RESTRICTED
WORLD TRADE G/ADP/W/73
G/SCM/W/82
ORGANIZATION 9October 1995
(95-2985)
Original: English Committee onAnti-Dumping Practices
Committee onSubsidies andCountervailing Measures
QUESTIONS CONCERNING THE NOTIFICATION PROVIDED BY
THE GOVERNMENT OFCANADA1OFLAWS AND REGULATIONS
UNDER ARTICLES 18.5AND 32.6OFTHE AGREEMENTS
Thefollowing communication, dated 2October 1995, hasbeenreceived fromtheUnited States
Trade Representative.
_______________
ANTI-DUMPING METHODOLOGY
CEPSales -Value Added inCanada
CEPSales -Profit inCanada Section 25oftheSIMA (G/ADP/N/CAN/2, pp.41-43) states that,for
bothfurther manufactured andnon-further manufactured CEPsales, theDeputy Minister istodeduct
anamount forprofit oftheimporter. Sections 20(non-further manufactured goods) and21(further
manufactured goods) oftheSIMA Regulations (G/ADP/N/1/CAN/2 p.233)statethattheterm"an
amount forprofit", inthisspecific context, means anamount thatwould bemade intheordinary course
oftradeonsaleofthegoods. Section 22oftheSIMA Regulations (G/ADP/N/1/CAN/2 p.233)provides
ahierarchy ofoptions foridentifying profit intheordinary course oftrade: (1)profit generally earned
inCanada byvendors atthesame leveloftrade onsalesofthelikegood tounaffiliated parties; or,
ifunavailable, (2)profits generally earned inCanada byvendors atthesame leveloftrade onsales
ofthegeneral category ofmerchandise; or,ifunavailable, (3)7.4percentoftheprice atwhich the
goods were soldbytheimporter.
1. Given thatArticle 2.4oftheA-DAgreement states thatthededuction shallbefor"profits
accruing", doesCanada intend tobaseitsdetermination ofwhatprofit would bemade inthe
ordinary course oftrade ontheexperience andfinancial records ofthespecific exporter at
issue?
2. Where istheA-DAgreement rationale foruseof7.4percent astheamount of"profit accruing"
onanygiven CEPsale?
Selection ofNormal Value Sections 15through 19oftheSIMA (G/ADP/N/1/CAN/2, pp.33-37)
address identification andadjustment ofnormal value. Normal value isestablished onsales inthe
home market tounaffiliated parties, made atthesame level oftrade, andinsimilar quantities.
Section 16(c) oftheSIMA provides thatiftheexporter didnotmake sufficient home market sales,
salesofanother vendor maybeusedtoestablish normal value. Section 19oftheSIMA provides that
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iftheexporter didnotmake sufficient home market sales, Canada mayusethird country sales or
constructed value.
3. Article 2.2,footnote 2,oftheA-DAgreement states thatsalesinthehome market orthird
country arenormally notsufficient iflessthan5percentofexport salestoCanada. Neither
theSIMAnortheSIMARegulationscontainthis5percentstandard.WhatstandardwillCanada
apply indetermining whether thevolume ofsalesinthehome market issufficient?
4. Isthereahierarchy among thethreealternative methods ofdetermining normal value outlined
insections 16(c) and19ofSIMA?
Intermediate Country Sales Section 30oftheSIMA (G/ADP/N/1/CAN/2, pp.45)provides that,where
goods exported toCanada "pass intransit" through anintermediate country, normal value andexport
price willbebased inthecountry oforigin, rather thantheintermediate country. Ifmerchandise is
shipped toCanada from anintermediate country, export price andnormal value willbebased inthe
country oforigin ifnormal value intheintermediate country islower thatnormal value inthecountry
oforigin.
5. What istheA-DAgreement rationale forbasing normal value andexport priceinthecountry
oforigin because normal value ishigher inthecountry oforigin?
DutyAsACost Sections 25(1)(c)(i) and25(1)(d)(v) oftheSIMA (G/ADP/N/1/CAN/2, p.41)provide
thatexport priceistobereduced bytheamount ofallduties, including anti-dumping duties. However,
these provisions aremodified somewhat inthatsection 25(2) (G/ADP/N/1/CAN/2, p.42)provides
thatnosuchdeduction willbemade iftheDeputy Minister concludes that,before suchdeduction is
made, export price isequal toorgreater thannormal value. However, section 60(2) oftheSIMA
(G/ADP/N/CAN/2, p.78)provides that,notwithstanding 25(2) oftheSIMA, anyduties imposed shall
beincluded inthecosts (under certain circumstances) inre-determination proceedings.
6. HowwillCanada implement these seemingly contradictory provisions inamanner thatwill
notartificially increase dumping margins?
Price Averaging Section 30.2(1) oftheSIMA (G/ADP/N/1/CAN/2, p.45)provides thatmargins will
bebased onthedifference between weighted-average normal value andweighted-average export price.
Section 30.2(2) oftheSIMA (G/ADP/N/1/CAN/2, p.45)provides thatwhere there isasignificant
variation inprices among purchasers, regions ortimeperiods, theDeputy Minister may"determine
themargin ofdumping ...tobetheweighted average ofthemargins ofdumping inrelation tothe
goods ...soldinsuchindividual sales...astheDeputy Minister considers relevant."
7. Because thelanguage ofsection 30.2(2) issomewhat unclear, isourunderstanding correct that
normal value willbedetermined bycomparing weighted average prices toprices ofindividual
salestransactionsinsituationsofsignificantpricevariations?Ifnot,thenpleaseexplainprecisely
hownormal value willbedetermined.
COP/CV -Development Costs Section 12oftheSIMA Regulations (G/ADP/N/1/CAN/2, p.218)
provides forthepossibility ofusing design andengineering costsoftherespondent oranyotherexporter
orproducer ofthesubject merchandise forthesame general category ofmerchandise inthecost
calculation. Suchcostsmaybeadjusted forthevalue ofanydifferences inthedesign andengineering
between thegeneral category ofgoods andthesubject merchandise. Except inthecaseofprofit and
SG&A calculations (anddeterminations based onthefactsavailable), Article 2oftheA-DAgreementG/ADP/W/73
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provides noauthority forutilizing costs relating tonon-subject merchandise (thegeneral category of
goods) orcosts incurred byother producers orexporters.
8. What istheA-DAgreement rationale forderiving thecalculation ofdesign andengineering
costs onnon-subject merchandise (thegeneral category ofgoods) orcosts incurred byother
producers orexporters?
Section 13(a) oftheSIMA Regulations (G/ADP/N/1/CAN/2, p.230)[which concerns determining
an"amount forprofit"] defines saleswhich are"such astopermit aproper comparison" tomean the
sales"thatsatisfy thegreatest number oftheconditions setoutinparagraphs 15(a) to(e)ofthe[SIMA],
taking intoaccount subsection 16(1) ofthe[SIMA]." (Paragraphs 15(a)to(e)provide forthecalculation
ofnormal value onthebasisofsalesintheordinary course oftrade, inthesameorsubstantially similar
quantities, etc.) Areference tosales "that satisfy thegreatest number oftheconditions setoutin
paragraphs 15(a) to(e)ofthe[SIMA], taking intoaccount subsection 16(1) ofthe[SIMA]" alsoappears
in11(c) oftheSIMA Regulations withregard tothecalculation ofSG&A expenses.
9. How willtheCanadian authorities apply therequirements ofsection 13(a) oftheSIMA
Regulations (G/ADP/N/1/CAN/2, p.230)(regarding theconditions inparagraphs 15(a) to
(e)oftheSIMA (G/ADP/N/1/CAN/2, p.33-34)) insituations where thecalculation ofprofit
isbased onother thansalesofthesubject merchandise bytherespondent exporter?
10. Howwillthese same requirements (regarding theconditions inparagraphs 15(a) to(e)ofthe
SIMA) beapplied forpurposes ofcalculating SG&A expenses?
11. HowdoesCanadaplantoimplementsection13(c)oftheSIMARegulations(G/ADP/N/1/CAN/2,
p.230)? Willrespondents berequired toprovide alltransactions andtransaction specific
adjustments forthegeneral category ofsalesorforsalesofthenextlargest group orrange
ofgoodswhenprofitcannotbecalculatedonsalesofthesubjectmerchandise?Whatinformation
willberequired fromother exporters orproducers iftheirprofit istobeusedinthecalculation
ofCVforarespondent company?
12. HowwillCanada restrict theapplication ofsection 11(b)(v) and(vi)oftheSIMA Regulations
(G/ADP/N/1/CAN/2, p.229)toassure thattheprofit calculation doesnotexceed theprofit
normally realized byother exporters andproducers forthesamegeneral category ofproducts?
CV-SG&A Section 11(c) oftheSIMA Regulations (G/ADP/N/1/CAN/2, p.229)appears toprovide
twobases forcalculating SG&A expenses. Section 11(c)(i) calculates SG&A expenses as"anamount
equal totheaverage ofalladministrative, selling andothercosts...."Section 11(c)(ii) calculates SG&A
expenses as"anamount equal toalladministrative, selling andother costs ...." (emphasis added).
13. Arethere anycircumstances under which thecalculation ofSG&A expenses under section
11(c)(ii) oftheSIMA Regulations (G/ADP/N/1/CAN/2, p.229)would result inadifferent
figure forSG&A expenses thanunder section 11(c)(i)?
14. Ifarespondent isunable toprovide appropriate SG&A information forsubject merchandise,
willCanada consider using anyalternative SG&A information (such asisprovided forin
Article 2.2.2(i) through (iii)oftheA-DAgreement) prior torelying onthefactsavailable?G/ADP/W/73
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SUBSIDIES AND COUNTERVAILING MEASURES
Non-Actionable ("Green") Subsidies
Initiation Under section 31.1(4) oftheSIMA (G/ADP/N/1/CAN/2, p.50),when theDeputy Minister
ofNational Revenue, during theinitiation phase ofaninvestigation, "isoftheopinion that...asubsidy
thatwasnotnotified totheCommittee inaccordance withArticle 8.3oftheSCM Agreement isanon-
actionable subsidy", heorshemustnotify theDeputy Minister ofFinance andthecomplainant. The
significance ofthisnotification, however, isnotclear.
15. Does section 31.1(4) oftheSIMA (G/ADP/N/1/CAN/2, p.50)mean thattheDeputy Minister
ofNational Revenue willnotinitiate onthissubsidy? Or,doesitsimply mean thattheissue
ofthesubsidy 'snon-actionability must beresolved during theinvestigation?
Research Subsidies Canada makes onechange tothe"fundamental research" category ofnon-actionable
subsidies. Section 25.3(d)(ii) oftheSIMA Regulations (G/ADP/N/1/CAN/2, p.258)provides that
assistance forfundamental research activities conducted byinstitutions ofhigher education andother
independent research establishments isnon-actionable provided thattheresearch being conducted, inter
alia,isnot"directly linked" toindustrial orcommercial objectives. TheSCM Agreement (infootnote
26toArticle 8.2(a)), incontrast, doesnotusetheword "directly"; itonlyspeaks ofresearch thatis
not"linked" toindustrial orcommercial objectives.
16. What isthereason fortheinclusion oftheword "directly" insection 25.3(d)(iii) oftheSIMA
Regulations?
INVESTIGATION PROCEDURES
Timetable forInvestigation Section 38oftheSIMA (G/ADP/N/1/CAN/2, p.55)provides fora
preliminary determination afterthe59thdayandonorbefore the90thdayfollowing initiation. Section
39oftheSIMA(G/ADP/N/1/CAN/2,p.56)providesthatthepreliminarydeterminationmaybeextended
uptothe135th dayfordifficult andnovel issues. Ifacaseisterminated under 35(1)(b) oftheSIMA,
(G/ADP/N/1/CAN/2, p.53)thenaparty has30daystoappeal toCITT under section 35(2)(b) ofthe
SIMA. TheCITT has30days todecide whether toinitiate aninquiry under 37(b)(iii) ofthe
SIMA(G/ADP/N/1/CAN/2, p.54). Section 29(1) oftheCITT Act(G/ADP/N/1/CAN/2, p.147)
provides thatiftheCITT initiates aninquiry ofanyissue appealed from adecision oftheDeputy
Minister, theCITT mustissueitsreport within 180days, withapossible extension of90days(29(2)
oftheCITT Act). Section 41oftheSIMA (G/ADP/N/1/CAN/2, p.57)provides thatthefinal
determination shallbemade within 90daysafterthepreliminary determination ortheCITT'sreport
re-instituting aterminated investigation.
Itisunclear fromthestatutory andregulatory provisions whether anA-DorCVD investigation
must becompleted within 12months (or18months withanextension) under Canadian lawandin
accordance withArticles 5.10oftheA-DAgreement and11.11 oftheSCM Agreement. Forexample,
iftheDeputy Minister terminates aninvestigation, aCITT inquiry determines thatthetermination was
incorrect, andtheCITT orders re-instatement oftheinvestigation, andtheinvestigation iscompleted
bytheDeputyMinister,theearliesttheinvestigationwouldbecompleted,withoutextensions,isday390.
Itappears thatallthese activities areadministrative innature andthusshould count toward theamount
oftimeinaninvestigation.G/ADP/W/73
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17. Please explain howinvestigations willbecompleted inthe360daysallowed byArticles 5.10
oftheA-DAgreement and11.11 oftheSCM Agreement.
Critical Circumstances
18. Whyisthere noprovision inSection 6(a)(i)(A) oftheSIMA (G/ADP/N/1/CAN/2, p.21)for
theimports tobeoverarelatively short time, aswellasmassive, asapre-requisite toafinding
ofcritical circumstances asrequired byArticles 10.6oftheA-DAgreement and20.6ofthe
SCM Agreement? Does thelanguage, "amassive importation", of6(a)(i)(A) envision asingle
importation andhence dispenses withthe"relatively short time" language?
Undertakings
19. Section 49(3) oftheSIMA (G/ADP/N/1/CAN/2, p.67)permits theparties torequest thatthe
underlying investigation becompleted (when anundertaking isaccepted), butdoesnotexplicitly
require theDeputy Minister todoso.Articles 8.4oftheA-DAgreement and18.4oftheSCM
Agreement require theadministering authority tocomplete theinvestigation ifcompletion is
requested. Under SIMA istheDeputy Minister required tocomplete theinvestigation?
ADMINISTRATIVE REVIEWS
Reviews oforders andfindings bytheCITT
Section 76oftheSIMA (G/ADP/N/1/CAN/2, p.80-83) contains theCITT Rules
(G/ADP/N/1/CAN/2, p.293-295), which provide fortheparty requesting thereview toprovide a
rationale andsupporting factsastowhyreview is"warranted", aswellasastatement ofthenature
ofthedesired order. Theresultant order canrescind theoriginal order orcontinue itwithorwithout
amendment. Section 76(4) oftheSIMA (G/ADP/N/1/CAN/2, p.81). Neither thelegislation northe
rulesandregulations appear tospecify standards fordetermining when review is"warranted", orfor
thereview itself. (The1993 CITT annual report describes thestandard asfollows: "The purpose
ofareview istodetermine whether anti-dumping orcountervailing duties remain necessary. Indoing
so,theTribunal usually assesses whether dumping islikely toresume orsubsidizing islikely tocontinue,
and,ifso,whether thedumping islikely tocause material injury tothedomestic injury. Inareview,
theTribunal follows procedures similar tothose intheoriginal injury inquiry.")
20. What standards areapplied ingranting anddeciding theresults ofreviews under section 76
oftheSIMA(G/ADP/N/1/CAN/2, p.80-83)?
21. TheCITT annual report citedabove refers toreviews pursuant to76oftheSIMA under the
heading"ReviewsofFindingsofMaterialInjury".DoestheCITTalsoconductreviewsdirected
solely orprimarily toward changed circumstances which result inanabsence ofdumping or
subsidizing alone? Ifnot,howaresuch reviews, foreseen byArticles 11.2 oftheA-D
Agreement and21.2oftheSCM Agreement, provided forunder Canadian law?
Reviews ofUndertakings
22. Itisnotclearhowreview isobtained ifaparty toanundertaking wishes tomake ashowing,
prior toasunset review, thattheconditions thatledtotheundertaking would nolonger exist,
weretheundertaking tobeterminated. Articles 11.5oftheA-DAgreement and21.5ofthe
SCM Agreement callfortheprovisions ofArticles 11(oftheA-DAgreement) and21(oftheG/ADP/W/73
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SCM Agreement) (including thechanged circumstances provisions) toapply, mutatis mutandis ,
toundertakings. Hasthisprovision beenimplemented inCanadian law,oristhetreatment
accorded undertakings distinct from thataccorded definitive measures?
AllOthers Rate
23. Indetermining theallothers rate,Article 9.4oftheA-DAgreement requires authorities to
disregard margins established onthebasisofthefactsavailable. Section 25.2(1)(a) oftheSIMA
Regulations (G/ADP/N/1/CAN/2, p.257)requires theexclusion ofmargins established as
aresult of25(1)(e) oftheSIMA. Section 25(1)(e) oftheSIMA (G/ADP/N/1/CAN/2, p.42)
states thattheexport priceshallbethepricedetermined insuchmanner astheMinister specifies.
Issection 25(1)(e) oftheSIMA anexport price factsavailable provision? Ifso,theSIMA
Regulationsdonotsimilarlyexcludenormalvaluesestablishedonthebasisofthefactsavailable.
Willthisexclusion beadded totheSIMA Regulations? Inaddition, whyissection 29ofthe
SIMA, thefacts available provision, notreferred toinsection 25.2(1)(a) oftheSIMA
Regulations?
24. Section 25.2(1)(b) oftheSIMA regulations (G/ADP/N/1/CAN/2, p.257)provides, inthe
alternative, thattheallothers rateequal theweighted-average margin established withrespect
togoods from allother countries whose goods areunder consideration andareincluded in
apercentage orsample. What isthereason forincluding thiscalculation methodology?
NewShippers
25. Article 9.5oftheA-DAgreement states thatnoduties willbelevied onimports from the
exporter orproducer while theexpedited review isbeing carried out.Section 56oftheSIMA
Regulations (G/ADP/N/1/CAN/2, p.267)setsforthprocedures forposting security intheform
ofcashoracertified check, andprocedures forposting security "inanyother form". Will
newshippers begiven theoption ofposting security intheform ofcash(orcertified check)
orinsome other form? Section 56oftheSIMA Regulations doesnotspecify whatother form
ofsecurity willbeaccepted. Willadefinition ofsecurity "inanyother form" beadded to
section 56oftheSIMA Regulations?
Implementation ofWTO Panel Reports:
26. Have anyprovisions under Canadian lawhavebeenmade fortheimplementation ofWTO
panel reports?