Canada to Impose Provisional Steel Safeguards Effective October 25

What Does This Mean For Your Business?

Written By George W.H. Reid, Margaret M. Kim, Darrel Pearson, Sabrina A. Bandali, Jessica B. Horwitz, and Jessica R. Roberts

Effective October 25, 2018, provisional safeguard measures apply to seven categories of steel products imported into Canada from most countries. These provisional safeguard measures take the form of tariff rate quotas (TRQs), with a 25% over access surtax that will apply to imports for 200 days from October 25, 2018, to May 13, 2019.

During this 200-day period, the Canadian International Trade Tribunal (CITT) will conduct a global steel safeguards inquiry. Following this inquiry, the CITT will report its recommendations to the Government of Canada, which will then decide whether or not to extend the application of safeguards for up to four years (to October 2022).

Foreign exporters, Canadian and non-resident importers, and purchasers of imported designated steel products are encouraged to obtain Canadian legal advice from the Bennett Jones expert team of international trade lawyers. We can help you efficiently navigate the complex system of safeguards and in developing strategies to address these new tariff barriers.

This update provides a quick reference to five basic questions about the provisional safeguards and CITT process:

1. What is a safeguard?
2. What are the seven steel product categories subject to provisional safeguards?
3. What countries are excluded from the provisional safeguards?
4. How does the TRQ system work?
5. What is the CITT safeguards inquiry?

If your projects or business are sensitive to the price of steel, you have one opportunity to oppose the imposition of safeguards by participating in the CITT inquiry. Time is of the essence because the deadline to participate in the CITT process is October 29, 2018. Contact us for more information about the CITT inquiry. Bennett Jones’ International Trade and Investment Group is well-versed in the CITT’s proceedings and regularly represents clients before the CITT.

1. What is a safeguard and how long do they last?

Safeguards are exceptional measures intended to temporarily assist domestic producers that have suffered, or are threatened by, serious injury from increased imports of specific goods. In Canada, safeguard measures can take the form of: (i) an import surtax, or (ii) a restriction on import volumes, such an import quota or a TRQ system. The Governor-in-Council (i.e., the Federal Cabinet) has the authority to impose safeguards:

1. on a provisional basis and only in the form of a surtax, after a report by the Minister of Finance, in “critical circumstances” for up to 200 days, or
2. following an inquiry by the CITT, for up to four years, which can be extended once for a further four year period.

For more information, please see Bennett Jones’ Canadian Safeguard Measures Guide.

2. What are the seven steel product categories subject to provisional safeguards?

The seven categories of steel products subject to provisional safeguards are:

1. Energy tubular products;
2. Heavy plate;
3. Hot-rolled sheet;
4. Pre-painted steel;
5. Concrete reinforcing bar;
6. Wire rod; and
7. Stainless steel wire.

For the definitions of each of the seven steel product categories, see Annex A – Steel Products Subject to Provisional Safeguards on Finance Canada’s website.

The product category definitions should be reviewed closely. Some of the definitions exclude certain types of steel products that would otherwise fall within the product definition. While the product category definitions include code HS tariff codes, these should be read as illustrative only. The product descriptions, not the HS codes, are determinative of whether a steel product is subject to provisional safeguards.

3. What countries are excluded from the provisional safeguards?

Steel imported from any country except those listed below are subject to provisional safeguards:

• The United States, which is already subject to retaliatory tariffs on steel and other products;
• Mexico, except for energy tubular products and wire rod which are subject to provisional safeguards;
• Chile;
• Israel and other beneficiaries of the Canada-Israel Free Trade Agreement; and
• Countries that qualify for the General Preferential Tariff (PDF from Canada Border Services Agency), except rebar imports from Vietnam which are subject to provisional safeguards.

4. How does the TRQ system work?

As noted in Finance Canada’s news release, the provisional safeguards take the form of a TRQ system administered under the EIPA. Under this system, the Government has set a total access quantity (tonnes) for each category of steel product imported in the 200-day provisional safeguard period. The access quantity is based on the average volume of imports over a similar period covered by the provisional safeguard in the years 2015-2016, 2016-2017 and 2017-2018. Each access quantity is divided evenly into four 50-day periods, and administered in accordance with the following rules.

• Global Affairs Canada administers the quota of products to be imported surtax-free by issuance of import permits (see the Global Affairs Canada, Notice to Importers).
• A “Canadian resident”, as defined by the EIPA, must apply to Global Affairs for a shipment-specific permit to import steel subject to the provisional safeguards.
• If a steel product subject to provisional safeguards is imported without a permit, the 25% surtax will apply.
• Import permits will be issued up to 5 days in advance of the arrival of the shipment but are only valid for 14 days from the date of issuance, subject to an extension in “exceptional and unforeseen circumstances”.
• Once imports surpass the access quantity for the product and period, subsequent imports are subject to a 25% surtax within that 50-day period, until the start of the next 50-day period. The 50-day periods are as follows:
  • October 25 to December 13, 2018
  • December 14, 2018 to February 1, 2019
  • February 2 to March 23, 2019
  • March 24 to May 12, 2019
• For a shipment to be free of the surtax, the importer must present a valid shipment-specific import permit to the Canada Border Services Agency (CBSA) at the time of final accounting.
• Unused access quantity in a given 50-day period carries over into the next 50-day period.
• Importantly, the Government has also established limits to the total access quantity that can be imported from a single country, by product, over the 200-day period.
  • For example, imports from any individual country of energy tubular products may not exceed 23% of the total 200-day quota amount (59,200.16 tonnes) during the 200-day provisional period. If imports from a single country exceed this “country limit”, the 25% surtax will apply for the remainder of the 200-day provisional period to imports from that country for that product.
• The access quantities and total country limits are set out in the following table:

Table: Provisional Safeguards Tariff-Rate Quota Volumes

5. What is the CITT safeguards inquiry?

The CITT published a notice of initiation of its inquiry, according to which interested parties must file notices of appearance on or before Monday, October 29, 2018. As participants of the safeguard inquiry, domestic producers, importers and foreign producers of each class of goods must each complete and submit questionnaires to the CITT by Wednesday, October 31, 2018. A series of public hearings to take place from January 3 - 22, 2019.

In Canada, the authority tasked with conducting safeguard investigations is the CITT. The CITT also has the authority to conduct exclusion inquiries, mid-term reviews and extension inquiries in addition to safeguard inquiries, pursuant to the CITT Act, the CITT Regulations and the CITT Rules. In accordance with WTO requirements, the CITT conducts safeguard inquiries to determine if increased imports of goods into Canada are causing or are threatening to cause serious injury to domestic producers of like or directly competitive goods.

The CITT’s global safeguards inquiry will result in the Tribunal submitting its recommendations to the Minister of Finance about the imposition of safeguards and the form of those safeguard measures by April 3, 2019. The CITT published a notice of initiation of its inquiry, according to which interested parties must file notices of appearance on or before Monday, October 29, 2018. The Tribunal has published detailed questionnaires to be completed by domestic producers, importers and foreign producers of each category of goods by October 31, 2018. During the inquiry, parties who choose to participate also file evidence and legal argument, and attend a CITT hearing, usually held in Ottawa, Ontario. At the hearing, legal counsel for participants conduct cross-examinations of witnesses and make oral arguments.

Should you have any questions, please contact Darrel H. Pearson, Head of the International Trade & Investment Group, Bennett Jones LLP.