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Are My Goods Subject to AD/CVD Duties

in Canada?: Canada’s New Formalized

Process for AD/CVD Scope Rulings

Written By: Cyndee Todgham Cherniak

Date: April 26, 2018

There is a new/formalized antidumping (AD) and countervailing duty (CVD) procedure in Canada for importers to ask whether the goods they wish to import are subject to AD/CVD duties.  Importers may now request a formal AD/CVD Scope Ruling from the Canada Border Services Agency (“CBSA”).  Only the CBSA can make Scope Rulings relating to a Canadian International Trade Tribunal (“CITT”) AD/CVD Order.  Importers should consider filing a request for a Scope Ruling if they want a formal decision as to whether specific goods will be considered to be subject to an existing CITT AD/CVD Order.  This process will be particularly helpful when a Subject Goods definition is unclear or when the goods are unique or different from goods produced in Canada.  If the goods are clearly within a subject goods definition, this is not the right procedure to use to get them out.

Until recently, the CBSA had an informal process whereby an importer could obtain a confidential advance ruling as to whether certain goods would be considered by the CBSA to be subject to a CITT AD/CVD Order.  This informal process was used from time-to-time when a subject goods definition was unclear or the goods at issue had a characteristic that fell outside the subject goods definition.

At the request of Canada’s steel industry associations, the Scope Ruling procedures were formalized in the 2017 Federal Budget and new sections 62-66 was added to the Special Import Measures Act (“SIMA”).  In Bill C-44 received Royal Assent on June 22, 2017. Sections 62- 66 of SIMA entered into force came into effect April 26, 2018.

On March 31, 2018, the Governor in Council published amendments to the Special Import Measures Regulations and the Canadian International Trade Tribunal Regulations in order to implement regulatory changes to enact the Scope Rulings Procedures.  The amendments to the Special Import Measures Regulations also entered into force came into effect April 26, 2018.
The new procedures are formalized and more transparent.  However, the new procedures also allow for opposition by the domestic industry, unions and competitors (where before the process was behind closed CBSA doors).  Previously, approvals were behind closed doors and unopposed. Now, the domestic industry will be allowed to file submissions to prevent the Scope Ruling from being issued.  Alternatively, a Scope Ruling Request may lead to a circumvention proceeding (which will be discussed in another article).

What is a Scope Ruling?
A Scope Ruling is a binding ruling by the CBSA under section 66 of SIMA with respect to whether certain goods are subject goods under a CITT AD/CVD Order or undertaking.  In other words, it is a decision by the CBSA as to whether specific goods are goods subject to AD/CVD duties.

Who may request a Scope Ruling?
A Scope Ruling may be filed by any of the following interested persons:

1. A person who is or who may become an importer of goods that are or could be subject to the applicable CITT AD/CVD Order or an Order of the Governor in Council;
2. A person who is or who may become an exporter of goods that are or could be subject to the applicable CITT AD/CVD Order or an Order of the Governor in Council;
3. A foreign producer of goods that are or could be subject to the applicable CITT AD/CVD Order or Order of the Governor in Council;
4. A domestic producer of like goods in relation to goods that are subject to the applicable Order, finding or undertaking; or
5. Any person, who in the opinion of the President of the CBSA has a substantial interest in the matter.

How long will the process take? What is the Scope Ruling Process?
The process starts with an application for a Scope Ruling being made pursuant to new section 62 of the SIMA.  As stated above, any interested person may file an application for a Scope Ruling.  The President of the CBSA must decide within 30 days (can be extended to 45 days by the President of the CBSA) whether the application for a Scope Ruling should be accepted or rejected.  If the application for a Scope Ruling is rejected, the President of the CBSA must provide write reasons for the rejection.  If the application for a Scope Ruling is accepted, the President will initiate a Scope Ruling review. The Scope Ruling Review decision must be made by the President of the CBSA within 120 days (can be extended to 210 days by the President of the CBSA).

If the President commences a Scope Ruling review, upon an application by an interested person or on his/her own initiative, the President must provide written notice to the applicant, any foreign government of the country of export of goods that are covered by the Scope Ruling review, the exporter, the importer and the domestic producers.

The CBSA will publish a schedule.  A sample schedule has the following timeline of events:

• Day 0: Initiation – RFIs sent out
• Day 21: Importer’s response to Request for Information due
• Day 28: Exporter/Producer responses to Request for Information due
• Day 55: Closing of the administrative record
• Day 80: Statement of Essential Facts published
• Day 87: Case arguments due from interested persons
• Day 94: Reply submissions due from interested persons
• Day 120: Conclusion of scope proceeding, ruling issued and Statement of Reasons published.

What Must the Request for a Scope Ruling Include?
The Scope Ruling must include the following information in order to be considered to be complete:

1. The name and civic address/or postal address) of the interested person/requestor;
2. An indication as to how the requestor is an “interested person”;
3. An identification of the applicable AD/CVD Order of the CITT or Order of the Governor in Council;
4. An indication as to whether the goods subject to the request are of the same description as the goods subject to the applicable AD/CVD Order, finding or undertaking, including arguments that support the requestors position;
5. A description of the goods subject to the request, including a description of their physical characteristics, their composition, their uses, their packaging (including any other goods contained in the packaging), technical specifications and trade name;
6. The applicable H.S. tariff classification numbers for the goods that are the subject of the request;
7. An indication as to whether the goods have been sold or consigned to an importer in Canada and whether those goods have been imported;
8. The name and civic address of each importer;
9. The name and civic address of each producer and exporter of the goods (if known);
10. The name and civic address of each Canadian domestic producer of like goods and any association of those domestic producers (if known); and
11. Any other relevant information.

If the basis for the Scope Ruling is that the goods originated in a subject country (covered by a CITT AD/CVD Order) or originate in a third country, the following information must also be provided:

1. Identify the subject country or third country;
2. A description of the goods at the time of export from the subject country;
3. A description of the movement of the goods from the third country to Canada or from the subject country to a third country to Canada, including all transshipment points;
4. A description of production activities that are undertaken in a subject country, third country and/or any intermediate country; and
5. Any other relevant information.

For more information about what must be in a Scope Ruling Request, please refer to the new CBSA guidance entitled "Information relating to Scope Proceedings and Guidelines for Preparing an Application for a Scope Ruling".

What are the possible reasons for rejection of a Scope Ruling by the CBSA?
The CBSA may reject any application for a Scope Ruling if the application is incomplete.  Further, the CBSA may reject any application for a Scope Ruling if the goods are subject of a separate Scope Ruling request. In addition, the CBSA may reject an application for a Scope Ruling:

1. The goods for which the ruling is applied have not been produced and at the day the application is received;
2. The basis for which the ruling is applied is subject of a court proceeding, CITT appeal or a bi-national panel proceeding;
3. If the Tribunal has amended its AD/CVD Order after a circumvention proceeding under section 75.3 of SIMA;
4. A decision by the CITT or a Canadian court or bi-national panel applies in respect of the ruling requested; and
5. If the President of the CBSA is of the opinion that the application for a Scope Ruling is frivolous, vexatious or made in bad faith.

What is the effect of a Scope Ruling (if Granted)?
A CBSA Scope Ruling decision would apply to determinations or re-determinations made under sections 55, 56, 57 and paragraphs 59(1)(a) and (e) of SIMA.  A Scope Ruling will be binding with respect to any decision or determination or re-determination of the CBSA or President of the CBSA.  In other words, if the Scope Ruling covers new goods, the CBSA must impose antidumping and/or countervailing duties on the goods and issue an assessment against the importer or record.

A Scope Ruling decision may also apply to an undertaking (which are not common in the Canadian trade remedies process).

The effect of a Scope Ruling may be retroactive going back two years – yes, on previously accounted goods going back 2 years.  For this reason, importers need to be very concerned and will have to factor this risk when pricing goods.  If the volume of imports were significant and the anti-dumping duties/countervailing duties rates are high, the re-determinations after a Scope Ruling could bankrupt an importer.

Will the Scope Rulings be Published?
Yes, Scope Rulings will be published on the CBSA web-site.

Is there an appeal process if the CBSA does not grant the Scope Ruling?
Yes. Any interested person will be entitled to appeal a Scope Ruling made under section 66 of the SIMA.  A written appeal must be filed with the CITT (with a copy to the President of the CBSA) within 90 days after the Scope Ruling decision is made by the CBSA.  The CITT will have to publish rules for the conduct of Scope Ruling proceedings.  The CITT is granted the authority to make an order or finding as to the nature of the matter may require and declare what duty is payable or that no duty is payable on the goods that are the subject of the appeal.
The appeal decision of the CITT will be final and conclusive subject to a further appeal to the Federal Court.

Are there alternative processes to review a Scope Ruling - Interim Review?
The President of the CBSA may, pursuant to new section 67 of the SIMA, review a Scope Ruling after it is issued.

Would you like more information?
For more information about Canada’s antidumping and countervailing duty laws, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  More information has been posted on the LexSage website.

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