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

a. Sufficient Link

The Complainant argued that Canada's international obligations compel the CITT to establish a sufficient link between the threat of injury and the per se dumping of AHMSA. The Complainant points to Canada's international obligations under the GATT and argues that these obligations impose a definite cause and effect standard that the CITT is obligated to follow. Specifically, it refers to article 3(4) of the GATT Antidumping Code which states that “it must be demonstrated that the dumped imports are, through the effects of dumping, causing injury within the meaning of this code”. 

The role of Canada’s international obligations, and the GATT in particular, in shaping the CITT's practice was affirmed in Grain Corn.⁶⁰ The Supreme Court in Grain Corn approved the CITT's practice of looking at Canada's international obligations in fulfilling its mandate under the SIMA. However, while the Court was unanimous in the result, the Judges of the Court differed as to what the appropriate role of the GATT should be in determining the practice of the CITT. 

Justice Wilson, writing for the minority of the Court, called for a stricter approach to the use of Canada’s international obligations. She held that while it was permissible for the CITT to look at the GATT for interpretative guidance, courts should not attempt to enforce the GATT in its review of the CITT. She held:

I do not think that it is this Court's role on an application for judicial review to look beyond the Tribunal's statute to determine whether the Tribunal's interpretation of that statute is consistent with Canada's obligations... Until such time as the Courts in this country are given the responsibility of enforcing the GATT, I do not think that they should begin to analyse the merits of a Tribunal's interpretation of the Act in light of the GATT.⁶¹

Justice Dickson, writing for the majority of the Court, held that the GATT played a much larger role in shaping the practice of the CITT. He held that it was reasonable for the CITT to refer to Canada's international obligations under the GATT not only to clarify uncertainty, but also as an aid to interpretation in cases where the ambiguity was not patent. He held that the CITT should strive to expound an interpretation which is consonant with the relevant international obligation.⁶² He reasoned:

I do not understand how a conclusion can be reached as to the reasonableness of a tribunal's interpretation of its enabling statute without considering the reasoning underlying it.⁶³ 

While the Supreme Court held that the GATT was relevant to determining the practice of the CITT, it was not in agreement as to the extent of the GATT’s influence. In determining the precise role of the GATT on the CITT’s practice, we find the reasoning of Concrete Panels instructive. That Panel noted that the CITT applies Canada's GATT obligations always and when they are incorporated in the SIMA and its Regulations. In interpreting the legislation that was passed in order to implement international obligations, it is reasonable that the CITT examine the domestic legislation in the context of international obligations. The interpretation which must be arrived at must be congruent with the relevant international obligations.⁶⁴ 

We have reviewed the applicable law and find that the law, as it presently stands, does not assume the causal relation or the degree to which dumping must cause material injury. In this regard, we find the reasoning of the Hot Rolled⁶⁵ Panel instructive. That Panel held that:

SIMA itself does not specify the required degree of causal relationship between dumping and material injury or exactly what must be considered in a causal relationship. In past decisions, the Tribunal, or its predecessor, found that dumped imports constituted a “significant” or “direct” cause of injury or that a “significant proportion” of material injury was attributable to the effects of dumping. More recently, in Machine –Tufted Carpeting, the Tribunal found that dumped imports must be “a cause” of material injury. There is no single administrative standard against which to judge the Tribunal’s analysis of causality in this case. To a certain extent, this may be inevitable because the Tribunal’s analysis is driven largely by economics and market analysis of various products and industries, which may dictate that different weight must be given to different factors and different cases.⁶⁶ 

It was argued that the Panel decision in Carpets is instructive on how we should review the CITT with respect to the sufficient link question. In dealing with the issue of causation, that Panel could not agree on what constitutes a sufficient link. The majority found that, taking into account the GATT Code standard that causation be “demonstrated”, the rational nexus between the evidence and the required conclusion on causation mandates an analysis of how the dumping has affected price levels. The majority in Carpets went on to Remand the CITT to determine whether the dumping in and of itself caused material injury and to demonstrate the rational basis for such a determination by detailed analysis.⁶⁷ The minority opinion in Carpets found that the standard of review limited the type of review which the Panel could undertake. Dissenting Panelist Ward held:

...although I find myself in agreement with many of the observations of the majority and I believe they have set forth the better practice for the CITT to follow when rendering a decision, I am constrained...⁶⁸ 

The opinions in Carpets are indicative of the two approaches urged on Panels in these decisions. In trying to determine what the exact nexus between the dumped imports and the threat of injury should be in the causation analysis, we find the reasoning of the Panel in Baler Twine⁶⁹ instructive. The Baler Twine Panel found that it is not necessary to find that dumped imports are always or even predominantly the lowest priced imports. It held that, in order for the causation requirement to be met, all that is required is a showing that dumped imports contribute, at a sufficient level, to price erosion, price suppression or to lost sales.⁷⁰ 

Having determined that the applicable causation standard is that contained within the SIMA and the SIMA Regulations, to be read in light of Canada's international obligations, we believe that the specific link which the CITT must establish between the dumping and the threat of injury is a flexible one which varies on the circumstances. In the instant review, we believe that the CITT should, at least, demonstrate how the dumping contributed, at a sufficient level, to price erosion or suppression. Such a demonstration should include an analysis of what is “sufficient” about the contribution in the circumstances, but need not be limited to the effects of AHMSA's dumping. 

b. Quality of Evidence

Having articulated the link between the threat of injury and the dumping in the circumstances, we move to the related question pertaining to the quality of the evidence required to ground a causation finding. With respect to the nature and extent of the evidence required, we find that this is a matter which is factually laden and within the expertise of the CITT. In these circumstances, the deference which is afforded to the CITT, on a considerable deference standard, is very high.

The CITT has articulated its practice on evidentiary findings, in the context of threat of material injury, in the Caps, Lids and Jars case.⁷¹ It stated that its practice has been to analyse material injury and threat of material injury as separate findings. In describing its methodology, the CITT has recognised the importance of Canada's international obligations and has drawn on the Agreement for the Implementation of Article 6 of the GATT, 1994 (ADA). In distinguishing the injury analysis from the threat of injury analysis, the CITT has noted that the ADA makes separate references to injury and threat of injury determinations in the definition of injury. Secondly, the CITT noted that it is directed to consider factors for injury that are different from factors for threat of injury, necessitating a distinct evidentiary basis for each. Thirdly, it noted that a finding of threat of injury, unlike injury, may only be made where the circumstances in which the dumping would cause injury are clearly foreseen and imminent. Fourthly, it recognised the admonition found in the WTO Agreement on the implementation of Article VI of the GATT 1994 s. 3.8 which states:

... with respect to cases where injury is threatened by dumped imports, the application of antidumping measures shall be considered and decided with special care.⁷² 

In considering the quality of evidence required, we also find the reasoning of Concrete Panels instructive. That Panel reviewed previous Panel decisions and held that what is required is reliable evidence establishing a causal nexus between dumped imports and injury. Reliable evidence is not just any evidence. Rather, it is evidence which when viewed in the context of the record reasonably upholds the CITT’s determination. The CITT has considerable discretion with respect to what evidence it accepts and what weight it attaches to the evidence and we will not sit to reweigh the evidence nor substitute our opinion for that of the CITT. However, while we will defer to reasonable findings of the CITT, we will not permit assumptions to stand in place of evidence.⁷³ What is required is positive evidence beyond conclusory findings which, when viewed in the context of all the evidence, reasonably supports the causation finding.

In the instant review, the CITT has, at times, substituted conclusory findings in place of evidence. Specifically, and important in the context of this review, we believe that the CITT does not address evidence which speaks to what is sufficient about the level to which the dumped imports contributed to the price erosion and suppression. 

c. The CITT’s Past Practice

The Complainant argued that the CITT committed error of law in misapplying s.37.1(3)(a)(vi) of the SIMA Regulations which directs the CITT to consider “the productivity of the domestic industry in respect of like goods”. In this respect, the Complainant alleges that the CITT erred in not considering the productivity problems of the domestic industry with respect to high demand and allocation. The Complainant cites Tomato Paste⁷⁴ for the proposition that when evidence exists to show that the domestic producers are not prepared to offer product to customers, who must source outside Canada, the dumping is not the cause of material injury.⁷⁵ For the reasons discussed below, we uphold the CITT in this regard.

As with respect to s.37.1(3)(a)(vi) of the SIMA Regulations, we find that it is one of the factors that the CITT should look at in performing its analysis. However, it is one factor among many that the CITT should look at. While we believe that productivity concerns are important factors to consider in this case, neither the law nor the circumstances compel the conclusion that s.37.1(3)(a)(vi) is dispositive. 

As with respect to the Tomato Paste decision, this Panel finds that it is very fact specific and not meant to lay down a rule for general application nor describe CITT practice. In fact, in that case, while the CITT determined that there was no threat of injury, it did so on the basis that “ the evidence of the Complainants concerning future injury was not convincing”.⁷⁶ 

In the circumstances, we would Remand as follows:

That the CITT cite record evidence and demonstrate how dumped imports contributed, at a sufficient level, to price erosion or price suppression, in the circumstances.

3. Did the CITT commit reviewable error in failing to ensure that other non dumped factors did not enter the threat of injury?

In cases where the presence of various factors cause the erosion or suppression of prices, the CITT is obligated to follow s.42(1)(a)(i) of the SIMA and s.37.1 (b) of the SIMA Regulations. These requirements compel the CITT to assure itself that the injury was not caused by factors other than those of the dumped goods. 

AHMSA argued that factors other than its specific dumping caused the threat of injury. It argues that the price erosion was caused by other factors including the pricing behaviour of Stelco and the domestic industry, new domestic capacity, U.S. steel imports, and plate from coil. In response, Counsel for the CITT argued that the CITT considered the factors raised by the Complainant and concluded that they were not the cause of the threat of injury.

The CITT noted the existence of other factors and stated that a key question in its analysis was whether dumped imports, or other factors, have caused a downward pressure on the industry's prices.⁷⁷ The CITT found that Stelco may have over reacted to certain market pressures and contributed to price decline in the first quarter of 1996, but concluded that there was no evidence that would lead to the conclusion that the industry caused the steady erosion of prices. The CITT appears to have preferred the evidence of industry witnesses who testified that on several occasions in 1996 and early 1997, the industry tried to increase its prices, but that it was only in August 1997, two months after the preliminary determination of dumping, that the industry was able to increase prices in the market. 

The CITT also concluded that although domestic prices increased after the first quarter of 1996, they did not reach the levels that had prevailed at the end of 1995 and that subsequently prices followed a downward trend into 1997. The CITT was persuaded that this downward trend was caused by the continued dumping of low-priced carbon steel plate in the market place.⁷⁸ 

The Complainant points to record evidence to suggest that the domestic industry may have contributed to price declines at various times in an attempt to gain or keep market share.⁷⁹ The Complainant recognizes the conflicting evidence on the record, but argues that in coming to its conclusions, the CITT incorrectly preferred the evidence of the industry witnesses over that of other witnesses. The arguments presented on pricing behaviour appear to be disagreements over factual findings which afford the CITT considerable deference at the high end of the spectrum. Absent cogent record evidence that the CITT's findings were unreasonable in the circumstances, we will not reweigh this sort of evidence as the CITT was in the best position to assess the competing evidence proffered by the witnesses. 

With respect to domestic capacity, the CITT held that this could be a mitigating as well as an exacerbating factor. The CITT noted the expansion plans of the domestic producers and concluded that the demand for carbon steel plate and other products will depend largely on the general performance of the economy at the time that the capacity comes on stream. The CITT went on to caution that there “is no evidence on the record forecasting what those conditions may be”.⁸⁰ The CITT stated that even if it were in a position to forecast that the new capacity would become an other factor having a negative impact on carbon steel plate prices, it still considered that the continued dumping of carbon steel plate from the named countries would, nonetheless, threaten to cause material injury to the domestic injury.⁸¹ 

With respect to imports from the U.S., the CITT noted that the import volumes of the U.S. subject plate in 1996 were lower than in previous years and were substantially below those from the other countries under investigation. The CITT also found that imports from the United States increased in the first quarter of 1997 and that there was evidence that these imports would increase in the second half of 1997 into 1998. However, the CITT determined that the evidence indicated that these imports were supplying shortfalls in domestic production and were being imported at prices at, or above, import prices for the subject plate from the named countries.⁸² 
With respect to sales of Plate from coil by Steel service centres, the CITT similarly held that it was not a relevant factor. The CITT noted evidence of relatively stable prices for the domestic plate cut from coil by the steel service centres. The CITT also noted the fact that the product competes in a relatively narrow segment of the market. The CITT therefore concluded that the prices of plate cut from coil by the steel service centres have had, and are likely to continue to have, little impact on the average prices of carbon steel plate in the market.⁸³ 

In this case, given the existence of other factors which may cause threat of injury, the effects caused by each of them must be separated and it must be demonstrated that the dumped goods were the cause of the threat of injury. This obligation does not compel the quantification of weight to be attached to each factor, but seeks to ensure that other non dumped factors are kept out of the analysis. This can not be accomplished by a mere showing of the existence of dumped goods. 

The CITT appears to have considered the other factors urged by the Complainant and analysed them individually. It concluded that none of these factors individually have had a significant impact on the price of the subject goods. However, the CITT did not consider them on an aggregate basis nor explain their combined relevance in the threat of injury analysis. We believe that this further analysis would be especially pertinent in the context of this threat of injury determination given the CITT's findings of shortfalls in domestic production and a lack of record evidence forecasting the general environment of the economy in the future, which is an important factor in determining the demand of the subject goods. 

In the circumstances, we would Remand as follows:

i) That the CITT analyse the effects of the non dumped factors on an aggregate basis and explain their combined effect in the threat of injury analysis.

ii) That the CITT explain how its finding of shortfalls in the domestic production and the lack of evidence forecasting the general performance of the economy in future, an important factor in determining the demand of the subject goods, affected its analysis on threat of material injury.

Signed in the original by:



Hernán García-Corral (Chairman) 
Hernán García-Corral (Chairman)

William E. Code 
William E. Code

Loretta Ortiz Ahlf 
Loretta Ortiz Ahlf

Alejandro Ogarrio Ramírez 
Alejandro Ogarrio Ramírez

Leon E. Trakman 
Leon E. Trakman

Issued on the 15^th day of December, 1999

^{61 Grain Corn, p.1349.}

^{62 Grain Corn, p.1371.}

^{63 Grain Corn, p.1383.}

^{64 Certain Concrete Panels, CDA-97-1904-01 ("Concrete Panels"), p. 10.}

^{65 Certain Hot Rolled Steel, CDA-93-1904-07 ("Hot Rolled").}

^{66 Hot Rolled, p. 33-34.}

^{67 In the Matter of Machine Tufted Carpets Originating in or Exported from the United States of 
America, (January 21, 1994), CDA-92-1904-02. ("Carpets").}

^{68 Carpets, p. 78.}

^{69 Synthetic Baler Twine With A Knot Strength of 200 Lbs or Less Originating in or Exported from the United States of America, CDA-94-1904-02 (April 10, 1995) ("Baler Twine").}

^{70 Baler Twine, p. 28.}

^{71 Inquiry No. NQ-95-001, finding October 20, 1995. Statement of Reasons, November 6, 1995. ("Caps, Lids and Jars").}

^{72 See, Caps, Lids and Jars p.9-10.}

^{73 See, Caps, Lids and Jars p.9-10.}

^{74 NQ-92-006, SOR, March 30.1993, p.14.}

^{75 Complainant´s Brief, p.53-4.}

^{76 Tomato Paste, p. 15.}

^{77 SOR, p.17.}

^{78 SOR, p. 18.}

^{79 Complainant´s Brief, p.86.}

^{80 SOR, p.22.}

^{81 SOR, p.22.}

^{82 SOR, p. 19-20.}

^{83 SOR, p. 28.}