After the CBSA initiates a countervailing duty investigation, the CBSA issues an exporter request for information (RFI) that must be completed by the exporter of the goods and all factories involved in the manufacture of the goods (if the exporter is not the manufacturer). The CBSA sets a filing deadline that is between 30-35 days after the initiation of the subsidy investigation.
Top ten mistakes in responding to CBSA questionnaires are:
- Waiting too long before hiring a Canadian subsidy specialist. A Canadian subsidy specialist knows why the CBSA is asking certain questions. Care must be taken in completing the RFI response. The goal in completing the RFI response is to receive a 0% subsidy rate or the lowest possible subsidy rate based on the information provided. Too many exporters do not understand why they are completing the RFI (other than to be able to sell into the Canadian market).
- Waiting too long to get started. In most cases, the subsidy specialist is hired with only a week left before the filing deadline. I have been asked many times to request an extension of time. However, the CBSA refuses to grant extensions of time.
- The exporter fails to dedicate company personnel and other resources to the investigation and the completion of the RFI. The completion of the RFI is a lot of work. It is necessary to dedicate a team, which includes senior people knowledgeable about domestic sales, knowledgeable about sales to Canada, knowledgeable about the financial accounting system, knowledgeable about taxes, and knowledgeable about production costs.
- The non-confidential version of the RFI response and supporting documentation is prepared at the very end (instead of identifying confidential parts and documents as each RFI is prepared). As a result, highly confidential information is made public.
- The exporter does not contact the factories: Often the exporter of the goods to Canada is a trading company or an agent and not the actual factory that produced the goods. The CBSA will want to receive a subsidy response from the exporter and the factory if the exporter sells goods manufactured by another person. If the factory subcontracts some of the production activities to other related or unrelated factories, each factory involved in the manufacture of the finished good will be required to file a subsidy RFI. As a result, it is very important to identify all the relevant parties at the start of the process of completing RFIs in order to make sure the right number of responses are submitted from the right parties.
- The exporter fails to provide English translations of documents. The CBSA instructions indicate that all RFIs must include a French or English translation (Canada’s official languages). There are often many attachments to a subsidy RFI, such as tax returns, incorporation documents, loan documents, government grant applications, leases, etc. It is common for these documents to not be written in English or French. All attached documents must be translated before being attached to the subsidy RFI response. The translation process should be started early because many of the documents are very long.
- The exporter does not carefully review the subsidy RFI instructions: The Subsidy RFI often has a period of investigation. Amounts received within the period of investigation must be reported. Many exporters mistakenly include amounts outside that period and that results in higher subsidy rates. Since the goal is to have an accurate, but lower amount, it is important to understand what to include and what not to include.
- All subsidies received must be identified. Many exporters do not want to provide information about the amount of subsidies they received. However, this is the purpose of the subsidy investigation. It is very important to look at the accounting records to identify all inbound payments that could be considered to be subsidies or benefit
- No reconciliation is completed: It is important to perform a reconciliation between what is reported in the Subsidy RFI response and what is contained in the accounting records. The CBSA is going to conduct a verification and will find the discrepancy. The CBSA will be more likely to accept the information provided as valid and correct if you have taken the step to make sure the reconciliation shows a match or any deviance can be explained. Canadian legal counsel who have been involved in other subsidy cases can perform necessary reconciliations.
- Just because the CBSA says it is a subsidy does not make the amount or benefit received a countervailable subsidy. A Canadian advisor with knowledge about WTO rules and Canadian law is very useful in reducing the subsidy rate by excluding what is not includable. Only countervailable subsidies and prohibited subsidies may result in countervailing duties.