Written by Jesse Goldman and Laura MurrayThe recent proliferation of affirmative threat of injury findings by the Canadian International Trade Tribunal (CITT) indicates problems with the CITT's approach to its threat of injury analyses. The CITT is arguably applying a lax evidentiary standard that does not meet the legal requirements prescribed by Canadian legislation and respective WTO agreements covering Canada's obligations regarding trade remedy measures (Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 and Agreement on Subsidizing and Countervailing Measures, collectively "WTO Agreements").
BackgroundUnder the authority of the Special Import Measures Act (SIMA) and the Special Import Measures Regulations (SIMR), the CITT conducts quasi-judicial inquiries into allegations of injury and threat of injury caused to Canadian producers by dumped or subsidized imports. In conducting its inquiry, the CITT is required to consider issues of past, present, and future injury. Anti-dumping and/or countervailing duties are imposed if the CITT makes a finding that dumped or subsidized imports: (i) have caused material injury to Canadian producers (past and present injury), or (ii) have not caused but are threatening to cause material injury to Canadian producers (future injury). The imposition of anti-dumping or countervailing duties based on a threat of injury is an exceptional remedy because it allows for punitive measures based on injury that has not occurred. However, the CITT's recent practice has been to make affirmative threat of injury findings as the rule rather than the exception in cases where there is insufficient evidence of past injury. During the last five years, the CITT found that dumping or subsidizing was threatening to cause injury in close to 90 percent (all but one) of the cases where there was insufficient evidence of past injury. This represents a significant departure from the CITT's practice in the preceding five year period when affirmative threat of injury findings were made in only 33 percent of the cases where there was insufficient evidence of past injury.
Most recently, the CITT made back-to-back threat of injury findings in a succession of cases: (i) Photovoltaic Modules and Laminates, Inquiry No. 2014-003 (Photovoltaic), (ii) Oil Country Tubular Goods, Inquiry No. NQ-2014-002 (OCTG), and (iii) Concrete Reinforcing Bar, Inquiry No. NQ-2014-001. These cases (and others) raise important issues relating to the evidentiary threshold applied by the CITT to its threat of injury analyses and potential non-conformity with the WTO Agreements.
The Evidentiary Standard for Threat of Injury Findings
The legal standard prescribed by the WTO Agreements and the SIMA is that the threat of injury be: (i) material, (ii) clearly foreseen, and (iii) imminent. This requires, among other things, that a threat finding be based on positive evidence of a change in circumstances that is likely to lead to dumped/subsidized imports causing injury in the imminent future (generally within the next twelve to twenty-four months). The standard sets a relatively high threshold for the establishment of a threat of injury “ near certainty of material injury to the domestic industry is required.
The WTO Agreements recognize that threat of injury matters must be decided with "special care" and prohibit determinations based on "allegation, conjecture or remote possibility". The SIMA reflects these international rules set out by the WTO Agreements.
The WTO Appellate Body's decision in United States “ Investigation of the International Trade Commission in Softwood Lumber from Canada explains the need for positive evidence for a threat of injury finding:
Article 3.1 of the Anti-Dumping Agreement and Article 15.1 of the SCM Agreement are "overarching provision[s]" that [impose] certain "fundamental" obligations, in particular, that determinations of injury, including threat of injury, be based on positive evidence and an objective examination of the specific factors set out in these provisions. Article 3.7 of the Anti-Dumping Agreement and Article 15.7 of the SCM Agreement combine positive requirements”that such a determination "be based on facts" and show how a "clearly foreseen and imminent" change in circumstances would lead to further dumped/subsidized imports causing injury in the near future”with an express prohibition of a determination based "merely on allegation, conjecture or remote possibility".In assessing whether there is a threat of injury, the CITT must consider positive evidence relating to the factors prescribed by the SIMR. The SIMA also states that a threat of injury finding cannot be made unless the circumstances in which the dumping and subsidizing of the goods would cause injury are "clearly foreseen" and "imminent".
Legal Issues with Recent Trends in Tribunal Practice
The trend of affirmative threat of injury findings by the CITT, when considered with the reasons for those findings, suggests that the CITT is not deciding threat of injury cases with "special care" or applying the legal standard prescribed by the WTO Agreements and the SIMA. That is not to say that the CITT is considering threat of injury less seriously than past injury; rather, it is arguable that the CITT has misinformed itself about the established evidentiary and legal requirements for a threat of injury finding. The CITT's findings appear to be speculative, and are not based on positive evidence that a change in circumstances is likely to result in injury to Canadian producers that is material and caused by dumped or subsidized imports.
Two recent cases, Photovoltaic and OCTG, illustrate the speculative nature of the CITT's findings. In both cases, the CITT's threat finding was based on speculation that future market conditions (i.e., the removal of local content requirements in Photovoltaic and deteriorating conditions in the oil and gas sector in OCTG) would result in a significant increase in dumped and subsidized imports and material injury to domestic industry. The problems with the CITT's approach in these cases relate to the lack of positive evidence for the finding that the market conditions are likely to result in increases of dumped and subsidized goods and that such increases will cause injury to Canadian producers. The CITT's findings assumed that subject country imports would increase based on the mere existence of export capacity; failed to quantify or qualify the potential future injury and causally link that injury to subject country imports; and assumed that the injury would be material because of the market conditions without examining the concept of materiality in relation to the effect of dumped and subsidized imports.The CITT's speculations regarding injury and causation in Photovoltaic are particularly noteworthy given the absence of injury caused by dumped and subsidized imports in the past. Evidence regarding the effect of dumped and subsidized imports was non-existent; the complainants did not even argue at the hearing that the dumping and subsidizing had caused injury. Arguably, the Photovoltaic case was premature. Canadian producers had experienced healthy production and sales given local content requirements in Ontario that severely limited market access for imports, and any negative effects arising from the removal of the local content requirement had not materialized. The case is troubling because it quite probably represents a misuse of Canada's trade remedy regime to maintain market share and preference for Canadian production after the removal of the local content requirements, notwithstanding the absence of indicia of injury. In these circumstances, it is unclear how the CITT discharged the requirement for its threat finding to be based on positive evidence.
The findings in Photovoltaic and OCTG are representative of other recent cases and fall troublingly short of the legal standard that the threat of material injury caused by dumped or subsidized imports be clearly foreseen and imminent. Evidence of a predicted change in circumstances and the mere presence of dumped or subsidized imports are not sufficient. The standard requires positive evidence showing that domestic producers are likely to suffer future injury and that imports of dumped or subsidized goods are causally linked to that injury.
Other governments, international trade lawyers, and academics in the area are aware of the mounting evidentiary and resulting legal problems with the CITT's approach to its threat of injury analyses. The CITT's findings are vulnerable to challenge and being determined by the WTO Dispute Settlement Body to violate Canada's international obligations. Canada's trade remedy laws are jointly administered by the CITT and the Canada Border Services Agency (CBSA). The CBSA has exclusive jurisdiction for determinations of dumping and subsidizing while the CITT has exclusive jurisdiction for determinations of injury.  The CITT's injury inquiry is terminated if the CBSA makes a final determination that the imported goods have not been dumped or subsidized.  The CITT made affirmative threat of injury findings in three cases between 2006 and 2010.  Other cases where the CITT found that dumping or subsidizing had not caused injury but was threatening to cause injury are: Hot-Rolled Carbon Steel Plate (Inquiry No. NQ-2013-005), Silicon Metal (Inquiry No. NQ-2013-003), Unitized Wall Modules (Inquiry No. NQ-2013-002), Steel Piling Pipe (Inquiry No. NQ-2012-002), Carbon Steel Welded Pipe (Inquiry No. NQ-2012-003), and Pup Joints (Inquiry No. NQ-2011-001).  WT/DS277/AB/RW at para.96.  Section 37.1(2) of the SIMR prescribes the following factors:
(a) the nature of the subsidy in question and the effects it is likely to have on trade;
(b) whether there has been a significant rate of increase of dumped or subsidized goods imported into Canada, which rate of increase indicates a likelihood of substantially increased imports into Canada of the dumped or subsidized goods;
(c) whether there is sufficient freely disposable capacity, or an imminent, substantial increase in the capacity of an exporter, that indicates a likelihood of a substantial increase of dumped or subsidized goods, taking into account the availability of other export markets to absorb any increase;
(d) the potential for product shifting where production facilities that can be used to produce the goods are currently being used to produce other goods;
(e) whether the goods are entering the domestic market at prices that are likely to have a significant depressing or suppressing effect on the price of like goods and are likely to increase demand for further imports of the goods;
(f) inventories of the goods;
(g) the actual and potential negative effects on existing development and production efforts, including efforts to produce a derivative or more advanced version of like goods;
(g.1) the magnitude of the margin of dumping or amount of subsidy in respect of the dumped or subsidized goods;
(g.2) evidence of the imposition of anti-dumping or countervailing measures by the authorities of a country other than Canada in respect of goods of the same description or in respect of similar goods; and
(h) any other factor that is relevant in the circumstances. SIMA, 2(1.5).  In Certain Cold-Rolled Steel Sheet (2001), the CITT recognized that a determination of threat of injury necessarily involves extrapolations from the past and that what happened in the past is the best indication of the future.