SOR/2017-28 February 24, 2017
Gypsum Board Products Anti-dumping Duty Remission Order, 2017
P.C. 2017-175 February 24, 2017
His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 115 (see footnote a) of the Customs Tariff (see footnote b), makes the annexed Gypsum Board Products Anti-dumping Duty Remission Order, 2017.
Gypsum Board Products Anti-dumping Duty Remission Order, 2017
1 The following definitions apply in this Order.
Act means the Special Import Measures Act. (Loi)
Agency means the Canada Border Services Agency. (Agence)
gypsum board products means subject goods as defined in paragraph 30 of the finding of the Canadian International Trade Tribunal issued on January 4, 2017 in Inquiry Number NQ-2016-002. (produits de plaques de plâtre)
import value means the value calculated for B in the formula set out in paragraph 2(1)(b) as if it were the export price in sections 24 and 25 of the Act. (valeur à l’importation)
reference value means the value calculated for A in the formula set out in paragraph 2(1)(b). (valeur de référence)
2 (1) Remission is granted of the anti-dumping duties paid or payable under the Act for each gypsum board product in the amount by which such duties exceed the greater of
- (a) 0; and
- (b) an amount calculated by the following formula:
A − B
- A is the reference value that corresponds to the normal value, per thousand square feet, calculated at the time of the final determination rendered, in respect of the investigation, under section 41 of the Act for future shipments of the gypsum board product, reduced by 32.17%; and
- B is the import value per thousand square feet of the gypsum board product calculated,
- (i) if paragraph 25(1)(b) of the Act applies, under section 25 of the Act, without any deduction for duties set out in paragraph 25(1)(c) or (d) of the Act, other than those imposed by the Customs Tariff; or
- (ii) in all other cases, under section 24 of the Act.
(2) If the import value calculated for B in the formula set out in subsection (1) is less than the reference value calculated for A in that formula, the amount calculated under subsection (1) is reduced by the difference between the reference value and the import value.
(3) In this section, investigation means the investigation that was initiated on June 8, 2016 under subsection 31(1) of the Act and that led to the finding of the Canadian International Trade Tribunal issued on January 4, 2017 regarding the injurious dumping of gypsum board products.
3 The reference value for each gypsum board product is indexed annually, beginning on January 1, 2018, according to the Industrial Product Price Index for gypsum product manufacturing for the 12-month period ending on September 30 of the immediately preceding calendar year.
4 Remission is granted on the following conditions:
- (a) a claim for remission is made by the importer to the Minister of Public Safety and Emergency Preparedness within two years after the day on which the gypsum board products are accounted for under section 32 of the Customs Act;
- (b) on request by the Agency, the importer files with the Agency the evidence or information that the Agency requires to determine eligibility for the remission;
- (c) the importer agrees that it is subject at any time, including after the remission, to audit by the Agency for the purpose of determining whether the information supplied by the importer under paragraph (a) or (b) is accurate and complete and whether the facts on which the Agency relied or intends to rely to determine the eligibility for remission remain unchanged in all material respects; and
- (d) at the time when the Agency conducts the audit referred to in paragraph (c), the Agency must be able to conclude that the information supplied remains accurate and complete and that the facts remain unchanged in all material respects.
Coming into Force
5 This Order comes into force on the day on which it is registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Order.)
On October 13, 2016, the Government of Canada asked the Canadian International Trade Tribunal (CITT) to conduct an inquiry into whether anti-dumping duties on gypsum board (drywall) imported from the United States into Western Canada are in Canada’s economic, trade and commercial interest, and to make recommendations on any remedy that could be taken. As a result of its inquiry, the CITT issued a number of recommendations, including a recommendation that final anti-dumping duties be reduced, in order to address their unintended impacts. The Order responds to that recommendation.
Anti-dumping duties are imposed to address instances where the dumping of imports into the Canadian market injures Canadian producers. Anti-dumping duties remedy the injurious effects of dumping by increasing the price of imported goods to a level that reflects non-dumped prices.
In Canada, anti-dumping duties may be imposed pursuant to the Special Import Measures Act (SIMA), following investigations by the Canada Border Services Agency (CBSA) and the Canadian International Trade Tribunal (CITT), which are conducted in an independent, impartial and transparent manner.
When anti-dumping measures are imposed, the CBSA issues confidential “normal values” to each cooperative exporter in the investigation, for each product they export. Anti-dumping duties payable for a given importation is equal to the difference between the normal value and the export price. Therefore, normal values create a minimum price for the importation of subject goods. Importers may avoid paying anti-dumping duties by importing goods that are priced at or above the normal value.
On September 6, 2016, provisional anti-dumping duties (ranging from 105% to 276%) were imposed on drywall imported from the United States into Western Canada (British Columbia, Alberta, Saskatchewan, Manitoba, Yukon and the Northwest Territories) following a preliminary determination of dumping by the CBSA and a preliminary finding of injury by the CITT.
After the imposition of provisional duties, construction stakeholders in Western Canada raised concerns that the anti-dumping duties were having a significant impact, including large price increases and supply shortages in Western Canada.
Given the exceptional circumstances, on October 13, 2016, the Government of Canada asked the CITT to conduct an inquiry into whether the duties are in Canada’s economic, trade and commercial interest and to make recommendations on any remedy that could be taken. The resulting inquiry was an independent, arm’s length process that allowed the CITT to hear from a wide range of stakeholders and the public.
On January 4, 2017, the CITT issued its report finding that, while the dumped drywall from the United States had injured the Western Canadian producer (CertainTeed Gypsum Canada Inc.), the imposition of anti-dumping duties in their full amount is not in Canada’s economic, trade and commercial interest. In its Statement of Reasons (published January 19, 2017) the CITT noted that the full amount of duties would substantially reduce competition in the Western Canadian market, which would leave businesses that use drywall with fewer choices, disrupt a well-established supply chain and lead to potential supply shortages.
In its report, the CITT made a number of recommendations to address different impacts of the duties. One of its recommendations was that final anti-dumping duties should be reduced, by capping the maximum amount of anti-dumping duties payable to 43% of the export price for any given transaction, in order to mitigate the unintended impacts of the duties while allowing the domestic producer to generate a profitable return on sales.
The Order responds to the CITT’s recommendation concerning the reduction of the anti-dumping duties applicable to drywall imported from the United States for use or consumption in Western Canada.
The Order establishes “reference values” for drywall products imported from the United States for use or consumption in Western Canada. These reference values are 32.17% lower than the normal values established by the CBSA in its dumping investigation. The Order allows for the remission of anti-dumping duties imposed pursuant to SIMA that are in excess of the difference between the reference value and the export price thereby establishing a new minimum price for importation of drywall from the United States into Western Canada that is lower than normal values. The Order is intended to result in the same level of duty reduction as the CITT recommended.
This approach addresses potential circumvention concerns as the amount of anti-dumping duty payable will be anchored to a fixed normal value rather than be a percentage of a variable export price. This approach also encourages exporters to increase their export prices in order to avoid paying anti-dumping duties.
However, for importers that import goods below this reference value, or in situations where the importer is related to the exporter, and resells drywall in the Western Canadian market at prices that injure the Canadian producer by absorbing the impact of the duties, the amount of anti-dumping duty remitted will be reduced by an amount equal to the difference between the reference price and the export price.
Under the Order, remission is granted on the condition that the importer makes a request to the Minister of Public Safety and Emergency Preparedness, and agrees to verification by the CBSA regarding the eligibility and accuracy of the remission.
Any importer who makes the request for remission would choose to do so of its own accord. Therefore, the “One-for-One” Rule does not apply to this Order, as it does not impose any new direct administrative costs on businesses.
Small business lens
The small business lens does not apply to this Order, as there are no costs being imposed on small business.
The CITT’s recommendation was made following an inquiry process that included extensive public consultations with written submissions and oral hearings in which the CITT heard from a wide range of interested parties, including representatives of the Western Canadian producer, drywall contractors and distributors, the Competition Bureau, provincial governments, exporters and related importers.
Since the issuance of the CITT’s report and recommendations, a number of stakeholders that participated in the CITT’s inquiry have also made submissions to the Government and met with Finance Canada officials concerning the appropriate implementation of the CITT’s recommendation. In particular, both the Canadian producer and importers proposed that the structure of duty reduction be modified to align more closely to the normal operations of Canada’s existing anti-dumping duty assessment system and to better address potential circumvention concerns.
The Government asked the CITT to inquire into the impacts of anti-dumping duties on imported drywall from the United States so that the Government could act quickly to address the unintended consequences of anti-dumping duties on drywall imports on the basis of impartial advice from the CITT.
Consistent with the CITT’s recommendation, the reduction of anti-dumping duties strikes a balance between the protection afforded under SIMA for the domestic producer from the injurious effects of dumped imports and ensuring that anti-dumping duties do not impose an unnecessary burden for downstream businesses that use drywall.
The Order is intended to result in a target market price in the Western Canadian market. This market price (calculated based on business confidential information of the Western Canadian producer) allows the domestic producer to obtain a reasonable return on sales while allowing U.S. imports to ensure competition and greater availability of choice to users, and mitigates the potential for supply shortages.
While the Order differs in form to the recommendation of the CITT, in which the maximum duty was expressed as a percentage of the export price, it reflects the CITT’s underlying reasoning and intent by seeking to mitigate the unintended impacts of the duties while allowing the domestic producer to generate a profitable return on sales. The Order is intended to result in the same level of duty reduction as the CITT recommended, but in a manner that more closely aligns with Canada’s existing anti-dumping duty assessment system.
The Order does not result in foregone revenue to the Government. Canada’s anti-dumping duty system provides an incentive for exporters to sell goods at a price equal to, or greater than, normal values to avoid anti-dumping duties payable on imported goods. Similarly, as a result of the Order, U.S. exporters are expected to price exports equal to, or greater than, new reference values in order to avoid having to pay anti-dumping duties.
Implementation, enforcement and service standards
The CBSA will administer the Order and ensure compliance with its terms and conditions in the normal course of its administration of customs and tariff-related legislation and regulations.
International Trade Policy Division
Department of Finance