SUG 2020 ER: Refined sugar
Statement of Reasons—expiry review determination

Canadian production

[44] The data in Table 2 reveals that, in terms of volume, the Canadian producers’ share of the apparent Canadian market was fairly stable, and decreased slightly from 96.1% to 94.9% over the POR.

Imports

[45] The data in Table 1 reveals that the value of subject goods imported currently represents 16.8% of the value of all imports.

[46] Since the period of investigation (POR) of the last expiry review (2012 to 2014), total imports dropped by over 49.8% in terms of value, from $31 million in 2012, to less than $16 million in 2019. This decrease coincided with a 32.1% decrease in the size of the apparent market between 2012 and 2019. Conversely, the total subject imports increased by 39.0% during the same period of time. A major rise of 213% of subject goods imported from the named countries was observed between 2017 and 2018, but this was at the expense of imports from other countries as the total imports was practically unchanged. The rise was followed by a drop of about one third of the value of subject imports in 2019.

[47] Still, imports from other countries decreased faster than the Canadian market during the POR. In this regard, imports from countries other than the E.U. and the U.S. decreased by 34.1% between 2017 and 2019 in terms of value vs. 11.0% for the total market.

[48] The data in Table 2 reveals that the volume of refined sugar imported from all countries most recently from January 1 to March 31, 2020, represents 5.1% of the volume of the Canadian market.

Market projections

[49] Generally speaking, both responding Canadian producers are expecting to operate fully while continuing their extensive COVID-19 protection measures, which involved additional incremental costs. Despite this, the Canadian producers contend that the food service sector remains under pressure and there is still economic uncertainty during the pandemic. Demand was lower for industrial segment and liquid sugar, while the demand was stronger for both refined sugar and maple products.^{Footnote 29}

[50] Information on the record shows that the COVID-19 pandemic has also reduced apparent sugar consumption in 2019/20, which has resulted in the first contraction in global demand since 1980/81. While this may be a short-term trend, sugar consumption in certain countries is being adversely affected by product re-formulation, particularly in countries which have introduced taxes on sugar-sweetened beverages.^{Footnote 30} As a result, the domestic demand for sugar is expected to increase modestly over the decade, as use by a growing global population is offset by lower per capita consumption of refined sugar and total caloric sweeteners.^{Footnote 31}

[51] As widespread government intervention in the sugar sector globally continues to limit market access for refined sugar and as the world sugar balance continues to realize more surplus years than deficit years, the CBSA expects increased competition in the foreseeable future.^{Footnote 32} Further, on the basis of the CBSA’s compilation of the producers’ data, the domestic industry has significant unused capacity.

[52] Overall, if the CITT’s orders on refined sugar remain in place, the CBSA expects the Canadian market balance to remain relatively stable in the foreseeable future.

Administrative record

[70] The information considered by the CBSA for purposes of this expiry review investigation is contained in the administrative record. The administrative record includes the information on the CBSA’s Exhibit Listing, which is comprised of the CITT’s administrative record relating to the initiation of the expiry review, the CBSA exhibits and information submitted by interested parties, including information which the interested parties feel is relevant to the decision as to whether dumping and subsidizing are likely to continue or resume, if the CITT’s orders are allowed to expire. This information may consist of expert analysts’ reports, excerpts from trade magazines and newspapers, orders and findings issued by authorities of Canada or of a country other than Canada, documents from international trade organizations such as the World Trade Organization (WTO) and responses to the ERQs submitted by Canadian producers, exporters, importers, and governments.

[71] For purposes of an expiry review investigation, the CBSA sets a date after which no new information submitted by interested parties will be placed on the administrative record or considered as part of the CBSA’s investigation. This is referred to as the “closing of the record date.” This allows participants time to prepare their case briefs and reply submissions based on the information that is on the administrative record as of the closing of the record date. For this investigation, the administrative record closed on December 9, 2020.

Parties contending that continued or resumed dumping is likely

Position of the Canadian Sugar Institute (CSI) regarding the United States

[72] The CSI presented evidence, a case brief and a reply submission in support of its position that the continued or resumed dumping is likely should the orders be rescinded and noted that the conditions that lead to the dumping in 1995, and continued in 2000, 2005, 2010 and 2015, still exist. Accordingly, the CSI contends that anti-dumping measures should remain in place.

[73] The main arguments made by the CSI relate to:

• Continued dumping due to U.S. government price support
• Decline in volume of imports
• Unutilized cane sugar refining capacity
• IMMEX program
• Surplus production of beet sugar
• World market for sugar and Canada’s position
• Geographic proximity of Canada

Continued dumping due to U.S. government price support

[74] The CSI relayed that the U.S. government’s sugar program has a dominant structural influence on the U.S. sugar market. It supports U.S. domestic sugar prices that are above world and Canadian price levels, restricts imports through the tariff rate quotas (TRQ), generates unutilized cane refining capacity and beet sugar surpluses and encourages exports, particularly, through the Refined Sugar Re-export Program (RSRP).^{Footnote 36} Since Canada is adjacent to the U.S. with the substantial majority of the industrial and consumer markets lying close to the border, and because corporate supply and purchase relationships cross the border, Canada is an obvious and desirable target for U.S. sugar.^{Footnote 37}

[75] The CSI highlighted that the U.S. sugar program expressly “uses price supports” to maintain “U.S. sugar prices above comparable levels in the world market”.^{Footnote 38} Among other U.S. sugar programs outlined by the CSI, the current Farm Bill has maintained the price support program through non-recourse loan programs and TRQ which continue to limit imports and help maintain U.S. prices at levels sufficient to prevent forfeiture.^{Footnote 39}

[76] The CSI also alleged that the high U.S. domestic prices, which are above the world and Canadian levels, and a number of U.S. policy measures continue to provide strong incentives to maintain its domestic sugar production. More specifically, the CSI conveyed that the RSRP is designed to enable domestic refiners to maximize the capacity utilization of their refineries by exporting to the world market (including Canada) refined sugar and selling U.S. beet sugar below the U.S. domestic price.^{Footnote 40}

[77] The CSI emphasized that refined sugar is a fully substitutable commodity product that competes mainly on the basis of price.^{Footnote 41} Thus, the CSI argued that in order to re-enter the Canadian market, particularly in competition with well-established domestic suppliers in a well-supplied market, U.S. suppliers will need to offer prices that are more advantageous than those offered by domestic refiners.^{Footnote 42} The commodity nature and the fact that price is a key driving factor in capturing sales of the subject goods support a determination that the continuation of dumping of refined sugar from the U.S. is likely.^{Footnote 43}

Decline in volume of imports

[78] According to the CSI, observations from the 2015 expiry review are still valid as the small volume of imports since the anti-dumping duties were imposed indicates that U.S. refined sugar cannot be sold in the Canadian market without dumping.^{Footnote 44} It is the CSI’s position that, if the CITT’s orders are rescinded, the entire Canadian market will be opened to imports of refined sugar from the U.S. at dumped prices and will create an untenable situation of one-way trade.^{Footnote 45}

[79] The CSI argued that if the SIMA measure expires, substantial volumes of exports of dumped U.S. refined sugar to Canada are undeniable.^{Footnote 46} According to the CSI, without the CITT’s orders, the U.S. exporters will be able to price into the Canadian market without fear at residual price levels exerting substantial dumping margins.^{Footnote 47}

Unutilized cane sugar refining capacity

[80] According to the CSI, since the 2015 expiry review, U.S. refiner capacity utilization ranged between 80% and 87%, with unutilized capacity of 991,000 to 1.541 million short tons, raw value (STRV), or 841,000 to 1.307 million tonnes refined value, which represents a considerable unutilized cane sugar refining capacity. In addition, every year since the previous expiry review, except for fiscal year 2019/20 where there was a significant reduction in the sugar beet crop due to extreme adverse weather, the excess U.S. cane refining capacity could have generated exports that would fill the entire Canadian market.^{Footnote 48}

[81] The CSI provided an explanation of the Refined Sugar Re-export Program (RSRP), which is designed to enable refiners in the U.S. to maximize the capacity utilization of their refineries through the exportation of refined sugar to the world market, including Canada.^{Footnote 49} Exports are matched against imports of an equivalent amount of world-priced raw cane sugar for processing in a U.S. refinery and sale in the U.S. market, thus increasing capacity utilization at U.S. cane refineries without increasing the supply of refined sugar in the U.S. market.^{Footnote 50} If the Orders expire, U.S. refiners will use the RSRP to increase their capacity utilization through exports to Canada.

[82] The CSI argues that with unutilized refining capacity in the U.S., if the CITT’s orders are permitted to expire, the RSRP would be leveraged to export U.S. beet sugar and refined cane to Canada, an obvious market for this surplus capacity.^{Footnote 51}

IMMEX program

[83] The CSI submitted information regarding the modification of the Promotion of the Manufacturing, Maquiladora, and Export Services (IMMEX) program by Mexico in January 6, 2016. The revised IMMEX program, which is used by the U.S. to export sugar to Mexico for purposes of being incorporated into other products and then re-exported, now specifically forbids U.S. sugar to benefit from the RSRP.^{Footnote 52} The CSI argues that this modification considerably decreased the use of the RSRP, which could be approximately 250,000 MT annually. According to the CSI, the credit opened through RSRP are valuable to a U.S. refiner because it allows a refiner to import world-priced raw cane sugar, refine it and increase capacity utilization, and then sell the resulting refined sugar into the U.S. domestic market at the supported price.^{Footnote 53}

[84] Thus, the loss of this market has reduced U.S. cane sugar refining capacity utilization and the U.S. domestic refiners will seek other export markets where they can generate credits under the RSRP program to maximize capacity utilization.^{Footnote 54} In the absence of Canada’s anti-dumping duty protection, Canada would be an obvious market to use the RSRP for this surplus capacity.^{Footnote 55}

Surplus production of beet sugar

[85] The CSI explained that U.S. beet sugar processors are subject to marketing allotments that limit the amount of refined beet sugar that U.S. sugar beet processors can sell in the U.S. market but do not impose any limits on sugar production. Production of surplus refined beet sugar producer’s allotment is referred to as “blocked stocks” because this excess of refined beet sugar cannot be sold in the U.S. market and therefore must be stored, exported (e.g., to Canada) or used for non-food purposes.^{Footnote 56} The CSI noted that, based on a LMC International^{Footnote 57} report, when companies in the U.S. exceed their domestic marketing allotments (blocked stocks), it results either in ploughing of surplus beets, paying to store surplus or exporting the sugar.^{Footnote 58}

[86] The CSI presented evidence that, despite the decline in U.S. sugar production in 2018/19 and 2019/20 due to adverse weather conditions, the beet sugar production for 2020/21 is projected to be 5.206 million STRV, an increase of 21% from 4.293 million STRV in 2019/20.^{Footnote 59} Further, the CSI provided information concerning the total ending stocks for 2020/21 which are forecasted by the U.S. Department of Agriculture (USDA) to be 1.622 million MT raw value (1.2 million tonnes refined value), an amount comparable to the size of the entire Canadian market.^{Footnote 60}

[87] The CSI reiterated that in the 2010 review, the CITT found that sugar beet processors normally plant additional precautionary acres of sugar beets in order to ensure marketing allotments are fulfilled, in case poor weather conditions adversely affect yields. The CSI also highlighted that the CITT went further to conclude that, if the orders were rescinded, there would be less need for U.S. sugar beet growers to plough under their excess sugar beet crop and, instead, they would dispose of the surplus in the Canadian market.^{Footnote 61} The CSI also recalled that in the 2015 review the CITT recognized that it is important to sell refined sugar as soon as possible because of the high cost of storing surplus stocks.^{Footnote 62}

[88] The CSI recalled that in the 2015 review the CBSA found that beet sugar production can be unpredictable, depending on such factors as weather and the price of alternative crops. Under good conditions, or when there is a financial incentive to plant sugar beets, surpluses may build up. Canadian sugar markets are in close geographic proximity to the U.S. border and to U.S. sugar processing plants and refineries, therefore, as beet sugar production levels rise, there is a greater likelihood of dumped sugar entering Canada in the absence of the CITT’s orders.^{Footnote 63}

[89] As per the CSI, U.S. beet sugar producers who have consistently had the capacity to produce substantial volumes of surplus sugar since the original investigation in 1995, have announced capacity expansions amounting to 225,900 tonnes.^{Footnote 64} The CSI argued that the existence of permanent marketing allotments under the 2008, 2014 and 2018 Farm Bills has not changed the incentive to export blocked stocks of beet sugar to Canada.^{Footnote 65}

World market for sugar and Canada’s position

[90] The CSI provided evidence indicating the Canadian market is highly valued by exporters and remains one of the few developed country sugar markets that is open to sugar imports and that is not protected by a government-regulated sugar program.^{Footnote 66} If the CITT’s orders are rescinded, at the same time as the U.S. sugar programs continue to create incentives to export refined sugar and tightly limit imports of Canadian sugars, this will create an open market where the price advantage caused by the dumping of refined sugar from the U.S. is not offset, and will materially injure the Canadian industry.^{Footnote 67}

[91] The CSI argued that if the orders expire, Canada will not have import barriers other than a relatively small import tariff of $30.86 per tonne, in comparison to the U.S. import tariff of US $357.40 per tonne (equivalent to approximately $470 per tonne).^{Footnote 68}

[92] The world sugar balance over the last decade has seen more surplus years than deficit years.^{Footnote 69} The surpluses are getting larger, while the deficits are getting smaller. The inventory stocks have accumulated to the current high levels of 71.6 million MT, representing 38.88% of global consumption.^{Footnote 70}

[93] As per the CSI, Canadian prices continue to track at a premium compared to residual world refined sugar prices but trend lower than the supported prices in the U.S. As such, the Canadian market presents an attractive export market opportunity for U.S. sugar exporters.^{Footnote 71}

[94] According to the CSI, if the SIMA protection is removed, the Canadian market would be a desirable destination for U.S. refined sugar exports, and the prices of the U.S. refined sugar will undercut the price of Canadian refined sugar almost immediately.^{Footnote 72}

Geographic proximity of Canada

[95] The CSI argued that the geographic proximity of the major Canadian sugar markets to the U.S. border as well as the numerous U.S. sugar processing plants and refineries is an important factor to be considered.

[96] The CSI also recalled that in the 2015 review the CBSA recognized that the geographic proximity with the U.S. border and U.S. sugar processing plants and refineries, represent a greater risk, as production level rise, of dumped sugar entering Canada in the absence of the CITT orders.^{Footnote 73}

Position of the Canadian Sugar Institute regarding Denmark, Germany, the Netherlands and the United Kingdom

[97] The CSI presented evidence and a case brief in support of its position that the continuation or resumption of dumping of refined sugar originating in or exported from Denmark, Germany, the Netherlands and the U.K. is likely based on the following factors:

• Decline in volume of imports
• Increased production
• E.U. sugar prices
• Unutilized capacity of E.U. cane sugar refiners
• Unutilized capacity of E.U. beet sugar producers
• Limited opportunities for exports to other markets
• Implications of the U.K.’s withdrawal from the E.U.

Decline in volume of imports

[98] The CSI noted that imports of refined sugar from the four E.U. countries appear to be only high-priced, non-subject sugar, and that imports of subject refined sugar have ceased almost completely since the anti-dumping and countervailing measures were put into place in 1995.^{Footnote 74}

[99] The CSI referenced the CBSA’s Statement of Reasons from the 2015 expiry review, where the CBSA observed that since the injury finding, imports of subject refined sugar from the four E.U. countries had all but ceased, which could be attributed to the high anti-dumping and countervailing duties in place. The CSI further referenced the CBSA’s conclusion that this indicates that exporters were unable to export to Canada at non-dumped prices. The CSI argues that this conclusion is still applicable, and further indicates that dumping is likely to be continued or resumed should the Orders expire.^{Footnote 75}

Increased production

[100] The CSI presented evidence to support that the E.U. continues to be the world’s third largest sugar producer, and over the past five years, total sugar production increased 16%, from 14.9 million MT in 2015/2016 to a projected 17.4 million MT in 2019/2020. The CSI further noted that production increased significantly in 2017/2018, following the abolition of E.U. production quotas. The CSI argued that this increase shows the producers’ abilities to expand capacity utilization and exports.^{Footnote 76} The CSI submitted that Denmark, Germany, the Netherlands and the U.K. account for 40% of E.U. sugar production, and noted that total production in these four countries has increased by 38.5% since the 2015 review. The CSI noted that Germany’s production increased the greatest, having grown by 46.5%.^{Footnote 77}

[101] The CSI further noted that poor weather conditions and beet disease outbreaks in 2018/2019 and 2019/2020 caused decreased sugar production in the E.U. However, production is still on average 7% higher than it was before the October 2017 reform, and the area cultivated with sugar beet is 11% greater on average.^{Footnote 78} The CSI argues that the increased production in the E.U. indicates that dumping is likely to continue or resume if the Orders expire.^{Footnote 79}

E.U. sugar prices

[102] The CSI acknowledged that due to the increased production and strong competition in the E.U. market, domestic sugar prices in the E.U. decreased following the removal of the domestic quotas, and that the decrease was intensified by the surplus and declining prices in the world market. At the same time, the CSI noted that E.U. sugar prices have since begun to recover, and are projected to continue increasing.^{Footnote 80}

[103] The CSI provided evidence in support of its claims that the four countries exported sugar at dumped prices. The CSI noted that the data demonstrated significant quantities exported to unprotected markets at prices below the E.U. domestic prices. The CSI further noted that the average prices of exports are skewed by high-priced exports to countries such as Switzerland, Norway and Iceland. The CSI argued that should the orders expire, sugar would similarly be exported into the Canadian market at dumped prices.^{Footnote 81}

[104] The CSI also referenced submissions by sugar producers in the four countries, which indicated that they have incurred losses on their domestic sales of sugar during the POR, meaning domestic sales have been made at prices below cost. The CSI further stated that these unprofitable domestic prices cannot, therefore, be used as a benchmark for normal values.^{Footnote 82}

Unutilized capacity of E.U. cane sugar refiners

[105] The CSI provided evidence relating to the capacity of E.U. cane sugar refiners, noting that there is a significant amount of unutilized cane refining capacity in the E.U. market.^{Footnote 83}

[106] The CSI further noted that in the 2010 expiry review, the CITT found that there was a likelihood that E.U. sugar refiners with unutilized capacity would use the Inward Processing Relief (IPR) Program to export refined sugar to Canada, if the orders were to be rescinded. The CSI submits that this is still likely. The CSI further referenced the CITT’s Order and Statement of Reasons from the 2015 expiry review in which the CITT referred to the IPR program, and stated that evidence demonstrated that there had been, and would likely continue to be, excess refining capacity and sugar surpluses in the E.U.^{Footnote 84}

Unutilized capacity of E.U. beet sugar producers

[107] The CSI argued that the significant increase in production during the 2017/2018 marketing year shows the ability of E.U. beet sugar producers to increase capacity utilization and exports. The CSI referenced Südzucker’s ERQ response, which stated that after the abolition of the beet quotas, minimum prices and export restrictions, Südzucker took the opportunity to utilize existing capacities through longer campaigns, which led to an “expansion of low-margin third-country sugar exports.” The CSI further noted that while weather events and disease outbreaks temporarily reduced sugar production and exports in marketing years 2018/2019 and 2019/2020, surplus production of approximately 3.1 million MT is expected under normal conditions. The CSI argued that this will lead to more low-margin sugar exports, including to Canada, should the orders be rescinded.^{Footnote 85}

Limited opportunities for exports to other markets

[108] The CSI referenced the CITT’s Order and Statement of Reasons from the 2015 expiry review, in which the CITT found that the E.U. lacked traditional export market opportunities due to increased refining capacity in those markets. The CITT further stated that this could lead E.U. producers to find new markets to export its surplus sugar to countries such as Canada. The CSI argued that this has not changed, stating that since the last review, no other markets for E.U. refined sugar exports have developed. The CSI further argued that should the orders expire, Canada will be a target for E.U. refined sugar exports.^{Footnote 86}

Implications of the U.K.’s withdrawal from the E.U.

[109] The CSI noted that following the U.K.’s withdrawal from the E.U., the U.K. Global Tariff (UKGT) came into force on January 1, 2021. Under the UKGT, a customs duty will be applicable on imports of refined sugar from countries without preferential access, at a rate of 350 GBP per tonne. The CSI argued that depending on whether a free trade agreement is implemented between the U.K. and the E.U., or whether the U.K. gives preferential access to imports of refined sugar from the E.U., the historical trade of E.U. refined sugar into the U.K. could be disrupted. The CSI noted that this could cause between 400,000 and 500,000 MT of E.U. sugar to return to the E.U. market, increasing competition in the E.U. and potentially increasing exports.^{Footnote 87}

[110] The CSI further noted that the U.K. has a 260,000 MT duty-free quota of raw sugar, which could increase the raw sugar available for refining, and as a result, increase the utilization of the Tate & Lyle refinery, which is currently underutilized. The CSI quoted a beet sugar refiner, British Sugar PLC, who is opposed to the raw cane sugar quota because there is “no scarcity of sugar available in the U.K.” The CSI also noted that the U.K. implemented a program similar to the E.U. IPR program, which will incentivize exports, should the orders expire.^{Footnote 88}

Parties contending that continued or resumed dumping is not likely

Position of the European commission regarding Denmark, Germany, the Netherlands and the United Kingdom

[111] The E.C. provided a response to the CBSA government ERQ and provided arguments in support of its position that continued or resumed dumping of refined sugar from Denmark, Germany, the Netherlands and the U.K. is not likely based on the following factors:

• Absence of anti-dumping investigations against the E.U.
• Exports from the E.U. are not dumped
• Decreased prices of sugar in the E.U.
• Decreased production in the E.U.

Absence of anti-dumping investigations against the E.U.

[112] The E.C. notes that no other anti-dumping investigation has been initiated against sugar from the E.U. since Canada’s first investigation. The E.C. argues that this indicates that the likelihood of the recurrence of dumping of sugar from E.U. exporters is low.^{Footnote 89}

Exports from the E.U. are not dumped

[113] The E.C. claims that exports from the named countries are not being dumped. To support this, the E.C. provided ex-works regional E.U. domestic prices and export prices from Denmark, Germany and the Netherlands to third countries for 2019 and 2020.^{Footnote 90} For Region 1, the E.C. compared the average E.U. prices (329 EUR per MT in 2019 and 380 EUR per MT in 2020) to the export prices from Denmark (477 EUR per MT in 2019, and 468 EUR per MT in 2020). For Region 2, the E.C. compared the average E.U. prices (312 EUR per MT in 2019 and 363 EUR per MT in 2020) to the export prices from Germany and the Netherlands (327 EUR per MT in 2019, and 527 EUR per MT in 2020). The E.C. submits that exports from these countries to foreign markets were priced above domestic prices, and therefore are on average not dumped. The E.C. further claims that this indicates that should the measures expire, exports to Canada from these countries would likely not be dumped.^{Footnote 91}

Decreased prices of sugar in the E.U.

[114] According to the E.C., following the abolition of the sugar quota, E.U. sugar prices have aligned closer to the world market, and were below the world market price in some periods. The E.C. explained that during the first year without quotas (marketing year 2017/2018), E.U. sugar production increased, fostered by optimal weather conditions. The increased production also increased exports, which the E.C. explained caused the E.U. prices to decrease and align with the world market. The E.C. notes that the E.U. average sugar price decreased from 490 EUR per MT in September 2017 to 347 EUR per MT the next year. In January 2019, E.U. price reached an unprecedented low of 312 EUR per MT. The E.C. further stated that the price recovered slowly, following the world trend, and reached an average price of 379 EUR per MT in June 2020, in line with the world market price.^{Footnote 92} The E.C. argues that the alignment of E.U. prices to world prices indicates that it is very unlikely that exports to Canada would be dumped.^{Footnote 93}

Decreased production in the E.U.

[115] The E.C. claims that although production increased in marketing year 2017/2018 following the abolition of quotas, production reduced by nearly 4 million MT in marketing year 2018/2019, and a further 1.7% in marketing year 2019/2020, to 17.36 million MT. The E.C. further states that the sugar beet area sown reduced by 5.5% in marketing year 2019/2020. The E.C. noted exports decreased due to reduced production, causing the E.U. to become a net importer in 2019/2020.^{Footnote 94}

Position of Südzucker regarding Denmark, Germany, the Netherlands, and the United Kingdom

[116] Südzucker submitted a response to the CBSA exporter ERQ and provided arguments in support of its position that continued or resumed dumping of refined sugar from Denmark, Germany, the Netherlands and the U.K. is not likely based on the following factors:

• Decreased price of sugar in the E.U.
• Decreased production in the E.U. market
• The E.U.’s status as a net importer
• Low exports to Canada

Decreased prices of sugar in the E.U.

[117] Südzucker provided evidence which showed that prices of sugar in the E.U. have decreased as a result of the elimination of the E.U. sugar quota regime and the removal of minimum beet prices. Südzucker added that the production surplus and strong competition in the domestic market have contributed to the sharp decrease in prices. Südzucker further noted that E.U. prices have aligned with world prices, and are expected to remain in line with the world market, with average prices in the range of 400 EUR per MT.^{Footnote 95}

Decreased production in the E.U. market

[118] According to Südzucker, although the E.U.’s production increased in the year following the abolition of the quotas (2017/2018), production decreased significantly in the following years. Südzucker further noted that production is forecasted to remain around 17 to 18 million MT for the E.U. and the U.K. combined, until 2030, closely following consumption levels. Although forecasts for the E.U. predict a 3% decrease in beet area between 2020 and 2030, stable beet output is also predicted as the average beet yield has increased in 2020. Südzucker also noted that production of sugar in the E.U. could decrease from 15.9 million MT in 2020 to 15.6 million MT in 2023.^{Footnote 96}

[119] Südzucker further indicated that factory closures were announced due to the production surplus and competition in the E.U., as well as the decline of world market prices. Four factories in France and two in Germany shut down in 2020, with combined total processing capacity of approximately 800,000 MT of sugar. In addition, one factory in Poland closed in 2019. Südzucker noted that companies intend to run existing factories at capacity to maximize efficiency and increase competitiveness while reducing fixed costs.^{Footnote 97}

The E.U.’s status as a net importer

[120] Südzucker noted that although the E.U. was a net exporter in 2017/2018 as a result of the increased production following the abolition of the quotas, production of E.U. beet sugar declined significantly in the three following years. This caused exports to decrease and the E.U. became a stable net importer. Südzucker further noted that by the end of July 2020, the trade deficit had already more than tripled from the previous year.^{Footnote 98}

Low exports to Canada

[121] Südzucker provided evidence which showed that exports of refined sugar from the E.U. to Canada peaked at 2,306 MT in 2018/2019. Südzucker argued that the volume of exports from the E.U. to Canada, at an average of less than 0.1% of the total volume of imports of refined sugar from all countries from 2017 to 2020, is negligible. Südzucker further states that E.U. exports to traditional markets will continue, and that the volumes have stabilized in the last decade.^{Footnote 99} Südzucker also notes that based on the E.U.’s status as a net importer, and the production predictions, it is unlikely that exports to Canada will resume in significant quantities that could cause injury to the Canadian producers.^{Footnote 100}

Position of the Comité Européen des Frabricants de Sucre (CEFS) regarding Denmark, Germany, the Netherlands and the United Kingdom

[122] The CEFS submitted a case brief and reply submission in response to the case brief submitted by the CSI. The CEFS provided arguments in support of its position that continued or resumed dumping of refined sugar from Denmark, Germany, the Netherlands and the U.K. is not likely based on the following factors:

• Decreased price of sugar in the E.U.
• Lack of evidence of dumping
• Higher prices in the Canadian Market
• E.U.’s status as a net importer
• Unlikelihood of exports being directed to Canada
• Absence of trade actions targeting E.U. sugar exports

Decreased prices of sugar in the E.U.

[123] The CEFS provided evidence to support that prices in the E.U. have decreased following the abolition of the E.U. quota regime in October 2017. The CEFS further noted that the E.U. prices have aligned with the world market prices, which demonstrates the competitive nature and free-market operation of the E.U. market.^{Footnote 101}

Lack of evidence of dumping

[124] The CEFS referred to the information submitted in the E.C.’s ERQ response to support its claim that there is currently no dumping from Germany, the Netherlands and Denmark. The CEFS specifically referred to the comparison of regional average E.U. prices and average export prices of the three countries submitted by the E.C., which showed that the export prices were higher and therefore showed no dumping from these countries.^{Footnote 102}

[125] The CEFS further noted that the Canadian industry provided no evidence to support its claim of continued dumping.^{Footnote 103}

Higher prices in the Canadian market

[126] The CEFS notes that the Canadian prices of sugar appear to be on average higher than E.U. domestic prices. The CEFS referred to information submitted by both the CSI and the E.C. to support its claim. The CEFS submits that since the E.U. prices are below Canadian prices, E.U. producers would not need to lower prices below domestic prices in order to compete in the Canadian market. The CEFS further states that the higher price in the Canadian market would incentivise E.U. producers to sell to Canada above their domestic prices, rather than at dumped prices.^{Footnote 104}

E.U.’s status as a net importer

[127] The CEFS notes that the E.U. has been a net importer for 9 of the past 10 years, with the exception being 2017. The CEFS argues that the year 2017 should not be considered as a relevant indicator as the abolishment of the Sugar Quota Regime and exceptionally favourable weather conditions lead to an exceptional year of exports. The CEFS states that if any excess volumes would be available, the volumes would not pose a risk of injury, nor induce the E.U. producers into dumping in order to get sales. The CEFS further notes that only small quantities are forecasted to be available for export by 2030.^{Footnote 105}

Unlikelihood of exports being directed to Canada

[128] The CEFS submits that should there be an increase in export volumes, it is unlikely that the exports would be directed towards the Canadian market. The CEFS notes that since the E.U. has been excluded from the Canadian market for 25 years, it would be more favourable for exporters to continue to export to the MENA (Middle East/North Africa) region using existing trading relationships, rather than establish new trading relationships in Canada. The CEFS further notes that E.U. exporters have expressed that they have no plans to alter their trading patterns or distribution channels, and as such will continue to direct exports mainly towards the MENA region.^{Footnote 106}

Absence of trade actions targeting E.U. sugar exports

[129] The CEFS notes that since the initiation of Canada’s investigation, no other anti-dumping investigations have been initiated concerning exports of sugar from the E.U. The CEFS submits that this indicates that sugar exporters from the E.U. do not apply a commercial policy using dumping practices, and that the recurrence of dumping practices is unlikely.^{Footnote 107}

[130] The CEFS further indicates that the only trade remedy measures in place concerning sugar from the E.U. during the period under investigation have been import bans or safeguard measures, which are not related to anti-dumping. The CEFS adds that these measures concern all imports of sugar, regardless of their origin, and do not exclusively target exports from the E.U. The CEFS argues that the existence of these measures does not indicate that E.U. exporters would continue or resume dumping practices.^{Footnote 108}

Likelihood of continued or resumed dumping—United States

[133] The current U.S. sugar policy, administered by the USDA, maintains domestic sugar prices above the world market price and is structured to protect domestic sugar cane and sugar beet producers and processors. Sugar prices are supported through the U.S. sugar program under the authority of the Agricultural Improvement Act of 2018 (2018 Farm Bill), covering sugar marketing since the 2019 crop year. This Act amended the Agricultural Act of 2014 (2014 Farm Bill), which applied through the 2018 crop year. The current legislation continues the main elements of the previous sugar program that were factors in the original 1995 findings and the CITT’s reviews in 2000, 2005, 2010 and 2015. Indeed, the 2018 Farm Bill has continued the sugar program provisions in the 2014 Farm Bill that were in force during the previous expiry review, with the only change being a 5% increase in the non-recourse marketing assistance loan rates for raw cane sugar and refined beet sugar.^{Footnote 109}

Continued dumping while the orders were in effect

[134] The U.S. government’s sugar program supports U.S. domestic sugar prices above world and Canadian price levels; consequently, when U.S. sugar is imported into Canada at the lower Canadian prices, it is priced lower than the like goods sold in the U.S. and thus is dumped.

[135] As noted previously, only one re-investigation of U.S. normal values has been conducted since the final determination, and as the provisions of the U.S. sugar program ensure high domestic prices, it results in normal values that were much higher than the Canadian pricing levels.

[136] As shown above in Table 3, approximately $7.9 million in SIMA duty was assessed on U.S. imports during the POR. The SIMA duties represent approximately 62.2% of the value for duty, which indicates that subject goods from the U.S. continued to be dumped.

[137] The record contains evidence that compares wholesale bulk refined sugar prices for U.S. beet sugar, the world refined sugar price and Canadian imports of bulk granulated refined sugar prices from the U.S.^{Footnote 110} A simple comparison of U.S. and Canadian price levels provide a reasonable indication of the potential magnitude of the margins of dumping as shown in Table 4 below.

[138] As can be seen in Table 4, when the U.S. wholesale price for refined beet sugar is compared to the average price of bulk granulated sugar imported into Canada during the POR, the U.S. pricing is higher ranging from USD 143.11 per MT to USD 405.89 per MT. As such, it is reasonable to conclude that export sales of U.S. refined sugar would be sold at dumped prices in the Canadian market, in order to compete with Canadian prices, which are substantially lower than the supported prices in the U.S.

[139] In addition, as can be observed in Table 4 above, the fact that Canadian import prices are higher than world refined sugar prices provides an incentive for the U.S. to export their surplus sugar to Canada, being geographically close, before seeking other international markets. As a result, because of the relative price differences between the U.S. domestic price and the export price to Canada, exports of refined sugar from U.S. will likely be at dumped prices if the CITT’s orders are rescinded.

Small volume of imports

[140] Imports into Canada have remained low during the POR and were comparable, in terms of value, to those found in the last expiry review in 2015. As shown in Table 1, the value of subject goods from the U.S. represents a relatively small proportion of the total Canadian market in each year during the POR; i.e., less than 1%^{Footnote 111} This low volume of imports is likely a direct consequence of the high normal values in place, when compared to the lower Canadian market price and the assessment of anti-dumping duties of 180% of the export price. The small volume of imports since the anti-dumping duties were imposed is an indicator that U.S. refined sugar cannot be sold in the Canadian market at non-dumped prices.

Production, capacity and demand

[141] The CBSA’s analysis centres on the actual performance of U.S. exporters as well as the near and medium term performance projections. The performance of U.S. exporters with respect to their level of sugar production, the capacity utilization rates of sugar refiners, the level of inventories (ending stocks) of refined sugar and their export opportunities, are all factors that will likely influence the pricing and volume of imports of refined sugar into Canada, and thus, factors that affect the likelihood that subject goods will be dumped into Canada in the near to medium term.

Sugar production

[142] As further described below, the U.S. refining sugar capacity has increased during the POR. The Canadian market by comparison is much smaller and similar in size to the surplus production capability in U.S. Indeed, the total ending U.S. stocks for 2020/21 are forecasted to be 1.622 million MT raw value, or 1.2 million tonnes refined value.^{Footnote 112}

[143] Although U.S. sugar production was reduced in 2018/2019 and 2019/2020 due to adverse weather conditions, production is projected to go up for 2020/2021, based on increased acreage and yield forecasts for sugar beet and sugarcane crops.^{Footnote 113} In this regard, USDA data indicates that U.S. beet sugar production in 2020/2021 increased to 5.206 million STRV, a 21.3% increase from 4.293 million STRV in 2019/2020. A similar trend was reported by the USDA for cane sugar production which is projected to reach 4.062 million STRV, an increase of 5.9% from 2019/2020 production and 4.6% above the five year average.^{Footnote 114}

[144] USDA agricultural projections to 2029 predict that U.S. sugar demand will increase modestly, despite a decrease in consumption of refined sugar and caloric sweeteners, driven by population growth. In addition, U.S. sugar production is projected to increase at a higher rate than domestic supplies which indicates surplus production throughout the decade.^{Footnote 115}

[145] Information on the record indicates that U.S. cane sugar producers have continued to expand their operations in the U.S. since the CBSA’s last expiry review. Imperial Sugar Company, located in Savannah, Georgia, made improvements to their facility. In addition, Imperial Sugar Company announced in the first half of 2020 that they will be investing in new sugar refining machinery for their sugar refining plant, adding further capacity to the U.S. market.^{Footnote 116}

[146] Since the last expiry review in 2015, Michigan Sugar Co. initiated a $65 million capital upgrade project in 2016 to increase its Crowell, Michigan plant’s sugar beet processing capacity by 50%.^{Footnote 117} In addition, SC Sugar LLC, located in Gramercy, Louisiana, established a new packaging and distribution facility in 2017. The information on the record indicates that total production capacity in the U.S industry has increased significantly since the last expiry review, which was estimated at the time to be 13.5 million STRV (11.5 million MT), while as of September 2020 it is estimated, according to the USDA outlook report, to have increased to 13.9 million STRV (12.6 million MT).^{Footnote 118} For comparative purpose, it can be seen in Table 2 that the total production capacity of U.S. producers is at least ten times larger than the total Canadian market which is approximately 1.3 million MT.

Unused capacity of U.S. sugar refiners

[147] Over the last five marketing years (2015-2020), U.S. cane refiners had on average approximately 16.7% of unutilized capacity that ranged between 0.8-1.3 million MT, refined value.^{Footnote 119} With the exception of the marketing year 2019/2020 when bad weather caused by significant reduction in sugar beet crop, the excess of U.S. cane refining capacity could have been enough to supply the entire Canadian market.^{Footnote 120} It is reasonable to conclude that the U.S. producers have the capacity and the incentive to increase their production, which will be available for increased exports to Canada, made possible by existing unused capacity. This is directly relevant to the likelihood of continued dumping of U.S. refined sugar into Canada.

[148] Through the RSRP, U.S. refiners can maximize the capacity utilization of their refineries by exporting refined cane or beet sugar to the world market, and then import an equivalent amount of world-priced raw cane sugar outside of the Tariff-Rate Quotas, for processing in a U.S. refinery and sale in the U.S. market. The program helps U.S sugar refiners compete in world markets.^{Footnote 121} As a result, the RSRP allows producers to increase the capacity utilization of their cane refineries without increasing the supply of refined sugar in the U.S. market which could consequently destabilize the sugar price support program.

[149] It is important to note that the program allows refined sugars derived from either sugar beet or sugarcane to be substitutable, which encourages exports to Canada, given the proximity of sugar beet processing facilities to the Canadian border.^{Footnote 122} Accordingly, the benefits of the RSRP provide incentives to export refined sugar to Canada at prices that are significantly lower than U.S. domestic supported prices, should the CITT’s orders be rescinded.

[150] Domestic marketing allotments that were in place during the 2015 expiry review have been continued with the 2018 Farm bill which extends the program through the 2023 crop year. While the marketing allotments are established each year by the USDA and limit the quantity of sugar that U.S processors can sell for domestic use, they do not limit the amount of sugar beet and cane U.S growers can produce, nor limit the amount that can be refined.^{Footnote 123} Further, sugar produced in excess of a producer’s market allotment, referred to as “blocked stocks”, cannot be used for credit under the RSRP. However, beet sugar producers can create a credit by exporting allotment sugar and subsequently selling the credit to a refiner, allowing the refiner to import world-priced raw cane sugar for refining, thus increasing capacity utilization, and then selling the sugar in the U.S. domestic market at the supported domestic price. The combination of the selling price of the sugar in the world market and the revenue from the sale of the credit make the exportation profitable.^{Footnote 124}

[151] Given that all the major U.S. sugar refiners and marketers currently hold licenses^{Footnote 125} to participate in the RSRP, it is reasonable to conclude that all sugar exported from the U.S. during the POR has benefited from the RSRP. As such, the RSRP continues to provide an incentive to export dumped sugar into Canada.

Inventories of refined sugar

[152] The administrative record contains information on actual and forecasted production of U.S. refined sugar. The USDA monthly report indicates that domestic production of sugar (cane and beet) is projected to be 9.265 million STRV in 2020/2021, up 14% from 2019/2020. This projection also reflects the increase in beet sugar production forecasted at 23.8% with production reaching 5.199 million STRV. According to the USDA, the sugar ending stocks for 2020/2021 are estimated to be approximately 1.788 million STRV or 1.622 million MT, which correspond to a 14.6 % stocks-to-use ratio (the ending stock over the total consumed).^{Footnote 126} This is significant compared to the total Canadian market of approximately 1.3 million MT, as reported in Table 2.

[153] The stocks-to-use ratio is also a key determiner of refined sugar prices; a lower stocks-to-use ratio generally means stronger prices. Since 2017, U.S. stocks-to-use ratios have returned to the USDA’s targeted range of 13.5% to 15.5%. Even though the surplus ratio, on average, has declined from 16.2% in the marketing year 2005/2006, to 14.3% in 2019/2020, the volume of ending stocks has increased overall from 1.698 to 1.744 million STRV, respectively, as the production domestically consumed rose. Further, the ending-stock-to use is forecasted to increase and reach 14.6% in 2020/2021 with a volume of ending stocks of 1.788 million STRV.^{Footnote 127}

[154] Given the existence of this considerable stock surplus situation in the U.S and the fact that U.S. supported domestic sugar prices are above world and Canadian price levels, the CBSA finds that it is likely that exporters of subject goods will continue to sell goods to Canada at dumped prices.

Future performance of exporters

[155] American Sugar Refining (ASR) is the only U.S. company that provided a response to the exporter ERQ. Based in West Palm Beach, Florida, ASR is a leading producer of refined sugar in the U.S. and operates four sugar refineries and one facility.^{Footnote 128} In addition, ASR has a large number of associated companies which are involved in the supply, production, and/or marketing of raw or refined sugar. ASR owns the leading sugar brands in the Eastern and Western U.S. regions, as well as Redpath which operates in Canada.^{Footnote 129}

[156] Given the presence of an associated company already well established in Canada (Redpath), and the fact that ASR holds a license under the RSRP which can generate credits on their exports, it is reasonable for the CBSA to conclude that ASR has the incentive to increase its production and exports to Canada if the CITT’s orders are rescinded.^{Footnote 130}

[157] Evidence on the record also indicates that, on January 6, 2016, the Mexican Government modified the provisions of its special import zone (IMMEX) which was allowing U.S. to export sugar duty-free to Mexico to be incorporated into other products and then re-exported, using the U.S. RSRP. This recent change in policy prohibits the U.S-origin sugar from benefiting from the U.S. RSRP when using the IMMEX program and has resulted in reduced demand for refined sugar and reduced capacity utilization of sugar refiners in the U.S.^{Footnote 131}

[158] Information on the record, consisting of monthly reports published by the USDA Foreign Agricultural Service (FAS), exposed a drastic reduction in the use of the RSRP following the recent change in IMMEX program regulation. According to these reports, the total RSRP was 138,616 MT in 2015, before the change in IMMEX, and dropped to 7,499 MT in the 2020 calendar year.^{Footnote 132} This represents an approximate decrease of 95% from 2015 to 2020 in the use of U.S. refined sugar for export credit under the RSRP to Mexico. As such, the loss of this market reduced the capacity utilization of sugar refiners in the U.S. which has created additional pressure for U.S. sugar producers to seek new export markets such as Canada.

[159] The record also contains evidence showing the most recent import protection measures in place, including WTO bound and applied tariffs on refined sugar for selected WTO member countries.^{Footnote 133} With few exceptions, this information indicates that tariffs applied to imports of refined sugar by developed and developing countries remain at very high, often prohibitive, levels. Widespread government interventions combined with some level of domestic support further limit market access for refined sugar.^{Footnote 134} Canada is a well-developed industrial and consumer market in close proximity to the U.S. border, enabling convenient supply arrangements with U.S. refiners and beet processors. The CBSA is of the opinion that, in the absence of the CITT’s orders, Canada would be an attractive market for U.S. exporters as Canada remains one of the few open markets in North and South America without government intervention and import restrictions on refined sugar.

Trade measures in other jurisdictions

[160] In 2020, several jurisdictions imposed other trade measures with respect to refined sugar as well as other sweetener products. At least five countries have imposed safeguard measures and import duties on exports of refined sugar covered by the product definition. For example, Costa Rica currently has safeguard measures at a rate (digressive) of 27.68% in place until July 2023. In addition, Indonesia has banned certain sugar products and adopted safeguard measures against fructose syrup. In March 2020, Lebanon also implemented trade measure against refined white sugar in the form of an import tariff of 7%.^{Footnote 135}

[161] The intensification of trade measures around the world limits the availability of markets outside the U.S. for exported refined sugar and the use of the RSRP to maximize the capacity utilization by U.S domestic refineries. This leaves Canada as a desirable potential target for U.S. sugar exports, given Canada is one of the few open markets for the subject goods.

Outlook for a continued global sugar surplus

[162] Evidence on the record indicates that during the last decade, the world sugar market has had more surplus years than deficit years. While deficits still occur, they are becoming less important, and the surpluses are getting larger. The 2018/2019 marketing year had a large surplus with high production from India and Thailand, which contributed to increased world stocks. Overall, the world sugar supply has been rising with global production in 2020/2021 forecasted at 183.4 million MT, up 4.9 million MT from 2019/2020.^{Footnote 136} Inventory stocks have also accumulated, reaching high levels with 71.6 million MT for 2020/2021, an increase of 12% compared to the stock levels of 64.0 million MT in 2011/2012.^{Footnote 137} During 2019/2020, the COVID-19 pandemic has also decreased apparent consumption which has resulted in the first contraction in global sugar demand since 1980/1981.^{Footnote 138}

[163] The data in Table 1 and Table 2 show that the Canadian market for refined sugar decreased in value but increased in volume over the POR, suggesting a reduction in per unit prices for refined sugar in the Canadian market. This is in line with global production output and rising sugar stocks over the POR.

Proximity of the U.S. industry to the Canadian market

[164] As mentioned previously, an important factor to consider is that the U.S. sugar industry is situated close to Canada. The record contains a map showing the locations of the sugar beet factories, cane refineries and sugar distributions centres. A large portion of these factories and centers are concentrated in the northern part of the U.S, including Idaho, Montana, North Dakota, Minnesota, Michigan, Ohio, Pennsylvania, and New York.^{Footnote 139}

[165] In the 2015 review, the CBSA recognized that the geographic proximity with the U.S. border and U.S. sugar processing plants and refineries represents a greater risk, as production levels rise, of dumped sugar entering Canada in the absence of the CITT orders.^{Footnote 140}

[166] With widespread government intervention in the sugar sector in other countries continuing to limit market access for refined sugar, Canada remains one of the few nations not protected by a government-regulated sugar program. As such, given its close proximity to the U.S. border, Canada will continue to be an attractive market for U.S. refined sugar in the absence of the CITT’s orders.

Determination regarding likelihood of continued or resumed dumping—the U.S.

[167] Based on the information on the record in respect of: continued dumping into Canada of the subject goods while the orders were in effect; the small volume of imports; production, capacity and demand in the U.S.; trade measures in other jurisdictions; and the proximity of the U.S. industry to the Canadian market, the CBSA determined that the expiry of the orders is likely to result in the continuation or resumption of dumping of refined sugar originating in or exported from the U.S.

Likelihood of continued or resumed dumping—Denmark, Germany, the Netherlands and the United Kingdom

[168] The following analysis pertains to the above four named countries located in the E.U. As mentioned previously, during all but the final three months of the POR, the U.K. was a member of the E.U. and was still within the E.U. customs union and single market during the transition period which ended January 1, 2021. Therefore, for the purposes of this assessment, the CBSA considered the U.K. to be a member of the E.U. A country-by-country analysis is not included, as exporters in the named countries did not previously provide any information to the CBSA allowing such a distinction, even at the time of the original investigation. Although the CBSA received responses from three exporters in the current investigation, one headquartered in the U.K., one in the Netherlands, and one in Germany, these companies provided information on operations conducted throughout the E.U., again not allowing a country-by-country analysis. In addition, comments made regarding the likelihood of continued/resumed dumping by the CSI, exporters, the CEFS and E.C. relate to all four countries, and arguments were not provided on a country-by-country basis.

[169] Since the last expiry review, there have been changes to the E.U. sugar regime. The E.U. reform in 2017 abolished production quotas and minimum beet prices, and at the same time, the WTO export limits were rescinded. These changes came into effect on October 1, 2017.^{Footnote 141} However, some trade distorting programs remain in place, including private storage aid, and import tariff protection for all but preferential suppliers.^{Footnote 142}

Continued dumping while the orders were in effect

[170] The CITT’s anti-dumping orders concern subject goods from Denmark, Germany, the Netherlands and the U.K.. Lack of response from the exporters at the time of the original investigation resulted in dumping margins ranging from 42% to 180%, in accordance with the ministerial specification. As stated previously, a re-investigation was conducted in 2014. None of the exporters in Germany, Denmark, the Netherlands, or the U.K. participated in the re-investigation. As such, following the conclusion of the re-investigation on September 4, 2014, all imports of subject goods from Germany, Denmark, the Netherlands and the U.K. are subject to 180% anti-dumping duty rate, in accordance with the revised ministerial specification.

[171] During the POR, imports of subject goods from Denmark, Germany, the Netherlands and the U.K. were minimal, totalling approximately $267,238, on which $285,199 of SIMA duties (both anti-dumping and countervailing duty) were assessed, as shown in Table 1 and Table 3. The fact that the duties were assessed indicates that subject goods from those countries were dumped while the orders were in effect.

Decline in the volume of imports

[172] In general, imports of the subject goods from the four countries have all but ceased since the injury findings. As shown in Table 1, imports from the four countries represent less than 1% of all imports during the POR. This can be attributed to the high anti-dumping duties and countervailing duties that are currently in place. This can also be an indication that the producers from Denmark, Germany, the Netherlands and the U.K. are unable to export to Canada at non-dumped prices. Without anti-dumping duty in place, these exporters would therefore have to resume dumping in order to generate sales in the Canadian market.

Removal of production quotas and export limits

[173] Information on the record provided by Cosun Beet Company indicates that the E.U. exported 0.74 million MT of white sugar and imported 1.745 million MT of sugar in 2019/2020. However, it is noted that 1.161 million MT of these imports were of raw sugar, which is not subject to the orders.^{Footnote 143} Therefore, evidence on the record demonstrates that the E.U. is a net exporter of refined sugar.

[174] Following the removal of the production quotas and export limits in October 2017, E.U. production increased significantly from 16,838,693 MT in 2016/2017 to 21,316,844 MT in 2017/2018.^{Footnote 144} The surplus production during this year was 3.3 million MT, more than twice the size of the Canadian market.^{Footnote 145} In that same year, refined sugar exports from the E.U. increased significantly, from 1.3 million MT in 2016/2017 to 3.4 million MT in 2017/2018.^{Footnote 146} In their 2018/2019 Annual Report, Südzucker noted that they took advantage of the removal of the quotas by increasing capacity utilization, leading to an “expansion of low-margin third-country sugar exports.”^{Footnote 147}

[175] Exporters in the E.U. will likely continue to take advantage of the unlimited production and exports, and should the orders be rescinded, Canada’s open market would likely be a target for these exports.

Production within the E.U.

[176] As mentioned above, production in the E.U. increased significantly following the abolition of the production quotas and export limits. Although production decreased in the 2018/2019 and 2019/2020 years, this could be due to unfavourable weather conditions and crop disease outbreaks.^{Footnote 148} Nonetheless, total E.U. annual production has increased by 16% over the past 5 years, from approximately 14.9 million MT in 2015/2016, to an estimated 17.4 million MT in 2019/2020.^{Footnote 149} More specifically, the production in the four named countries has increased by 38.5% since the 2015 expiry review.^{Footnote 150}

[177] In addition, human consumption of sugar in the E.U. is expected to decrease by 0.8% annually, while production is expected to recover from the poor conditions of the past two years. The decreased demand and increased production is projected to increase exports, which are estimated to reach 2.2 million MT by 2030.^{Footnote 151}

[178] Evidence on the record also suggests that there is unutilized capacity in the E.U.^{Footnote 152} This indicates an ability for producers to further increase production, creating a surplus of sugar. With export limits having been eliminated, this surplus sugar could then be exported to third countries. Should the CITT’s orders be rescinded, Canada’s open market would likely be a target for dumped exports of surplus sugar from the four named countries subject to the CITT’s orders.

Price levels in the E.U.

[179] The E.C. and Südzucker claim that the E.U. domestic prices have aligned closer to world price levels since the 2017 sugar reform. Although there is evidence to support the decrease in prices, evidence on the record also demonstrates that prices have begun to recover, and are projected to continue increasing.^{Footnote 153} The CBSA further notes that although refined sugar prices in the E.U. have narrowed substantially in comparison to the world price, E.U. sugar prices remain higher than world prices. As of June 2020, the E.U. refined price in the first half of 2020 averaged USD 411 per MT, compared to the average world price of USD 365 per MT.^{Footnote 154} Although E.U. and Canadian prices have been similar since 2015, the Canadian refined sugar import price was USD 404 per MT for the first half of 2020, above the world price and below the E.U. price.^{Footnote 155} With prices above world prices but below E.U. prices, Canada remains an attractive market for E.U. exports.

[180] Information provided by producers in the E.U. demonstrates that the decrease in prices in the E.U. has caused operating losses for producers, indicating that these prices are unprofitable.^{Footnote 156} These unprofitable sales would likely not permit a proper comparison.

[181] As a result, exports of subject sugar from the E.U. to Canada would most likely be found to be dumped.

Loss of traditional export markets for E.U. exporters

[182] The MENA region, a traditional export market for the E.U., has experienced growth in sugar refining capacity. Evidence on the record indicates that daily refining capacity in the MENA region increased by 21,000 MT between 2010 and 2016. Although the capacity decreased slightly after 2017 and 2018 when refineries in Israel and Bahrain closed, it has increased again in 2020, and is projected to increase further in the next two years due to the openings of new refineries.^{Footnote 157}

[183] The current refining capacity of standalone raw sugar processors in the MENA region is approximately 36,000 MT daily. When considering the production capacity of these producers as well as the growth in domestic production of three significant importers in the region, there is an estimated surplus of 2 million MT in the MENA region.^{Footnote 158} The increased capacity and surplus reduces the opportunities for sales to these traditional markets, thus increasing the likelihood of sales of dumped goods to Canada by the named countries, in the absence of the CITT’s orders.

Outlook for a continued global sugar surplus

[184] As noted in the discussion of U.S. sugar, forecasts of a global sugar surplus increase the concern that Canada would be an attractive market for dumped sugar from the E.U. if the CITT’s orders are rescinded. As mentioned in the discussion of U.S. sugar, evidence has been provided summarizing the sugar policies and import restrictions of other countries.^{Footnote 159}

[185] Given the E.U. sugar surplus and the government intervention and import restrictions on imports of sugar in other countries, there is a likelihood of diversion of E.U. refined sugar exports to Canada, in the absence of the CITT’s orders, including diversion of sugar from Denmark, Germany, the Netherlands and the U.K.

Determination regarding likelihood of continued or resumed dumping—Denmark, Germany, the Netherlands and the United Kingdom

[186] Based on the information on the record in respect of: continued dumping into Canada of the subject goods from these countries while the orders were in effect; the decline in volume of imports; the removal of production quotas and export limits; the production and price levels in the E.U.; the loss of traditional export markets; and the outlook for a continued global sugar surplus, the CBSA determined that the expiry of the orders is likely to result in the continuation or resumption of dumping of refined sugar originating in or exported from Denmark, Germany, the Netherlands and the U.K..

Parties contending that continued or resumed subsidizing is likely

Position of the Canadian Sugar Institute regarding the European Union

[187] The CSI presented evidence, additional information, a case brief and a reply submission in support of its position that the countervailing duty measures should remain in place. The main argument made by the CSI is that the E.U. has continued subsidization of E.U. refined sugar while the orders have been in effect.

EU continues to subsidizes refined sugar

[188] The CSI argued that the nature of the E.U. subsidies supports its position on the likelihood of continued subsidizing of E.U. refined sugar.

[189] In their case argument, the CSI noted that the current E.U. direct payments regime, which is comprised of the “voluntary coupled support” (VCS) and “decoupled support” subsidies, allocated approximately EUR 293 billion of direct payments to European farmers over the 2014-2020 period (i.e., an average of about EUR 41.8 billion per year).^{Footnote 160} Further, the CSI note that these subsidies are passed through to the production of refined sugar due to the interconnection between producers of sugar beets and the production of refined sugar. This, in turn, has distorting effects on trade in that exports of subsidized sugar production are at higher levels than would exist in the absence of the subsidies.^{Footnote 161}

[190] To further support their arguments, the CSI provide an estimate of sugar subsidies by referring to a recent report from ProSunergy (UK) for the American Sugar Alliance.^{Footnote 162} Specifically, they noted that the annual E.U. sugar subsidies in 2019 amounted to EUR 685 million, of which EUR 203 million was VCS for sugar beet production and EUR 299 million was decoupled support.^{Footnote 163}

[191] As per the CSI, with the removal of the E.U. sugar production quotas and the WTO-mandated limitation on E.U. sugar exports on October 1, 2017, the direct payment subsidies now support substantial surplus production and exports of E.U. refined sugar that would not otherwise exist.^{Footnote 164}

[192] The CSI also noted that an impact assessment done by the E.C. concluded that “[c]oupled support is questionable when it is used, as in the sugar sector, to compensate for the lack of competitiveness of a whole country (and not a specific territory)” and that it “introduces elements of unfair competition between Member States”.^{Footnote 165}

[193] Based on the information discussed above, the CSI argue that such injurious subsidizing should not be immune from remedy, particularly where it clearly has distorting effects on the production and trade of the subject goods.^{Footnote 166}

Parties contending that continued or resumed subsidizing is not likely

Position of the European Commission regarding the European Union

[194] The E.C. provided a response to the CBSA government ERQ and a submission to the CITT’s administrative record with respect to the pre-initiation stage of the expiry review, where it contends that the subsidizing of refined sugar from the E.U. is not likely to continue or resume should the CITT’s orders expire. Therefore, the E.C. argues that the countervailing measures should not remain in place.

[195] The main argument made by the E.C. concerns the elimination of public interventions in E.U. sugar since the reform of that sector in 2017.

Elimination of subsidization in the E.U. Sugar Sector

[196] The E.C. explained that the E.U. agricultural policy has undergone reforms resulting in the withdrawal of the main schemes that motivated the imposition of countervailing duties and the continuation of measures since the last re-investigation in 2014.^{Footnote 167} Full implementation of these reforms led to the elimination of the E.U. sugar quota regime in 2017. The E.C. also noted that since September 2008, export refunds in the sugar sector have been eliminated.^{Footnote 168}

[197] Further, the E.C.argues that the reform process has made the price for E.U. refined sugar significantly aligned with world prices. As per the E.C. the E.U. sugar market relies on market forces and the E.U. legislation has not provided public intervention since 2009/2010.

[198] The E.C. also provided comments related to the last CBSA’s last subsidy re-investigation in 2014. The E.C. argues that its Basic Payment Scheme is a “green box” (i.e. it is not trade distortive) as it is in line with the provisions of the WTO as defined in Annex 2 of the WTO Agreement on Agriculture, and is not countervailable.^{Footnote 169}

[199] In addition, the E.C. provided information regarding the VCS which is granted to specific types of farming or agricultural sectors (including the sugar beet sector). In particular, the E.C.argued that the VCS is reported as a “blue box” support according to the requirement in Article 6.5 of the WTO Agreement on Agriculture and stress that VCS does not aim to increase production.^{Footnote 170}

[200] The E.C. also provided additional information in regards to the Program of Options Specifically Relating to Remoteness and Insularity (Programme d'options spécifiques à l'éloignement et l'insularité - POSEI) which was targeted in the 2015 expiry review. The E.C. explains that POSEI supports the production volumes of refined sugar in the E.U. outermost regions which are facing specific socioeconomic problems due to their geographical situation (remoteness, insularity, smaller size, difficult topography and climate).^{Footnote 171}

Position of the CEFS regarding the European Union

[201] The CEFS submitted a case brief and a reply submission in response to the case brief submitted by the CSI. The CEFS provided arguments in support of its position that continued or resumed subsidizing of refined sugar from the E.U. is not likely.

Elimination of subsidization in the E.U. sugar sector

[202] The CEFS stated that the price support program found during the CBSA’s last re-investigation in 2014 has been terminated. The CEFS further stated that remaining amount of support under the E.U. POSEI (Programme d'options spécifiques à l'éloignement et l'insularité), is payable to sugar beet growers in the outermost regions. The CEFS noted that this program has not been shown to confer a pass-through benefit to the producers of refined sugar.^{Footnote 172}

[203] The CEFS noted that exporters in both Germany and the Netherlands have stated that they have not received subsidies from either the E.U. or its member states in relation to the production or export of refined sugars. The CEFS explained that support measures in the E.U. have either been terminated or now conform to WTO rules, and therefore are neither prohibited nor actionable.^{Footnote 173} The CEFS also referenced the submission by the E.C. in which it described specific programs, and indicated that the programs had either been terminated, or do not constitute countervailable support.^{Footnote 174}

[204] The CEFS further argued that since the quotas, minimum beet prices and export prices have all been terminated, the E.U. sugar market is a fully liberalized market. The CEFS noted that seven sugar factories have closed in France, Germany and Poland between 2017 and 2020, and the number of beet growers decreased from 300,000 in 2000 to 140,000 in 2020. The CEFS argued that this demonstrates the restructuring and consolidation of the industry since the reform, as well as the free and competitive state of the market.^{Footnote 175}

Position of Südzucker regarding the European Union

[205] Südzucker submitted a response to the CBSA exporter ERQ and provided arguments in support of its position that continued or resumed subsidizing of refined sugar from the E.U. is not likely.

Elimination of subsidization in the E.U. sugar sector

[206] Südzucker noted that since September 2008, export refunds in the sugar sector are no longer being granted.^{Footnote 176} In addition, due to the E.U. sugar sector reform in 2017, the E.U. quota regime and minimum beet prices were eliminated. It is Südzucker’s position that since the 2017 reform, the E.U. is one of the most liberal sugar markets in the world.^{Footnote 177} In addition, as a result of the Comprehensive Trade and Economic Agreement that concluded between Canada and the E.U. in 2014, the E.U. has committed to not granting export refunds to sugar destined for Canada.^{Footnote 178}

Likelihood of continued or resumed subsidizing—European Union

[209] As mentioned previously, sugar producers in the E.U. are supported by a sugar regime that is administered as part of the Common Agricultural Policy (CAP) by the Commission of the European Communities. The current version of the CAP was established in 2013 and has been applied over the 2014-2020 period.^{Footnote 179} The E.U. sugar policy currently in effect is outlined in Regulation (E.U.) No 1308/2013 of the European Parliament and of the Council of December 17, 2013 establishing a common organisation of the markets in agricultural products. On October 1, 2017, E.U. sugar production quotas were removed which represented 13.5 million tonnes per year, along with the minimum beet prices and WTO-mandated export limitation.^{Footnote 180}

Continued subsidizing while the orders were in effect

[210] The CBSA concluded its last subsidy re-investigation on September 4, 2014, which updated the amount of subsidy applicable to refined sugar from the E.U. The amount of countervailing duty is currently set at EUR 24.39 per 100kg, which remains unchanged since the last expiry review.

[211] The CSI argues that various measures from the CAP can be used to continue supporting the E.U. sugar sector to mitigate unexpected market disturbances. Evidence on the record shows the distortive effects, massive surplus production and increased exports in 2017/2018, caused by the decoupled support and VCS subsidies, which remain in effect.^{Footnote 181}

[212] Both the CEFS and Südzucker argued in their submissions that export refunds have been suspended since September 2008.^{Footnote 182} The CBSA agrees with the position stated by the CEFS and Südzucker, and at the last re-investigation, an amount of subsidy for export refunds was not included in the calculation of the overall amount of subsidy for the E.U.

[213] The E.C. provided information with respect to the POSEI income support provided to the outermost regions of the E.U. The E.C. explained that POSEI supports the production volumes of refined sugar which are facing specific socioeconomic problems due to their geographical situation (remoteness, insularity, smaller size, difficult topography and climate).^{Footnote 183}

[214] The CEFS noted that this program has not been shown to confer a pass-through benefit to the producers of refined sugar. They further stated that exporters in both Germany and the Netherlands have stated that they have not received subsidies from neither the E.U. nor its member states in relation to the production or export of refined sugars.^{Footnote 184}

[215] During the last re-investigation, the CBSA investigated the POSEI program, and found it to be both a financial contribution under paragraph 2(1.6)(a) of SIMA, and specific under paragraph 2(7.2)(a) of SIMA. Therefore, it was included in the calculation of the overall amount of subsidy for the E.U. Evidence on the record demonstrates that the POSEI program is still in effect, and still provides a benefit to the E.U. market.^{Footnote 185}

[216] The CBSA notes that as the 2014 subsidy re-investigation was conducted on an aggregate basis, an amount of subsidy of EUR 24.39 per 100kg currently applies to subject goods from the E.U. Generally, the amount of subsidy will vary according to the Member State, producer or exporter. However, due to the proximity of the E.U. countries, cross-border ownership of production facilities and the fungible nature of sugar, it is difficult to know if the sugar is beet or cane sugar, or even in which production facility the sugar was produced.

[217] The CBSA acknowledges that E.U. sugar prices have aligned closer to the world price levels due to the 2017 reform and elimination of the price support subsidy. However, it also notes that the POSEI program continues, as well as other trade-distorting CAP measures, such as the decoupled and VCS subsidies.

Determination regarding likelihood of continued or resumed subsidizing

[218] Based on the information on the administrative record in respect of the subsidizing of the subject goods while the orders have been in effect and the fact that this subsidizing is continuing, the CBSA determined that the expiry of the orders is likely to result in the continuation or resumption of subsidizing of refined sugar originating in or exported from the E.U.