Public Interest Investigations (Section 45)
PREFORMED FIBREGLASS PIPE INSULATION WITH A VAPOUR
BARRIER, ORIGINATING IN OR EXPORTED FROM THE UNITED STATES OF
TABLE OF CONTENTS
Ottawa, Friday, January 28, 1994
PREFORMED FIBREGLASS PIPE INSULATION WITH A VAPOUR BARRIER,
ORIGINATING IN OR EXPORTED FROM THE UNITED STATES OF
On November 19, 1993, pursuant to subsection 43(1) of the
Special Import Measures Act  (SIMA), the Canadian International Trade Tribunal
(the Tribunal) found that the dumping in Canada of preformed
fibreglass pipe insulation with a vapour barrier, originating in or
exported from the United States of America, had caused, was causing
and was likely to cause material injury to the production in Canada
of like goods.
During the course of the inquiry which led to the finding of
material injury, several parties expressed an interest in making
representations concerning the public interest pursuant to section
45 of SIMA. On September 29, 1993, the Tribunal informed counsel
and parties that they would be given the opportunity to make such
representations if the Tribunal were to make a finding of material
injury. On November 24, 1993, the Tribunal invited interested
persons to make written representations to the Tribunal on or
before December 20, 1993, concerning the public interest. Persons
wishing to respond to these representations were directed to do so
on or before January 7, 1994. The Tribunal advised that, following
consideration of the representations, it would take a view as to
whether the representations demonstrated that there was a public
interest issue worthy of further investigation.
Six parties made representations to the Tribunal concerning the
Counsel for the Director of Investigation and Research,
Competition Act (the Director), submitted that the
imposition of anti-dumping duties at or near the full margin of
dumping would curtail effective import competition, would confer a
benefit to Manson Insulation Inc. (Manson) beyond the elimination
of material injury and would likely reduce economic welfare in
Canada. He also contended that anti-dumping duties at or near the
full margin of dumping could lead Manson to expand its productive
capacity to supply more, and possibly all, of the domestic market.
In counsel's submission, any anti-dumping duties imposed should not
be set at a level that could distort the incentives for investment
in productive capacity.
Counsel for Owens-Corning Fibreglas Corporation (Owens-Corning)
and Owens-Corning Fibreglas Canada Inc. (Fibreglas) maintained that
the imposition of anti-dumping duties in the full amount would
result in protection far in excess of any injury caused to Manson
and result in unwarranted costs to the Canadian economy in general
and the construction sector in particular. According to counsel,
this situation could have an adverse impact on competition in the
market for the subject goods in Canada as well as for other related
products, some of which are produced by Fibreglas at its Canadian
Moreover, the imposition of anti-dumping duties in a punitive
manner could discourage rationalizations of the type carried out by
Owens-Corning and Fibreglas, and which have benefited Canada.
Counsel for Fibreglas contended that normal values for the subject
goods should not exceed the non-injurious undertaking prices agreed
to by parties on June 18, 1993. Further, counsel submitted that no
normal values should be imposed, or anti-dumping duties collected,
on pipe sizes not manufactured by the Canadian producer or on pipe
sizes Manson imports now, or at any time in the future, from the
United States or any third country.
The Master Insulators' Association of Ontario Inc. submitted
that the imposition of the anti-dumping duties in the full amount
would eliminate competition in the marketplace. The resulting
monopoly would enable Manson to choose those contractors to whom it
will sell at competitive prices and, thus, to decide which
contractors and distributors will remain in the industry.
Burnaby Insulation Supplies Ltd. (Burnaby) submitted that the
anti-dumping duties would create a monopoly for their competitor,
Crossroads C&I (Crossroads), a Manson-associated company. Its
selling prices would preclude Burnaby's ability to compete in the
marketplace. Burnaby's customers, which are insulation contractors,
would have no choice of suppliers. In order to remain competitive,
Burnaby argued, these contractors would have to purchase their
preformed fibreglass pipe insulation requirements from Crossroads.
Burnaby also questioned why anti-dumping duties are applied to
sizes of preformed fibreglass pipe insulation that Manson cannot or
does not manufacture.
Glass-Cell Fabricators Ltd. stated that the imposition of
anti-dumping duties was not in the public interest.
Counsel for Manson contended that it is not rational to think
that Manson, with its limited capacity, would price its goods much
differently from the landed cost of U.S. goods and that there was
no discernible public interest which would call for intervention by
way of a section 45 recommendation to hold the prices lower.
Counsel argued that the goods pay for themselves at "normal prices"
through energy conservation and that the initial capital cost of
the goods was minuscule in relation to the cost of the buildings in
which they are used.
In reply to the representations of other parties, counsel for
Manson stated that the Director's "welfare economics" methodology
would produce the same recommendation in virtually all anti-dumping
or countervailing duty cases and that accepting this argument would
vitiate the anti-dumping system. In relation to competition
concerns, counsel noted that the Director has the means to address
this issue under his own legislation.
With regard to the allegation that the price undertakings
negotiated in June 1993 would result in prices high enough to
remove any injury being suffered by Manson, counsel argued that
these prices were negotiated prior to the Tribunal's injury
inquiry. According to counsel for Manson, a complainant has an
incentive to balance the certainty of protection offered by price
undertakings against the uncertainty of a finding of material
injury resulting from a Tribunal inquiry and the cost of the
inquiry process. Therefore, a complainant may be willing to accept
prices that would remove less than the full amount of injury in
order to ensure protection and avoid the costs associated with a
Tribunal inquiry. Counsel also submitted that the full amount of
anti-dumping duties is not yet known and will not be known until
the Department of National Revenue (Revenue Canada) completes its
determinations pursuant to section 55 of SIMA.
Subsection 45(1) of SIMA provides that where, after making a
finding of material injury, the Tribunal is of the opinion that the
imposition of anti-dumping duties, in whole or in part, would not
or might not be in the public interest, it shall report its opinion
to the Minister of Finance with a statement of the facts and
reasons that caused it to be of that opinion.
The Tribunal is of the view that SIMA, in its entirety, was
enacted by Parliament in the public interest. The primary object of
SIMA is to protect Canadian producers from injury caused by dumped
or subsidized imports. In an anti-dumping case, where the Tribunal
finds material injury under section 43 of SIMA, pursuant to section
3 of SIMA, an anti-dumping duty in an amount equal to the margin of
dumping must be imposed on imports of dumped goods to which the
finding applies. The Tribunal is without jurisdiction to order that
duties in less that the full amount be imposed. Under subsection
45(1) of SIMA, the Tribunal shall report to the Minister of Finance
if it is of the opinion that the imposition of an anti-dumping duty
in whole or in part would not, or might not, be in the public
interest. To come to such an "opinion," the Tribunal must first be
satisfied, on the particular facts of the case, that there is a
sufficiently compelling public interest issue to warrant a
departure from the primary object of SIMA.
In considering the public interest question, the Tribunal has
reviewed carefully the representations summarized above, as well as
the evidence and testimony adduced during the section 42 inquiry.
The Tribunal is of the view that, if there is a public interest
issue in this case, it would relate to the allegation that the
imposition of anti-dumping duties may curtail effective price
competition in the domestic market for the subject goods.
In this regard, the Tribunal notes that Manson is the sole
producer of preformed fibreglass pipe insulation with a vapour
barrier in Canada, that there are no close substitutes for the
subject goods, that there is little likelihood of competition from
the subject goods produced in countries other than the United
States, and that the price of the subject goods from the United
States will rise with the imposition of the anti-dumping
Thus, Manson's only competition in the Canadian domestic market
is from imports of the subject goods from the United States. In
this regard, the Tribunal is of the view that the imposition of the
full amount of the anti-dumping duties would not exclude the U.S.
subject goods from the Canadian market nor interfere with effective
price competition between the subject goods made in the United
States and like goods made in Canada.
The evidence available to the Tribunal indicates that Manson is
not able to supply the entire domestic market for preformed
fibreglass pipe insulation with a vapour barrier. The firm's plant
capacity is constrained by plant equipment limits and by
raw-material supply. Because anti-dumping duties, generally
speaking, are in place for five years unless there is a review and
an order to continue the finding, the Tribunal does not consider it
likely that the anti-dumping duties will encourage Manson to invest
in plant and equipment so as to serve the entire domestic market.
In light of these circumstances, the Tribunal is of the view that
the subject goods imported from the United States will continue to
compete in the domestic marketplace.
Moreover, in these circumstances, the Tribunal anticipates that
Manson will respond to the imposition of the anti-dumping duties by
raising its prices. It is reasonable to expect that these prices
will not rise above the applicable normal values (which generally
reflect U.S. market prices), plus applicable customs duties and
Thus, the Tribunal finds it reasonable to believe that the
subject goods imported from the United States will continue to
compete in the Canadian domestic marketplace. However, the price
points around which that competition will take place will likely
rise from those of the dumped prices to those of the normal values
of the U.S. preformed fibreglass pipe insulation with a vapour
barrier sold in the U.S. domestic market, plus any applicable
customs duties and transportation costs. Effective price
competition, therefore, should continue in Canada between the like
goods made in Canada and the subject goods made in the United
States, albeit at a higher price level.
In this respect, it is useful to reflect on the price levels
represented by the normal values established by Revenue Canada.
Thus far in this case, Revenue Canada has determined normal values
on the basis of the U.S. domestic prices for like goods or, with
respect to some product sizes sold by certain exporters, on the
basis of U.S. production costs plus amounts for expenses and
profits. The anti-dumping duties will be assessed only to the
extent necessary to compensate for dumping margins on specific
The Tribunal has carefully considered the other arguments
advanced in favour of it forming an opinion under subsection 45(1)
The Director contended that the imposition of anti-dumping
duties in the full amount in this case would likely reduce economic
welfare in Canada. It is true, in this case, that the imposition of
anti-dumping duties in the full amount is likely to cause prices
for preformed fibreglass pipe insulation with a vapour barrier to
rise. However, that is a natural consequence of the regulatory
scheme established by Parliament under SIMA. The economic welfare
argument would lead to the conclusion that it is in the public
interest not to apply anti-dumping duties in the full amount in
virtually every case that comes before the Tribunal. This
conclusion would conflict with the public-policy purpose that
Parliament recognized in providing protection against injury caused
by dumping to Canadian industry.
It is also argued that, by raising prices in the domestic
marketplace, the imposition of anti-dumping duties would give
Manson a more dominant position in the market and possibly enable
it to abuse that position. For instance, it is alleged that Manson
may practice price discrimination between contractors or otherwise
favour certain contractors over others. The Tribunal cannot
forecast with certainty what precise events may unfold in the
marketplace. If any anti-competitive activities should materialize,
however, the Tribunal is of the view that the proper authority to
address them is the Director, under the Competition Act.
Some parties argued that duties should be imposed only to the
extent that is necessary to remove the injury to Manson. The
Tribunal takes a similar view regarding this generic argument as it
did regarding the Director's economic welfare argument.
Specifically, in SIMA, Parliament has established a statutory
scheme whereby, upon a finding of material injury, duties are
imposed on imports of dumped goods in an amount equal to the full
margin of dumping. Under subsection 45(1) of SIMA, the Tribunal
shall report to the Minister of Finance if it is of the opinion
that the imposition of an anti-dumping duty, or the imposition of
such a duty in the full amount, would not or might not be in the
public interest. The Tribunal shall make a report if it is
satisfied that there is a sufficiently compelling public interest
issue to warrant a departure from the primary object of SIMA. The
Minister of Finance may use the Tribunal's report in such manner as
he considers appropriate.
Finally, some parties submitted that, because Manson does not
produce certain sizes of preformed fibreglass pipe insulation with
a vapour barrier, the anti-dumping duty on those sizes should be
reduced to zero. This submission, in effect, amounts to a request
for an exclusion from the finding of material injury for the pipe
insulation sizes in question. The Tribunal is of the view that
section 45 of SIMA is not the appropriate provision under which to
request an exclusion from a finding made under section 43 of SIMA.
Such arguments are more properly made during an inquiry conducted
pursuant to section 42. Section 43 expressly provides the Tribunal
with the power to declare to what goods its order or finding
applies. The Tribunal has used that power from time to time to
exclude certain products, producers and countries from the effects
of its orders and findings, but did not receive any requests to
exclude specific sizes of pipe insulation during the section 42
inquiry. In the Tribunal's view, requests for exclusion are not
properly part of a consideration pursuant to section 45.
For the above reasons, the Tribunal is not convinced that there
is a public interest issue worthy of further investigation under
section 45 of SIMA. As a consequence, no report will be issued to
the Minister of Finance.
Robert C. Coates, Q.C.
Robert C. Coates, Q.C.
Sidney A. Fraleigh
Sidney A. Fraleigh
1. R.S.C. 1985, c.
2. R.S.C. 1985, c.
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Initial publication: August 12, 1997