evidence on the record or otherwise not in accordance with law. Specifically, Deacero argues that the Department of Commerce incorrectly accounted for s. 232 national security tariffs on steel and the United States’ commitments to Mexico in its determination of anti-dumping duties [6].

Dispute
Importing Party: United States
Other Involved Party: Mexico
Timeline
Panel Request: September 17, 2021
Result
Dispute ongoing.

Steel Concrete Reinforcing Bar AD AR (USAMEX-2021-10.12-02)

The complainant (Deacero) challenges the US Department of Commerce’s final AD determination in the administrative review of Steel Concrete Reinforcing Bar From Mexico. It argues that Commerce incorrectly accounted for s. 232 national security tariffs on steel and the United States’ commitments to Mexico in its determination of anti-dumping duties.

Dispute
Importing Party: United States
Other Involved Party: Mexico
Timeline
Panel Request: October 8, 2021
Result
Dispute ongoing.

Softwood Lumber CVD AR2 (USA-CDA-2021-10.12-03)

The complainants challenge the US Department of Commerce’s final CVD determination in the second administrative review of Certain Softwood Lumber Products from Canada.

Dispute
Importing Party: United States
Other Involved Party: Canada
Timeline
Panel Request: December 28, 2021
Result
Dispute ongoing.

Softwood Lumber AD AR2 (USA-CDA-2021-10.12-04)

The complainants challenge the US Department of Commerce’s final AD determination in the second administrative review of Certain Softwood Lumber Products from Canada.

Dispute
Importing Party: United States
Other Involved Party: Canada
Timeline
Panel Request: December 28, 2021
Result
Dispute ongoing.

Large Diameter Welded Pipe AD AR (USA-CDA-2022-10.12-01)

The complainants argue that the Department of Commerce incorrectly calculated Evraz’s revenue when determining antidumping duty margins in the administrative review of the AD order in Large Diameter Welded Pipe from Canada.

Dispute
Importing Party: United States
Other Involved Party: Canada
Timeline
Panel Request: March 4, 202
Final Report: n/a (terminated December 9, 2022)
Total Length of Panel Proceedings: 280 days
Result
The parties consented to terminate proceedings pursuant to Rule 75(2) of the USMCA Rules of Procedure for Article 10.12 (Binational Panel Review).

Softwood Lumber CVD AR3 (USA-CDA-2022-10.12-03)

The complainants allege that the US Department of Commerce’s final CVD determination in the third administrative review of the AD order in Certain Softwood Lumber Products from Canada is unsupported by substantial evidence on the record or otherwise not in accordance with law. For example, complainants argue that Commerce’s use of Nova Scotia as a benchmark for other provinces is unfounded, as are its findings with regard to specific grant and incentive programs.

Dispute
Importing Party: United States
Other Involved Party: Canada
Timeline
Panel Request: September 8, 202
Final Report:
Total Length of Panel Proceedings:
Result
Dispute ongoing.

Softwood Lumber AD AR3 (USA-CDA-2022-10.12-02)

The complainants allege that the US Department of Commerce’s final AD determination in the third administrative review of the AD order in Certain Softwood Lumber Products from Canada is unsupported by substantial evidence on the record or otherwise not in accordance with law. This includes, for example, Commerce’s use of certain methods for calculating the margin of dumping, which the complainants argue was flawed.

Dispute
Importing Party: United States
Other Involved Party: Canada
Timeline
Panel Request: September 8, 202
Final Report:
Total Length of Panel Proceedings:
Result
Dispute ongoing.

Steel Concrete Reinforcing Bar AD AR7 (USA-MEX-2023-10.12-1)

Grupo Acerero alleges that the US Department of Commerce’s final AD determination in the seventh administrative review of the AD order in Steel Concrete Reinforcing Bar from Mexico is unsupported by substantial evidence on the record and not in accordance with law. Specifically, it contends that Commerce erred by allocating credit note adjustments provided to customers on a per-unit basis rather than allocating them to sales on a monthly, customer-specific basis.

Dispute
Importing Party: United States
Other Involved Party: Mexico
Timeline
Panel Request: July 6, 2023
Final Report:
Total Length of Panel Proceedings:
Result
Dispute ongoing.

Softwood Lumber CVD AR4 (USA-CDA-2023-10.12-01)

The complainants allege that the US Department of Commerce’s final AD determination in the fourth administrative review of the CVD order in Certain Softwood Lumber Products from Canada is unsupported by substantial evidence on the record or otherwise not in accordance with law. They raise several allegations, including Commerce erred by treating stumpage prices, tax credits and other non-tax programs as countervailable subsidies.

Dispute
Importing Party: United States
Other Involved Party: Canada
Timeline
Panel Request: August 31, 2023
Final Report:
Total Length of Panel Proceedings:
Result
Dispute ongoing.

Chapter 10 (Trade Remedies Binational Panel Review) Total Score

Canada Mexico U.S.A.
Wins 1 0 0
Losses 0 0 0
Total Disputes 9 3 12

Chapter 14 (Investor-State Dispute Settlement) Disputes

Finley Resources et al. v. Mexico (ICSID Case No. ARB/21/25)

The claimants entered into several oilfield service contracts with Petroleos Mexicanos (“Pemex”), Mexico’s state-owned oil company. They allege that Pemex breached those contracts, leading to litigation that either had to be abandoned or was wrongly decided in favour of Pemex. The claimants also allege that Mexico compromised with and paid similarly situated Mexican oilfield service companies. The claims are brought under the national treatment (Article 14.4) and minimum standard of treatment (Article 14.6) obligations of USMCA, in addition to comparable NAFTA obligations.

Dispute
Claimants: Finley Resources, Inc. (US), MWS Management, Inc. (US), Prize Permanent Holdings, LLC (US)
Respondent: Mexico
Timeline
Notice of Arbitration: March 25, 2021
Final Report:
Total Length of Panel Proceedings:
Result
Dispute ongoing.

Chapter 14 (Investor-State Dispute Settlement) Total Score

Canada Mexico U.S.A.
Wins
Losses
Total Disputes 1

Overview of Dispute Settlement Paths under CUSMA

The CUSMA contains three principal dispute settlement mechanisms: binational panel review under Chapter 10, investor-state dispute settlement under Chapter 14, and the general dispute settlement provisions of Chapter 31.

The appropriate dispute settlement path depends on the disputing parties (e.g., state vs. state or investor vs. state) and the obligation the party seeks to enforce (e.g., anti-dumping or countervailing duty, investment, or another CUSMA obligation).

We provide an overview of these dispute settlement mechanisms below.

CUSMA’s Trade Remedies Binational Panel Review (Chapter 10)

Under Chapter 10, a Party may request panel review of another Party’s decisions to impose antidumping and countervailing duties. The panel review process effectively replaces recourse to the courts in the country in question [7]. The panel may either uphold a final determination or remand it back to the decision maker [8]. No appeals are permitted [9].

Parties establish and maintain a roster of 75 individuals (25 from each Party) to serve as panelists for the purpose of adjudicating these disputes. When a Party makes a request for a panel, each involved Party appoints two panelists and generally determine by lot (coin toss) which Party will appoint the fifth panelist.

Overview of Dispute Settlement Paths under CUSMA McMillan LLP 7 CUSMA’s Investor-State Dispute Settlement (Chapter 14)

Under Chapter 14, investors of one Party may bring a claim against the Party in which the investment has taken place. Unlike other forms of dispute settlement under CUSMA, an investor may submit a claim on its own behalf and obtain a monetary damages award against the responding Party [10].

CUSMA’s investment arbitration mechanism is only available between the United States and Mexico [11]. While Canadian and US investors may continue to bring NAFTA-based investment claims until July 2023, their access to the mechanism will expire thereafter. Investment arbitration between Canada and Mexico remains available under the CPTPP, which contains similar investment obligations to CUSMA.

Canada remains bound by the commitments set out in CUSMA’s investment chapter. CUSMA Parties, including Canada, may enforce these obligations against each other through CUSMA’s state-to-state dispute settlement mechanism under Chapter 31, discussed further below.

General Dispute Settlement (Chapter 31)

State-to-state dispute settlement under CUSMA Chapter 31 is available to enforce most obligations under CUSMA [12]. Under chapter 31, any Party may request consultations with any other Party regarding an actual or proposed measure if it considers the measure inconsistent with a CUSMA obligation or if a benefit under the agreement is being nullified or impaired [13].

Chapter 31 requires the Parties to enter into consultations before a panel is established to hear a dispute [14]. However, if a dispute is not resolved through consultation, a panel may be requested. The default procedure is for the parties to select a chair (a non-national of either party) and each disputing Party then appoints two panelists from a roster who are citizens of the opposing Party’s country [15].

The rules of procedure provide a right to at least one hearing before the panel as well as the opportunity to provide written submissions [16]. Chapter 31 does not permit monetary damages. Where the panel finds that a measure is inconsistent with a CUSMA obligation, the disputing Parties must endeavor to agree to a resolution or, if no agreement is reached, the complaining Party may “retaliate” to equivalent effect [17].


[1] Known in the United States as the United States–Mexico-Canada Agreement (“USMCA”)
[2] The value of international trade between Canada, Mexico and the United States was over USD $ 1.1 trillion in merchandise in 2019.
[3] For example, if a country launches a dispute against another with 10 unique claims, and that country is successful in only one of those 10, it is entirely possible that the Scoreboard would accord the point to the defending party (especially if the only claim on which the complaining party was successful was minor or of less important).
[4] These are Chapter 10, Trade Remedies Binational Panel Review; Chapter 14, Investor-State Dispute Settlement as between Mexico and the United States; and Chapter 31, General Dispute Settlement.
[5] This does not include disputes that continue under NAFTA, which we have excluded from the Scoreboard.
[6] The United States imposed section 232 tariffs of 25% on Mexican steel products in 2018.
[7] CUSMA, Article 10.12.1
[8] CUSMA, Article 10.12.8.
[9] CUSMA, Article 10.12.13. However, an Extraordinary Challenge Committee procedure is available to Parties for certain serious allegations concerning the conduct of an antidumping or countervailing duty investigation, such as judicial bias.
[10] CUSMA, Article 14.D.3
[11] CUSMA, Annex 14-D
[12] Chapter 31 does not apply to certain disputes, such as those arising under chapter 21 (Competition Policy), chapter 25 (Small and Medium-Sized Enterprises), chapter 26 (Competitiveness) and those concerning the TBT Agreement. Further, the procedures are modified for disputes arising from certain obligations, such as chapter 17 (Financial Services), chapter 23 (Labor), and chapter 27 (Anticorruption).
[13] CUSMA, art 31.2
[14] CUSMA, art 31.4
[15] CUSMA, art 31.9.
[16] CUSMA, art 31.11.
[17] CUSMA, art 31.19

by William Pellerin and Philip Kariam

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 2023

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