Federal Court of Appeal Rules on Court’s Ability to Review CBSA Final Determinations in Anti-Dumping Investigations

It doesn’t look promising for importers, exporters and domestic producers alike looking to challenge a Final Determination of the CBSA in the Federal Court of Appeal (“Court of Appeal”) after the Court of Appeal’s recent decision in JFE Steel Corporation v. Evraz Inc. NA Canada, 2018 FCA 111 (“JFE Steel”).

In JFE Steel, the Court of Appeal dismissed the applicants’ application for judicial review citing several reasons, which we discuss in this blog entry.

In Brief:

  1. The Court of Appeal may overturn a Final Determination of the CBSA only if it fell “outside the range of reasonable possible outcomes”.  Remember: simply because another outcome was possible (or even better) it does not mean that the CBSA’s decision will be overturned.
  2. The Court of Appeal on an application for judicial review only has limited jurisdiction to review Final Determinations. The scope of judicial is limited by statute.
  3. When challenging the margins of dumping calculations, the Court of Appeal will only intervene in the CBSA’s decision if the results were unreasonable and the new margin of dumping under the proposed calculations would change from insignificant to not insignificant or vice versa.

 

The Full Story:

The CBSA Investigation

This application for judicial review began with CBSA investigations into large diameter carbon and alloy steel line pipe (“LDLP”).

Pursuant to subsection 41(1)(a) of the Special Import Measures Act (“SIMA”), on September 20, 2016, the Canada Border Services Agency made final determinations of dumping with respect to LDLP originating in or exported from the People’s Republic of China (“China”) and Japan, and subsidizing of large line pipe from China.

The Margins of Dumping were as follows:

Exporters Margin of Dumping as % of Export Price Amount of Subsidy per MT (RMB)
China – All Exporters 95.0% 1,657.11
Japan – Marubeni Steel 22.1%
Japan – Metal One 43.1%
Japan – Sumitomo 44.6%
Japan – All Other Exporters 95.0%

 

The CITT’s finding

The CITT concluded on October 20, 2016, that pursuant to subsection 43(1) of SIMA, the CITT found that the dumping and/or subsidizing of the LDLP originating in or exported from China and Japan have caused injury to the domestic industry.

And as such duties were imposed in accordance with the table above.

 

The Application for Judicial Review

JFE Steel Corporation, brought an application for judicial review pursuant to paragraph 96.1(1)(a) of SIMA.  Moreover, Nippon Steel & Sumitomo Metal Corporation, Sumitomo Corporation, Sumitomo Canada Ltd., and Metal One Corporation also brought an application for judicial review.  Both cases were heard together on January 30, 2018 and decided June 5, 2018.

The Applicants collectively argued three main issues in this application for judicial review:

  1. Did the CBSA err in determined that the trading companies were exporters for the purposes of SIMA?
  2. Should the Final Determination be set aside on the basis that the CBSA erred in the calculation of normal values?
  3. Should any prospective anti-dumping duty assessment regime be set aside?

 

The Court of Appeal’s Decision

Standard of Review

The Court of Appeal’s standard of review for CBSA Final Determinations is one of reasonableness.

This means that a court reviewing will accord deference to the CBSA’s Final Determination that is being reviewed.  If the result reached by the CBSA was within the “range of rational and acceptable solutions”, then the court will let the Final Determination stand.  The court is mostly concerned with “existence of justification, transparency and intelligibility within the decision-making process”.

In order for an applicant to successfully challenge the CBSA’s decision (that is the court overturns the decision of the CBSA), the applicant needs to show the court that decision of the CBSA was “outside the range of reasonable possible outcomes”.  But note, that simply because another outcome was possible (or even better) it does not mean that the CBSA’s decision will be overturned.

Using the standard of review of reasonableness, the Court of Appeal ruled against the applicants on all three issues and upheld the Final Determination of the CBSA.

 

Trading Companies as Exporters

The CBSA had determined that certain trading companies were the exporters for the sake of calculating the margins of dumping, and not the manufacturers of the LDLP.  The CBSA came to this conclusion by looking at numerous factors, including:

  • the roles that each party (manufacturer or trading company) played in in determining the sale price of the LDLP coming to Canada; and
  • the roles that each party (manufacturer or trading company) as they related to exercising power over sending the LDLP to Canada.

The Court of Appeal inferred that the supply chain involved the trade companies ordering the LDLP from the producers, and the title of the LDLP passed from the producers to the trading companies, making them exporters for the sake of the investigation.

The Court of Appeal followed the CITT’s decision in EMCO Electric International – Electrical Resource International v. President of the Canada Border Services Agency (25 June 2009), CITT AP-2008-010.  Specifically, the Court of Appeal concluded that because the LDLP was purchased by the trading companies from the manufacturer, before the trading companies then sold the LDLP to the importer, the trading company could reasonably have been determined to be the exporter for the sake of anti-dumping calculations.

 

The Court of Appeal’s Ability to Overturn Calculations of Normal Values

The Court of Appeal followed its previous decision in SeAH Steel Corporation v. Evraz Inc. NA Canada, 2017 FCA 172 (“SeAH Steel”) in upholding the Final Determination of the CBSA.

In SeAH Steel the Court of Appeal did not have jurisdiction to adjust the calculations of the CBSA’s Final Determination.  Rather it decided that a Final Determination addresses the two issues identified in section 41 of SIMA – 1) whether certain goods of a particular country have been dumped and 2) whether the margin of dumping is not insignificant.

The applicants argued that the Court of Appeal should not follow SeAH Steel, to no avail.  The Court of Appeal again has declined to examine the calculations of the CBSA on judicial review based on its limited jurisdiction.

Specifically, the Court of Appeal can only overturn the CBSA’s decision if the applicant can prove:

  • That the manner in which the calculation of margin of dumping was done was unreasonable;

AND

  • That the result of those calculations would change the margin of dumping from being not insignificant to insignificant (or vice versa).

Therefore, the Court of Appeal (theoretically) can grant the relief of changing the margin of dumping from e.g. 5% to 1% because it would change the margin of dumping from not insignificant (> 2%) to insignificant (< 2%).

Similarly, the Court of Appeal (theoretically) can grant the relief of changing the margin of dumping from e.g. 1% to 10% because it would change the margin of dumping from insignificant (< 2%) to not insignificant (> 2%).

However, the Court of Appeal cannot grant the relief of changing the margin of dumping from e.g. 50% to 30% or vice versa because both margins of dumping would be not insignificant (> 2%).

And similarly, the Court of Appeal cannot grant the relief of changing the margin of dumping from e.g. 0.5% to 1.9% because both margins of dumping would be insignificant (< 2%) anyway.

 

Setting Aside the Prospective Anti-Duping Duty Assessment Regime

The last main challenge of the applicants was that the CBSA “restricted future normal values to the LDLP shipped during the Period of Investigation and applied the Ministerial Specification to ‘new models’ of LDLP”.

This challenge was based on letters of the CBSA dated September 20, 2016 stating that the ministerial specification of 95% would be used in relation in certain future normal values of LDLP.

The Court of Appeal declined to review this part of the Final Determination.  The Court of Appeal only has limited jurisdiction under section 28 of the Federal Courts Act, and section 96.1 of SIMA to review only the Final Determination, which consists of 1) a determination that goods are being dumped and 2) whether the margin of dumping is not insignificant.

More to the point, the Court of Appeal correctly pointed out that because the CBSA’s letters did not make up the Final Determination, and as such are not reviewable by the Court of Appeal.

 

The Implications of the Court of Appeal’s Decision

  1. As it stands now, importers, exporters and domestic producers challenging a Final Determination of the CBSA in the Court of Appeal will only be successful if they can convince the Court of Appeal that the Final Determination fell “outside the range of reasonable possible outcomes”.  Remember: simply because another outcome was possible (or even better) it does not mean that the CBSA’s decision will be overturned.
  2. The Court of Appeal on an application for judicial review only has limited jurisdiction to review Final Determinations. The scope of judicial is limited by statute.
  3. When challenging the margins of dumping calculations, the Court of Appeal will only intervene in the CBSA’s decision if the results were unreasonable and the new margin of dumping under the proposed calculations would change from insignificant to not insignificant or vice versa.  This decision of the Court of Appeal outcome may negatively impact importers, exporters and the domestic industry alike.  Domestic producers who hypothetically may wish for an increased margin of dumping, will not be able to obtain that remedy at the Court of Appeal unless it changes from insignificant to not insignificant or vice versa.  Importers and exporters who may seek to have the margin of dumping decreased are similarly without that remedy.

 

John Reiterowski, DS Lawyers Canada, LLP

jreiterowski@dsavocats.ca

DS Customs & Trade team located in Paris, Brussels, Montreal, Toronto, Lima, Singapore, Vietnam, Beijing, Guangzhou, Dakar and Cotonou is at your disposal to provide you with additional information.

CONTACT US:

dscustomsdouane@dsavocats.com

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