- SAFEGUARD INQUIRIES
- GLOBAL SAFEGUARD INQUIRY PROCESS
Safeguard measures are intended to protect domestic industries against injury caused by an increase in the volume of imports. Safeguard inquiries can be distinguished from injury inquiries conducted pursuant to section 42 of the Special Import Measures Act on the basis that it is not necessary for imports to have been dumped and/or subsidized for a safeguard inquiry to take place.
The Tribunal has the mandate to conduct two different types of safeguard inquiries under the Canadian International Trade Tribunal Act (the CITT Act),1 depending on the source of the imported goods identified by Canadian producers and the type of complaint. In global safeguard inquiries, the Tribunal looks at the impact of imports of goods from all countries on Canadian producers of similar products. In safeguard inquiries specific to the People’s Republic of China (China), the Tribunal looks at the impact of goods imported from China.2
Canada’s safeguard legislation implements the Tribunal’s rights and obligations under the Agreement Establishing the World Trade Organization (the WTO Agreement), with regard to global safeguard inquiries, and the Protocol on the Accession of the People’s Republic of China to the World Trade Organization (the Protocol), with regard to safeguard inquiries specific to China. The provisions relating to safeguard inquiries specific to China under the Protocol will expire on December 11, 2013.
In global safeguard inquiries, the Tribunal determines if there is “serious injury” or threat of “serious injury”. Under the CITT Act, “serious injury” is defined as “a significant overall impairment in the position of the domestic producers.” The CITT Act requires that the increased imports be in such quantities and under such conditions as to be a “principal cause” of the injury. A “principal cause” is defined as “an important cause that is no less important than any other cause of the injury”. In assessing whether there is serious injury, the Regulations direct the Tribunal to consider whether there has been a significant increase in imports and significant price undercutting, depression or suppression. Other important factors that the Tribunal must examine include the impact of the imported goods on domestic producers’ output, sales, market share, profits, capacity utilization, inventories and employment.
The Tribunal has the mandate to conduct two types of safeguard inquiries specific to China. In the first type, the Tribunal determines if there is “market disruption” or threat of “market disruption”. The CITT Act defines “market disruption” as a rapid increase in imports so as to be a significant cause of material injury, or threat of material injury, to the domestic industry”. “Material injury” is not defined. A “significant cause” is defined as “an important cause that need not be as important as, or more important than, any other cause of the injury”. In assessing whether there is market disruption, the Regulations direct the Tribunal to consider the volume of imports, the effect of the imported goods on prices of like goods in Canada and the impact of the goods on domestic producers.
In the second type of safeguard inquiry specific to China, the Tribunal determines if trade actions affecting imports of goods from China into the market of another WTO country have caused or threaten to cause a significant “trade diversion” into the Canadian market.
A determination of serious injury, market disruption or trade diversion by the Tribunal does not automatically result in the application of safeguard measures because only the Government has the authority to apply such measures. The Government can choose to apply safeguard measures in the form of surtaxes under the Customs Tariff or in the form of quotas or tariff rate quotas under the Export and Import Permits Act.
For more information, refer to the Interim Guideline—Safeguard Inquiries-Imports from China found on this Web site.
Canadian producers that believe that an increase in imports, either from all sources or from China, is injuring their businesses may file a complaint with the Tribunal.
In the case of a global safeguard inquiry, the Tribunal will initiate an inquiry only if the complaint is properly documented and if there is a reasonable indication that increased imports are causing or threatening to cause serious injury to Canadian producers of similar goods. In the case of a safeguards specific to China, the Tribunal determines if a complaint is properly documented and if it discloses a reasonable indication of market disruption or trade diversion. In both cases, the complaint must be made or supported by domestic producers that represent a “major proportion” of domestic production of the goods in question.
The Government also has the authority to order the Tribunal to conduct global or safeguard inquiries specific to China.
When initiating a safeguard inquiry, the Tribunal issues a notice of inquiry and forwards it to all known interested parties and the governments of countries whose exports will be affected. It also publishes the notice in Part I of the Canada Gazette.
The Tribunal obtains information through questionnaires and other sources and may visit manufacturers, importers and purchasers of the goods in question. Its staff prepares a report that sets out the facts relating to the factors that it will examine to arrive at its decision. This report becomes part of the inquiry record and is made available to counsel and parties in the inquiry. The Tribunal may also issue requests for information and receive submissions from interested parties. It also holds a hearing where it receives evidence.
During or after an inquiry, the Government may direct the Tribunal to examine related matters and issue a recommendation, such as the most appropriate remedy to address the injury.
In the case of global safeguard inquiries, the Tribunal must submit its report to the Government and the Minister of Finance within 180 days (270 days in complex cases) from the beginning of its inquiry. In the case of safeguard inquiries specific to China, the Tribunal’s report is due 90 days after initiating an inquiry into market disruption and 70 days after initiating an inquiry into trade diversion. When the Tribunal conducts safeguard inquiries at the Government’s request, the Government’s terms of reference establish the timelines for the inquiry.
The WTO Agreement allows countries to apply global safeguard measures for an initial period of up to four years. It also provides that such measures are to be progressively liberalized during their period of application. The maximum period of application of measures cannot exceed eight years.
The Protocol allows countries to apply safeguard measures on imports from China as long as is necessary to prevent or remedy market disruption. There is no requirement to liberalize the measures during the period of application. In the case of trade diversion, the Protocol allows safeguard measures to remain in place as long as the trade action in the other country remains in place.
Under the CITT Act, domestic producers can request the Tribunal to conduct an inquiry to determine if safeguard measures should be extended beyond their original period of application. Based on submissions from interested parties and other information that it collects, the Tribunal prepares a report to the Government on whether the measures continue to be necessary.
When a global safeguard measure is to be in place for more than three years, the CITT Act requires the Tribunal to conduct a review of the measure before its “mid-point”. Based on submissions from interested parties and other information that it collects, the Tribunal prepares a report to the Government on developments since the measure was applied and advises on whether the measure should remain in effect, be revoked or be amended.
Provisions of the WTO Agreement and the Protocol establish consultation and dispute resolution procedures for governments respecting import safeguard inquiries and measures. The Tribunal’s decision made in the context of safeguard measures is also subject to judicial review before the Federal Court of Appeal.
1 . When interpreting and applying the law in this area, the Canadian International Trade Tribunal Regulations (the Regulations) and the Canadian International Trade Tribunal Rules should also be consulted.
2. The CITT Act also has provisions relating to safeguard inquiries under various bilateral free trade agreements. These are not discussed in this document.
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