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II. Preliminary Stages of Investigation

(I) The Present System

The SIMA process normally begins with a complaint from domestic producers to Revenue Canada that dumped/subsidized goods are causing injury. Such a complaint must be accompanied by supporting evidence and documentation. Personnel from Revenue Canada will frequently assist Canadian producers, especially small companies that may lack resources, to properly document their complaint.

At this point of the process, SIMA is not designed to be adversarial and additional time is not permitted for consideration of opposing interests. The Deputy Minister, in order to verify the information contained in a complaint, may consider an unsolicited third party communication which bears on a fundamental aspect of the complaint. Where an unsolicited third party communication raises a question about the complaint, the Deputy Minister can seek additional information from the complainant.

Once a properly documented complaint is received, the Department has 30 days, (which may be extended to 45 days in certain cases), to decide whether to initiate an investigation. The Deputy Minister must assess whether:

(a) the complaint has been made by or on behalf of the domestic industry;

(b) there is sufficient evidence that the imports are being dumped or subsidized; and

(c) there is a reasonable indication that the dumping or subsidizing has caused injury or retardation or is threatening to cause injury.

For an investigation to start, the complaint must be supported by producers who represent 25% or more of the total Canadian production of the goods in question, and producers who support the complaint must have greater total production than those who oppose it.

There must be sufficient evidence of dumping or subsidizing, and sufficient evidence of injury to a major proportion of the total domestic production, for an investigation to proceed. Revenue Canada will determine "major proportion", which may be less than 50%, of the total domestic production, on a case by case basis.

Revenue Canada has the requisite expertise to evaluate evidence of dumping/subsidization, but it operates in more of a generalist role in evaluating evidence of injury. In recognition of the CITT's expertise in injury determinations, the SIMA includes various provisions which allow the Deputy Minister and other interested parties to seek the "advice" of the Tribunal on the issue of injury during the pre-initiation phases.

Once a decision to initiate an investigation has been made, whether by Revenue Canada or the CITT upon referral, written notice is given in the Canada Gazette and is also sent to interested parties. In the case of a dumping investigation, a copy of the non-confidential version of the complaint is sent to the foreign government and, where practicable, is provided to all known exporters or their trade associations.

The purpose of the investigation is to obtain detailed information. During the preliminary investigation, the Deputy Minister re-examines all of the evidence of injury contained in the original complaint or obtained elsewhere. The circumstances prevailing in individual cases impose particular operational requirements and thus no two investigations are the same.

At the time of the initiation, all known importers, exporters and, in a subsidy investigation, the foreign governments, are asked for information. The request describes in detail the data which must be submitted by the exporter or importer to allow Revenue Canada to determine normal values, export prices and margins of dumping and amounts of subsidy. The request for information also provides an opportunity for exporters to fully explain and document their pricing practices on sales to Canada. Failure to provide the information will oblige Revenue Canada to proceed on the basis of the facts available at the time.

The purpose of seeking information is to substantiate the data supplied by the exporter respecting sales to importers in Canada, including the export price. Exporters and foreign governments are allowed 37 days in which to respond. If the respondent's submission is incomplete, the missing information will be requested again and the respondent advised of the steps required to make the submission acceptable.

Following the receipt of information, the preliminary determination process begins. This decision, required within 90 days of initiation, is based as much as possible on verified data which may require on-site visits to check and validate information. Upon verification of data, all information is analyzed in detail and normal values and export prices, margins of dumping, or amounts of subsidy are estimated.

A preliminary decision is made within 90 days on dumping and subsidization, and on injury. If unusual circumstances exist, SIMA allows for an extension to 135 days depending on:

If a preliminary determination is made of injurious dumping or subsidizing, the Deputy Minister:

Following a preliminary determination, all dumped or subsidized imports from the countries involved in the investigation may be subject to provisional duties, which are collected from the preliminary determination to the date of the CITT's final determination on injury. Provisional duties are based on the estimated margin of dumping or the estimated amount of subsidy on the imported goods.

(II) Summary of Proposals and Recommendations

Pre-Initiation Notification and Preliminary Determination

A number of witnesses who appeared before the Sub-Committees were concerned with the manner in which the SIMA process operates following the receipt of a complaint. The view was expressed that SIMA required some sort of mechanism through which unwarranted complaints could be filtered out at an early stage in the process. For example, the Canadian Importers Association noted that in the last four anti-dumping cases heard by the CITT, findings of no injury were determined, and that if Revenue Canada had earlier access to such information the cases might not have proceeded thereby saving time and expense. The Association proposed additionally that SIMA require input from importers and exporters when presented with a complaint by Canadian producers.

A related point was that the CITT should be brought more quickly into the SIMA process. For example, the Canadian Sugar Institute proposed that the CITT be granted jurisdiction to conduct a preliminary investigation before the Revenue Canada preliminary determination is made. This would greatly assist in the gathering of critical evidence and the identification of issues.

A number of submissions, including those by the Retail Council of Canada and the Canadian Importers Association, suggested that interested parties should be given notice of a complaint and should be involved in the process by which the Deputy Minister decides whether to initiate an investigation. This proposal is precluded by Article 5.5 of the WTO Anti-dumping Agreement, which states that: "The authorities shall avoid, unless a decision has been made to initiate an investigation, any publicizing of the application for the initiation of an investigation." The proposal to give notice of a complaint was motivated by a desire to improve the precision and adequacy of the information used in trade remedy cases, but another way must be found to address this problem.

Yet another issue was access to the SIMA process, which was a particular concern of the Canadian Federation of Agriculture. While many of the submissions made some reference to the cost and burden of the process, the Canadian Federation of Agriculture was especially concerned with the inability of small producers to have viable access. It was proposed, to insure that such producers have fair and equal access to the trade remedies provided by SIMA, that consideration be given to measures that could assist in the documentation of their cases and in reducing the costs to participate in the processes, without compromising the integrity of the system. It was noted that unlike other primary industries, agriculture production is not carried out by large corporations. Most producer organizations do not have the in-house technical skills to do the necessary gathering of information and analysis. The legal costs alone, associated with dealing with a prolonged process of investigation and review, may be prohibitive for small agricultural, and other, sectors.

In response to the above concerns and proposals, the Sub-Committees recommend, first, that Revenue Canada take concrete measures to insure fair and equal access to the SIMA process by small and medium-sized Canadian producers. (2) At present, Revenue Canada has indicated that equal access is one of its priorities in administering SIMA, and that it accomplishes this goal by serving as a single port of entry to the SIMA system, and by proactively assisting small and medium-sized producers during the pre-initiation process. The Department should continue with these efforts.

Second, in an effort to improve the efficiency and fairness of the SIMA process, the Sub-Committees recommend that the CITT be given the responsibility for making the preliminary determination of injury. (3) This would create a more fully "bifurcated" system for administering trade remedies in Canada, and would more closely resemble the model used in the United States. The highlights of this model are shown in Graph 2.

The adoption of a bifurcated model would not affect the pre-initiation stage. Revenue Canada would continue to receive complaints and to be responsible for the decision to initiate an investigation. Therefore, there would still be a single filing point for complaints to minimize cost and paper-burden. Revenue Canada would continue to provide assistance in the preparation of complaints and would remain solely responsible for determining properly documented complaint and whether the complainant has standing.

Following initiation of an investigation, Revenue Canada would transmit the injury portion of the complaint to the CITT. The CITT would then conduct the preliminary injury investigation while Revenue Canada simultaneously began its preliminary dumping investigation. Each authority would concentrate on its area of expertise. There would be no substantive change in the information a complainant would have to submit nor any additional burden placed on complainants.

Being a quasi-judicial body, the CITT would make the injury portion of the complaint available to all interested parties (with the confidential version being available to counsel). This would make the process more transparent. Interested parties would have the opportunity to make submissions on questions concerning injury and related matters, namely, like goods, classes of goods, the definition of domestic industry, and the adequacy of the injury allegations. The complainant and those supporting the complaint would have the opportunity to respond to such submissions.

The CITT would render its decision within 60 days of the initiation of the preliminary inquiry (30 days before the preliminary determination of dumping is due from Revenue Canada). Revenue Canada would continue its preliminary dumping investigation only where the CITT's preliminary injury determination is affirmative. The CITT would then await the outcome of Revenue Canada's preliminary investigation. If Revenue Canada subsequently made a determination of dumping, the CITT would then initiate an inquiry pursuant to section 42 of SIMA.

While having the CITT make the preliminary injury determination would result in parties having to deal with two administrative authorities earlier in the SIMA process, the Sub-Committees believe that it would result in a more streamlined and efficient system. Parties would make all submissions on injury questions to the CITT. Currently, they make injury submissions to Revenue Canada and then to the CITT. Often they must repeat or modify the submissions originally made to Revenue Canada when they are provided to the CITT in its injury inquiry. Furthermore, because both the dumping investigation and the injury inquiry would be framed more clearly, parties would have a clearer understanding of how the process would be carried out and thus could participate with a greater sense of certainty.

There were several proposals relating to "advice" given by the CITT to Revenue Canada on matters of determining injury. Sections 33, 34, and 35 of SIMA, which allow for references to the CITT for "advice" on injury, would not be necessary under a bifurcated model. Consideration may be given to retaining section 33 references for cases where Revenue Canada decides not to initiate for want of injury.

To sum up, five main arguments for the adoption of a bifurcation model are offered. First, it would reduce institutional duplication. Second, it would give interested parties the opportunity to make submissions on injury in accordance with the due process rules of the CITT, which would promote greater transparency and procedural fairness. Third, it would promote an earlier and more thorough examination of injury, which in turn could lead to unwarranted complaints being dropped or otherwise settled.

Fourth, such a system would facilitate a more consistent treatment between CITT and Revenue Canada of certain framework issues such as the determination of "like goods" and "domestic industry". Fifth, in response to the concerns of the Canadian Federation of Agriculture, the model could accommodate statutorily-mandated expedited procedures for horticultural products to ensure early implementation of provisional duties (e.g. SIMA could be amended to allow injury and dumping/subsidization preliminary determinations in 60 days from initiation for perishable goods).

Questionnaires and Requests for Information

The Automotive Parts Manufacturers Association proposed that the Revenue Canada questionnaire revert to its previous, shorter format. It was argued that the investigation procedure should be as minimally intrusive as possible while still meeting its objective.

Furthermore, it was proposed that companies that did not export during the period in question should not be required to complete a questionnaire as there is no reason to investigate them. It was argued that there is a significant possibility that a company will choose not to complete a questionnaire and opt instead for a ruling against them. As this could result in a price increase or loss of imports in the Canadian market, it was argued to be in the best interests of consumers and downstream producers to limit the requirement to complete questionnaires to relevant firms.

It was further proposed that in cases involving distributors, these firms should only be asked what they paid for their raw materials and the CITT should use this as cost. This recommendation was partly based on the reasoning that distributors often have no access to the production costs of goods they export.

The Sub-Committees note the above concerns are matters of administrative practice rather than changes in SIMA legislation. The response of Revenue Canada to these concerns is that it gathers the information necessary to carry out its responsibilities under the legislation. The Sub-Committees are of the view that these administrative practices are appropriate under the legislation.

Data Collection

The Canadian Steel Producers Association advocates that Revenue Canada be required to disregard unsolicited submissions from parties other than the complainants prior to the initiation of an investigation. However, consideration of such submissions is given by Revenue Canada based on its obligation under the WTO to verify the accuracy of complaints. The Sub-Committees are disinclined to interfere with this issue of administrative practice.

The Canadian Steel Producers Association also argued that Revenue Canada be allowed to make a finding of "massive dumping" at the time of the preliminary determination and to apply duties to the period from the initiation of the complaint. This proposal would allow for a prompt response to cases where exporters in anticipation of a ruling on dumping and injury accelerate their imports in advance of the finding. The Sub-Committees are advised that this proposal would be inconsistent with Article 10.6 of the WTO Anti-dumping Agreement that effectively requires a final determination prior to taking any actions on ``massive dumped imports.''

Additionally, it was noted that there are presently certain limits on the data Revenue Canada can collect from respondents. These limits both prevent Revenue Canada from making an accurate assessment and make it difficult for Canadian industries to assist the Department in assessing the data of respondents.

To rectify this problem, two sub-proposals were put forth. First, it was submitted that Revenue Canada be given the power to collect data from all the domestic plants in which a respondent or its affiliates produce the goods subject to an investigation, not just the plant from which the goods are shipped to Canada. Revenue Canada could then be required to create a company wide normal value for each product. Second, Revenue Canada should be given the authority to gather data with respect to all the exporters' domestic sales of the "subject goods" not just those identified by the exporter as "comparable" to its sales in Canada.

Revenue Canada has indicated it already has sufficient statutory authority to determine normal value. However, if the Department were to take all the action proposed above in every case, it could increase non-compliance on the part of exporters and have the perverse result of reducing the data available in establishing anti-dumping duties.

Confidential Information

The CITT regularly affords counsel to parties engaged in anti-dumping and countervailing duty actions access to the confidential information acquired during these proceedings. However, the policy of the Deputy Minister of National Revenue has been to provide counsel with access to confidential information only in cases where the Deputy Minister is of the opinion that non-confidential summaries are not adequate to provide parties with a reasonable understanding of the substance of the information.

The Canadian Steel Producers Association submitted that SIMA should be amended to provide counsel increased access to confidential information in anti-dumping/countervailing duty investigations conducted by Revenue Canada. There are two principal arguments in favour of greater disclosure. First, it would allow interested parties to make rebuttal submissions thus improving the quality and reliability of evidence. Second, it would result in greater procedural fairness and lead to greater consistency with U.S. policies that are applied to Canadian producers exporting to that country.

However, a number of points were offered against any such proposal. It was contended that broader exposure to confidential information would result in parties becoming less forthcoming and would both lengthen the investigation process and render it more adversarial, thus substantially increasing the costs. Also, current SIMA timeframes might need to be extended to accommodate the consideration of rebuttal submissions and SIMA would have to be amended to provide for penalties to discipline the unauthorized disclosure of confidential information by counsel.

The Sub-Committees recognize that Revenue Canada has established a reasonable practice for handling confidential information. However, the large majority of Canadian exports go to the United States, and in that country the U.S. practice of affording access to confidential information often leads to an increase in the information burden on Canadian exporters who are subject to U.S. investigations. In the interest of level playing field, the Sub-Committees recommend that SIMA should be amended to provide counsel increased access to confidential information in anti-dumping/countervailing duty investigations conducted by Revenue Canada. (4) The Sub-Committees note that this recommendation promotes overall balance in this report.

Any amendment to SIMA, implementing this recommendation will require the introduction of penalty provisions in SIMA for the unauthorized released by counsel of confidential information.

A related issue is access by experts to confidential information. Under Subsection 45(3) of the Canadian International Trade Tribunal Act, the CITT may only grant disclosure of confidential information to counsel and such counsel may not, without consent, disclose confidential information to any third party.(10) Counsel often wish to retain experts to give testimony before the CITT. However, in order to gain access to the confidential information on the record, such experts have to designate themselves as "counsel" to satisfy Section 45(3) of the CITT Act. However, common law normally precludes an individual acting as counsel from appearing as a witness in the same proceeding; therefore, parties' attempts to have fully informed experts appearing as witnesses on their behalf have been frustrated. The Sub-Committees recommend that appropriate changes be made to Canadian trade legislation to permit access by experts to confidential information in SIMA proceedings before the CITT. (5)

(10) Canadian International Trade Tribunal Act, R.S.C., 1985, ch. C-18.3.

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