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BINATIONAL PANEL REVIEW PURSUANT TO THE
NORTH AMERICAN FREE TRADE AGREEMENT
DECISION AND REASONS OF THE PANEL
ON REVIEW OF THE CANADIAN INTERNATIONAL
TRADE TRIBUNAL FINDING
December 15, 1999
The Complainant argues that the Tribunal erred in finding that, while “domestic producers generally price product for delivery within a relatively short time frame, rarely exceeding a month, importers, in contrast, sell their product at today’s prices for delivery in up to six months.” It submits that the evidence indicates that domestic producers actually deliver on a nine week time frame.25 It also argues, at paragraph 263 of its Brief, that the Tribunal erred in finding that the largest importers often presold much of its imported plate and that the price quoted for such presold imports became the negotiating base in the market, unless there were subsequent sales at even lower prices. The Complainant submits that this ignores the fact that contracts for presold plate will depend on conditions of delivery and that the product is completely separate from Canadian domestic plate with separate terms and conditions. Specifically, import plate is rusted and its flatness is not up to domestic standards. Moreover, very little bargaining is done on the price since the product is needed immediately and is usually shipped out in 24 hours. Finally, the Complainant takes issue with the finding that such future sales prolong the period that any particular dumped price can influence and exert pressure on market prices. It submits that once a sale is made for future delivery it is gone and that the prices have no impact on Canadian prices in the future.
The Complainant may be correct that the period for the delivery of domestic steel on occasions was longer than one month. However, the Tribunal was not concerned with the exact period of time during which domestic or for that matter, foreign steel was being delivered. It was concerned with the suppressive effect upon price caused by delays in delivery of imports. The majority finds that the CITT’ determination of fact in this regard was not patently unreasonable.
Wirth’s policy of pricing imports close to domestic market prices indicates that regardless of the different “conditions of sale”, such imports were competitive with domestic product. Further, the CITT heard experts who attested to the fact that while the price of steel was determined at time of sale, the impact of that price continued until the goods were actually delivered. Purchasers were unwilling to pay more for goods when there were accessible lower price alternatives. Further, evidence through a Wirth witness showed that 30% of goods were not presold and were there available to exert price erosion.26 The Tribunal concluded that this constituted reason to find that imports had a suppressive effect on prices.27 The Tribunal received and considered significant documentary evidence of the connection between import offers, import sales pricing and domestic price suppression.28 Given the high standard of deference owed to it as an expert Tribunal of fact and the presence of evidence in support of its finding, its conclusion is not patently unreasonable.
The Complainant alleges that the Tribunal erred in fact in finding that there were increases in imports from the subject countries. It refers to Exhibit B-7 for evidence of declining imports, particularly from 1995 to 1996.29 It also takes issue with the finding that increasing dumped imports were displacing undumped imports from other countries.30 At page 20 of the Statement of Reasons, the CITT notes:
Evidence of increased dumped imports was available to the Tribunal, as noted in Tables 14 and Table 2 in the Statement of Reasons. Table 2 post-dates Exhibit B-7 and only deals with subject goods, which B-7, as noted, does not. The evidence indicates that dumped imports from the subject countries increased from 5 to 8% of market share from 1994 to 1997.31 From the first quarter of 1996 to the first quarter of 1997 there was an 11% increase in imports. Table 14 also indicates that imports from non-subject countries decreased correspondingly. They went from 8% in 1994 to 5% in 1997.32 Therefore, the CITT’s findings were, again, not patently unreasonable.
The Complainant alleges a number of errors with respect to the Tribunal’s findings regarding the cause of price erosion in the industry. It alleges that the finding that imports caused price erosion was an error. It, instead, attributes price erosion to the following factors. First, it points to Stelco’ price decrease to increase its market share in 1996 as the real cause of suppression and erosion. It alleges that this had a significant negative impact on the market when the domestic steel industry followed suit.33 Second, the Complainant maintains that this was compounded by imports of steel from the United States and by the sale of Cut-To-Length Plate in Canada. It argues that the Tribunal’s findings that imports from the United States were unlikely to increase and that they were uncompetitive because prices were significantly higher prior to the Preliminary Determination was a “manifestly erroneous finding of fact”.34 With respect to sales of CTL plate, it alleges, that the Tribunal also erred in finding that it was uncompetitive.
The Tribunal deals with the U.S. factor on pages 20 - 21 of the Statement of Reasons. This issue is raised again under errors of law as being one of the real causes of the threat of injury finding against the subject countries. First, and most importantly, there was no finding that U.S. imports were dumped. The issue before the Tribunal was whether dumped goods caused material injury or threat of material injury. In doing so, the Tribunal does not have to ensure that dumped goods are the only and sole cause of the threat or even the principle cause. In 1983, the Federal Court of Appeal found in Sacilor Acieres et al. v. Anti-dumping Tribunal et al. (1985) 9 C.E.R. 210 at 214 that it is the role of the Tribunal to weigh and balance all the factors:
In making its determination that U.S. goods were unlikely to contribute to price erosion there was evidence before the Tribunal, in Table 16 in the Public Pre-hearing Staff Report that carbon steel imported from the United States was 1) much higher in price than carbon steel exported from subject countries; 2) that steel from the United States was not dumped in Canada; and 3) that steel from the United States did not compete with subject goods in a manner comparable to that of steel from the subject countries.35 Table 16 indicates that in the first quarter of 1996, U.S. steel plate was sold for $1231 per tonne, while in the first quarter of 1997 it was sold for $672. The evidence for imported steel from the subject countries were $675 and $610 and domestic prices were $663 and $657 respectively. In 1996, the investigation year, the Tribunal noted that the import volumes from the United States of the subject plate were lower than in previous years and were substantially below import volumes of the subject countries. It also noted the evidence that U.S. imports were increasing in the first quarter of 1997 and likely to increase in the second quarter. However, it found that evidence showed that its prices were unlikely to change in the foreseeable future and that in fact prices at that time were close to Stelco book prices in August of 1997 and significantly higher than prices for goods prior to the Preliminary Determination.36
Moreover, in addressing the effect of CTL Plate on price on page 20 of the Statement of Reasons, the Tribunal found that CTL while lower in price than discrete plate, was sold within a narrow segment of the steel market, that the prices of CTL were different and stable and that such sales did not compete with the subject goods to a substantial extent. Evidence was established at the Tribunal’s hearing37 that the price differential was based on the fact that plate cut from coiled plate steel was primarily in narrower widths (72 inches and below) than discrete plate; while the standard width of both domestic and imported discrete steel plate was 96 inches.38 In addition, there was testimony from witnesses that producers, specifically Algoma and IPSCO, sold coiled plate at levels that would not permit an undercutting or erosion of the prices of discrete plate.
The Tribunal found that there was no material injury and held further that imports from the subject countries threatened to injure the domestic hot-rolled steel industry. In so doing, the Tribunal found that there was a causal connection between the dumped imports and the threat of material injury.
The Tribunal further stated that it had examined the evidence on the record with respect to the following issues; inter alia:
The Panel is obliged to refer back to the Tribunal's Statement of Reasons in order to review its findings that there was a causal connection between imports from subject countries and a threat of material injury. The Tribunal sets out those reasons on pages 13 to 22 of its Statement of Reasons. It is apparent, from those reasons, that the Tribunal did consider some evidence in arriving at its determination that there was a threat of injury, and further that there is evidence on the record in support of the Tribunal's findings.
There is nothing in the language of paragraph 42(1)(a)(i) of SIMA or any other provision of SIMA which specifies the exact nature of the causal relationship that must be established between the dumped imports and material injury. Accordingly, the issue of causation is a matter that comes squarely within the Tribunal's area of expertise and is further a matter where the Tribunal enjoys a broad discretion. The following extract from the Hot-Rolled Carbon Steel Sheet Panel decision is helpful:
It is interesting to note that the primary emphasis of the Complainant on the issue of causation at the within hearing related to whether the Tribunal was obligated, under SIMA, to consider the effect of the dumped imports from Mexico separately from other dumped imports from other countries. For reasons articulated elsewhere in this decision, this argument has no basis in law and is rejected by the panel.
The Complainant also raised issues with respect to virtually each and every factual consideration referenced by the Tribunal in the context of its causation finding. Counsel for Stelco argued that much of this argument was in effect an attempt to have the panel rehear evidentiary matters that were before the Tribunal and to reevaluate and re-weigh that evidence. Counsel's point is well taken. The panel does not propose to deal with each and every factual issue raised by the Complainant as it relates to the issue of causation. As stated above, the panel has carefully reviewed the submissions of the Complainant in this regard, in light of the evidence on the record, and finds that the Complainant has failed to demonstrate any reviewable error under the patently unreasonable standard of review. However, certain key elements of the Tribunal's methodology relating to price suppression and erosion which were the subject of significant discussion at the within hearing will be briefly discussed below.
The Complainant argued that the falling price of steel in the domestic market was caused by Stelco's price leadership and by declining prices in the domestic market itself. Accordingly, the Complainant argued that the Tribunal committed an error of fact in finding a causal connection between the dumped imports and the threat of injury.
The Tribunal then considered evidence to determine whether a small volume of imports could compete in the domestic market and have a significant impact on prices. It considered, among other factors, the fact that imports had a wide customer base, that Samuel expected the domestic industry to compete with Wirth's prices, that setting prices at a fixed rate below market with Wirth's prices had a negative effect on market prices and that in continuously preselling steel Wirth's prices would compound that negative effect upon domestic steel prices and would deplete the market share of the domestic industry.
The panel finds that this interpretation is not patently unreasonable, and that the Tribunal’s interpretation of the appropriate standard of causation is not inconsistent with SIMA and/or the anti-dumping code.
In assessing the causation issue the Tribunal clearly considered some of the additional factors prescribed under subsection 37.1(3) of SIMA and considered the volumes and prices of like goods that were not dumped as set out in paragraph 37.1(3)(a)(i) of the SIMA Regulations.
Further, the Tribunal considered changes in the patterns of consumption of the goods or the like goods as set out in subparagraph 37.1(3)(a)(iii) of the SIMA Regulations. The Tribunal ultimately concluded that:
Further, it is clear that the Tribunal also considered developments in technology and the productivity of the domestic industry and specifically, that the Tribunal considered the domestic producer’s plans to expand their capacity and improve production processes.
Continue on to Minority Opinion: Panel Members Garcia-Corral and Ortiz
25 Brief of the Complainant at para. 261.
26 Algoma brief pg. 93.
27 Statement of Evidence of D. Thompson, Protected Exhibit D-2, para 13, Administrative Record, Vol. 16, p. 9.
28 Statement of Evidence of R. Dionisi, Portected Exhibit B-1, Administrative Record, Vol. 14B, pp 11-33.
29 Brief of the Complainant, at para. 269.
30 Brief of the Complainant, at para. 270.
31 Brief of Algoma, at para. 96.
32 Brief of the CITT, at para. 127.
33 Brief of the Complainant, at para. 273 and 275.
34 Brief of the Complainant at para. 281.
35 Protected Pre-Hearing Staff Report, revised September 20, 1997, Tribunal Exhibit NQ-97-001-7C (protected), Administrative Record, Vol. 2 at 131.21; Transcript of In Camera Hearing, vol 3, September 25, 1997 at 317-18.
36 Statement of Reasons at p. 21.
37 Public Transcript (Vol. 4) Administrative Record Vol. 17A at 689-690 and 783.
38 Transcript of Public Hearing, Vol. 2, p. 343, lines 18-25; p. 344, lines 1-11; p. 345, lines 12-22, Administrative Record, Vol. 17, p. 343-5.
39 Statement of Reasons at p. 13.
40 Hot-Rolled Carbon Steel Sheet, supra, at 34-35.