The reality is that all governments, including the Government of Canada, are considering how to make trade remedies laws a more effective tool for protecting domestic manufacturers. How can imports of steel products, aluminum extrusions, chemicals, agricultural products, consumer goods, etc. be discouraged?
On July 19, 2019, the Canada Border Services Agency (“CBSA”) announced it has revised D-Memorandum D-14-1-8 “Re-investigation and normal value review policy – Special Import Measures Act (SIMA)” and reminded importers and foreign producers/exporters of goods subject to SIMA measures that:
“…exporters with specific values are required to advise the CBSA when there are changes in market conditions, prices, costs and terms of sale that could reasonably be expected to have an impact on those values. Exporters are also advised to adjust their selling prices to Canada so that the export price of subject goods sold to Canada are reflective of the domestic selling price and cost increases. Where such changes are deemed by the CBSA to be significant, the normal values will be updated to reflect the changed conditions. Normal values may be applied retroactively in cases where the parties have not adjusted the selling prices of subject goods sold to Canada to reflect increases in domestic selling prices and costs. This is discussed further in the Retroactive Assessment section below.”
This paragraph is not a new position. Historically, exporter letters that are sent at the end of an anti-dumping investigation or a re-investigation contain a similar statement. This means that exporters have been told for years to come to the CBSA if there have been changes in market conditions, prices, costs and terms of sale that could reasonably be expected to have an impact on the normal value and export prices calculated by the CBSA. In other words, the CBSA tells (not asks) exporters to come forward if their normal values and export prices are outdated.
While this paragraph is focused on exporters, it is the importer who pays any anti-dumping duty that is applicable under SIMA and penalties and interest. As a result, it is the importer who will be charged the Retroactive Assessment by the CBSA. For this reason, this is the time for Canadian importers to ask whether their exporter has followed the instructions given by the CBSA.
The CBSA goes on to say the following about Retroactive Assessments:
“29. Exporters with normal values are required to promptly inform the CBSA in writing of changes to domestic prices, costs, market conditions or terms of sale associated with the production and sales of the goods. All parties are cautioned that where there are increases in domestic prices and/or costs as noted above, the export price for sales to Canada should be increased accordingly to ensure that any sale made to Canada is not only above the normal value but at or above selling prices and full costs and profit of the goods in the exporter’s domestic market. If exporters did not properly notify the CBSA of any such changes, did not adjust export prices accordingly, or did not provide the information required to make any necessary adjustments to normal values and export prices, retroactive assessments of anti-dumping duties may be warranted. Exporters can provide this information to the CBSA using the “Making Representations” process outlined in paragraphs 8-11 in this Memorandum.
30. When the CBSA conducts a re-investigation or normal value review, it will also do an analysis to determine whether retroactive duties should be assessed for past importations considering the following factors:
- whether there were changes in market conditions, prices, costs and terms of sale that could reasonably be expected to have a significant impact on an exporter’s normal values;
- whether the exporter’s domestic selling prices or costs of production increased during the period under consideration;
- whether the exporter increased its export prices to Canada to take into account cost and price increases and whether this was done in a timely manner;
- the difference between the new normal value and the actual export price of the goods; and
- any other factors deemed relevant by the CBSA.
31. Where the CBSA’s analysis determines that changes to market conditions caused normal values to become significantly outdated and that the exporter failed to price up its exports in a timely manner, the CBSA may issue retroactive assessments to the exporter’s Canadian importers. This is based on the revised normal value compared to the actual export price. In determining what constitutes significantly outdated, the CBSA will conduct a contextual analysis, which will give due regard to the market conditions of a particular good.
32. Retroactive duty assessments can be made for importations occurring from the start of the period of investigation covered by the re-investigation or normal value review until the conclusion of the re-investigation or normal value review.”
The CBSA is making it clear that the retroactive reassessments might be costly.
The CBSA’s thinking on calculation of normal values and export prices has changed. The methodologies have evolved. Anyone who has recently undergone a CBSA re-investigation of normal values has been asked questions that were not asked before. Any cost accounting deductions are questioned – extensively. Where cost accounting allows additions to cost of production, the CBSA considers if the additions should be made. Paperwork that was once accepted may no longer be acceptable evidence. The goal is to increase normal values of goods subject to SIMA.
If the importer and exporter are related parties, the importer has greater control over getting the exporter to work hard to answer all of the CBSA’s questions. Where the importer is unrelated to the exporter, it is more difficult to convince the exporter to respond to CBSA requests for information.
Regardless of whether the importer is related to the exporter or not, now is the time for exporters to (1) revisit their normal values and ask whether they need to notify the CBSA of changes and (2) implement internal controls to ensure that pricing to Canada increases as costs of production and costs of doing business increase.
Exporters should ask the following:
- What are the CBSA’s current hot button topics (e.g., discounts, warehousing costs for goods after production and prior to shipment, currency fluctuations between invoice date and payment date, date of sale, etc)?
- How can this information be tracked and recorded?
- What changes should be made to ensure that pricing reflects changes to costs of production and change in the market conditions?
- What should be done to ensure that prices to customers can be increased during times of cost increases between purchase order and purchase order confirmations?
- When should the CBSA be notified of changes (e.g., when the costs of production increase by 5% or more)?
- What documentation packages need to be maintained relating to shipments to Canada?
- What is the best method to use to communicate with the CBSA (normal value review, request for re-investigation, request for re-determination (B2), email, etc.)?
- What actions are necessary to avoid a retroactive assessment?
For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at email@example.com.