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

DECISION OF THE PANEL

(JULY 19, 2000)

5) PROPORTION OF EXPORTS TO CANADA  

i) The CITT Failed to Properly Assess Propensity to Dump 

The Complainants submit that: 

In concluding that there existed no likelihood of resumed dumping on the part of the U.S. producers of the subject goods and in particular no propensity to dump on the part of the participating U.S. producers, the Tribunal accepted the statements made by the participating U.S. producer witnesses that they had and enforced company policies not to dump the subject goods.[150]   

The CITT concluded on the basis of the testimony of the witnesses for the U.S. Mills that exports to Canada are subject to limitations on availability and strict pricing policies. The witness for National Steel testified that its sales program is customer-driven rather than country-driven and that National Steel had no cold-rolled steel sheet available for sale to Canada beyond that which was included in its annual sales plan. The witness for U.S. Steel indicated that U.S. Steel has a strict pricing policy that precludes it from undercutting Canadian mill prices or selling at prices that are not profitable. According to the witness for Bethlehem, the company's export pricing policy requires that all exports, including the subject goods, generate a profit and not be priced below its U.S. transaction price. The witness for LTV testified LTV's pricing policy is to cease selling to customers where prices fall below its domestic selling prices. Finally, the witness for Inland testified that its current production capacity falls short of the demand for its cold-rolled steel sheet and that it has no plans to increase capacity at the present time.[151]  

The CITT determined that on the basis of the high levels of demand for the subject goods produced by the U.S. Mills combined with their strict pricing policies there was no incentive on the part of the U.S. Mills to export the subject goods to Canada at price levels below their domestic transaction prices. Considering the evidence before it, the CITT concluded that there was no propensity to dump on the part of the U.S. Mills.  

The Complainants allege that the CITT made an error by concluding there was no propensity to dump on the part of the U.S. Mills simply on the basis of  witnesses verbal testimony which was unsupported by documentary evidence.[152] The Complainants contends that in erroneously basing its conclusion on the verbal statements of witnesses for the U.S. Mills, the CITT failed to consider evidence to the contrary contained in Revenue Canada's Enforcement Data indicating that the assessment of SIMA anti-dumping duties against exports of the subject goods more than doubled between 1993 and 1996, and increased another 300% between 1996 and 1997.[153] The Revenue Canada Enforcement Data also indicated that in 1997 exports of the subject goods from the U.S. to Canada accounted for a certain portion of SIMA duties assessed against exports of subject goods from subject countries. Exports of subject goods by the U.S. Mills were assessed SIMA anti-dumping duties.[154]   The Complainants contend that given this information, the CITT erroneously concluded that the U.S. Mills would not dump. 

In response, the U.S. Mills submit that regardless of whether witnesses oral statements were supported by documentary evidence, the CITT has the discretion to accept and give weight to verbal statements made by sworn witnesses.[155] However, the U.S. Mills also argue that the Complainants’ argument regarding the lack of documentary evidence to support  witnesses testimony with respect to the strict pricing policies of the U.S. Mills is without merit. The documentary evidence reflected on the record that supports the testimony of witnesses for the U.S. Mills consists of written in-camera evidence statements of witnesses for the U.S. Mills.[156]  

The Complainants further allege that the CITT failed to account for evidence of pricing policies of the U.S. Mills that sold subject goods into the Canadian market at below normal values. The U.S. Mills responded to these allegations by arguing that there is no direct evidence to support allegations of aggressive pricing policies, that such allegations that Inland, LTV, AK Steel and Bethlehem were selling subject goods below normal values are unfounded and that there is ample evidence on the record to refute such allegations. The evidence on the record that purports to repudiate the allegations set forth in the internal correspondence of the domestic producers consists of in-camera witness statements and oral testimony of witnesses for the U.S. Mills stating that U.S. Mills maintain strict pricing policies and do not sell the subject goods at prices below normal values in the spot market or otherwise. 

It is alleged that the approach taken by the CITT showed that it was concerned only with the statements made by the U.S. Mills’ witnesses that they had and enforced company policies not to dump the subject goods. It is further alleged that the CITT erroneously based its conclusions on the verbal statements of witnesses for the U.S. producers unsupported by documentary evidence and failed to consider evidence to the contrary contained in the Revenue Canada Enforcement Data and the evidence of aggressive pricing practices presented by the domestic producers. With respect to this alleged error, it is not the role of this Panel to reweigh such evidence. It is apparent that the CITT had before it relevant information relating to the propensity to dump on the part of the U.S. Mills including documentary evidence to support the witnesses testimony.  Pursuant to its mandate, the CITT is required to assess such evidence and to not make its determination in a capricious or perverse manner.  This Panel will not remand if the evidence viewed reasonably is capable of supporting the finding of fact. 

As this Panel had noted previously, the CITT has the statutory authority to determine what evidence it will accept and what weight it will afford it. The CITT has the discretion to accept verbal statements made by sworn witnesses, particularly in the absence of direct contradictory evidence or a direct challenge to the veracity of the witnesses’ evidence on cross-examination. Additionally, there was documentary evidence on the record that supported the testimony of such witnesses. While a more fulsome evidentiary case may be desirable, this Panel will not reweigh the evidence and accordingly the Panel does not order a remand on this issue. The CITT's inquiry involves determining the presence or absence of evidence to support a contention, and where conflicting evidence exists, to weigh that evidence in reaching its conclusion. This is not a situation in which the matter must be referred back to the CITT for expert reweighing of the evidence, nor is it a situation where the CITT's finding is perverse due to an absolute lack of evidence on the record to support its conclusion. As there was material before the CITT that viewed reasonably supports its finding with respect to the propensity to dump, this Panel declines to remand on this issue.  

ii) Jurisdictional Error or Error of Law in Failure to Consider A Significant Number of Other Exporters. 

The Complainants submit that:  

The CITT made an error of jurisdiction (and in the alternative, an error of law) by failing to address the legal question of the likelihood of resumed dumping of the subject goods by the U.S. industry as a whole as it is required to do by SIMA, and specifically in failing to consider the actual and potential volume of subject goods exports by non-participating U.S. producers and exporters. In this regard, it is significant to note that the six participating U.S. producers accounted for less than half of the subject goods exported to Canada from the U.S. in 1997.[157]  

The CITT found that the U.S. Mills accounted for approximately 80 percent of the current production capacity of the subject goods in the U.S.[158] Furthermore, the CITT accepted the fact that for the period from 1997 to mid-1999, the additional cold-rolling capacity that would be available for merchant sales was estimated to be 4.1 million tons.[159] This additional capacity represented over 25 percent of U.S. demand for subject goods and over 30 percent of U.S. producer shipments of subject goods. The CITT explained that there was no information on the record to lead it to conclude that any of the additional capacity introduced by the U.S. producers of the subject goods, other than those that attended the hearing, will have an impact different from that demonstrated during the CITT proceedings.[160] On the basis of this determination and other evidence presented by the U.S. Mills, the CITT concluded that the evidence and testimony citing high demand and prices, coupled with near full capacity utilization levels and recent price increases, support the conclusion that there was no economic incentive for U.S. producers to export the subject goods at reduced prices[161]. 

The Complainants allege that the CITT committed a jurisdictional error or an error of law in only considering the stated behavior and asserted export polices of the U.S. Mills and failing to consider their actual behavior, or the behavior and practices of the fifteen non-participating U.S. producers of subject goods and a number of other exporters of subject goods into the Canadian market[162]. 

Firstly, the Complainants submit that there are now a significant number of exporters of the subject goods and the failure to consider the activities of these exporters in light of the additional capacity they were bringing into the U.S. market constitutes an error of jurisdiction or law. The Complainants argue that the CITT did not in its decision refer at all to the existence of these numerous exporters of subject goods from the U.S., and did not address (1) the issue of the very minimal level of participation of the U.S. producers and exporters in its review proceedings; (2) the types of exporters who had chosen not to participate in its review proceedings; and (3) the volume of the exports accounted for by exporters who chose not to participate[163].  

Secondly, the Complainants submit that the CITT failed to consider the volume of exports by non-participating producers and exporters, in so far as only a portion of the exports to Canada had been made by the U.S. Mills.  The evidence before the CITT indicates that less than half of imports of subject goods in 1996 and in 1997 were from the U.S. Mills[164].  Moreover, the relatively low proportion of subject goods imports represented by the U.S. Mills is also consistent with evidence before the CITT concerning certain individual producer’s estimates as to their share of subject goods exported to Canada.  The U.S. Mills who provided a response to the request for this information contained in the Foreign Manufacturer's Review Questionnaire, namely, Inland, LTV and U.S. Steel, estimated that their exports of subject goods to Canada were relatively low.[165]   

Thirdly, the Complainants submit that of the 4.1 million net tons of additional capacity for the merchant market, only 300,000 net tons were being added by the participating U.S. producers of the subject goods.  The balance of the additional capacity, 3.8 million net tons or 93 percent of all on-coming capacity was being added by producers who did not participate in the CITT's review proceedings.[166] Accordingly, the CITT made an error in concluding that none of the additional capacity introduced by U.S. producers, other than those that attended the hearing, will have an impact different from that demonstrated during the CITT proceedings[167]. In so finding, the Complainants submit that the CITT erroneously accepted the U.S. Mills as being representative of all 21 (or 23) U.S. producers of the subject goods despite the fact that a significant percentage of new on-coming capacity for the U.S. merchant market was being brought on by U.S. producers who failed to participate in the CITT's review proceedings.   

Based on the foregoing, the Complainants allege that having ignored the large number of non-participating U.S. producers and exporters who accounted for over half of the subject goods exports to Canada and a significant percentage of additional capacity coming-on in the U.S. merchant market, the CITT committed a reviewable error by failing to consider the non-participating U.S. producers and by accepting the evidence of the U.S. Mills as representative of all exporters of subject goods from the U.S. to Canada. 

The U.S. Mills responded to the Complainants’ allegations that the CITT committed an error of law or jurisdiction in failing to consider non-participating U.S. producers and exporters by pointing out that the CITT did consider the overall situation of the U.S. market as a whole and as such committed no error. The U.S. Mills further submitted that even if the CITT had committed the alleged error and failed to consider non-participating producers, this would not constitute a reviewable error under SIMA as there is no legal requirement for the CITT to address the specific level of participation of the U.S. producers, the types of exporters who did not participate and the amount of exports accounted for by these exporters.[168]            

The U.S. Mills argue that the CITT did not fail to consider the U.S. industry as a whole as the CITT specifically noted in its Statement of Reasons that counsel for Dofasco underlined the important role of the 15 non-participating U.S. producers, the U.S. service centres and the U.S. based steel traders.  The CITT also explicitly recognized there are over a dozen producers of the subject goods in the U.S., which implies that the CITT took into account that in its estimation approximately 20% of U.S. production comes from producers not represented at the hearing.[169] The U.S. Mills further submit that the CITT acted reasonably in analyzing the evidence submitted by the U.S. Mills and was entitled to infer that market conditions for non-participating U.S. producers and other exporters were similar, in the absence of any evidence to the contrary.[170]  

A difficult issue is raised by the Complainants’ assertion that the CITT committed a reviewable error in failing to consider the actual and potential volume of subject goods exports by non - participating U.S. producers and exporters as well as their actual behavior and that of the a significant number of other exporters.[171] Furthermore, the Complainants’ assert that the CITT's statement regarding the production capacity of the U.S. Mills and failure to discuss the dumping behavior of the non‑participating producers and exporters was an error of such magnitude that it infects their ultimate finding.  The question of failing to discuss a factor on which the CITT heard evidence was addressed in Stelco II, where the Federal Court of Appeal stated:  

Accordingly, it cannot be inferred from the fact that the reasons do not discuss a factor on which the Tribunal heard evidence that it must therefore have failed to consider it. 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 the decision.[172]  

It may not be inferred that the CITT failed to consider the volume of exports from producers who did not participate in the hearing or the dumping behavior of such producers or non‑participating exporters of subject goods solely on the basis that the CITT did not evaluate such evidence in its reasons. The critical issue is whether the CITT gave adequate reasons to explain its conclusion on those issues that are of central importance to the decision.  

This Panel finds that even if the CITT erred, there is sufficient evidence, reasonably viewed, to support the CITT's ultimate finding of no likelihood of resumed dumping. Under the standard of review that this Panel must follow, the question is whether there is evidence which, reasonably viewed, is capable of supporting the CITT's finding.[173] Such evidence need not be substantial nor need the Panel arrive at the same determination as the CITT in light of it.[174] In the words of the Federal Court of Appeal, the Panel "should be very reluctant to set aside a decision by virtue of the inferences drawn by the CITT from the material before it or to insist that the CITT canvass all the material on which the parties relied, when that which the CITT regarded as important, and on which it evidently based its decision, was sufficient to provide a rational basis for it”[175]. 

Even assuming that the CITT erred in viewing the U.S. Mills as representative of the U.S. export market and thereby failed to consider a significant number of other U.S. exporters to Canada, this Panel declines to remand on this issue.  The evidence of favourable supply and demand conditions for subject goods in the U.S. market as a whole coupled with near full capacity utilization levels and recent price increases, viewed reasonably, support the conclusion that there was no economic incentive for U.S. producers to export the subject goods at reduced prices.  Furthermore, the CITT heard direct evidence on these critical issues, and did not simply rely on inferences about the U.S. market that were based in any finding about the representativeness of the U.S. Mills.  

Therefore, the CITT's ultimate finding that the U.S. Mills had no incentive to dump in the Canadian market and that there was no likelihood of resumption of dumping escapes review notwithstanding any failure to consider evidence respecting the behavior of non‑participating producers or exporters. As the Federal Court of Appeal concluded in Stelco II, "even if the tribunal committed a reviewable error on some of the 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."[176]  

iii) Competition With Non-Subject Country Imports 

The Complainants submit that:  

The CITT made an error of fact and law when it concluded, solely on the basis that subject countries had sold into the Canadian market at a substantive premium above the domestic industry's prices, that subject country imports would not be made at non-subject country import price levels. In particular, the CITT failed to consider that only a small percentage of subject country imports were of commercial quality cold-rolled steel sheet in 1997. During the same period, a substantial percentage of non-subject country imports, only a small percentage of apparent Canadian consumption and domestic production consisted of commercial quality cold-rolled steel sheet. Accordingly, the CITT's comparison of average subject country import prices with average domestic industry's prices was improper in light of these vastly different product mixes.[177] 

The CITT rejected the Complainants’ argument that U.S. producers and exporters of subject goods would have to sell at dumped prices in order to re-enter the Canadian market. The CITT found that because the subject countries now sell into the Canadian market at a substantial premium above domestic prices, any increase in subject country imports into Canada would not have to be made at dumped prices in order to meet low non-subject country prices.[178] 

The Complainants allege that the CITT made an error of fact and law when it concluded that subject country imports would not be made at non-subject country prices on the basis that they had previously sold into the Canadian market at a premium because average prices do not account for differences in product mix.  The differences in average prices are due to other factors, thus there can be difficulties in drawing conclusions.[179] Further, the Complainants point to the fact that although average U.S. import selling prices exceeded average domestic industry's selling prices for subject goods by 32% in 1992, the CITT in the 1993 Finding concluded that subject goods were being exported from the U.S. to Canada at dumped prices. 

The U.S. Mills responded to the Complainants allegation that the CITT improperly referred to average prices by first pointing out that imports from non-subject countries into Canada are not determinative of the question as to whether subject countries are likely to resume dumping.[180] The U.S. Mills further submit that even if the use of such average prices was inappropriate, such use does not constitute a reviewable error.  It is an undisputed fact that average prices were higher for U.S. subject goods imported into Canada than average domestic prices, thus no primary error of fact was made.[181]     

The CITT did not commit an error of law or fact by concluding that any increase in subject country imports into Canada would not have to be made at dumped prices because the subject countries sell into the Canadian market at a substantial premium above domestic prices. A logical nexus exists between the evidence cited by the CITT and its finding. Moreover, the difference in product mix evidences the fact that subject country imports compete in a different market segment than non-subject country imports referred to by the Complainants. Thus, it would be erroneous to conclude on the basis of this evidence that subject country imports would have to be made at dumped prices in order to compete with low-priced non-subject country imports.  

The CITT's authority to conduct such an analysis and to make a determination based on its analysis is central to the authority granted to it under SIMA. The CITT exercised its discretion and applied its expertise to the facts obtained in its investigation. The question of whether the existence of low-priced non-subject country imports would cause subject country imports to be made at dumped prices is a matter clearly within the jurisdiction and specialized expertise of the CITT. For these reasons the Panel finds that the CITT's interpretation was one reasonably open to it based on the facts on the record and thus no reviewable error was committed.  

6)  INTERPRETATION OF “LIKELIHOOD OF RESUMED DUMPING” 

The Complainants’ submit that the CITT committed an error of law in its interpretation of the phrase “likelihood of resumed dumping”, and a jurisdictional error in failing to ask the proper questions in its determination of likelihood of resumed dumping.  The Complainants asserted that the conditions that gave rise to the 1993 Finding had not changed materially and the CITT’s assessment of likelihood of resumed dumping should have been made on a country-by-country basis.[182]  

In its Brief, the CITT claimed that the errors alleged by the Complainants in this regard are subject to the standard of review of patent unreasonableness, since the questions considered by the CITT related to matters within its jurisdiction and expertise.  The CITT argued that the phrase “likely to resume dumping”, which is a phrase created by the CITT, is plain on its face, that the relevant regulation is devoid of guidance and in any event, the CITT considered all the relevant factors in coming to its decision.   The CITT claimed that it must conform to the circumstances of the case which permit it to dispense with past practice in appropriate circumstances and that it has discretion as to whether it conducts an assessment of likelihood of resumed dumping on a cumulative basis.[183]  

In their Briefs, both the U.S. Mills and the Stampers argue that no reviewable error was made by the CITT in its interpretation of likelihood of resumed dumping.  They argue that SIMA imbues the CITT with considerable discretion in undertaking a s. 76 review.  They further argued that the CITT must conform its decision to the circumstances of the present case that gives them the flexibility to interpret and apply “likelihood of resumed dumping” and “material change”.  In the alternative, they submit that even if the CITT was obligated to follow past practices, it satisfied this obligation by employing an analysis that was fully consistent with past practices.  They further submit that the CITT has the discretion to analyze the relevant factors on either a country by country, cumulative, or producer by producer basis, depending on the circumstances.  They conclude by asserting that the country-by-country analysis undertaken by the CITT was not only permissible, but was in fact the correct one under the circumstances.[184]  

In their Reply Brief and during oral argument, the Complainants modified their position with respect to this issue.[185]  They argued that the parties were, in fact, in agreement that the CITT stated in the Statement of Reasons that it would undertake a country-by-country analysis.  They argued that the disagreement is whether the CITT actually reviewed the U.S. industry and the U.S. market conditions as a whole and whether it “focused more heavily” and indeed “too heavily” on the evidence of the U.S. Mills, thereby disregarding relevant probative material and evidence before it regarding the entire U.S. market.

The Complainants submit in their Reply Brief that the issues before the Panel are:  

(i)                  whether the CITT made incorrect finding of facts with respect to the U.S. Mills leading it to rely “more heavily” on this evidence “such that the decision is reviewable as jurisdictional error or an error of law”; and

(ii)                even if the findings of fact were correct, did the CITT commit a jurisdictional error or an error of law in relying more heavily on the evidence of the participants to the exclusion of others, particularly in light of the conclusions reached in its 1993 Finding.[186]   

The Complainants appear to have either abandoned or refined their original arguments focusing on error of law pertaining to the interpretation of the phrase “likelihood of resumed dumping” and jurisdictional error in failing to ask the proper questions.  The issues as reframed by the Complainants pertain to findings of fact with respect to the U.S. Mills and the weight of the evidence given to such findings.  This Panel agrees with the CITT and the U.S. Mills that the CITT has ample discretion when dealing with sunset reviews in its interpretation of likelihood of resumed dumping and the questions asked and answered by the CITT pertaining thereto do not reach the level of reviewable error.  

As with respect to the alleged errors as refined, counsel for the Complainant Stelco conceded at the oral hearing that the likelihood of dumping and resumption of dumping are price issues.[187]  The issues pertaining to pricing are elsewhere discussed in this opinion and need not be reconsidered in this context.  

The Complainants submit that the Canada Customs and Revenue Agency and not the CITT is the most qualified to determine the likelihood of resumed dumping and that this is a factor that goes to the level of deference. [188]   The Complainants submit that the CITT has less expertise with respect to the likelihood of dumping analysis than it does with respect to likelihood of injury analysis. [189]   As discussed in the standard or review section above, the CITT is entitled to ample deference in this review, even if another agency might be more expert in some aspects.  Accordingly, the level of deference afforded the CITT in these circumstances is more than necessary to uphold its determination.  This Panel will not reweigh the evidence.  

7)  CONCLUSION 

The heart of the CITT’s decision is that favorable U.S. market conditions for the subject goods in the U.S. provide U.S. producers with no economic incentive to dump the subject goods in Canada.  More particularly, U.S. producers have no incentive to dump the subject goods in Canada because supply and demand condition for the subject goods are in balance in the U.S. market, demand is outpacing production capacity and prices for the subject goods are high.  Further, discounting the effects of low-priced imports into the U.S., the CITT addresses the diminishing value of the Canadian dollar, the volume of U.S. exports to Canada, U.S. steel exports to Mexico and U.S. producers’ policies regarding dumping. The CITT therefore determined that there is no likelihood of resumed dumping from the U.S. and found it unnecessary to reconsider the issue of likelihood of injury and issued an order rescinding its earlier findings.  

The CITT’s findings with respect to the condition of the U.S. market provide the foundation for this conclusion.   Given that the key to the CITT’s finding regarding the U.S. market conditions is its supply and demand and capacity findings, all of the factual errors alleged by Complainants are rendered harmless if the findings about supply and demand and capacity conditions remain intact.  In view of the applicable standard of review, this Panel upholds the determination of the CITT.  While the reasoning of the CITT in some areas could have been more fulsome, this Panel finds that the allegations of error do not reach the level of reviewable error required by the applicable standard of review.  

In view of the foregoing, the Panel hereby orders that the decision of the CITT in this matter be and is hereby affirmed.  This Panel directs the Canadian Secretary of the NAFTA Secretariat to issue a Notice of Final Panel Action pursuant to Rule 77 of the NAFTA Article 1904 Panel Rules.  

Signed in the original by:   
  
Ms. Wilhelmina K. Tyler, J.D. (Chairperson) 
Ms. Wilhelmina K. Tyler, J.D. (Chairperson) 
    
Mr. Frank R. Foran, Q.C. 
Mr. Frank R. Foran, Q.C. 
  
    
Ms. Lisa B. Koteen 
Ms. Lisa B. Koteen 
  
Mr. Paul C. LaBarge 
Mr. Paul C. LaBarge 
  
  
Professor James Frank Smith 
Professor James Frank Smith 
  
  
Issued on the 19th day of July 2000