ARTICLE 1904

BINATIONAL PANEL REVIEW PURSUANT TO THE

NORTH AMERICAN FREE TRADE AGREEMENT

ON REVIEW OF THE CANADIAN INTERNATIONAL

TRADE TRIBUNAL FINDING

December 15, 1999

2. MINORITY OPINION: PANEL MEMBERS GARCIA-CORRAL and ORTIZ

DID THE CITT COMMIT REVIEWABLE ERROR IN FINDING THREAT OF INJURY?

The Minority has had the benefit of reading the Majority's Opinion from which we agree in part and disagree in part. While we agree, in the result, with the Majority on most issues, we have come to these conclusions on the basis of a considerable deference standard.⁴¹ We disagree with the Majority, on issues relating to the threat of injury analysis, where utilizing a standard of considerable deference, we would have remanded parts of the Decision back to the CITT for further analysis.

Part One of this Minority Opinion will outline the CITT's Decision on the threat of injury. Part Two of this Minority Opinion will proceed to review the CITT's threat of injury analysis by reviewing the three sub-issues which have been called into question. Firstly, we will review the finding of likely significant price suppression and erosion. Secondly, we will review the finding of causation. Finally, we will review the issues dealing with other non dumped factors and the threat of injury analysis.

Part One: The CITT's Decision on the Threat of Injury Determination

The CITT found that the injury suffered by the domestic industry was not of the duration nor the extent necessary to constitute material injury within the meaning of the SIMA.⁴² Having so found, the CITT went on to consider whether there was a threat of material injury and, if so, whether there was a causal link between the dumped imports and any threat of injury.

The requirement that the CITT carry out a causal analysis is found in SIMA s.42(1), as amended by the WTO Agreement Implementation Act.⁴³ The CITT has recognized, in past decisions⁴⁴, that the purpose of amending subsection s.42(1)(a)(i) of the SIMA was to make it consistent with the WTO Agreement on the Implementation of Article 6 of the GATT, 1994. SIMA s.42 states:

(1) The Tribunal...shall make inquiry with respect to such of the following matters as is appropriate in the circumstances:

(1) in the case of any good to which the preliminary determination applies, as to whether the dumping or subsidizing of goods...
(b)(1) has caused injury or retardation or is threatening to cause injury...

Section 2(1) of SIMA defines injury as material injury to the domestic industry. In making a finding of threat of material injury to the domestic industry, subsection 2(1.5) of SIMA requires that the “circumstances in which the dumping... of [the subject] goods would cause injury [must be] clearly foreseen and imminent.” 

Even though the SIMA does not establish more details with respect to the nature of the causal relation that must be established, the SIMA Regulations prescribe certain factors for the purposes of determining whether the dumping of subject goods is threatening to cause injury. In pertinent part, it reads:

37.1 (2) for the purposes of determining whether the dumping or subsidizing of any goods is threatening to cause injury, the following factors are prescribed:

(a) the nature of the subsidy in question and the effects it is likely to have on trade;

(b) whether there has been a significant rate of increase of dumped or subsidized goods imported into Canada, which rate of increase indicates a likelihood of substantially increased imports into Canada of the dumped or subsidized goods;

(c) whether there is sufficient freely disposable capacity, or an imminent, substantial increase of dumped or subsidized goods, taking into account the availability of other export markets to absorb any increase;

(d) the potential for product shifting where production facilities that can be used to produce are currently being used to produce other goods;

(e) whether the goods are entering the domestic market at prices that are likely to have a significant depressing or suppressing effect on the price of like goods and are likely to increase demand for further imports of goods;

(f) inventories of goods;

(g) the actual and potential negative effects on existing development and production efforts, including efforts to produce a derivative or more advanced versions of like goods;

(g.1) the magnitude of the margin of dumping ... in respect of the dumped...goods; and

(h) any other factors that are relevant in the circumstances.

As with respect to the requirement of a causal relationship between effects of dumping and the threat of injury, the SIMA Regulations go on to prescribe additional factors. It reads, in pertinent part:

37.1 (3) for the purposes of determining whether the dumping... is threatening to cause injury, the following additional factors are prescribed:

(a) whether a causal relationship exists between the dumping ...of any goods and... threat of injury on the basis of:

(i) the volumes and prices of imports of like goods that are not dumped...,
(ii) a contraction in demand for the goods or like goods;
(iii) changes in patterns of consumption of the goods or like goods;
(iv) trade restrictive practices ...;
(v) developments in technology;
(vi) the export performance and productivity of the domestic industry in respect of like goods; and

(b) whether any factors other than the dumping or subsidizing of the goods ...is threatening to cause injury.

In the instant review, the CITT noted that the various factors prescribed in s.37.1(2) of the SIMA Regulations were relevant to its inquiry. Specifically, it said that it reviewed: 

... whether there has been a significant rate of increase of dumped carbon steel plate in Canada; whether there is sufficient freely disposable capacity, or an imminent substantial increase in the capacity of exporters in the subject countries, that indicates a likelihood of a substantial increase in exports of dumped goods, taking into account the availability of other export markets to absorb any increase; whether the goods are entering the domestic market at prices that are likely to have a significant depressing or suppressing effects on the price of like goods; and other relevant factors. 

The CITT went on to list the additional factors prescribed in s.37(3)(a) of the SIMA Regulations for determining whether there is a causal relationship between the dumping and the threat of injury. The CITT also noted the requirements of paragraph 37.1(3)(b) which direct it to determine whether any factors other than the dumping of the goods is threatening to cause injury. The CITT concluded that it must determine whether there is a causal relationship between the dumping of the goods and the threat of material injury and that it must ensure that injury caused by other factors is not attributed to the dumped imports. 

The CITT noted that when making a finding of threat of material injury it was required to ensure that the circumstances in which the dumping of the subject goods would cause injury must be clearly foreseen and imminent. The Tribunal began by examining the extent to which there had been growth in imports from the named countries. The Tribunal found that the imports grew over the relevant time frame and concluded that the subject countries will continue to export to Canada and that “these circumstances are clearly foreseen and imminent”. 

The CITT considered the increase in imports of the countries in question, and then it considered the tendency of imports in the future, in the absence of antidumping duties.⁴⁵ The CITT held that the substantial cumulate increase in import volumes of carbon steel plate from the named countries in 1994 to the first quarter of 1997 and the fact that imports continued, even increased following the initiation of the investigation by the Deputy Minister and up to the Tribunal’s inquiry, indicated that it was likely that the subject countries would continue to export to Canada. The CITT held that, in its view, these circumstances were clearly foreseen and imminent.⁴⁶ 

With respect to the capacity of the countries in question to continue exporting to Canada, the CITT found that the capacity of the mills to produce carbon steel plate in the subject countries was several times that of the domestic producers. The CITT further found that the freely disposable capacity in these mills was extensive, particularly in China and Russia.⁴⁷ The CITT held that, in its view, the capacity analysis showed that exporters in the named countries clearly had the capacity to continue, and even to increase, their exports to Canada. Moreover, the CITT held that the conditions which exporters in each of the countries under investigation faced, or would face, in major export markets, as a result of antidumping or other measures limiting their access, would likely create an incentive to direct their exports to countries without these restrictions, such as Canada.⁴⁸ 

Having determined that dumped imports are likely to continue, the CITT eventually turned to the question of whether the dumped imports were likely to constitute a threat of injury. In this respect, the CITT purports to have assessed the extent to which there was a causal link between the dumped imports and the price erosion, price suppression and financial performance and, if there was, whether it was likely to continue in future. The CITT noted that a key question in its analysis was whether dumped imports, or other factors, have caused the downward pressure on prices and, if so, whether dumped imports were likely to continue to impact prices in the absence of antidumping duties. 

The CITT compared prices of imported and domestic carbon steel plate during the period from 1994-1997. The CITT concluded that the gap between the two widened due to the downward trend into 1997 of domestic industry prices. The CITT determined that although initially the domestic industry may have contributed to the price decline, the downward price trend was caused by the continued dumping of low priced carbon steel plate into the market place.⁴⁹ The CITT held that the pressures exerted on prices and the low priced dumped imports made it difficult for the industry to move prices back up. The CITT held that these were foreseen and imminent price pressures and that they would continue with the consequent negative effect on gross margins and net revenues leading to threat of material injury.⁵⁰ 

The Complainant challenges the CITT's determination of threat of injury on several different grounds. These grounds have been divided into three questions: a) Did the CITT commit reviewable error in finding likely significant price suppression and erosion?; b) Did the CITT commit reviewable error in finding causation?; c) Did the CITT commit reviewable error in failing to ensure that other non-dumped factors did not enter the threat of injury analysis? Unless we state otherwise, we have found that the grounds raised by the Complainant are, for the most part, questions of mixed fact and law. As such, we will subject the determinations of the CITT to a standard of considerable deference. 

The considerable deference standard which we will apply was articulated in our preliminary decision and is incorporated herein by reference.⁵¹ Suffice it to say that as the issues raised by the Complainant are, for the most part, questions of mixed law and fact, we will accord the CITT considerable deference at the higher end of the spectrum. That is, as questions of mixed fact and law draw closer to questions of fact, the deference that we will accord to the CITT will increase. In applying this standard of review, we will be looking to ensure that the CITT reasonably interpreted the law and that there was a rational connection between the facts and the CITT's findings. The standard is not whether there is any evidence at all which would uphold the CITT's determination, but whether there is evidence which, if reasonably reviewed, is capable of supporting the CITT's findings in light of the record evidence.

Part Two: Review

1. Did the CITT commit reviewable error in finding likely significant price suppression and erosion?

The CITT determined that the pressures exerted on prices by the low priced dumped imports have made it difficult for the industry or any one company in the industry to move prices back up. The CITT was of the view that, in the absence of antidumping duties, these pressures would continue and that the domestic industry was likely to continue to suffer price erosion and price suppression with the consequent negative effects on gross margins and net revenues. The CITT was persuaded that these downward pressures were clearly foreseen and imminent and that the domestic industry could not continue to sustain such downward pressure indefinitely “without suffering material injury”.⁵² In addition, the Tribunal went on to speculate that further increases in the volume of dumped imports could have a negative impact on the domestic industry’s ability to maintain its market share and speculated on the industry’s position in the face of further increases in imports.⁵³ 

AHMSA argued that the CITT committed error of law and error of fact in finding price suppression. It was alleged that these errors led the CITT to fail to distinguish between evidence of price erosion and price suppression. The Complainant further alleges that the CITT committed error of fact with respect to its finding that industry prices were on a downward trend and that there was a widening of price gaps. AHMSA argued that there were five price increases, one of which came in early 1997, and then argued that this suggests that the price trend was up, that there was not a widening of the price gap, that there was no consequent price erosion or suppression, and that it was unlikely to change in the near future. The Complainant then argues that these factual inaccuracies lead the CITT to error of law in finding significant price suppression on the part of AHMSA.⁵⁴

In reviewing the arguments of the parties, the record evidence and the reasoning of the CITT, we are inclined to affirm in part and remand in part. For reasons already mentioned, this Panel has already found no merit in the Complainant´s argument that the CITT failed to distinguish between evidence of price suppression and erosion. Further, we believe that AHMSA misapprehends the nature of the analysis needed to be undertaken by the CITT, in so far as this Panel has affirmed the CITT ´s decision to cumulate AHMSA in the injury analysis and not to exclude it from the result. This Panel has affirmed the approach of the CITT in not analyzing the per se contribution of AHMSA to the price suppression and erosion suffered by the domestic industry. However, while this Panel affirms this part of the CITT´s analysis, we have reservations with respect to other parts of its analysis. 

There is record evidence to the effect that the average domestic unit price was $611 in 1994, $700 in 1995, $663 in 1996 and $657 in 1997.⁵⁵ Moreover, record evidence suggests that Stelco, the acknowledged price leader, increased prices at various times in 1996 and 1997.⁵⁶ It would appear that the finding of price suppression or erosion, and more importantly in this case -to what extent, depends on the period of time that the CITT chooses to analyze. We find that the CITT does not adequately explain which time frame it chose to analyze nor why it is the more appropriate in the circumstances. Moreover, the CITT does not explain how the price suppression or erosion it found was significant in the circumstances, especially in light of the relatively low volume of imports. We believe that this information is particularly important given that present injury, within the meaning of the SIMA, was not found because the injury was not of the requisite duration and extent. 

In the circumstances, we would Remand as follows:

i) That the CITT explain what the relevant time period for the price comparison was and explain why it was the appropriate time frame in light of threat of material injury analysis.

ii) That the CITT explain what is significant, in terms of duration and extent, about the price erosion or suppression that it finds.

2. Did the CITT commit reviewable error in finding causation?

Having determined that the dumped imports from the named countries were likely to continue and even increase, the CITT eventually turned to the question of whether these imports were likely to constitute a threat of injury to the domestic industry. In so doing, the CITT claims to have assessed the extent to which there was a causal link between the dumped imports and the price erosion, price suppression and the consequent negative impact on the domestic industry's financial performance and whether it was likely to continue in to the future.⁵⁷ 

AHMSA alleges that the CITT committed reviewable error in finding causation. The Complainant argues that the evaluation of causation, in the context of the threat of the material injury analysis, goes beyond mere identification of dumped goods in the market and that the CITT's analysis fails to establish causation. In response, counsel for the CITT denied these allegations and argued that the causation standard is within the discretion of the CITT. They argued that in evaluating causation, the CITT’s discretion is guided by the SIMA and the SIMA Regulations. The argument held that as neither the SIMA nor the SIMA Regulations set out a specific standard that the CITT needs to apply to the causation standard, the CITT was free to establish the relevant standard.⁵⁸ Counsel for the CITT cited the Federal Court of Appeal decision in Sacilor Acieres⁵⁹ for the proposition that causation is largely a matter of fact and that the relevant standard which is to be applied lies in the discretion of the CITT.

The Complainant’s arguments against the causation finding effectively fall into three categories. Firstly, the Complainant claims that the CITT failed to establish a sufficient link between dumped goods and the threat of injury as is required by Canada’s international obligations. Secondly, the Complainant claims that even if such a nexus could be found, the evidence that the CITT relied upon was not of the nature and extent required. Finally, the Complainant argues that the CITT's past practice of interpreting and applying s.37.1(3)(a)(vi) of the SIMA Regulations should preclude a finding of causation under these circumstances. We will analyse these questions below.

Continue on to Sufficient Link 

^{41 The considerable deference standard that we will apply was articulated by the Minority in this Panel's preliminary decision on The Standard of Review and Remand Order dated May 19, 1999 at pages 12-18.}

^{42 Statement of Reasons ("SOR") p. 13.}

^{43 S.C. 1994, C. 47.}

^{44 See Caps, Lids and Jars, Inquiry No. NQ-95-001, Finding Oct 20, 1995. Statement of Reasons, November 6, 1995, at 8-10. ("Caps, Lids and Jars")}.

^{45 SOR, p.14.}

^{46 SOR , p.14.}

^{47 SOR , p. 15.}

^{48 SOR , p. 17.}

^{49 SOR, p.18.} 

^{50 SOR, p. 19.}

^{51 The considerable deference standard that we will apply was articulated by the Minority in our preliminary decision on The Standard of Review and Remand Order dated May 19, 1999 at pages 12 - 18.}

^{52 SOR p.19.}

^{53 We find this latter part of the analysis to be particularly unsatisfactory as it is in the nature of speculation and conjecture.}

^{54 AHMSA's Brief, p. 78 -80, 111-146.}

^{55 SOR, p. 11.}

^{56 Administrative Record, Vol. II (Protected) at 131.23, Administrative Record Vol. III (Public), p. 241 and 264.}

^{57 SOR p 17.}

^{58 CITT Brief p. 69.}

^{59 Sacilor Aciéries v. Anti-dumping Tribunal (1986), 9 CER 210 (F.C.A.).}