ARTICLE 1904
BINATIONAL PANEL REVIEW PURSUANT TO THE
NORTH AMERICAN FREE TRADE AGREEMENT

DECISION OF THE PANEL

(JULY 19, 2000)

At the reasonableness end of the spectrum, where deference is at its highest, are those cases where a tribunal protected by a true privative clause, is deciding a matter within its jurisdiction and where there is no right of statutory appeal.[29] 

The Pezim case involved a tribunal decision from which there was a statutory right of appeal and which was not protected by a privative clause.  In those circumstances, the Court held that the applicable standard of review fell between the two extremes of correctness and patent unreasonableness, which entitled the Tribunal to “considerable deference”.  

Similarly, in Baker, the decision maker was not protected by a privative clause and there was the explicit contemplation of judicial review by the Federal Court of Canada.  In those circumstances, the Court held that there should be considerable deference, but that the standard should not be as deferential as patent unreasonableness.[30]  

The present case is similar to both Pezim and Baker.  The CITT is a specialized tribunal deciding matters within its area of expertise[31] and is not protected by a privative clause.  However, unlike the tribunal in Pezim, but like the decision maker in Baker, the CITT is subject to judicial review rather than a statutory right of appeal.[32]  

Factors which call for a more exacting standard include the wording of s. 18.1(4)(c) which permits review of errors of law, whether or not they appear on the face of the record, the fact that the CITT is subject to judicial review and the fact that the CITT no longer enjoys the benefit of any type of privative clause.[33]  On the other hand, the factors which counsel deference include the fact that the CITT is a specialized tribunal making determinations within its area of expertise, the polycentric nature of the decision and the lack of a statutory right of appeal.  

Under the circumstances of this review, the CITT is not entitled to the highest deference on the spectrum.  Under similar circumstances the Supreme Court of Canada, has said:  

... (when) there are indications both ways, the proper standard of review falls somewhere between the ends of the spectrum.[34]  

The appropriate standard of review falls between the extremes of correctness and patent unreasonableness, which entitles the CITT to considerable deference.  While this standard does not extend to the point of patent unreasonableness, it does fall closer to that end of the spectrum.  This is a high degree of deference commensurate with the CITT’s expertise and the circumstances of this review.  

This Panel should remand only if it finds that the CITT’s decision cannot be sustained on any reasonable interpretation of the law.[35]  This is also consistent with the standard adopted by the recent Binational Panels in Baler Twine[36] and Concrete Panels[37] and is also consistent with the analysis provided in Baby Food.[38]  

iii) Issues of Fact 

The Federal Court Act provides that a tribunal’s determination can be reviewed for errors of fact when the tribunal:  

18.1(4)(d) based its decision or order on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material before it.

Issues of fact arise from factual determinations made by a  tribunal acting within its jurisdiction. While the line that divides issues of fact from issues of law may not be clear at first instance, and indeed issues of fact may at times be mixed with issues of law, the courts have developed an appropriate litmus test to assist in this task.  The court in Pushpanathan adopted the reasoning in Southam, which held:  

...it is not always easy to say precisely where the line should be drawn, though in most cases it should be sufficiently clear whether the dispute is over a general proposition that might qualify as a principle of law or over a very particular set of circumstances that is not apt to be of much interest to judges and lawyers in the future.[39] 

Several recent Federal Court of Appeal decisions have dealt with the appropriate standard of review to be applied to the CITT in the context of issues of fact and issues of substantial fact mixed with law.  Depending on the circumstances of the particular case, the courts have described this standard as patently unreasonable,[40] akin to patently unreasonable,[41] or slightly less deferential than patently unreasonable.[42]  Regardless of the particular labels, the standard of review with respect to issues of fact and issues of substantial fact mixed with law remains a deferential one.  

In fact, a recent Federal Court of Appeal decision[43], reviewing a decision of the CITT pursuant to a subsection 76(4) determination under SIMA, held that when trying to ascertain the standard of review to be applied, it did not seem “to advance matters appreciably to try to determine whether this equates to a ‘patently unreasonable’ or an ‘unreasonable simpliciter’ standard”.  The Court warned that there is a danger that an inquiry of that kind may serve to divert the Court’s attention from a careful consideration of the words in which Parliament has formulated the standard of review for the factual finding on which federal administrative tribunals base their decisions.[44]  

In that particular case, while the Court declined to articulate the precise standard of review, it was deferential. The Court held that three factors were particularly relevant in establishing a reluctance to intervene in the CITT’s decision.  These factors included, firstly, that the CITT’s decision was made in the exercise of the subjective discretion conferred by subsection 76(4) of SIMA that permits the Tribunal to make an order “as the circumstances require”.  Secondly, the facts in dispute were manifestly within the expertise of the CITT and the Court ran the risk of “second guessing” the conclusions reached by the specialized tribunal. Thirdly, the important part played in the fact finding process of the CITT by staff research and the extensive written submissions made in response to it.  Hence the Court held that it should be very reluctant to set aside a decision by virtue of the inferences drawn by the CITT from material before it or to insist that the CITT reasons canvass all the material when that which the CITT regarded particularly important and on which it evidently based its decision was sufficient to provide a rational basis for it.  Given the above, the Court expressed the applicable standard of review as follows:

Accordingly, in order to establish that the tribunal committed a reviewable error the applicant and the intervenors must demonstrate on the balance of probabilities that the Tribunal’s finding that dumping was likely to resume if the original finding were rescinded was not rationally supported by any material before it.  Thus, even if the Tribunal committed a reviewable error on some of its findings of fact, its decision to rescind will still be upheld if there were other facts on which it could reasonably base its ultimate conclusion.[45] 

This Panel adopts the reasoning of the Court in Stelco II and holds that even if the CITT committed a reviewable error on some of its findings of fact, its decision will still be upheld if there were other facts on which it could reasonably base its ultimate conclusion.  A tribunal that is subject to a duty to give reasons, as is the CITT by virtue of subsection 76(4) must of course provide adequate reasons.  But, this does not mean that it must deal with every issue raised before it.  Rather, it must explain its conclusion on those issues that are of central importance to its decision.[46]  

In the particular circumstances of this review, this Panel must balance competing factors.  On the one hand, it must consider the factors calling for deference, which include the strict language of s. 18.1(4)(d), the fact that the CITT is a specialized tribunal making findings of fact in its area of expertise with the benefit of analyzing the evidence first hand and the fact that the CITT is making a decision which is polycentric in nature and is not subject to a statutory right of appeal.  On the other hand, it must consider factors calling for a more exacting standard, which include the absence of any type of privative clause and the fact that the CITT is subject to judicial review.  

Given the circumstances of this Panel Review and informed by the jurisprudence developed by the Federal Court of Appeal, the appropriate standard of review to be employed falls on the patent unreasonableness side of the spectrum.  In the context of reviewing issues of fact or substantial issues of fact mixed with law under these circumstances, the deference that is accorded to the CITT is greater than in the context of issues of law.[47]  

The standard of review normally applied to questions of fact or substantial issues of fact mixed with law is that there must be a rational connection between the facts and the tribunal’s findings. This statutory standard, however, is not whether there is any evidence at all, but whether there is evidence which, viewed reasonably, is capable of supporting the tribunal’s finding.[48]  Such evidence need not be substantial nor need the Panel arrive at the same determination as the tribunal in light of it.[49]  

Moreover, notwithstanding the high degree of deference accorded to the CITT with respect to questions of fact, both the Courts and other panels have insisted that the CITT base its decision on evidence found in the record and not mere speculation or conjecture.[50]  While the CITT need not deal with every issue raised, it must provide adequate reasons for its decision based on the issues which were central to its inquiry.[51]  

This Panel adopts this standard of review for the conduct of its review of findings of fact in this case and accordingly, this Panel will remand only if it finds that the CITT’s decision cannot be sustained on any reasonable interpretation of the facts.[52]  

2)SUPPLY AND DEMAND CONDITIONS IN THE UNITED STATES MARKET  index

The Complainants assert that the CITT made an:  

[e]rroneous finding of fact that supply and demand conditions  for the subject goods were generally in balance in the United States, and in making such finding, the failure to consider  evidence that the precipitous drop in U.S. transaction prices for subject goods of 13 percent was the result of flat demand conditions for subject goods as of 1996, rapidly increasing  imports due to global oversupply conditions for subject goods, and declining U.S. producers’ shipments at a time of huge incremental capacity additions by the U.S. producers.[53] 

Preliminarily, this Panel notes that two allegations are discussed elsewhere in this decision:  (1) that U.S. transaction prices had plunged 13 per cent; and (2) that increases in capacity by U.S. producers would have an additional adverse impact on prices.  Because these two issues are discussed below, this Panel does not consider them here.  This Panel addresses in turn the allegations that: there was no evidence that supply and demand for the subject goods were generally in balance; demand conditions for the subject goods as of 1996 were flat; imports into the U.S. market were rapidly increasing due to global oversupply; and U.S. producers’ shipments were declining.  

i) Whether Supply and Demand Conditions Were Generally in Balance in the U.S. Market for the Subject Goods. 

The Complainants maintain that the CITT erred in resting its finding regarding supply and demand for subject goods in the U.S. market on the testimony of a single witness, a representative of U.S. producer Inland, who testified that “supply and demand conditions are generally in balance in the U.S. market” [54].  The Complainants assert that the evidence provided by the witness from Inland “was very much limited to Inland’s experience, and at that to Inland’s sales in the ‘high-quality high-end segment’ of the subject goods market limited to at most 200,000 net tons”[55].  The Complainants examine the Inland witness’ testimony in considerable detail in an effort to show that the witness’ statement is limited to the experience of his firm, such that it is not reliable evidence for the proposition that supply and demand were in balance in the U.S. market as a whole.    

In response, the U.S. Mills submitted that “there was evidence in the record as to general balance between supply and demand in the U.S. market for the subject goods”[56] and that “[n]otwithstanding Stelco’s attempts to qualify, circumscribe and limit the scope of the testimony of Mr. Hudson [the witness for Inland], it is clear that his observations about supply and demand were to the effect that they were roughly in balance”[57].  The U.S. Mills assert that “[c]learly, Mr. Hudson was expressing his understanding of the ‘total market’ and of the ‘high end of the market’ and of conditions ‘in general’, rather than just the particular circumstances of Inland (as Stelco would have it)”[58].   

The CITT takes the position that “there is evidence on the record that the announced price increase was limited to the products on the higher end of the market”[59]. With respect to this issue, the CITT submitted  “that the testimony of the witness for Inland was supportive of the CITT’s conclusion that supply and demand conditions were generally in balance in the U.S. market”[60].  

This Panel finds that review of the testimony indicates that the witness was in fact responding to a question about the conditions facing the cold-rolled carbon steel sheet market generally.[61]  In his further remarks he does describe his own firm’s situation but he also alludes to the overall U.S. market in describing “a pretty favourable environment”[62]. On cross-examination, Stelco’s counsel did elicit an admission from the witness that there was excess supply “at the low end”[63] and that prices generally seem to be dropping,[64] yet the witness repeatedly resisted Counsel for Stelco’s efforts to have him attribute the price reductions to excess supply.[65]  

Nor did the CITT rely upon the comments of one witness alone.[66]  The CITT referred to witnesses’ testimony that their companies had no extra product to export to Canada.[67]   The CITT made several statements which, taken together, comprise its finding with respect to supply and demand.  The Complainants focused almost exclusively on the statement that “supply and demand conditions are generally in balance in the U.S. market…”[68].  However, in discussing capacity utilization and the effect of the planned additions to capacity, the CITT observed, “[t]he planned additions to capacity are a response to increased demand by users” and “there is abundant evidence on the record that demonstrates that capacity in the United States and Canada has been unable to keep pace with the rising demand for cold-rolled steel sheet…”[69].  References to the relationship between supply and demand in the industry are found throughout the CITT’s Statement of Reasons.  

The central issue, however, is whether there is evidence, reasonably considered, to support the CITT’s determination with respect to supply and demand conditions.  There is sufficient evidence, particularly as discussed further below, that this Panel cannot disturb the CITT’s determination that supply and demand conditions were generally in balance.  

ii) Whether Demand Conditions for the Subject Goods Were Flat 

The Complainants assert that the “[t]ribunal had before it substantial, independent and authoritative evidence that U.S. demand for subject goods had flattened or declined since 1996 and that, during the recent months of 1998, U.S. demand for the subject goods had furthered softened” [70].  

In response, the U.S. Mills stated:  

The fact that there existed some evidence supporting the domestic industry’s argument is immaterial. The question before this Panel is whether the CITT made a finding without any evidentiary support and if so whether there was any other evidence capable of supporting the CITT’s conclusion. The U.S. Mills submit that there was abundance of evidence supporting the CITT’s findings with respect to demand and that, in any event, there was voluminous other evidence supporting the CITT's general conclusion as to the likelihood of resumed dumping[71].   

To support their allegation, the Complainants rely upon U.S. Department of Commerce statistics showing that apparent 1998 consumption climbed 10 percent between 1995 and 1996 but then rose only slightly the following year.  Comparing the first two months of 1997 with the same time period in 1998, the demand curve is nearly flat.[72]  Again, the CITT identifies evidence in the record to support its finding.[73] As the Statement of Reasons declares, “[t]he Tribunal heard considerable evidence that the outlook is for continued high demand in the U.S. market, as the major cold-rolled steel consuming industries are experiencing sustained high demand in their respective markets.  High demand for cold-rolled steel sheet by the U.S. automotive sector, in particular, was cited by all the witnesses for the U.S. Mills”[74].  Although the CITT did not provide any citations to the record, representatives of the five other U.S. Mills that participated in the proceeding, AK Steel, US Steel, Bethlehem, National Steel and LTV, did testify to high demand in the U.S. market.[75]  

Also instructive are the responses the U.S. Mills filed in response to the CITT’s Foreign Manufacturer’s Review Questionnaire.  The questionnaire included the question, “Please describe the trends in the state of the market for cold-rolled steel sheet in your country from 1993 to the present in relation to demand, prices and capacity utilization”.  Because of the broad scope of the question, the respondents’ answers varied widely.  Their assessments were mixed.  AK Steel wrote, “[e]ach year since 1993, we have been able to increase productivity of our #3 cold-rolled mill”, adding “[t]he current trend remains positive…”[76]. National Steel indicated that demand was flat but that additions to capacity were offset by increased demand.[77]  Inland stated that “cold-rolled capacity has risen steadily to meet demand” but that mini-mills were exerting price pressure at the low-end [of product quality] and consumption might be on the decline.[78]  Bethlehem opined that the market for cold-rolled sheet steel in the United States was strong.[79]  LTV took the position that demand was up and prices were up but in the future prices could go up or down depending on supply and demand.[80]  While there is no consensus, the majority of the mills expressed at least cautious optimism.  

This Panel finds that other evidence supporting the proposition that demand was strong includes documentation in the trade press.  For example, the Price Waterhouse World Steel Dynamics Price Track #57 (Feb. 9, 1998), observes, “[o]ne of the strongest positives is the robust steel demand in both the U.S. and Europe where the economies are doing well…”[81]. Although demand did not appear to be increasing above the 1996 levels, the industry officials who appeared in or prepared questionnaire responses for the proceeding apparently considered the demand to be quite high in an absolute sense.  Therefore, this Panel will not interfere with the CITT’s finding that demand was high. 

iii) Whether the U.S. Market Experienced Rapidly Increasing Imports Due to Global Oversupply 

The Complainants contend that the CITT “ignored substantial and independent evidence  before it of worldwide overcapacity for the production of flat-rolled steel sheet, including the subject goods, the result of which had been a continuing influx of low-priced subject goods imports into the United States, especially from Asia and Eastern Europe”[82].  In response, the U.S. Mills stated that “the Tribunal has a duty to address the principle [sic] issues raised and provide reasons based on the evidence presented before it.  This duty does not entail explicit reference to every price [sic] of evidence addressed and every argument presented at the hearing”[83].   

This Panel notes that, while the CITT did acknowledge that import penetration increased between 1996 and 1997, the CITT made no specific finding with respect to excess supply worldwide.  As the Federal Court of Appeal recently stated in Stelco II, the CITT is not obligated to address every issue on which it heard evidence and “[t]he burden is on the applicant to demonstrate that any factor on which the CITT did not make a reasoned finding was, on the facts of the case, of such manifest importance that the CITT was bound in law to deal with it expressly in its reasons for decision” [84].  Complainants have not demonstrated the manifest importance of the alleged worldwide oversupply per se.  Furthermore, this Panel references this question in the discussion of the effect of increased capacity, infra.  

The CITT disposed of the Complainants’ allegations that imports were supplanting U.S. shipments in two sentences:

The evidence demonstrates that, between 1996 and 1997, total imports into the United States increased from 2.3 million to 3.2 million tons, rising from 14.6 to 20 percent of the U.S. market.  This rise in imports coincided with a period of growing demand for cold-rolled steel sheet in the United States which, as indicated previously, outpaced the growth in capacity.[85] 

Essentially, the CITT considered the rise in imports to be a response to demand that the U.S. Mills could not meet and that it did not pose a serious threat to the U.S. Mills.  As indicated, there is evidence on the record that is sufficient for this Panel to conclude that it should not interfere with the CITT’ finding with respect to the effect of rising imports.  

iv)  Whether the U.S. Producers’ Shipments Were Declining 

The Complainants argue, “[d]uring 1997, while imports into the United States rose dramatically, and prices for the subject goods were declining, the domestic shipments of the subject goods by the U.S. producers fell by 8%”[86].  In reply, the U.S. Mills cite the U.S. Department of Commerce data for the proposition that between 1996 and 1997 “both imports into the U.S. and overall apparent consumption (demand) increased, just as the CITT said in its Reasons”[87].  The CITT, in turn, submits “that the period to which the CITT referred was not the 1996-1997, as suggested by the Complainants, but rather is the period that the finding has been in place”.  The CITT goes on to argue that there is evidence on the record to support its conclusion with respect to the U.S. firms’ shipments, citing to a document in the administrative record as an example of the supporting evidence.[88]  

The U.S. Department of Commerce document on which the Complainants rely shows that U.S. shipments rose ten percent between 1995 and 1996 and dropped less than six percent from 1996 to 1997.  In the first two months of 1998, shipments were up five percent compared to the same time in 1997.  While the data referred to by the U.S. Mills actually tends to support Complainants’ allegations that shipments were declining, the CITT is correct that consideration of the entire time frame does indicate that, overall, shipments were not trending down.  

Taken altogether, the evidence appears to provide support for both the CITT and the Complainants.  Much of the information, particularly the forecasts in the trade publications, is opinion rather than hard data and even the data is subject to subjective interpretation.  As this Panel explains in the discussion of the standard of review, interpretation and analysis should be left to the CITT, which has been granted the authority under SIMA and which has the expertise to engage in that exercise. The CITT’s finding with regard to supply and demand must stand.  

Continue on to:  The potential effect of increased production capacity