Anti-circumvention investigations conducted pursuant to the Special Import Measures Act

Introduction

What is circumvention?

Circumvention occurs when trade and business practices are altered to specifically avoid the liability for SIMA duties. More specifically, circumvention is defined in section 71 as occurring when all of the following elements are present:

1. a change in the pattern of trade has occurred after an order of the Governor in Council imposing countervailing duties was made under section 7 of SIMA, or after a dumping or subsidy investigation was initiated;
2. a prescribed activity is occurring and imports of the goods to which that prescribed activity applies are undermining the remedial effects of an order or finding of the Canadian International Trade Tribunal (CITT); and
3. the change in trade pattern is caused by the imposition of anti-dumping or countervailing duties.

What is not circumvention?

While circumvention relates to the avoidance of SIMA duties, it does not involve illegal activities. Illegal activities such as fraud are not within the scope of anti-circumvention investigations. Duty evasion that results from suspected misclassification of imports or fraudulent activity can be reported on the Report duty evasion section of the Canada Border Services Agency (CBSA) website.

Anti-circumvention investigations

The CBSA will conduct anti-circumvention investigations where these proceedings are warranted. Anti-circumvention investigations seek to eliminate circumvention of an existing order or finding. If circumvention is found following a formal investigation by the CBSA, duties will be extended to those goods that are circumventing an existing CITT injury finding. The following outlines the CBSA’s policies and procedures with respect to the conduct of anti-circumvention investigations under sections 71 to 75.7 of SIMA. These policies and procedures do not supplant the provisions of SIMA.

Anti-circumvention investigation process

Anti-circumvention investigations may be initiated as a result of the receipt of a complaint or self-initiated by the CBSA. Refer to the chart for a visual presentation of the process.

Complaint

Generally, an anti-circumvention investigation is initiated as a result of the submission of a formal complaint. Along with other administrative information, the complaint, to the extent that this information is reasonably available to the complainant, must provide information substantiating the allegations of circumvention. For assistance in determining what supporting information to provide, refer to the Anti-circumvention factors section. For specific details on how to file a circumvention complaint see the Guidelines for filing a circumvention complaint on the CBSA website.

Initiation

A decision whether or not to initiate an anti-circumvention investigation must be made within 45 days of receipt of a circumvention complaint. If the CBSA is of the opinion that there is evidence providing a reasonable indication that circumvention is occurring, based on prescribed Anti-circumvention factors, the CBSA will initiate an investigation. The decision to initiate can be made with respect to some or all of the goods identified in the complaint. Likewise, an investigation can be specific to certain goods from an exporter(s) or with respect to certain goods from a country. The manner in which an investigation is initiated will be determined by the CBSA and is dependent on the circumstances of each case.

If the CBSA decides not to initiate, all actions with respect to the complaint are terminated. The CBSA will notify the complainant and provide the reasons for its decision.

At initiation, Requests for Information (RFIs) will be sent to importers, exporters, vendors and foreign producers of the goods under investigation as well as domestic producers of like goods in Canada in order to obtain the necessary information for the investigation. A set of general instructions accompanies all RFIs to assist the parties in preparing the required information. The instructions identify the period covered by the investigation and include explanations of the information to be provided for specific situations as well as the rules regarding the treatment, use and disclosure of confidential information.

Anti-circumvention investigation schedule

A sample schedule for the key events in an anti-circumvention investigation is provided below. This schedule is subject to modification depending on the circumstances of a particular investigation.

The scheduling of events in a specific investigation will be published on the CBSA’s website at initiation and will be updated as required.

Notifications

The CBSA will notify the importer, the exporter, the government of the exporting country, the domestic producers and the complainant, if any, of the initiation of the investigation, a termination, an extension, the publication of the statement of essential facts, and the final decision.

Close of administrative record

In each anti-circumvention investigation, a date for the close of the administrative record will be established, after which no further information may be submitted by parties. This permits the CBSA to produce the Statement of Essential facts and participants to prepare their case arguments and reply submissions based on the information that is on the record as of the date of the closing of the record. Parties will be notified of the date of the close of the administrative record through the anti-circumvention investigation schedule.

Accordingly, participants should submit all of the information they believe supports their position prior to the closing of the record, in order that the CBSA may take this information into consideration in preparing the statement of essential facts. For further guidance on submitting or obtaining information related to an anti-circumvention investigation, please refer to the Confidentiality and disclosure guidelines for Special Import Measures Act proceedings.

Termination – Goods are within scope of order or finding

During the investigation, evidence may be discovered that the goods under investigation are, in fact, subject to an order or finding. In considering whether the goods are subject to an order or finding, the CBSA will consider the prescribed factors for making a scope ruling.

If the goods are found to be subject to an order or finding, the CBSA will terminate the anti-circumvention investigation, prior to the publication of the statement of essential facts, and will issue its reasons for terminating the investigation, including the reasons for determining that the goods in question are subject to an order or finding. Pursuant to subsection 75(4), this decision to terminate is deemed to be a scope ruling. For more information on scope rulings, refer to Information relating to Scope Proceedings.

Statement of essential facts

The statement of essential facts (SEF) is a non-confidential report prepared by the CBSA. The SEF will include the CBSA’s preliminary assessment of whether the evidence discloses a reasonable indication of circumvention. It will also include a summary of the facts that the CBSA relied on in making that preliminary assessment.

Submission of case arguments and reply submissions

After publication of the SEF, parties may choose to submit case arguments based on any relevant information available on the administrative record and respond to the CBSA’s preliminary assessment detailed in the SEF.

Parties may also submit reply submissions to the CBSA in response to the case arguments submitted. The date for receipt of both case arguments and reply submissions will be specified in the schedule. Generally, the CBSA will require that any case arguments be received no later than one week after the publication of the SEF and reply submissions be received no later than one week after case arguments are due. After the deadline for the receipt of reply submissions has passed, the CBSA will not consider any further submissions from parties.

Decision

In general, the CBSA will make a decision with respect to circumvention, based on prescribed anti-circumvention factors, within 180 days after the initiation of the investigation. In certain circumstances, such as where complex or novel issues arise, the CBSA may extend the period for making its decision to 240 days.

Where the CBSA makes a decision setting out a finding of circumvention, the CBSA will notify the CITT who will in turn modify the original finding or order to include the circumventing goods and thereby extend SIMA duties to those goods. The CBSA may also make a partial finding of circumvention, that is, find that only some goods under investigation are circumventing the order or finding. For example, where the investigation was initiated in respect of the goods from a country, the CBSA could decide that the importation of the goods from exporter A constitutes circumvention but that the importation of the goods from exporter B does not constitute circumvention.

Once the CITT modifies the order or finding, anti-dumping or countervailing duty is payable on all dumped or subsidized goods of the same description imported on or after the day the anti-circumvention investigation was initiated, and on all shipments of the goods released after the date of the Tribunal's order amending the order or finding. These duties are applicable until such time as the order or finding is amended or rescinded or it expires.

If the CBSA makes a decision that the order or finding is not being circumvented in respect of some or all of the goods, SIMA duties will not be extended to those goods.

Anti-circumvention factors

Sections 57.11 to 57.16 of the SIMR outline several factors that may be considered in assessing the various elements of circumvention. No single factor is necessary to prove/disprove an element of circumvention, instead, they will be considered holistically in making a judgement. However, all elements of circumvention must be present for a finding of circumvention to be made. The factors may be considered on a country level or on an exporter-specific level depending on the nature of the investigation.

The factors outlined in the sections of SIMR are as follows:

Change in pattern of trade

When determining if there has been a change in the pattern of trade referred to in paragraph 71(a) of SIMA, the CBSA may consider the following factors under section 57.11 of the SIMR:

1. any change in the import volume of subject goods;
2. any change in the import volume of goods that are allegedly circumventing the order or finding;
3. any change in the import volumes of like goods, or the components that can be assembled or completed like goods, from a country that is named in the applicable order or finding into a third country that is part of the anti-circumvention investigation; and
4. any other factor that is relevant in the circumstances.

Prescribed activity

The activities referred to in paragraph 71(b) of SIMA represent the manner in which circumvention may take place. They are prescribed under section 57.12 of the SIMR as follows:

1. the assembly or completion of like goods in Canada using parts or components originating in or exported from a country subject to the applicable order or finding. Under this activity,
   1. the parts or components must represent a major portion of the total cost of producing the like goods;
   2. the process of assembling or completing the like good must be insignificant; and
   3. the parts or components from the subject country do not need to be the only ones used to assemble or complete the like goods.
2. the assembly or completion of like goods in a third country using parts or components originating in or exported from a country subject to the applicable order or finding. Under this activity,
   1. the parts or components must represent a major portion of the total cost of producing the like goods;
   2. the process of assembling or completing the like goods must be insignificant; and
   3. the parts or components from the subject country do not need to be the only ones used to assemble or complete the like goods.
3. the slight modification of like goods originating in or exported from a country subject to the applicable order or finding, whether the modification took place in the subject country or a third country, so that the goods are no longer like goods.

Significance of the process of assembly or completion

Paragraphs 57.12(a) and (b) of the SIMR require that the processes of assembly or completion be insignificant. For the purpose of determining whether these processes are insignificant, the CBSA may consider the following factors outlined in section 57.13 of SIMR:

1. the nature of the processes;
2. the nature of the facilities in which the processes are carried out;
3. the level of investment in Canada or a third country into the processes or facilities;
4. the level of research and development in Canada or a third country related to the processes;
5. the costs of the processes in Canada or a third country;
6. the costs of the processes in Canada or a third country as a proportion of the total cost of production of the assembled or completed like goods; and
7. any other factor that is relevant in the circumstances.

Considerations in assessing “slight modifications”

In accordance with section 57.14 of the SIMR, the CBSA may consider the following factors when determining whether a modification of like goods referred to in paragraph 57.12(c) is slight:

1. the physical characteristics of the modified goods and the like goods, including their composition;
2. the technical specifications of the like goods and the modified goods;
3. the HS classification numbers attributed to the like goods and the modified goods;
4. the end uses before and after modification;
5. substitutability between the modified goods and the like goods as well as consumer preferences in relation to the like goods and the modified goods;
6. the manner in which the goods are packaged and advertised before and after modification (including promotional material and documentation related to the goods);
7. the channels of distribution before and after modification;
8. the differences in production processes, costs and facilities between the modified goods and the like goods;
9. the cost of the modification and, if it is possible to reverse the modification, the cost of reversing it; and
10. any other factor that is relevant in the circumstances.

Undermining the remedial effects of existing duties

When determining whether imports of goods to which a prescribed activity applies are undermining the remedial effects of duties as referred to in paragraph 71(b) of SIMA, the CBSA may consider the following factors which are set out in section 57.15 of the SIMR:

1. price and volume of the like goods that are assembled or completed in Canada and sold in Canada, or the price and import volume of like goods that are assembled or completed in a third country or of slightly modified like goods;
2. whether the goods are sold to the same consumers that otherwise may have bought goods subject to the order or finding;
3. whether the goods have the same end use as the goods subject to the order or finding; and
4. any other factor that is relevant in the circumstances.

Change in trade pattern is “caused” by the imposition of SIMA duties

When determining if the change in trade pattern is caused by the imposition of SIMA duties under paragraph 71(c) of SIMA, the CBSA may consider the following factors which are set out in section 57.16 of the SIMR:

1. a. differences in costs between the goods that are subject to the applicable order or finding and the completed/assembled like goods or the slightly modified like goods;
2. b. when the prescribed activity started, or substantially increased, in relation to the day on which an the dumping or subsidy investigation was initiated;
3. c. any sales, in a country other than Canada, of the:
   1. like goods that have been completed or assembled in the third country,
   2. parts or components that are being sold to Canada or the third county for assembly/completion, or
   3. slightly modified goods;
4. d. changes in consumer preferences;
5. e. changes in technology;
6. e.1 any economic or commercial factors that are unrelated to the imposition of anti- dumping or countervailing duties; and
7. f. any other factor that is relevant in the circumstances.

Review of the CBSA’s decision

Judicial review

In accordance with paragraph 96.1(1)(c.2) of SIMA, the CBSA's decision in the anti-circumvention investigation is subject to judicial review by the Federal Court of Appeal.

Interim review

The CBSA may conduct an interim review of a decision that sets out a finding of circumvention. A review may be necessary when the circumstances on which a circumvention decision was based have changed. On completion of the review, the CBSA will rescind the decision under review or confirm it, with or without amendment, as the circumstances require. If required, the CITT will amend the order or finding.

Exemption review

In limited circumstances, the possibility arises that exporters whose goods are covered by the extension of duties may not have had the opportunity to participate in the anti-circumvention investigation because they were not notified. Exporters, who can demonstrate that their goods were not circumventing an order or finding of the CITT may seek an exemption from the extension of duties resulting from an anti-circumvention investigation. The CBSA will initiate an exemption review where the circumstances warrant this.

Subject goods imported from the exporter making the request will be assessed anti-dumping and/or countervailing duty during the exemption review.

Request for exemption

The exporter may request that the CBSA determine whether their goods may be exempt from the extension of duties if the exporter:

1. establishes that they are not associated with any exporter who was given notice of the circumvention investigation; and
2. has not been
   1. given notice of the initiation of that investigation, or
   2. requested to provide information during the course of that investigation.

The exporter’s request for exemption must be made in writing and must contain the following information in accordance with subsection 57.21(1) of the Special Import Measures Regulations (SIMR):

1. the name and address of the exporter, along with a list of associated persons;
2. confirmation, along with evidence in support, that the goods for which the request for exemption is made have been sold or consigned to an importer in Canada;
3. a detailed description of the goods;
4. if applicable, the name and address of each producer of parts or components and, if known, the name and address of each person that uses those parts or components;
5. if applicable, the name and address of any exporter or producer of parts or components used to assemble or complete the goods;
6. if applicable, the name and address of any exporter or producer of like goods that were slightly modified;
7. an indication of the applicable CITT amending order; and
8. a justification for the request,

Request for an exemption review may be sent electronically to the CBSA via email at simaregistry-depotlmsi@cbsa-asfc.gc.ca

Provided the exporter meets the above requirements and the CBSA is satisfied that the review is warranted, the CBSA will initiate the review. The CBSA will notify the importer, the exporter, the government of the exporting country and the domestic producers of the initiation and completion of the review.

Upon completion of the review, the CBSA will make a determination that the goods from the exporter are:

1. subject to the extension of duties if the President is satisfied that circumvention is occurring; or
2. exempt from the extension of duties if the President is satisfied that no circumvention is occurring.

If the CBSA determines that the goods are exempt, the CITT will amend the order or finding that is affected by the review in order to give effect to the CBSA’s determination. Duties will cease on the day the CITT amends the order.