Special Import Measures Act

• Author: Mohan Prabhu
• Pages: 299-395

A | Introduction

299

Chapter 3

Special Import Measures Act1

A. INTRODUCTION

The primary purpose of the Special Import Measures Act (SIMA) is to pro-

tect Canadian manufacturers and producers by levelling the playing f‌ield

between exporting countries with which Canada has trade relations and

Canadian manufacturers and producers of goods and merchandise, by

counteracting unfair and aggressive competition that materially injures or

threatens to cause material injury resulting in disruption of Canadian mar-

kets, through the special measures provided by the Act. Unfair competition

is caused not only by below-normal pricing but also by the consequence

of various forms of government subsidy that enable foreign manufacturers,

producers, and exporters to reduce their production costs and sell at lower

prices in domestic as well as foreign markets. An analysis of facts in various

investigations conducted by the Canadian Border Services Agency (CBSA)

and the Tribunal reveals that f‌inancial subsidies granted to manufacturers,

producers, and exporters take various forms, both f‌inancial and non-f‌inan-

cial, including tax preferences; write-of‌f of research and development costs

against income; cheap leases of government lands that enable extraction of

timber, minerals, oil, and gas; and state trading, especially in grains.

The process begins with a preliminary investigation into dumping or

subsidizing, or both, by the CBSA on the basis of valid complaints from the

Canadian industry or producers, followed simultaneously by an inquiry by

the Tribunal. If the CBSA’s investigation f‌inds that the complaints are valid,

1 RSC 1985, c S-15 [SIMA].

CANADA’S LAWS ON IMPORT AND EXPORT

A | Introduction

300

it is authorized to impose provisional duties on all imports from the export-

ers concerned as of the date the investigation commenced. The provisional

duties, as the term implies, are only temporary, though payable immediately,

and must be conf‌irmed by the Tribunal through a f‌inding of injury. When

that f‌inding is made, and it has become f‌inal, the SIMA dumping or counter-

vailing duties, or both, are payable by the importer of the goods as from

the date of the f‌inding. If the Tribunal does not f‌ind injury, the provisional

duties have to be refunded. The obligation to pay the duties is imposed on

the importers who will, if they can, pass them on to Canadian manufactur-

ers and producers, who will ultimately raise the prices of their products. If

the imported goods continue to be cheaper than similar goods produced in

Canada, the ultimate losers are Canadians, hurting both the consumer and

the economy. To mitigate the ef‌fects of the levy, however, the Tribunal may

conduct a public interest investigation and, at the conclusion of its inquiry,

may, and usually does, invite Canadian manufacturers who were dependant

on the imports, and public interest groups, to make submissions, following

which the Tribunal may make a recommendation to the Minister of Finance

to reduce or eliminate the levies.

The SIMA applies to goods imported from any country. Specif‌ic Parts of

the Act apply to goods imported from the United States (Part II) and from the

NAFTA countries (Part I.1), but the operation of Part II (goods imported from

the United States) is suspended while Part I.1 (goods imported from a NAFTA

country) is in operation.2 The Governor in Council, on the recommendation

of the Minister of Finance, may by regulations prescribed under section 14,

exempt any goods or class of goods imported from any country from the ap-

plication of the SIMA, and, specif‌ically, goods imported from Chile, the latter

during a period and subject to conditions specif‌ied in the regulations.

Canadian exporters are not immune from similar protective measures

taken by other countries, including free trade partners, if they too engage in

unfair competition or receive f‌inancial or non-f‌inancial subsidies from vari-

ous levels of the Canadian government. A few of the signif‌icant measures

imposed on Canadian exporters, especially on softwood lumber exports, are

referred to in this chapter.

Safeguard measures taken under the Customs Tarif‌f that result in the im-

position of surtaxes and tarif‌f rate quotas have a similar purpose. They have

been discussed in Chapter 2. Unlike those measures, the SIMA anti-dumping

and countervailing duties are applied when there is evidence that the dump-

2 Ibid, s 77.1(2).

Chapter 3: Special Import Measures Act

B | Meaning and Occurrence of Dumping and Subsidizing

301

ing or subsidizing by exporters has caused, or is likely to cause, injury to, or

retardation of, production in Canada of like goods. Unlike the Customs Tar-

if‌f safeguard measures, there is no limitation on the amount of anti-dump-

ing and countervailing duties so long as they do not exceed the margins of

dumping or subsidy, and those margins or volumes of export to Canada are

not insignif‌icant or negligible.

Anti-dumping and countervailing duties are authorized by Article VI of

the General Agreement on Tarif‌fs and Trade (GATT) as a quid pro quo to global-

ization of trade advocated by the World Trade Organization (WTO), of which

Canada and over 150 other countries are members. The SIMA inquiries and

investigations must be consistent with the GATT Article VI procedures; if

they are not adhered to and the facts are disputed, the aggrieved country can

appeal to the appeals body of the WTO, whose decisions are binding.

In this chapter, except in respect of the Dispute Settlement provisions

of Parts I.1 and II, the word “Minister” is def‌ined by the Act to mean the Min-

ister of Public Safety and Emergency Preparedness, who acts through the

CBSA. In some provisions of the Act, another Minister is named, who may

be the Minister of Finance or the Minister of International Trade. The latter

is specif‌ically named in a few provisions of Part I.1. If the word “Minister” is

used alone in the Act, other than in Parts I.1 and II, it stands for the Minister

of Public Safety and Emergency Preparedness.

Section 98 of the Act expressly authorizes the Governor in Council, by

order, to modify or suspend the application, with respect to any country, of

any provision of the SIMA, in whole or in part, for the purpose of ensuring

that the SIMA procedures comply with the GATT Subsidies Agreement.

B. MEANING AND OCCURRENCE OF DUMPING AND

SUBSIDIZING

1) Dumping

Dumping and subsidizing are two concepts that are central to the SIMA.

Dumping is counteracted by levying an anti-dumping duty to of‌fset its ef-

fects, subsidizing by levying a countervailing duty to of‌fset the amount of

subsidy granted to exporters by their governments.

a) Meaning of Dumping and Margin of Dumping

According to section 2(1), dumping occurs when an exporter sells goods

to an importer in Canada at prices that are lower than those the exporter