Safeguard Inquiry into the Importation of Certain Steel Goods

Safeguard Inquiry into the Importation of

Certain Steel Goods

Inquiry No. GC-2018-001

FOREWORD

On October 10, 2018, Her Excellency the Governor in Council, on the recommendation of

the Minister of Finance, pursuant to paragraph 20(a) of the Canadian International Trade Tribunal

Act, directed the Canadian International Trade Tribunal, by Order in Council P.C. 2018-1275, to

inquire into and report on the importation of certain steel goods.

The purpose of this inquiry was to determine whether seven classes of steel goods were

being imported into Canada in such increased quantities and under such conditions as to be a

principal cause of serious injury or threat of serious injury to domestic producers of like or directly

competitive goods. The Tribunal was directed, if it made an affirmative finding for any class of

goods, to recommend the most appropriate remedy to address the injury or threat thereof.

The Tribunal was directed to submit to the Governor in Council, by April 3, 2019, a report

including the Tribunal’s determination, reasons and any recommendations. Accordingly, the

Tribunal is pleased to submit the following report.

This inquiry is one of the most complex inquiries ever conducted by the Tribunal. There

were 119 participants, including Canadian and foreign steel producers, steel importers, trade unions

and governments. Over 38,000 pages of documents were submitted. The Tribunal conducted

hearing sessions for each class of steel goods covered by the above Order in Council. The Tribunal

heard submissions on injury and remedy together.

The Tribunal thanks the parties, counsel and witnesses for their participation and invaluable

assistance.

The Tribunal also thanks the team of support staff for their dedication, professionalism and

commitment to excellence.

Serge Fréchette

Presiding Member

Peter Burn

Member

Rose Ann Ritcey

Member

EXECUTIVE SUMMARY

On October 10, 2018, the Tribunal was directed by the Order Referring to the Canadian

International Trade Tribunal, for Inquiry into and Reporting on, the Matter of the Importation of

Certain Steel Goods, P.C. 2018-1275 (Order), to conduct a safeguard inquiry concerning the

importation into Canada of certain steel goods. The classes of goods subject to the inquiry are:

(1) heavy plate, (2) concrete reinforcing bar, (3) energy tubular products; (4) hot-rolled sheet,

(5) pre-painted steel, (6) stainless steel wire, and (7) wire rod. This document is the Tribunal’s

report on the results of the inquiry.

The direction to initiate a safeguard investigation followed the imposition of provisional

safeguard measures pursuant to section 55 of the Customs Tariff on imports of certain steel goods

based on a confidential report to Cabinet from the Minister of Finance.

On October 12, 2018, the Government of Canada notified the World Trade Organization’s

(WTO) Committee on Safeguards that it had initiated this safeguard investigation, citing a

significant increase in total imports of the seven products in the first quarter of 2018. In the

Notification under Article 12.4 of the Agreement on Safeguards that is required before taking a

provisional safeguard measure, Canada advised that the Minister of Finance had determined the

existence of critical circumstances, based on publicly available import data and confidential

industry submissions.

The purpose of the inquiry was to determine whether any of these goods were imported

into Canada in such increased quantities and under such conditions as to be a principal cause of

serious injury or threat thereof to domestic producers of such goods. The Order directed the

Tribunal to have regard to Canada’s international trade rights and obligations.

The Order provided that certain imports were to be excluded from the Tribunal’s inquiry—

namely, imports from the United States, Israel and other Canada-Israel Free Trade Agreement

(CIFTA) beneficiaries, Chile and Mexico (with the exception of energy tubular products and wire

rod from Mexico).

The Order required the Tribunal, in the event it determined that there was an increase in

imports, and serious injury or threat thereof, to make separate determinations regarding subject

goods originating in and imported from certain free trade agreement partners. Specifically, the

Tribunal had to determine if subject goods from Panama, Peru, Colombia, Honduras and the

Republic of Korea (Korea) were a principal cause of serious injury or threat thereof.

The Tribunal also had to determine if energy tubular products or wire rod originating in and

imported from Mexico did not account for a substantial share of total imports of energy tubular

products or wire rod, or did not contribute importantly to serious injury or threat thereof.

Specific treatment was also outlined for imports from countries benefiting from the

General Preferential Tariff (GPT).

The Tribunal was instructed not to hear any motion to exclude any good from a class or that

would otherwise limit the scope of the inquiry, determination or recommendations.

If ultimately the inquiry showed that imports of a class of goods caused or threatened to

cause serious injury, the Order directed the Tribunal to provide recommendations on the most

appropriate remedy to address the injury.

There were 119 participants in the inquiry, including domestic producers, trade unions,

importers, foreign producers and users of the goods. Several foreign governments also participated.

The Tribunal held 13 days of public hearings in January 2019. The Tribunal considered evidence

from 44 witnesses. Parties filed written submissions and presented oral argument. The Tribunal was

directed to submit a report to the Governor in Council by April 3, 2019.

DETERMINATIONS AND RECOMMENDATIONS

The Tribunal’s determinations and recommendations are as follows:

 The Tribunal finds that heavy plate from the subject countries (other than goods

originating in Korea, Panama, Peru, Colombia and Honduras) is being imported in

such increased quantities and under such conditions as to be a principal cause of a

threat of serious injury to the domestic industry. The Tribunal therefore recommends a

remedy in the form of a tariff rate quota (TRQ) on imports of heavy plate from subject

countries, other than goods originating in Korea, Panama, Peru, Colombia, Honduras,

or countries whose goods are eligible for GPT treatment.

 The Tribunal finds that, while there has been a significant increase in the importation of

concrete reinforcing bar from the subject countries, this increase as well as the

conditions under which the subject reinforcing bar is being imported have not caused

serious injury, and are not threatening to cause serious injury, to the domestic industry.

The Tribunal therefore does not recommend a remedy in respect of concrete

reinforcing bar.

 The Tribunal finds that, while there has been a significant increase in the importation of

energy tubular products from the subject countries, this increase as well as the

conditions under which the subject energy tubular products are being imported have

not caused serious injury, and are not threatening to cause serious injury, to the

domestic industry. The Tribunal therefore does not recommend a remedy in respect of

energy tubular products.

 The Tribunal finds that hot-rolled sheet imported from the subject countries is not

being imported in such increased quantities as to cause or threaten to cause serious

injury to the domestic industry. Given that a safeguard measure can only be applied if a

product is being imported in such increased quantities, the Tribunal does not

recommend a remedy in respect of hot-rolled sheet.

 The Tribunal finds that pre-painted steel imported from the subject countries is not

being imported in such increased quantities as to cause or threaten to cause serious

injury to the domestic industry. Given that a safeguard measure can only be applied if a

product is being imported in such increased quantities, the Tribunal does not

recommend a remedy for pre-painted steel.

 The Tribunal finds that stainless steel wire imported from the subject countries (other

than goods originating in Korea, Panama, Peru, Colombia and Honduras) is being

imported in such increased quantities and under such conditions as to be a principal

cause of a threat of serious injury to the domestic industry. Therefore, the Tribunal

recommends a remedy in the form of a TRQ on imports of stainless steel wire from

subject countries, other than goods originating in Korea, Panama, Peru, Colombia,

Honduras, or countries whose goods are eligible for GPT treatment.

 The Tribunal finds that wire rod imported from the subject countries is not being

imported in such increased quantities as to cause or threaten to cause serious injury to

the domestic industry. Given that a safeguard measure can only be applied if a product

is being imported in such increased quantities, the Tribunal does not recommend a

remedy for wire rod.

TABLE OF CONTENTS

FOREWORD............................................................................................................................................... 2

EXECUTIVE SUMMARY........................................................................................................................ 3

DETERMINATIONS AND RECOMMENDATIONS .................................................................... 4

PART I – INTRODUCTION..................................................................................................................... 7

ORGANIZATION OF THE REPORT................................................................................................ 7

ORDER IN COUNCIL.......................................................................................................................... 7

CONDUCT OF THE INQUIRY .......................................................................................................... 9

PARTICIPATION IN THE INQUIRY................................................................................................ 9

PRE-HEARING FACT-FINDING....................................................................................................... 9

CONFIDENTIALITY AND ACCESS TO CONFIDENTIAL INFORMATION......................10

PUBLIC HEARINGS........................................................................................................................... 11

PART II – MARKET AND INTERNATIONAL TRADE CONTEXT............................................12

GLOBAL STEEL TRADE ISSUES..................................................................................................12

THE CANADIAN STEEL MARKET............................................................................................... 14

CANADIAN STEEL PRODUCTION .............................................................................................. 16

CANADA’S STEEL IMPORT REGIME......................................................................................... 16

PART III – LEGAL FRAMEWORK.....................................................................................................18

OVERVIEW..........................................................................................................................................18

INJURY ANALYSIS........................................................................................................................... 19

RECOMMENDATIONS ON APPROPRIATE REMEDIES........................................................30

PART IV – HEAVY PLATE...................................................................................................................32

PART V – CONCRETE REINFORCING BAR...................................................................................51

PART VI – ENERGY TUBULAR PRODUCTS .................................................................................71

PART VII – HOT-ROLLED SHEET.....................................................................................................91

PART VIII – PRE-PAINTED STEEL....................................................................................................99

PART IX – STAINLESS STEEL WIRE .............................................................................................108

PART X – WIRE ROD...........................................................................................................................125

APPENDIX I – LIST OF PARTICIPANTS........................................................................................134

APPENDIX II – WITNESSES APPEARING BEFORE THE TRIBUNAL..................................140

APPENDIX III – ATSSC STAFF INVOLVED IN THE INQUIRY...............................................147

Canadian International Trade Tribunal

Certain Steel Goods

PART I – INTRODUCTION

ORGANIZATION OF THE REPORT

This report is divided into 10 parts:

 Part I provides general information concerning the conduct of the inquiry.

 Part II describes the economic context of the inquiry.

 Part III sets out the legal framework for the inquiry.

 Parts IV to X provide the reasons for the Tribunal’s injury determinations for the

seven classes of goods.

In conducting the Tribunal’s analysis and formulating its Report, the Tribunal was mindful

of the nature of the Report and its recommendatory (as opposed to a purely adjudicative) function.

In this particular context, the Tribunal determined it would be preferable to provide a more

comprehensive set of reasons rather than using an approach based on judicial economy. These

reasons for decision also varied depending on the parties’ submissions to the Tribunal regarding a

specific class of goods. For example, regarding classes of goods where the Tribunal did not find a

significant increase in imports (and therefore did not recommend a remedy), it nonetheless provided

observations regarding the state of the domestic industry for that class of goods, or the role of the

subject imports and other factors, in the product-specific parts of this report. Accordingly, not every

product-specific part of this report follows the same structure or has the same content.

ORDER IN COUNCIL

On October 10, 2018, the Tribunal was directed, under the terms of the Order, to conduct a

safeguard inquiry concerning imports into Canada of seven classes of steel goods.¹This document

is the Tribunal’s report on the results of the inquiry.

The Order identified seven classes of goods subject to the inquiry:

1. heavy plate;

2. concrete reinforcing bar;

3. energy tubular products;

4. hot-rolled sheet;

5. pre-painted steel;

6. stainless steel wire; and

7. wire rod.

The Order was made on the recommendation of the Minister of Finance, pursuant to

paragraph 20(a) of the Canadian International Trade Tribunal Act (CITT Act).²The Order defined

1. The Order and a detailed product description for each class of goods, including representative HS codes,

can be found at http://orders-in-council.canada.ca/attachment.php?attach=36956&lang=en.

2. R.S.C. 1985 (4th Supp.), c. 47.

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the scope of the inquiry and established the considerations and factors for the Tribunal to take into

account.

The Order to initiate a safeguard inquiry followed the imposition of provisional safeguard

measures on imports of certain steel goods pursuant to section 55 of the Customs Tariff, based on a

confidential report to Cabinet from the Minister of Finance. The provisional measure took the form

of a 200-day TRQ reflecting historic import volumes and trade patterns, in excess of which a surtax

of 25 percent applies.

On October 12, 2018, the Government of Canada notified the WTO’s Committee on

Safeguards that it had initiated this safeguard investigation, citing a significant increase in total

imports of the seven products in the first quarter of 2018. In its Notification under Article 12.4 of

the Agreement on Safeguards that is required before taking a provisional safeguard measure,

Canada advised that the Minister of Finance had determined that there existed critical

circumstances, based on publicly available import data and confidential industry submissions.³

The Order specifically provided the following instructions to the Tribunal:

 Exclude from the Tribunal’s inquiry imports from the United States, Israel and other

CIFTA beneficiaries, Chile and Mexico (the latter with the exception of energy tubular

products and wire rod, which were within the scope of the Tribunal’s inquiry).

 Determine if energy tubular products or wire rod originating in and imported from

Mexico did not account for a substantial share of total imports of energy tubular

products or wire rod, or did not contribute importantly to serious injury or threat

thereof.

 Where the Tribunal determined that there was an increase in imports, and serious injury

or threat thereof, make separate determinations regarding subject goods originating in

and imported from certain free trade agreement partners. Specifically, the Tribunal had

to determine if subject goods from Panama, Peru, Colombia, Honduras and Korea were

a principal cause of serious injury or threat thereof.

 If there was a determination of no such causation, share or contribution by subject

goods imported into Canada from free trade agreement partners or (in the case of

energy tubular products and wire rod) Mexico, determine whether subject goods were

imported from all other countries subject to the inquiry but not covered by the

determination, in such increased quantities and under such conditions as to be a

principal cause of serious injury or threat thereof.

 Not address, in any recommendations concerning a class of goods, goods imported

from and originating in a country benefiting from the GPT where the importation of

such goods in 2017 did not exceed 3 percent of the total importation of goods of that

class, provided that the importation of goods of that class from all GPT countries with

less than 3 percent import share in 2017 collectively did not exceed 9 percent of the

total importation of goods of that class.

3. The full notification to the WTO can be found at the following address: https://docs.wto.org

/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=@Symbol=%20(g/sg/n/6/can/4)&Lan

guage=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true#.

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 Not hear any motion to exclude any good from a class or that would otherwise limit the

scope of the inquiry, determination or recommendations.

If the Tribunal determined that increased imports were a principal cause of serious injury or

threat thereof, it was directed to make recommendations to the Governor in Council on the most

appropriate remedy to address such injury, over a period of three years.

The Tribunal was directed to submit its report no later than April 3, 2019.

CONDUCT OF THE INQUIRY

On October 11, 2018, the Tribunal sent a copy of its Notice of Commencement of

Safeguard Inquiry – Certain Steel Goods (Notice) to persons and governments known to have an

interest in the inquiry. The Notice was also published in the Canada Gazette and posted on the

Tribunal’s website at http://www.citt-tcce.gc.ca.

The Notice included a detailed schedule of events, including dates when parties were to file

notices of participation, file written submissions, and reply to other parties’ submissions. The Notice

also announced that the Tribunal would hold public hearings starting on January 3, 2019.⁴The

Notice gave parties and their counsel directions regarding procedural and preliminary matters, the

submission of written materials, confidentiality, witness selection, the conduct of hearings, and

other rules and procedures applicable to the inquiry.

On October 31, 2018, the Tribunal held a teleconference to discuss its case management

directions with those who had filed notices of participation and representation. The Tribunal

subsequently provided parties with its responses to questions arising from the teleconference, and

advised parties that they could present final arguments in a written closing brief.

PARTICIPATION IN THE INQUIRY

There were 119 participants that filed notices of participation in the inquiry. Many parties

made written submissions regarding injury and remedy, and many replied to the submissions of

others. Parties and their counsel are listed in Appendix I.

PRE-HEARING FACT-FINDING

The Tribunal’s fact-finding was based primarily on a questionnaire survey of 959 domestic

producers, importers, and foreign producers of the steel goods subject to the inquiry. In addition, the

Tribunal sent 215 letters to embassies requesting that they forward the Notice to any firms who

produce and/or export any of the steel goods and complete the foreign producers’ questionnaire.

The Tribunal received 327 responses.

Questionnaire respondents provided economic and other information for the period of

inquiry (POI), i.e. January 1, 2015, to June 30, 2018, inclusive. A summary of the questionnaire

replies was prepared for parties to use as a common factual starting point in addressing the issues in

the inquiry. In addition to a general report covering methodological matters and giving a profile of

4. The schedule was subsequently modified so that hearings started on January 7, 2019. The revised Notice

can be found at the following link: http://www.citt.gc.ca/en/node/8405.

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the Canadian steel industry and market, separate reports (statistical summaries) on the industry and

market were prepared for each of the seven classes of goods.⁵

Despite the extensive verification process undertaken by the Tribunal, it is possible that

import data used in the fact-finding phase of the inquiry contained data on imports of goods not

subject to the inquiry.⁶It is also possible that imports of some goods subject to the inquiry may not

have been captured if they were imported under an HS Code that was not included in the illustrative

HS Code lists for the seven classes of goods. However, the Tribunal considers that the import data

compiled represents the best and most reliable basis for assessing import trends over the POI.

CONFIDENTIALITY AND ACCESS TO CONFIDENTIAL INFORMATION

The Tribunal members and its support staff are under a statutory obligation not to disclose

confidential information which the Tribunal receives as part of any of its mandates. Its governing

legislation also provides for the disclosure of all of the confidential information to independent

counsel for the parties that have made the required declaration and undertaking to protect the

information. Any violation of the terms of their declaration and undertaking is a serious offence.

In the current inquiry, especially as contrasted with the Steel Safeguard Inquiry of 2002,⁷a

large quantity of information had to be designated as confidential. A primary reason for this is that

there are fewer steel producers in Canada today than there were in that prior period, and, therefore,

it was more difficult to make aggregate industry data public without revealing company-specific

information.⁸

Certain parties, including foreign governments not represented by counsel, requested

disclosure of more information than was initially disclosed in the Tribunal’s statistical summaries.

The Tribunal addressed these concerns by providing some revisions to its public statistical

summaries which revealed more information. In doing so, the Tribunal reminded parties of the

following:

 Some data fields may be public for class of goods but confidential for another class.

 The data presented in the revised statistical summaries adhere to the Trade Remedies

Investigations Branch’s confidentiality procedures in order to comply with the statutory

requirements governing the designation of confidential information in the Tribunal’s

5. The import data presented in the statistical summaries are derived from the responses provided to the

Tribunal’s questionnaires and from estimations using the Canada Border Services Agency (CBSA)

Facility for Information Retrieval Management (FIRM) data. FIRM data on the 10-digit Harmonized

System (HS) tariff classification code are recorded for a good when it enters Canada. FIRM data are

confidential.

6. Although the Order did not include HS Codes, the Department of Finance prepared illustrative lists of

10-digit HS Codes for goods in each of the seven classes. These HS codes were used to determine which

importers would receive questionnaires. However, respondents were directed to provide information on

all imports matching the product definition, no matter the HS code under which they were imported.

7. Steel Goods (August 2002), GC-2001-001 (CITT) [Steel Goods]. Available online at: http://publications

.gc.ca/Collection/F42-12-2002E.pdf.

8. As well, the statistical summaries presented the data in more detail (e.g. domestic producer imports were

presented separately from excluded country imports, as were subject country imports) than in the 2002

Steel Safeguard inquiry, which further restricted the data which could be made public without

inadvertently revealing company-specific information.

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proceedings found in sections 45 to 49 of the CITT Act. These requirements cover

instances where there are only one or two respondents providing the information, i.e.

where there is no possibility of aggregating confidential information to make it public.

They also require the Tribunal to consider whether there is dominance—where a small

number of firms account for a very large portion of any data field such that confidential

information could be revealed by means of reverse-engineering the data.

 Counsel who have signed Declarations and Undertakings received the protected

revised statistical summaries, as they had with the entirety of the confidential record.

Accordingly, not every product-specific part of this report will present the same range of

information, depending on what data can be made public.

PUBLIC HEARINGS

The inquiry was conducted in accordance with the Canadian International Trade Tribunal

Rules (CITT Rules).⁹The Tribunal varied and supplemented the CITT Rules to provide for a more

expeditious process reflecting the short time frame for completion of the inquiry.¹⁰

At the public hearings, the Tribunal questioned witnesses for the domestic producers,

importers, foreign producers and users of the various steel goods on key issues. Witnesses were

selected by the Tribunal from among those who had filed witness statements. In selecting witnesses,

the Tribunal took account of matters it believed required clarification. Parties questioned witnesses,

made oral arguments, and had the opportunity to submit written final arguments.

Appendices I and II list the witnesses and counsel who appeared at the public hearings.

In the course of the public hearings, the parties had the opportunity to file additional

evidence as part of their witness statements. One such type of evidence was Statistics Canada¹¹

import data submitted by witnesses for the domestic industry as relevant, including data regarding

issues of increased imports and threat of serious injury. Parties opposed argued that such data was

inadmissible (especially Q3 2018 data which was said to be outside of the Tribunal’s POI) and

unreliable given the differences between it and data derived from Tribunal questionnaires. The

Tribunal finds that the data is admissible as it is relevant. While the Tribunal’s period for data

gathering for its statistical summaries is the POI, relevant evidence which can be received from

parties is not confined to that time period. This should be especially evident as part of the Tribunal’s

mandate is to assess issues regarding threat of serious injury, an assessment that is by its nature

focused on future events. The Tribunal also tested the reliability of the Statistics Canada data (as

explained in the product-specific parts of this report) in deciding what weight, if any, to place on it

in a given context.

9. SOR/91-499.

10. Rule 6 allows the Tribunal to dispense with, vary or supplement the CITT Rules to provide for a more

expeditious process as permitted by the circumstances and considerations of fairness.

11. Statistics Canada data is a limited set of import information, collected from customs declarations by the

CBSA, essentially consisting of tariff classification, volume, value for duty and origin of goods. The

CBSA has access to more extensive data, as part of its FIRM system, on which data the Tribunal

routinely relies in SIMA proceedings.

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PART II – MARKET AND INTERNATIONAL TRADE CONTEXT

GLOBAL STEEL TRADE ISSUES

There is significant world trade in steel goods, including the seven classes of steel goods

covered by this inquiry. The Organisation for Economic Co-operation and Development (OECD)

estimated that in 2014 the volume of global steel exports stood at around 442 million metric tonnes

(tonnes), which was slightly higher than the volume recorded in 2007, prior to the financial crisis.¹²

More recently, the OECD estimates the volume of global steel exports was 449 million tonnes

during the first seven months of 2017 (annualized), using monthly data from the International Steel

Statistics Bureau.¹³This is down from 460 million tonnes in 2016.¹⁴

In an effort to address global steel trade issues, industrialized nations worked toward

liberalizing trade in steel. During the Uruguay Round of multilateral trade negotiations which ended

in 1994, current members of the WTO, including Canada, made commitments to reduce tariffs on

steel imports. They also agreed to limit the use of quantitative restrictions but allow the imposition

of safeguard measures to address injurious increases in fairly traded steel. To that end, the WTO

signatories committed to phase in tariff reductions for steel, and signed the Agreement on

Safeguards.¹⁵

Negotiations to address steel production overcapacity have continued since

September 2001 in the OECD and, more recently, in the G-20.¹⁶

Notwithstanding these efforts, international trade in steel continues to be distorted by

massive steel production overcapacity, fuelled primarily by China’s extraordinary economic

expansion since 2000. Since 2000, global crude steelmaking capacity has more than doubled from

1,061 million tonnes to an estimated 2,291 million tonnes in 2018—nearly 50 percent larger than

total global demand.¹⁷Over the same period, the global crude steelmaking capacity-to-consumption

gap has more than tripled from just over 200 million tonnes in 2000 to approximately 650 million

tonnes in 2016.¹⁸

China is responsible for 75 percent of new steel capacity since 2000, with its crude

steelmaking capacity increasing sevenfold from 150 million tonnes in 2000 to an estimated

1,048 million tonnes in 2018—a level that represents more than 46 percent of total world crude

steel capacity.¹⁹Trading partners with domestic steelmaking capacity have sought commitments

from China to reduce its excess capacity and eliminate further subsidies.²⁰China’s response has

been to acknowledge the problem and to make repeated commitments to reduce steel production

capacity. While Chinese crude steel making capacity has declined by about 100 million tonnes

12. Exhibit GC-2018-001-066.38, Vol. 1 at 6.

13. Exhibit GC-2018-001-066.39, Vol. 1 at 13.

14. Ibid.

15. Canada bound its tariffs at zero percent for all of the subject goods at the conclusion of the Uruguay

Round: Exhibit GC-2018-001-066.43, Vol. 1.

16. Exhibit GC-2018-001-066.36, Vol. 1 at 6-9; Exhibit GC-2018-001-066.27, Vol. 1.

17. Exhibit GC-2018-001-066.29, Vol. 1 at 4 and 12.

18. Ibid. at 12.

19. Ibid. at 4.

20. Exhibit GC-2018-001-066.31, Vol. 1 at 4.

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since 2015,²¹this is just a small step considering the exponential growth seen in the previous years.

The net result is that China has added nearly 500 million tonnes of new capacity since 2007.²²

Steel producers have responded to episodes of weak growth and the global overcapacity

issue, in part, by increasing market and product concentration. Driven by external forces

increasingly global and diverse, the North American and global steel industry saw a wave of

consolidation between 1995 and 2005, including mergers and the selling of non-core assets,

resulting in increased concentration in regional markets and increased market power.²³In 1995, the

top 10 producers supplied 20 percent of global steel output. By 2005, this figure had increased to

about 29 percent.²⁴The global trend has been particularly noticeable in areas where there has been

more regional consolidation over the years, including the United States.²⁵

The advancement in information technology has allowed globally integrated steel

producers, such as ArcelorMittal, to gain a competitive advantage by leveraging technological

advances across their plants and adjusting to local demand shifts.²⁶

While steel market conditions have shown some cyclical recovery in 2017, the underlying

trend in global steel demand remains weak and excess capacity remains significant.²⁷The World

Steel Association forecasts that global steel demand will stay on the low growth track, with demand

in 2018 and 2019 showing a mild deceleration over 2017.²⁸

Continued rationalization of excess capacity and further consolidation will be necessary to

bring back efficiency and profitability to the industry.²⁹This process is supported by several

countries, including Canada, who have identified various measures to promote industry

consolidation and facilitate changes in ownership structure, corporate governance, and corporate

financing.³⁰In North America, recent mergers and acquisitions activity has focused on Canadian

producers Essar Algoma and U.S. Steel Canada and American producers A.K. Steel and Nucor.³¹

The last few years have seen increasing international trade tensions, especially with regard

to steel. Trade-restrictive regimes for steel have arisen in major markets around the world, with

anti-dumping duty, countervailing duty, and more recently, safeguard measures being employed

numerous times.

Most notably, in April 2017, the Trump administration self-initiated an unprecedented

investigation of the impact of imported steel on U.S. national security pursuant to section 232 of the

Trade Expansion Act of 1962.³²On March 8, 2018, President Trump issued Proclamations on

Adjusting Imports of Steel and Aluminum into the United States, following a recommendation

21. Exhibit GC-2018-001-066.29, Vol. 1 at 4.

22. Ibid.

23. Exhibit GC-2018-001-066.25, Vol. 1 at 5.

24. Ibid. at 19.

25. Ibid. at 19 and 21.

26. Exhibit GC-2018-001-066.28, Vol. 1 at 27-28.

27. Exhibit GC-2018-001-066.27, Vol. 1 at 1.

28. Exhibit GC-2018-001-066.34, Vol. 1 at 3.

29. Exhibit GC-2018-001-066.25, Vol. 1 at 5 and 15; Exhibit GC-2018-001-066.35, Vol. 1 at 6.

30. Exhibit GC-2018-001-066.27, Vol. 1 at 23.

31. Exhibit GC-2018-001-066.35, Vol. 1 at 7; Exhibit GC-2018-001-066.27 at 49-50.

32. Exhibit GC-2018-001-075.15, Vol. 5 at 7.

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from U.S. Commerce Secretary Wilbur Ross, according to which steel was being imported in such

quantities and under such circumstances as to threaten to impair the national security, with the

excess global production of steel and the present quantities of steel imports into the United States

“weakening our internal economy and shrinking our ability to meet national security production

requirements in a national emergency.”³³

Canada and Mexico were temporarily excluded from the original proclamations. However,

on May 31, 2018, President Trump extended the coverage of the section 232 measures to include

Canada and Mexico, and imposed a 25 percent tariff on imports of certain steel products.³⁴

On July 1, 2018, Canada responded by imposing a countermeasure, i.e. a 25 percent surtax

on up to C$16.6 billion in imports of steel (and other products) from the United States, representing

the value of 2017 Canadian exports affected by the U.S. measures.

The European Union followed suit with provisional safeguard measures on imports of

28 steel product categories on July 18, 2018,³⁵imposing definitive safeguard measures on imports

of 26 steel products on January 31, 2019.³⁶China and Mexico also implemented specific measures,

with China implementing countermeasures on $60 billion in U.S. goods on August 3, 2018, and

Mexico imposing countermeasures on imports of five categories of steel products from the United

States in June 2018.³⁷Additionally, the Eurasian Economic Union (comprising of the Kyrgyz

Republic, the Russian Federation, Kazakhstan and Armenia) initiated a safeguard investigation on

certain flat-rolled steel products on August 7, 2018.³⁸Turkey also imposed provisional safeguard

measures on five steel product categories in September 2018.³⁹

It is in this context that Canada imposed provisional safeguard measures and the Tribunal

initiated and conducted this investigation.

THE CANADIAN STEEL MARKET

The use of steel in the Canadian economy is widespread. The most important steel-using

sectors are manufacturing, particularly the automotive and transport equipment industries, and

construction and energy sectors.

Canadian demand for steel consistently exceeds supply. Apparent consumption in Canada

(domestic production minus exports plus imports) averaged 14.6 million tonnes in the period

2015-2017, with production of 12.9 million tonnes, exports of 6.4 million tonnes and imports of

33. Section 232 of the Trade Expansion Act of 1962, 19 U.S.C. § 1862(c), was the provision relied on by the

President of the United States, to adjust the imports of goods or materials from other countries, through

tariffs or other means, if it is found that the quantity or circumstances surrounding those imports threaten

to impair national security. The consequent actions are referred to as “section 232 measures” throughout

this Report.

34. Exhibit GC-2018-001-075.15, Vol. 5 at 20.

35. Exhibit GC-2018-001-03A, Vol. 1.1 at 25.

36. Available online at https://eeas.europa.eu/delegations/world-trade-organization-wto/56228/steel-

commission-intends-impose-definitive-safeguard-measures-imports-certain-steel-products-4_en.

37. Exhibit GC-2018-001-066.05, Vol. 15 at 39.

38. Exhibit GC-2018-001-077.06, Vol. 5 at 101-104.

39. Exhibit GC-2018-001-066.05, Vol. 15 at 116.

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8.1 million tonnes, leaving import penetration at approximately 60 percent of total market

demand.⁴⁰

Canadian steel producers, particularly in more populous Central Canada, have long

operated within a highly integrated cross-border market with American producers located in the

Great Lakes region. The cross-border movement of steel products has been encouraged by the

existence of an integrated cross-border automotive industry since the signing of the Canada—

United States Automotive Products Agreement of 1965 (commonly known as the Auto Pact) – the

automotive industry being a major steel consumer.⁴¹

Canada’s steel industry, as with all of North America, has become increasingly foreign-

owned during the 21^stcentury.⁴²For example, ArcelorMittal purchased both the flat products

producer Dofasco (now ArcelorMittal Dofasco) and various long product operations, now operating

as ArcelorMittal Long Products Canada and is part of ArcelorMittal Americas, a wholly owned

subsidiary of ArcelorMittal of Luxembourg.⁴³Gerdau, a Brazilian multinational, entered the

Canadian market in 1989 with the purchase of Courtice Steel Inc. and formed Gerdau Ameristeel

Corporation in 1999.⁴⁴The global pipe and tube producer, Tenaris, operates Algoma Tubes,

Prudential Steel ULC, Tenaris Global Services (Canada) and Hydril Canadian Company LP in

Canada.⁴⁵Stelco has emerged as a separate public company after a period of ownership by U.S.

Steel.⁴⁶IPSCO has become part of Evraz North America, which is itself a subsidiary of UK-based

Evraz plc; Algoma Steel Inc., formerly Essar Steel Algoma Inc., has been reorganized and sold by

its previous owner (the Essar group of India) to a private equity firm and its term lenders.⁴⁷

Canada’s relatively small domestic market means that the ability to address both domestic

and U.S. demand is often necessary to justify investment in efficient facilities of scale. It also means

that Canadian steel users necessarily rely on imports to meet more specialized needs. At the same

time, in a global steel company, the supply chain needs to be optimized at the global rather than the

local level to maximize profit.⁴⁸In this context, as a result of the North American Free Trade

Agreement (NAFTA) and other globalizing market forces, Canadian steel producers increasingly

participate in an integrated North American market with demand being driven by North American

supply chains in energy, construction and manufacturing.⁴⁹

Geography has facilitated the development of an integrated steel market in the Great Lakes

region. It has also impeded the development of a single national steel market across Canada, as the

vast distance between Quebec and Southern Ontario and the West Coast means most Canadian steel

producers face a formidable cost disadvantage in transporting products by rail to Vancouver,

relative to the cost of trucking steel to Vancouver from adjacent Pacific Northwest states, or

shipping steel from Asia by boat to the Port of Vancouver.

40. Exhibit GC-2018-001-066.32, Vol. 1 at 6 and Exhibit GC-2018-001-066.24, Vol. 1 at 6.

41. Cross-border commerce also occurs “upstream” at the level of coal, iron and other steel inputs.

42. One estimate suggests foreign steelmakers owned 42 percent of steel capacity in the NAFTA region:

GC-2018-001-066.28, Vol. 1 at 24.

43. Exhibit GC-2018-001-079.06, Vol. 5 at 42.

44. Exhibit GC-2018-001-073.06, Vol. 5 at 47.

45. Exhibit GC-2018-001-075.19, Vol. 5 at 43.

46. Exhibit GC-20118-001-077.04, Vol. 5 at 24.

47. Exhibit GC-2018-001-071.06, Vol. 5 at 71.

48. Exhibit GC-2018-001-066.25, Vol. 1 at 23-24.

49. Exhibit GC-2018-001-066.27, Vol. 1 at 53.

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Canada was the world’s 16th-largest steel importer in 2017, with Canada’s imports

representing about 2 percent of all steel imported globally in 2017. Canada imported steel from over

100 countries and territories, though the top 10 countries together accounted for over 85 percent of

total steel imports in 2017. Consistent with the reality of an integrated cross-border market in the

Great Lakes region, the United States accounts for approximately half of all steel imports into

Canada, and is the largest source of Canada’s steel imports in flat, long, tubular, and stainless

products. For instance, in H1 2018, imports from the United States accounted for 70 percent of

Canada’s flat product imports, 55 percent of long product imports, 64 percent of stainless steel

imports and 39 percent of pipe and tube imports.⁵⁰

CANADIAN STEEL PRODUCTION

Steel production in Canada is now dominated by foreign-owned companies, with many

domestically owned firms having been purchased by multinational steel companies during the first

decade of the 21^stcentury.⁵¹The largest producer, Luxembourg-based ArcelorMittal, alone

accounts for roughly half of Canadian steel production through its two subsidiaries, ArcelorMittal

Dofasco and ArcelorMittal Long Products Canada.⁵²

The seven classes of steel goods subject to the inquiry account for 85 percent of carbon and

alloy steel produced in Canada.⁵³There are 15 firms producing these products across Canada.⁵⁴In

2017, the Canadian primary steel industry employed more than 23,000 people,⁵⁵and had export

sales of $7.9 billion.⁵⁶Domestic sales from the seven classes of goods totalled $4.4 billion.⁵⁷

CANADA’S STEEL IMPORT REGIME

All imports of the seven classes of steel goods into Canada are subject to Most Favourite

Nation duty-free tariff treatment.⁵⁸

Canada has considered safeguard measures for the steel industry in the past. The Tribunal

conducted a steel safeguard inquiry in 2002.⁵⁹The following nine classes of steel goods were

subject to that inquiry: discrete plate; hot-rolled sheet and coil; cold-rolled sheet and coil;

corrosion-resistant sheet and coil; hot-rolled bars; angles, shapes and sections; cold-drawn and

finished bars and rods; reinforcing bars; and standard pipe. As a result of that inquiry, the Tribunal

50. Exhibit GC-2018-001-066.32, Vol. 1 at 1-4.

51. For some examples, Exhibit GC-2018-001-024.04, Vol. 3 at 377; GC-2018-001-026.04, Vol. 3 at 15;

Exhibit GC-2018-001-073.06, Vol. 5 at 47.

52. Exhibit GC-2018-001-066.24, Vol. 1 at 6.

53. Available online at: https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2018006-eng.htm and

various statistical summaries.

54. Exhibit GC-2018-001-03A, Vol. 1.1 at 22.

55. Available

online

at:

https://international.gc.ca/trade-commerce/controls-controles/steel_alum-

acier_alum.aspx?lang=eng.

56. Available online at: https://www5.statcan.gc.ca/cimt-cicm/home-accueil?lang=eng.

57. Various statistical summaries.

58. Customs Tariff, S.C. 1997, c. 36, Schedule.

59. Steel Goods.

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made several recommendations regarding remedies for five of the nine steel goods;⁶⁰however, the

Government of that time did not implement any of those recommendations.

Canadian anti-dumping measures currently apply to imports of goods of four of the seven

classes of goods subject to the inquiry, and some subject goods are also subject to Canadian

countervailing measures.⁶¹Certain measures have been in place for several years, and many of

them are not scheduled to expire until 2023.⁶²Canada’s anti-dumping and countervail regime is

very effective at blocking unfairly traded goods from entering the Canadian market, as imports of

steel products from countries subject to such measures are minimal in most instances.

As of the beginning of 2018, Canada had 46 outstanding anti-dumping orders against steel

products from 23 countries, including six anti-dumping orders against Korean products and seven

against Chinese products. There were also eight outstanding countervailing duty orders, including

six orders against Chinese products.

60. These products were discrete plate, cold-rolled sheet and coil, reinforcing bars, angles, shapes and

sections, and standard pipe.

61. The products are heavy plate, energy tubular products, rebar and hot-rolled sheet.

62. Exhibit GC-2018-001-05A, Vol. 1.1 at 35; Exhibit GC-2018-001-09B, Vol. 1.1 at 44; Exhibit GC-2018-

001-07A, Vol. 1.1 at 34; and Exhibit GC-2018-001-011A, Vol. 1.1 at 35.

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PART III – LEGAL FRAMEWORK

OVERVIEW

The Governor in Council may refer to the Tribunal, for inquiry and a report thereon, any

matter regarding goods imported into Canada in such increased quantities and under such

conditions as to be a principal cause of serious injury or threat thereof to domestic producers of like

or directly competitive goods.⁶³The Governor in Council establishes the terms of reference for the

inquiry and report.⁶⁴The Tribunal must conduct the inquiry and prepare the report in accordance

with the terms of reference.⁶⁵The Canadian International Trade Tribunal Regulations (CITT

Regulations) provide interpretative guidance and prescribe factors to be examined in an inquiry

under paragraph 20(a) of the CITT Act.

On October 10, 2018, on the recommendation of the Minister of Finance and pursuant to

paragraph 20(a) of the CITT Act, the Governor in Council directed the Tribunal to undertake a

safeguard inquiry regarding the importation of certain steel goods into Canada.⁶⁶The Order

established the terms of reference for the inquiry, and prescribed considerations and factors for the

Tribunal to take into account.⁶⁷Subject to an exception for GPT countries, the Order also directed

the Tribunal to make remedy recommendations if it found serious injury to domestic producers or

threat thereof.⁶⁸

In carrying out the inquiry pursuant to the provisions of the Order, the Tribunal was

directed to have regard to Canada’s rights and obligations under international trade agreements.⁶⁹

The relevant agreements include the WTO Agreement on Safeguards⁷⁰and the General Agreement

on Tariffs and Trade 1994 (GATT 1994).⁷¹

63. CITT Act, paragraph 20(a).

64. CITT Act, subsection 20.2(1).

65. CITT Act, subsection 21(1).

66. Order, section 1.

67. Order, sections 2-5.

68. Order, section 6.

69. Order, section 1.

70. The original 1947 General Agreement on Tariffs and Trade (GATT) contained a safeguard provision,

i.e. Article XIX. A separate agreement on the rules for application of safeguard measures pursuant to

Article XIX was concluded during the Uruguay Round of multilateral trade negotiations, and entered

into force in 1995 with the inception of the WTO. The Agreement on Safeguards aims to (i) clarify and

reinforce GATT disciplines, particularly those of Article XIX; (ii) re-establish multilateral control over

safeguards and eliminate measures that escape such control; and (iii) encourage structural adjustment on

the part of industries adversely affected by increased imports, thereby enhancing competition in

international markets. The Agreement on Safeguards was negotiated in large part because GATT

Contracting Parties had been applying a variety of so-called “grey area” measures that were not imposed

pursuant to Article XIX, and thus were not subject to multilateral discipline through GATT. The

Agreement on Safeguards now clearly prohibits such measures, and has specific provisions for

eliminating those that were in place at the time the WTO Agreement on Safeguards entered into force.

71. Canada is a WTO Member; it is also a party to NAFTA, CIFTA, the Canada-Chile Free Trade

Agreement, the Canada-Colombia Free Trade Agreement, the Canada-Korea Free Trade Agreement,

the Canada-Peru Free Trade Agreement, the Canada-Panama Free Trade Agreement and the Canada-

Honduras Free Trade Agreement.

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The legal framework reflects the requirements of the Order, the CITT Act, the CITT

Regulations, and Canada’s rights and obligations under international trade agreements. The specific

elements of the Tribunal’s injury analysis and remedy determinations are set out below.

INJURY ANALYSIS

The Tribunal’s inquiry was to determine whether goods of the seven classes of goods were

imported into Canada in such increased quantities and under such conditions as to be a principal

cause of serious injury or threat thereof to domestic producers of like or directly competitive

goods.⁷²Therefore, to make its determination for each class of goods, the Tribunal considered:

(a) whether domestically produced steel goods were “like or directly competitive” to

imported goods of a subject class of goods;

(b) where the goods were like or directly competitive, who were the domestic producers of

such goods;

(c) whether there was a significant increase in imports of the subject goods;

(d) if such an increase occurred, whether it resulted from unforeseen developments and the

effect of obligations incurred by Canada under GATT 1994, including tariff

concessions;

(e) if the increased imports arose from unforeseen developments and the effect of

Canada’s GATT 1994 obligations, whether there was serious injury to domestic

producers of like or directly competitive goods;

(f) if there was serious injury, whether the significant increase in imports is a principal

cause of the injury;

(g) if there was no serious injury or the increase in imports is not a principal cause of the

injury, the Tribunal examined whether there was a threat of serious injury;

(h) if there was a threat of serious injury, the Tribunal assessed whether the increase in

imports is a principal cause of that threat; and

(i) if the Tribunal determined that an increase in imports of goods of a class from all

sources other than the United States, Chile, Israel or another CIFTA beneficiary, and in

certain cases Mexico, is a principal cause of serious injury or threat thereof, it

considered whether imports of such goods from certain free trade agreement partners

are a principal cause of the injury or threat thereof, and if not, the Tribunal determined

whether all the goods of that class imported from all other countries subject to the

inquiry were imported in such increased quantities to be a principal cause of serious

injury or threat thereof.

Each of the above-mentioned elements of the Tribunal’s injury analysis is discussed in

more detail below.

72. CITT Act, paragraph 20(a).

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Like or directly competitive goods

The Tribunal must determine whether domestically produced steel goods are “like or

directly competitive” to imported goods of a subject class of goods. “Like or directly competitive

goods” are goods that are identical in all respects to, or have uses and other characteristics that

closely resemble, goods that are the subject of the inquiry.⁷³

In its analysis of whether domestic goods are “like or directly competitive” to goods in a

subject class of imported goods, the Tribunal examined a range of factors, including: physical

characteristics (such as physical appearance and composition), market characteristics (such as

substitutability, pricing and distribution), and the question of whether the goods meet the same

customer needs.⁷⁴

The Tribunal was specifically prohibited by subsection 3(2) of the Order from considering

whether the subject and like goods were comprised of more than one class of goods.

Domestic producers

The Tribunal’s injury analysis must consider the impact of the imported subject goods on

domestic producers of like or directly competitive goods in Canada.⁷⁵Neither the CITT Act, nor the

CITT Regulations, nor the CITT Rules define “domestic producers” for the purposes of a safeguard

inquiry. The Agreement on Safeguards also addresses injury in the context of the impact of imports

on the performance of a domestic industry.⁷⁶It defines “domestic industry” as “the producers as a

whole of the like or directly competitive products operating within the territory of a Member, or

those whose collective output of the like or directly competitive products constitutes a major

proportion of the total domestic production of those products.”⁷⁷The words “as a whole” and “a

major proportion” address “the number and the representative nature of producers making up the

domestic industry—they are a quantitative benchmark for the proportion of producers . . . which a

safeguard investigation has to cover.”⁷⁸

As mentioned earlier, the Order requires the Tribunal to have regard to Canada’s rights and

obligations under international trade agreements.⁷⁹Therefore, in conducting its injury analysis for

73. For the purposes of the CITT Act, section 3 of the CITT Regulations defines “like or directly competitive

goods” as “(a) goods that are identical in all respects to the goods that are the subject of a complaint, or

(b) in the absence of any identical goods referred to in paragraph (a), goods the uses and other

characteristics of which closely resemble those goods that are the subject of a complaint” Although the

definition refers to goods that “are the subject of a complaint”, the Tribunal has previously held that the

definition also applies to an inquiry referred to the Tribunal pursuant to paragraph 20(a) of the CITT Act;

Steel Goods at 12.

74. Steel Goods at 15; Bicycles and Frames (September 2005), GS-2004-01 and GS-2004-002 (CITT)

[Bicycles and Frames] at para. 65.

75. Paragraph 2(1)(a), Order; paragraph 5(1)(c), CITT Regulations; and paragraph 20(a), CITT Act.

76. Agreement on Safeguards, article 4.1(a).

77. Agreement on Safeguards, article 4.1(c).

78. United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New

Zealand and Australia, WTO Docs. WT/DS177/AB/R (1 May 2001), Report of the Appellate Body

[U.S. – Lamb] at para. 91.

79. Order, section 1.

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each class of goods, the Tribunal has identified the domestic producers on the basis of the

Agreement on Safeguards definition.

The Tribunal must determine what constitutes the domestic industry for each product.

Although the Tribunal may determine that all or a subset of all domestic producers constitute the

domestic industry, once it has made that determination, its analysis of whether the domestic

industry has been injured must proceed on the same basis.⁸⁰In this respect, the Federal Court of

Appeal has approved of the Tribunal’s methodology and stated that “[t]he wording of

subsection 2(1) of [the Special Imports Measure Act] leaves it open, depending on the

circumstances, to consider ‘domestic producers’ as a whole or a ‘major proportion’ thereof for

purposes of making a determination regarding the domestic industry.”⁸¹

Increase in imports

The Tribunal must determine whether any of the subject goods have been imported into

Canada in such increased quantities since January 1, 2015, and under such conditions, as to be a

principal cause of serious injury or threat thereof.⁸²To determine whether the subject goods have

been imported in increased quantities, the Tribunal must examine the actual volume of the goods

imported into Canada.⁸³When examining actual import volumes, the Tribunal must consider

whether there has been a significant increase in the importation into Canada of the goods.⁸⁴Where

such an increase has occurred, the Tribunal must consider the rate and amount of the increase, either

absolutely or relative to the production in Canada of like or directly competitive goods.⁸⁵

Similarly, the Agreement on Safeguards states that safeguard measures can only be applied

if products are imported in such increased quantities, in absolute terms or relative to domestic

production, and under such conditions, as to cause or threaten to cause serious injury.⁸⁶The

Agreement on Safeguards also provides that the competent authority must evaluate all relevant

objective and quantifiable factors, including the rate and amount of the increase, in absolute and

relative terms.⁸⁷The Tribunal must base its evaluation of objective and quantifiable factors, such as

its evaluation of the rate and amount of increased imports, on objective data and evidence.⁸⁸

According to the WTO Appellate Body, the phrase “in such increased quantities” in the

Agreement on Safeguards and GATT 1994 Article XIX:1(a) means that “the increase in imports

must have been recent enough, sudden enough, sharp enough, and significant enough, both

80. The Tribunal acknowledges that it is often presented with a domestic industry where the various

domestic producers are performing differently, including as a result of their corporate organization,

business structure or market focus. It is open for parties to make any arguments regarding such

performance but the overall approach to the Tribunal’s injury analysis remains as stated above.

81. Essar Steel Algoma Inc. v. Jindal Steel and Power Limited (9 August 2017), 2017 FCA 166 at paras. 20,

24; leave to appeal to the Supreme Court of Canada denied.

82. Order, subsections 2(2) and 3(1); CITT Act, paragraph 20(a).

83. CITT Regulations, paragraph 5(1)(a).

84. CITT Regulations, subsection 5(2).

85. Ibid.

86. Article 2.1; Article XIX:1(a) of GATT 1994 contains a similar requirement.

87. Article 4.2(a); NAFTA contains a similar provision (para. 9, Annex 803.3).

88. U.S. – Lamb at paras. 129 and 130.

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quantitatively and qualitatively, to cause or threaten to cause ‘serious injury’.”⁸⁹An assessment of

whether an increase is “recent enough, sudden enough, and significant enough” should not be done

in the abstract.⁹⁰The question is not whether imports have increased recently and suddenly in the

abstract; rather, the increase in imports must have a “certain degree of being recent and sudden.”

Determining whether the requirement for imports to be “in such increased quantities” has

been met does not involve a mere mathematical or technical determination.⁹¹It is not sufficient to

show simply that imports in one year were more than in a previous year or years.⁹²Recent imports

must be examined, not just import trends during a period of several years in the past.⁹³

This is not to suggest that import trends are not relevant. Investigative authorities are

expected to consider trends in imports over the period of inquiry, not to simply compare end points,

such as the beginning and end of a period of inquiry.⁹⁴There must be an explanation of how the

trend in imports over a period of inquiry supports a finding of “such increased imports” within the

meaning of the Agreement on Safeguards and GATT 1994 Article XIX:1(a).⁹⁵

The term “recent” need not be interpreted as meaning that imports must continue to

increase right up to the date of the determination, nor does it imply an analysis limited to the

present.⁹⁶There can be a ‘“recent’ increase even if that increase has ceased prior to the date of the

determination, as long as imports remain at a sharply increased level.”⁹⁷

With such considerations in mind, it follows that the Tribunal will generally:

 determine if the evidence shows an increase in imports for a class of goods, considering

recent imports, import trends, and end-point comparisons;

 determine the rate and amount of the increase in absolute terms and relative to the

production in Canada of like or directly competitive goods; and

 assess whether the increased quantity of imports is recent enough, sharp enough,

sudden enough, and significant enough, both in absolute terms and relative to

production in Canada, to cause or threaten to cause serious injury.⁹⁸

89. Argentina – Safeguard Measures on Imports of Footwear (12 January 2000), WTO Docs.

WT/DS121/AB/R, Report of the Appellate Body [Argentina – Footwear] at para. 131; United States –

Definitive Safeguard Measures on Imports of Certain Steel Products (10 December 2003), WTO Docs.

WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R,

WT/DS254/AB/R, WT/DS258/AB/R and WT/DS259/AB/R, Report of the Appellate Body [U.S. –

Steel] at para. 346.

90. U.S. – Steel at para. 360.

91. Argentina – Footwear at para. 131.

92. Ibid.

93. Ibid. at para. 130.

94. Ibid. at para. 129; U.S. – Steel at paras. 354 and 355.

95. US – Steel at para. 374.

96. United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line

Pipe from Korea (29 October 2001), WTO Docs. WT/DS202/R, Report of the Panel [Line Pipe] at

paras. 7.207 and 7.208.

97. Ibid. at para. 7.208.

98. Steel Goods at 17; Bicycles and Frames at para. 85.

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The Tribunal also addressed the more qualitative assessment of a “significant” increase by

viewing import volumes in the context of market size.

Unforeseen developments and obligations under GATT 1994

The relevance of unforeseen developments and of the effect of Canada’s obligations under

GATT 1994 in a safeguard inquiry is not addressed in domestic legislation. However, the Order

requires the Tribunal to have regard to Canada’s rights and obligations under international trade

agreements.⁹⁹The Tribunal notes that its past decisions have taken into account international trade

agreements to which Canada is a party.¹⁰⁰

Article XIX of GATT 1994 (Emergency Action on Imports of Particular Products) provides

that safeguard measures can only be imposed if certain circumstances exist and specific conditions

are met,¹⁰¹and provides in part as follows:

1.(a) If, as a result of unforeseen developments and of the effect of the obligations incurred

by a contracting party under this Agreement, including tariff concessions, any product is

being imported into the territory of that contracting party in such increased quantities and

under such conditions as to cause or threaten serious injury to domestic producers in that

territory of like or directly competitive products, the contracting party shall be free, in

respect of such product, and to the extent and for such time as may be necessary to prevent

or remedy such injury, to suspend the obligation in whole or in part or to withdraw or

modify the concession.

[Emphasis added]

Therefore, as part of its injury analysis, for each class of goods with a significant increase in

imports, the Tribunal considers whether the increase resulted from “unforeseen developments” and

the effect of Canada’s obligations, including tariff concessions. Before a safeguard measure can be

applied, both unforeseen developments and the effect of GATT 1994 obligations must be shown to

exist.¹⁰²The Tribunal must explain how evidence of unforeseen developments and GATT 1994

obligations or concessions undertaken by Canada demonstrates the existence of the “circumstances”

in the first clause of Article XIX:1(a).¹⁰³

Unforeseen developments

“Unforeseen developments” are developments that would have been “unforeseen” or

“unexpected” at the time the importing WTO member undertook relevant GATT 1994

99. Section 1, Order.

100. Steel Goods at 9.

101. The first clause in Article XIX:1(a) does not establish independent conditions, but rather describes

certain circumstances that must be demonstrated as a matter of fact. Ukraine – Definitive Safeguard

Measures on Certain Passenger Cars (20 July 2015), WTO Docs. WT/DS468/R and Add. 1, Report of

the Panel [Ukraine – Passenger Cars] at para. 7.52, citing Korea – Definitive Safeguard Measure on

Imports of Certain Dairy Products (21 December 1999), WTO Docs. WT/DS98/AB/R, Report of the

Appellate Body at para. 85 [Korea – Dairy] and Argentina – Footwear at para. 92.

102. For safeguards to be applied on imports of several different products, “the demonstration of ‘unforeseen

developments’ must be performed for each product subject to a safeguard measure.” US – Steel at

para. 319; US – Lamb at paras. 72 and 76; Ukraine – Passenger Cars at para. 7.52.

103. Ukraine – Passenger Cars at paras. 7.52-7.54.

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obligation(s).¹⁰⁴More specifically, unforeseen developments are “developments occurring after the

negotiation of the relevant tariff concession which it would not be reasonable to expect that the

negotiators of the country making the concession could and should have foreseen at the time when

the concession was negotiated.”¹⁰⁵The Tribunal is expected to demonstrate the existence of

unforeseen developments, and explain how they resulted in increased imports.¹⁰⁶

The existence of relevant unforeseen developments can be established by evidence

provided by the domestic industry.¹⁰⁷The Tribunal must provide reasoned and adequate

explanations to show how the developments were unexpected or unforeseen,¹⁰⁸and resulted in

increased imports.¹⁰⁹This includes explaining the timing of events that form the basis of the

unforeseen developments in order to show that there is a temporal connection between the events

themselves and the increase in imports.¹¹⁰

Canada’s GATT 1994 obligations respecting the seven classes of steel goods, specifically

the relevant tariff concessions, were undertaken by Canadian negotiators in the Uruguay Round of

Multilateral Trade Negotiations. The issue is whether the increase in imports resulted from

developments that could not have been reasonably foreseen by trade negotiators in 1994, when

Canada undertook obligations applicable to the subject steel goods.¹¹¹

Ultimately, the issue is not whether an increase in imports was unforeseen.¹¹²Rather, the

issue is whether there were unforeseen developments that resulted in or led to the import surge.¹¹³

In matters related to international trade in steel, the overarching unforeseen development

since 1994 is the continuing and increasing overcapacity in world steel production. While there may

have been excess steelmaking capacity in 1994, it could not be foreseen that such a situation would

not only persist, but dramatically worsen for over two decades, i.e. until the present time. As noted

above, since 2000, global crude steelmaking capacity has more than doubled from 1,061 million

tonnes to an estimated 2,290.7 million tonnes in 2018.¹¹⁴Over the same period, beginning just prior

to China’s accession to the WTO, China’s crude steelmaking capacity has increased sevenfold from

149.6 million tonnes in 2000 to an estimated 1,048.0 million tonnes in 2018.¹¹⁵Since 2000, the

104. Korea – Dairy at para. 86; Argentina – Footwear at para. 93. Events that have been found to constitute

“unforeseen developments” include: an increase in non-domestic production capacity, higher domestic

demand, decreased demand in major markets, and currency depreciation. See India – Certain Measures

on Imports of Iron and Steel Products (6 November 2018), WTO Doc. WT/DS518/R, Report of the

Panel [India – Steel] at para. 7.97.

105. Argentina – Footwear at para. 96, citing the Report of the Intersessional Working Party on the

Complaint of Czechoslovakia Concerning the Withdrawal by the United States of a Tariff Concession

under the Terms of Article XIX, GATT/CP/106, adopted 22 October 1951.

106. Ukraine – Passenger Cars at para. 7.67; India – Steel at para. 7.88.

107. Ibid.

108. Ibid. at 7.95.

109. Ibid. at para. 7.87.

110. Ibid. at para. 7.114.

111. Argentina – Definitive Safeguard Measure on Imports of Preserved Peaches (14 February 2003), WTO

Docs. WT/DS238/R, Report of the Panel [Argentina – Preserved Peaches] at paras. 7.25-7.29; U.S. –

Steel at para. 10.74.

112. Ukraine – Passenger Cars; Argentina – Preserved Peaches.

113. Ibid.

114. Exhibit GC-2018-001-066.29, Vol. 1 at 4.

115. Ibid.

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global crude steelmaking capacity-to-consumption gap has more than tripled from just over

200 million tonnes to approximately 650 million tonnes in 2016.¹¹⁶

Continued and increasing overcapacity of this magnitude and duration was not, and could

not have been predicted in 1994, as it could not be forecast by market mechanics. Instead, numerous

complex socio-political factors, such as the continuing transition of China’s industry and economy,

were at play to continue and exacerbate this overcapacity.

A second unforeseen development was the imposition of measures regarding steel imports

by U.S. President Trump pursuant to a self-initiated investigation under section 232 of the Trade

Expansion Act of 1962. This section authorizes the President of the United States, through tariffs or

other means, to adjust the imports of goods or materials from other countries if it is found that the

quantity or circumstances surrounding those imports threaten to impair national security. President

Trump imposed the section 232 measures on steel (and aluminum) from most countries in early

2018, and extended the coverage to include Canada on May 31, 2018.¹¹⁷

The product-specific parts of this Report also discuss these and other issues related to

unforeseen developments.

Obligations under GATT 1994

Article XIX:1(a) requires identification of the specific obligations (including tariff

concessions), and the effect thereof, that resulted in the increase in imports.¹¹⁸The Tribunal’s report

is expected to identify the relevant GATT 1994 obligation(s), and to explain how the obligation(s)

limits its ability to react to the import surge causing injury.¹¹⁹

There are several such obligations identified by the Tribunal. These include the facts that

Canada:

 committed not to impose quantitative restrictions under Article XI of GATT 1994, and

 bound the tariff applicable to the seven classes of goods at zero percent.

Article II of GATT 1994 established Schedules of Concessions that set out the WTO

Members’ tariff concessions. Article II provides that products for which tariff concessions were

made should be exempt from ordinary customs duties in excess of those provided in the

Schedule.¹²⁰As a result, not only did tariff concessions reduce tariffs, they prevented WTO

116. Ibid. at 12.

117. The Tribunal believes this to be the first time this section 232 has been used since the creation of the

WTO in 1995.

118. Ukraine – Passenger Cars at para. 7.96.

119. India – Steel at para. 7.89.

120. For example, Article II:1(b) provides as follows:

(b) The products described in Part I of the Schedule relating to any contracting party, which are the products

of territories of other contracting parties, shall, on their importation into the territory to which the Schedule

relates, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt from

ordinary customs duties in excess of those set forth and provided therein. Such products shall also be exempt

from all other duties or charges of any kind imposed on or in connection with the importation in excess of

those imposed on the date of this Agreement or those directly and mandatorily required to be imposed

thereafter by legislation in force in the importing territory on that date.

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Members from unilaterally applying higher tariffs, except under exceptional circumstances.

Therefore, under Article II and the related Schedules of Concessions, a WTO member cannot

impose tariffs above the bound tariff rate.

A tariff binding is a tariff concession, and represents an obligation not to raise the tariff

above the bound rate.¹²¹Thus, the effect of a bound tariff is that it limits the ability of a WTO

member to increase the tariff to stem the flow of increased imports.

As such, the bound tariffs and the inability to impose quantitative restrictions regarding the

seven classes of goods prevented Canada from addressing any significant increase in imports.

However, the Agreement on Safeguards continued to provide an emergency mechanism (including

quotas, TRQs or duties) to deal with such fairly traded goods including steel products.

Therefore, for classes of subject goods with a significant increase in imports, the Tribunal

has examined whether the increase resulted from the applicable Canadian concessions and related

obligations including those not to impose a higher tariff.

Serious injury

The Order requires the Tribunal to determine, assuming the relevant conditions precedent

discussed above are satisfied, whether imports of the subject goods are a principal cause of serious

injury to domestic producers.¹²²“Serious injury” is defined as meaning, in relation to domestic

producers of like or directly competitive goods, a “significant overall impairment in the position of

the domestic producers.”¹²³Serious injury is clearly more than material injury as the latter term is

used in the Special Import Measures Act¹²⁴proceedings. Given the definitions and the context,

which is that safeguard measures are emergency ones, the Tribunal views this determination as

having a high threshold and as being product-specific. In examining whether the domestic industry

suffered serious injury, the Tribunal was required to evaluate all relevant factors that have a bearing

on domestic producers of like or directly competitive goods, including actual changes in the level of

production, employment, sales, market share, profits and losses, productivity, return on investment,

utilization of production capacity, cash flow, inventories, wages, and growth or the ability to raise

capital or investments.¹²⁵

121. The WTO’s Dictionary of Trade Policy Terms defines this term in part as follows: “Binding: also called

concession. A legal obligation not to raise tariffs on particular products above the specified rate agreed in

WTO negotiations and incorporated in a country’s schedule of concessions” (online at

http://ctrc.sice.oas.org/trc/WTO/Documents/Dictionary%20of%20trade%20%20policy%20terms.pdf).

122. Order, subsection 3(1).

123. CITT Act, section 2. Under Article 4.1(a) of the Agreement on Safeguards, “serious injury” is defined as

“a significant overall impairment in the position of a domestic industry.” “Serious injury” is similarly

defined under Article 805 of NAFTA.

124. R.S.C., 1985, c. S-15 [SIMA].

125. CITT Act, subsection 5(4). The Tribunal notes that whether a domestic producer missed or would miss

an internal target for profits or return on investment does not necessarily translate into a significant

overall impairment, i.e. serious injury, or threat of serious injury to a domestic industry. The Tribunal has

previously indicated that, in the context of SIMA, internal targets are not performance indicators that, in

and of themselves, concern the Tribunal. Gypsum Board (20 August 2018), PI-2018-003 (CITT) at

para. 60.

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Similarly, Article 4.2(a) of the Agreement on Safeguards and paragraph 9 of Annex 803.3

of NAFTA also require the Tribunal to consider a list of relevant factors, all of which are reflected in

the factors identified above.¹²⁶

Principal cause of serious injury

Where the Tribunal finds that the domestic producers have suffered serious injury, it must

assess whether the increased imports are a principal cause of that serious injury.¹²⁷“Principal cause”

is defined as meaning an important cause that is no less important than any other cause of the

serious injury or the threat thereof.¹²⁸A causal link between the increased imports and serious

injury must be established, and serious injury caused by factors other than increased imports must

not be attributed to increased imports.¹²⁹

As part of this analysis, the Tribunal was required to examine the effect of imported subject

goods on prices of like or directly competitive goods produced and sold in Canada.¹³⁰Specifically,

the Tribunal had to consider whether:

 the prices of the imported goods significantly undercut the prices of like or directly

competitive goods produced and sold in Canada; and

 the effect of the imported goods was to depress significantly the prices of, or to limit to

a significant degree increases in the prices of, like or directly competitive goods

produced and sold in Canada.¹³¹

For the purpose of determining whether there is a causal link between the increased imports

and the serious injury or threat thereof, the Tribunal considers the effect of the increased imports on

the domestic producers, and takes steps to ensure that any injury caused by other factors is not

attributed to the increase in imports.¹³²Specifically, the Tribunal examines other factors potentially

causing injury, and if such factors have caused injury, the Tribunal evaluates whether the impact of

the injurious factors was more important than the impact of the increase in imports.¹³³

Threat of serious injury

When the Tribunal finds that there has been a significant increase in the importation of a

good, but that there was no serious injury or increased imports were not a principal cause of serious

injury, the Tribunal must determine whether the increased imports are a threat of serious injury.¹³⁴

Threat of serious injury means serious injury that, on the basis of facts, and not merely of

126. The Tribunal’s Notice of Commencement of Inquiry includes a consolidated list of the injury factors

enumerated in the Order and in section 5 of the CITT Regulations.

127. Order, subsection 3(1), and CITT Act, paragraph 20(a).

128. CITT Act, subsection 19.01(1). The definition applies to inquiries under section 20 of the CITT Act.

129. Agreement on Safeguards, Article 4.2. Paragraph 10, Annex 803.3, NAFTA, has similar requirements.

130. CITT Regulations, subsections 5(1) and 5(3).

131. Ibid.

132. Bicycles and Frames at para. 107.

133. Ibid.

134. Order, subsection 3(1).

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allegations, conjecture or remote possibility, is clearly imminent.¹³⁵Article 4.1(b) of the Agreement

on Safeguards, as well as Article 805 of NAFTA, defines this term in a similar manner.

The Tribunal is therefore mindful that a determination of threat is to be based on facts and

not on “conjecture”.¹³⁶Further, the Tribunal notes the following guidance from the WTO’s

Appellate Body:

. . . [W]e see the word “clearly”, which qualifies the word “imminent”, as an indication that

there must be a high degree of likelihood that the anticipated serious injury will

materialize in the very near future. We also note that Article 4.1(b) provides that any

determination of a threat of serious injury “shall be based on facts and not merely on

allegation, conjecture or remote possibility.” To us, the word “clearly” also relates to the

factual demonstration of the existence of the “threat”. Thus, the phrase “clearly imminent”

indicates that, as a matter of fact, it must be manifest that the domestic industry is on the

brink of suffering serious injury.¹³⁷

[Italics in original; bold added for emphasis]

On a related point, the WTO Panel in U.S. – Coated Paper (Indonesia) observed the

following:

. . . [I]t is the essence of a threat determination that the situation existing during the POI is

predicted to change such that there will be injury in the imminent future, if measures are not

imposed. The lack of present material injury caused by subject imports may be a

consequence of their volumes during the POI, their price effects, their impact during the

POI or the injurious effects of other factors. What is important in a determination of threat

of injury is that the investigating authority adequately explains, based on the evidence

before it, why the situation it predicts can be projected to occur.¹³⁸

[Emphasis added]

In conducting its analysis of whether there is a threat of serious injury, the Tribunal first

assessed the state of the market in the most recent part of its POI, i.e. during the first half of 2018, in

order to assess likely future events. The Tribunal has taken into account the evidence received on

demand, prices, and the general economic and financial situation for steel for 2018 in Canada, and

world markets. Then, the Tribunal considered whether an evaluation of the factors listed under

subsection 5(4) of the CITT Regulations indicated that a negative impact would materialize in the

near future; in this inquiry, the near future is generally meant to be the next 12 months, i.e. within

calendar year 2019.

Principal cause of threat of serious injury

Where the Tribunal finds that the domestic producers are threatened with serious injury, it

must assess whether the increased imports are a principal cause of this threat.¹³⁹As with serious

injury, a causal link between the increased imports and the threat of serious injury must be

135. CITT Act, subsection 2(1).

136. Agreement on Safeguards, Article 4(1)(b).

137. US – Lamb at para. 125.

138. United States – Anti-Dumping and Countervailing Measures on Certain Coated Paper from Indonesia

(6 December 2017), WTO Docs. WT/DS491/R, Report of the Panel at para. 7.313.

139. Order, subsection 3(1); CITT Act, paragraph 20(a).

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established under the provisions of the Agreement on Safeguards, and serious injury which will be

caused by factors other than increased imports must not be attributed to increased imports.¹⁴⁰

In assessing whether there is a causal link, the Tribunal considered what would be the effect

of imported subject goods on prices of like or directly competitive goods produced and sold in

Canada.

Goods of certain free trade agreement partners

Panama, Peru, Colombia, Honduras and Korea

Where the Tribunal finds serious injury or threat thereof, it must conduct a separate analysis

in respect of goods imported from Canada’s free trade agreement partners of Panama, Peru,

Colombia, Honduras and Korea. The analysis has two parts.

First, where the Tribunal determines that imports of a class of goods from all subject

sources are being imported in such increased quantities and under such conditions as to be a

principal cause of serious injury, or threat of serious injury, to the domestic producers of like or

directly competitive goods, the Tribunal shall determine whether imports of the goods from

Panama, Peru, Colombia, Honduras and Korea,¹⁴¹each taken on their own, are a principal cause of

the serious injury or threat of serious injury.¹⁴²

Second, where the Tribunal determines that imports of a class of goods from Panama, Peru,

Colombia, Honduras or Korea are not a principal cause of serious injury or threat thereof, it must

then determine whether all the goods of that class were imported into Canada from all other

countries subject to the inquiry that are not covered by any such determination, in such increased

quantities and under such conditions as to be a principal cause of serious injury or threat thereof to

domestic producers of like or directly competitive goods.¹⁴³

Mexico (energy tubular and wire rod)

If the Tribunal finds serious injury or threat thereof regarding energy tubular products or

wire rod, it must also conduct a separate analysis in respect of such goods imported into Canada

from Mexico.¹⁴⁴The analysis has two parts.

First, where the Tribunal determines that imports of energy tubular products or wire rod

from all subject sources are being imported in such increased quantities and under such conditions

as to be a principal cause of serious injury, or threat of serious injury, to the domestic producers of

like or directly competitive goods, the Tribunal must determine whether the quantity of such goods

imported from Mexico accounts for a substantial share of total imports of goods of the class in

question; and the goods imported from Mexico contribute importantly to the injury or threat

140. Article 4.2, paragraph 10. Annex 803.3, NAFTA, has similar requirements.

141. The Tribunal must assess whether specified imported goods from Korea and goods of the same kind

imported from other countries are being imported in increased quantities “in absolute terms” (CITT Act,

section 20.07).

142. CITT Act, sections 20.031, 20.04, 20.05, 20.06 and 20.07.

143. Order, section 5.

144. Order, section 4.

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thereof.¹⁴⁵“Contribute importantly” means an important cause, but not necessarily the most

important cause.¹⁴⁶

Second, where the Tribunal determines that energy tubular product or wire rod imports

originating in Mexico do not account for a substantial share of total imports of the class of goods at

issue or do not contribute importantly to serious injury or threat thereof, it must then determine

whether all the goods of that class were imported into Canada from all other countries subject to the

inquiry that are not covered by any such determination, in such increased quantities and under such

conditions as to be a principal cause of serious injury or threat thereof to domestic producers of like

or directly competitive goods.¹⁴⁷

RECOMMENDATIONS ON APPROPRIATE REMEDIES

The Order provides as follows:

[I]f the Tribunal determines that importation of the goods of a class described in the

schedule is a principal cause of serious injury or threat thereof to domestic producers of like

or directly competitive goods, the Tribunal must make recommendations, in respect of each

class of goods, as to the most appropriate remedy to address, over a period of three years,

the injury caused or threatened to be caused by increased importation into Canada of that

class of goods, in accordance with Canada’s rights and obligations under international trade

agreements.¹⁴⁸

Three different types of trade measures are commonly used to remedy serious injury or

threat thereof caused by increased imports. The first is simple surtaxes, which apply to all imports

irrespective of their volume. The second is quotas, which establish an upper limit on the absolute

volume of imports that can enter the market within a given period of time. Finally, there are TRQs,

which impose different tariff rates below and above a predetermined import volume threshold.

The Tribunal asked parties to consider potential remedies in their submissions. The

Tribunal considered all of the evidence and argument presented on the subject of remedies,

including the relative suitability of the three types of remedies available.

As will be discussed later in this report, the Tribunal is recommending that TRQs be

applied on imports of the two products for which it is recommending a remedy.

Indetermining the appropriate level of the above-quota surtax, the Tribunal considered

various factors including (1) the threat of serious injury caused by increased imports, (2) the views

of the various parties on the level of surtax required, (3) the methodologies suggested by various

parties for establishing a surtax, (4) domestic prices during the POI, and (5) the recent developments

in the market for each of the products. In formulating its recommendations where threat of injury to

a domestic industry was found, the Tribunal has taken into account the needs of those domestic

producers as well as the interests of the downstream industries. The Tribunal believes that there is

an important public interest issue in achieving a balanced recommendation on remedy, one that

removes the threat of serious injury to the domestic producers from increased imports, while, at the

same time, minimizing the costs to the Canadian economy.

145. CITT Act, section 20.01.

146. CITT Act, subsection 20.01(1), and Article 805, NAFTA.

147. Order, section 4.

148. Order, subsection 6(1).

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In this approach, the Tribunal is taking into account the positions of all interested parties

and is recommending that safeguard measures be applied only to the extent necessary to offset the

threat of serious injury being caused by increased imports, and in a manner consistent with

Canada’s international obligations, including Article 7.4 of the Agreement on Safeguards, which

provides that, in order to facilitate adjustment, the Member applying the safeguard measures shall

progressively liberalize them at regular intervals during the period of application.

The Tribunal also believes that the Government should periodically review these measures

to ensure that they remain appropriate. This recommendation reflects the fact that Canadian and

global market conditions could change significantly during the period of the application of the

measures. Also, the Government should take account of the manner in which trade measures on

steel are applied in the United States, the European Union or other jurisdictions and of any changes

that may be made there in response to market or other conditions.

Article 2(2) of the Agreement on Safeguards provides that safeguard measures shall be

applied to a product being imported irrespective of its source. However, the Tribunal was directed

by section 5 of the Order to exclude from any remedy, steel goods originating in Panama, Peru,

Colombia, Honduras and Korea, if they are not found to be a principal cause of serious injury or

threat of serious injury. In this case, the Tribunal would recommend that measures be applied to

imports from any remaining countries. In addition, the Tribunal’s recommendations on remedy do

not apply to imports originating in the United States, Chile, Mexico,¹⁴⁹Israel or other CIFTA

beneficiary.

Article 9.1 of the Agreement on Safeguards provides that “safeguard measures shall not be

applied against a product originating in a developing country Member as long as its share of imports

of the product concerned in the importing Member does not exceed three percent, provided that

developing country Members with less than three percent import share collectively account for not

more than nine percent of total imports of the product concerned.”

Similarly, subsection 6(2) of the Order provides that the Tribunal’s recommendations must

not address goods of a class that are being imported from a country benefiting from the GPT—and

originating in that country—for which importation of the goods of that class did not, in 2017,

exceed 3 percent of the total importation of goods of that class, provided that the importation of

goods of that class from all countries benefiting from the GPT did not, in 2017, exceed 9 percent of

the total importation of goods of that class.

Consequently, the Tribunal recommends that imports from countries benefiting from the

GPT that meet these conditions be excluded from the application of safeguard measures.

149. Except in the case of energy tubular products and wire rod.

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PART IV – HEAVY PLATE

PRODUCT

The first class of goods subject to the Tribunal’s inquiry is heavy plate. The Order provides

the following description of this class of goods:¹⁵⁰

Hot-rolled carbon steel plate and high-strength low-alloy steel plate not further

manufactured than hot-rolled, heat-treated or not, in widths from 80 inches (± 2,030 mm) to

152 inches (± 3,860 mm), and thicknesses from 0.375 inches (± 9.525 mm) to 4.0 inches

(101.6 mm), with all dimensions being plus or minus allowable tolerances contained in the

applicable standards. For greater certainty, these dimensional restrictions apply to steel

plate, which contains alloys greater than required by recognized industry standards

provided that the steel does not meet recognized industry standards for an alloy-

specification steel plate.

The following goods are excluded:



all plate in coil form, and

all plate having a rolled, raised figure at regular intervals on the surface (also

known as floor plate).

Heavy plate that is the subject of this inquiry is a subset of “plate” as defined for numerous

previous SIMA proceedings;¹⁵¹heavy plate is a wider and thicker type of plate. In those

proceedings, the Tribunal has made numerous factual findings in terms of methods of production

and product characteristics for plate and those findings are relevant here. The Tribunal takes judicial

notice and adopts the following:

 While details vary from mill to mill, the process by which plate is produced from

molten steel generally consists of the following steps: slab production, descaling,

rolling, levelling and cutting to size; the plate is then tested and shipped. Plate may be

heat-treated in processes that may include annealing, normalizing, stress relieving,

quenching, tempering or combinations of these treatments.¹⁵²

 Plate formed directly into rectangular shapes is referred to in the steel industry as

“discrete plate” and may be produced in any thickness covered by the product

definition. The rectangular shapes can also be produced by unwinding plate that has

been formed into coils and cutting it into separate lengths. Such plate is referred to as

“plate from coil” or “cut-to-length plate”.¹⁵³

 Heavy plate is used in a number of applications, the most common of which are the

production of rail cars, oil and gas storage tanks, heavy machinery, agricultural

150. In addition, the Department of Finance published an illustrative list of HS Codes for heavy plate, which

are 7208.51.00.10, 7208.51.00.93, 7208.51.00.94, 7208.51.00.95, 7208.52.00.10, 7208.52.00.93 and

7208.52.00.96: Exhibit GC-2018-001-01A, Vol. 1 at 3.

151. See, for example, Plate from Ukraine (30 January 2015), RR-2014-002 (CITT) [Plate from Ukraine];

Plate from Korea et al. (20 May 2014), NQ-2013-005 (CITT) [Plate from Korea et al.]; Plate from

Bulgaria et al. (7 January 2014), RR-2013-002 (CITT) [Plate from Bulgaria].

152. Plate from China (9 August 2018), RR-2017-004 (CITT) at para. 13.

153. Ibid. at para. 14.

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equipment, bridges, industrial buildings, high-rise office towers, automobile and truck

parts, ships and barges, and pressure vessels.¹⁵⁴

 Plate is a commodity product that is sold on the basis of price, all other criteria being

equal.¹⁵⁵Its production is capital-intensive and exhibits high fixed costs of production,

which provide an incentive for steel mills to increase production to cover these costs.¹⁵⁶

SUMMARY

The Tribunal finds that heavy plate from the subject countries (other than goods originating

in Korea, Panama, Peru, Colombia and Honduras) is being imported in such increased quantities

and under such conditions as to be a principal cause of a threat of serious injury to the domestic

industry. The Tribunal therefore recommends a remedy in the form of a TRQ on imports of heavy

plate from subject countries, other than goods originating in Korea, Panama, Peru, Colombia,

Honduras, or countries whose goods are eligible for GPT treatment.

ANALYSIS

The legal principles applicable to the analysis are set out in Part III of this report.

Like or directly competitive goods

The like goods are goods of the same description as above, manufactured in Canada.

Although parties opposing the imposition of safeguard measures contested the ability of the

domestic industry to make all specifications of heavy plate, they did not present any evidence or

argument that the domestic industry did not produce like goods. The Tribunal considered these

arguments not to be relevant to a like-product analysis in the context of this safeguard inquiry.

Those arguments may be relevant in the context of a like-product analysis under SIMA where

parties can argue that there is more than a single class of goods within the definition of like goods or

in the context of an exclusion request. However, the Order expressly indicates that heavy plate

constitutes a single class of goods and specifically instructed the Tribunal not to hear any motion to

exclude any good from a class of goods or that would otherwise limit the scope of the inquiry,

determination or recommendations.

The evidence was that domestic heavy plate is identical to, or has uses and other

characteristics that closely resemble, the imported heavy plate that is the subject of this inquiry.¹⁵⁷

On the basis of evidence on the record, the Tribunal finds that domestically produced heavy plate is

like goods or directly competitive goods to the subject imported heavy plate.

Domestic producers

Three domestic producers of heavy plate in Canada responded to the Tribunal’s Producers’

Questionnaire. They are Algoma Steel Inc. (formerly Essar Steel Algoma Inc., [Algoma]), SSAB

154. Ibid. at para. 15.

155. Plate from Ukraine at para. 88; Plate from Bulgaria et al. at para. 32; Plate from Korea et al. at para. 96.

156. Exhibit GC-2018-001-071.06, Vol. 5 at 27, 45-46; Exhibit GC-2018-001-072.06 (protected), Vol. 6

at 27, 45-46; Plate from China (8 January 2013), RR-2012-001 (CITT) at paras. 99-101.

157. Exhibit GC-2018-001-020.08, Vol. 3.

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Central Inc. (SSAB) and Janco Steel Ltd. (Janco).¹⁵⁸Algoma, by far the largest domestic

producer,¹⁵⁹is an integrated steel mill located in Sault Ste. Marie, Ontario. SSAB is a steel service

centre located in Scarborough, Ontario, and Janco is a steel service centre located in Stoney Creek,

Ontario.

Parties opposing did not present any evidence or argument that there were any other

significant domestic producers.

Therefore, the Tribunal finds that the collective output of these producers constitutes a

major proportion of the total domestic production of heavy plate.

Increase in imports

Table 1 shows the volume of imports of heavy plate into Canada for the period of

January 1, 2015, to June 30, 2018.

Table 1

Imports of Heavy Plate (Volume)

(Tonnes)

Interim

2015

2016

74,261

497,191

2017

56,049

241,015

2018

51,284

190,305

Subject

Countries

Total Imports

106,574

474,141

147,373

535,622

Source: Exhibit GC-2018-001-05B, Vol. 1.1 at 16.

158. Samuel, Son & Co., Limited (Samuel) is a service centre which likely produces some like goods at

various locations in Canada. It was asked to complete a Producers’ Questionnaire. Samuel was not

included in the Statistical Summary as a domestic producer because, after several revisions, its response

to the questionnaire was not viewed as reliable. Samuel’s revised response indicated that the amount of

its production within the scope of the inquiry is a minor proportion of domestic production: Exhibit GC-

2018-001-104 (protected), Vol. 2; Exhibit GC-2018-001-105 (protected), Vol. 2 and Exhibit GC-2018-

001-108 (protected), Vol. 2. The part of Samuel’s response regarding its imports was included as part of

importer data. Several other steel service centres that produced substantial volumes of plate within the

scope of previous proceedings responded to the Producers’ Questionnaire that they did not produce

heavy plate as defined in this inquiry, for example: Acier Nova Inc. (Exhibit GC-2018-001-20.06, Vol. 3

at 1-2), Del Metals (Exhibit GC-2018-001-20.04, Vol. 3 at 1-2), Evraz Inc. NA Canada (Exhibit GC-

2018-001-20.07, Vol. 3 at 1-3), Russel Metals Inc. (Exhibit GC-2018-001-20.03, Vol. 3 at 1-2), Varsteel

Ltd. (Exhibit GC-2018-001-20.13, Vol. 3 at 1-2). As well, a previously unknown domestic producer,

High Strength Plates & Profiles Inc. (HSPP), made itself known to the Tribunal. HSPP did not provide

any production data, but did complete an Importers’ Questionnaire: Exhibit GC-2018-001-35.04,

Vol. 3.1. HSPP is also very likely to account for a very minor amount of domestic production, as it was

completely unknown to the industry and the Tribunal in all previous Plate proceedings.

159. Since Algoma is such a large part of the domestic industry, much of the domestic industry’s information

(including trends in financial performance) was kept confidential in order to protect Algoma’s business

interests and the integrity of the Tribunal process.

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Parties opposing the imposition of a safeguard remedy argued that there was no increase in

imports which satisfied the requirements of Canadian law and the Agreement on Safeguards. Parties

supporting the imposition of a safeguard remedy had a contrary position. They also introduced

evidence from Statistics Canada regarding imports in Q3 of 2018.¹⁶⁰

Table 1 shows that, in absolute terms, the volume of subject imports of heavy plate into

Canada decreased in 2016 as compared to 2015, but then suddenly and sharply increased by

approximately 73,000 tonnes in 2017. In percentage terms, the increase of 98 percent in 2017 was

the sharpest year-on-year increase observed for any class of goods in this inquiry. While the volume

in 2016 was much reduced as compared to the 2015 volume, the volume in 2017 was still

38 percent greater than the 2015 volume.

Subject imports decreased by nine percent in interim 2018 as compared to interim 2017,

but this rate of decrease nevertheless implies that the volume of subject imports was on pace to

remain at a sharply higher volume compared to the full years 2015 and 2016. This is because a

simple comparison of the first halves of 2017 and 2018 masks the fact that most of the increase in

subject imports in 2017 (approximately 60 percent) occurred in the second half of the year.

In terms of assessing the most recent trends in the volume of subject imports, the Tribunal

determined that, in the case of heavy plate, Statistics Canada data were reliable and useful, with

imports in the prior two quarters tracking the data compiled by the Tribunal.¹⁶¹The Statistics

Canada import data for 2018 show that the volume of subject imports up to the end of the third

quarter of 2018 was 118,284 tonnes, which was already greater than the full-year volume for

2015.¹⁶²

The ratio of subject imports to domestic production¹⁶³increased along a similar trend. In

2016, the ratio decreased by 12 percentage points, but then increased by 38 percentage points in

2017, for a net increase of 20 percentage points over the three-year period. There was an increase of

one percentage point in interim 2018 as compared to interim 2017. In other words, while there was

an absolute decrease in subject imports in interim 2018, there was no decrease relative to domestic

production.

160. The general discussion concerning the admissibility of Q3 2018 data is contained in Part II above. In the

case of heavy plate, parties opposed argued that the Statistics Canada data was neither admissible nor

reliable.

161. The Tribunal conducted an analysis to assess the accuracy of the Statistics Canada import volume data

regarding heavy plate by comparing the first half 2017 and first half 2018 Statistics Canada data with the

data regarding these same periods as presented in the Tribunal’s Statistical Summary for Plate. The

Tribunal’s analysis showed that its data represented 97 percent and 95 percent of the Statistics Canada

data for first half 2017 and first half 2018, respectively. Therefore, the Tribunal has concluded that the

Statistics Canada data for imports of heavy plate in Q3 2018 is accurate and useful for the purposes of its

inquiry regarding this class of goods: Exhibit GC-2018-001-071.06, Vol. 5 at 12.

162. Testimony indicated that seasonal patterns in demand for imports remained stable in the Canadian

market throughout the POI, which suggests that subject imports in the first half of 2018 (51,284 tonnes)

would be less than half the annual total. Therefore, the annual total in 2018 is very likely to be at least

127,000 tonnes, i.e. well in excess of the 106,574 tonnes imported in 2015: Transcript of Public Hearing

at 54; Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 16.

163. The volume of domestic production itself is confidential: Exhibit GC-2018-001-005B, Vol. 1.1 at 19.

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This increase in subject imports in 2017 is significant when viewed in the context of the

Canadian market. Relative to domestic sales from domestic production, imports of the subject

goods decreased by 20 percentage points in 2016, but then increased by 46 percentage points in

2017, for a net increase of 26 percentage points over the three-year period. There was also an

increase of two percentage points in interim 2018 as compared to interim 2017. In other words,

while there was an absolute decrease in subject imports in interim 2018, there was no decrease

relative to sales from domestic production. In addition, the increases in subject imports represent a

sizeable portion of the domestic market.¹⁶⁴

Accordingly, the Tribunal concludes that in 2017, there was an increase in subject imports

and that the increase in these imports was recent enough, sudden enough, sharp enough and

significant enough, in absolute terms and relative to domestic production of heavy plate.

Unforeseen developments and GATT 1994 obligations

Having found that there was such an increase in subject imports of heavy plate in 2017, the

Tribunal considers whether the increase resulted from unforeseen developments and the effect of

Canada’s GATT 1994 obligations.

Unforeseen developments

The domestic industry submitted that increasing global overcapacity and various trade

remedy actions, especially since 2017, were developments which could not be reasonably foreseen

by Canadian negotiators in 1994. Other parties submitted that these developments were not

“unforeseen” and could not be linked to the increase in imports.

For the reasons that follow, the Tribunal finds that the increase in imports was due to a

combination of unforeseen developments. The overarching unforeseen development is the

continuing unresolved and substantially increasing overcapacity in world steel production,

including heavy plate production, which could not be foreseen in 1994.

The developments in excess capacity for steel generally have been described in Part II

above.

Evidence on the record with regard to the global capacity utilization rate on reversing mills

(which capacity is dedicated exclusively to the production of discrete plate, mostly in the

dimensions covered by the heavy plate product description) is projected to remain well under 80

percent through 2020. The excess capacity will remain at about 40 million tonnes in 2019 and 2020,

which represents many times the size of the total Canadian market for plate in 2017. Evidence

shows that the majority of this global excess capacity is located in the subject countries.¹⁶⁵

The Tribunal’s record indicates that overcapacity in the new sources of heavy plate imports,

i.e. Turkey and Malaysia, was high.¹⁶⁶These sources of heavy plate imports in the POI are not

164. Exhibit GC-2018-001-005B, Vol. 1.1 at 16 and 20; Exhibit GC-2018-001-06B (protected), Vol. 2.1

at 20.

165. Exhibit GC-2018-001-071.06, Vol. 5 at 21, 47-49; Exhibit GC-2018-001-072.06 (protected), Vol. 6

at 21, 47-49.

166. Transcript of Public Hearing at 51; Exhibit GC-2018-001-066.27, Vol. 1 at 6, 13, 21, 37-40, 43; Exhibit

GC-2018-001-066.29, Vol. 1 at 4.

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subject to anti-dumping and countervailing (AD/CV) measures in Canada. The resulting pricing in

subject countries is persistently much lower than North American prices.¹⁶⁷Subject countries’

exports of heavy plate are shipped to various destinations around the world, including Canada, if

there is an opportunity to do so. The ensuing opportunistic and random trade flows were

unforeseen, and have created a situation resulting in import surges in markets open to such imports

such as the Canadian market for heavy plate.

The Tribunal has no doubt that continuing and increasing overcapacity generally, and

specifically in respect of new sources of heavy plate in the POI, led to the surge of heavy plate into

Canada in 2017 and that this surge was unforeseen.

The other unforeseen developments of importance for heavy plate imports into Canada

were even less predictable, including the major depreciation of the Turkish lira in mid-2017 and

omnibus U.S. AD/CV measures against plate from, among others, Turkey in early 2017,¹⁶⁸as well

as the proposed U.S. section 232 measures.¹⁶⁹These led directly to the increase in subject imports

in 2017.

GATT 1994 obligations

In 1994, Canada agreed not to impose quantitative restrictions on trade in goods and bound

the tariff for heavy plate at zero percent.¹⁷⁰The effect of the concession and the obligations arising

under Articles II:1(a) and XI of GATT 1994 was to prevent Canada from imposing tariffs above the

bound tariff rate or quotas as a means of addressing the significant increase in imports of heavy

plate in 2017.

Serious injury

Having found that subject imports have increased, the Tribunal has to determine whether

serious injury has occurred.

As determined by the Tribunal and admitted by Algoma, imports increased only as of

2017; it follows that any injury suffered in 2015 and 2016 cannot be attributed to an increase in

imports.¹⁷¹Accordingly, the Tribunal will focus on developments from 2017 on, but will also place

them in the context of the entire POI.

167. Transcript of Public Hearing at 16-17; Exhibit GC-2018-001-072.06 (protected), Vol. 6 at 135.

168. The issue of the depreciation of the Turkish lira as an unforeseen development is discussed at length in

the Reinforcing Bar chapter where the Tribunal acknowledges that while currency fluctuations per se are

foreseeable, it is of the view that, in this instance, it was the timing, speed and depth of the depreciation

of the modern lira within the context of the broader economic instability in Turkey that could not be

foreseen by negotiators in 1994. Similarly, while countries’ use of AD/CV measures per se are

foreseeable, the impact of omnibus U.S. AD/CV measures (covering almost a dozen countries) in the

context of the significant global overcapacity and trade uncertainty could not have been foreseen.

169. Exhibit GC-2018-001-003B, Vol. 1.1 at 15; Exhibit GC-2018-001-005B, Vol. 1.1 at 37; The Tribunal

heard evidence that the U.S. section 232 measures resulted in diversion even before their official

implementation: Transcript of Public Hearing at 14-15.

170. Exhibit GC-2018-001-066.43, Vol. 1 at 33 et seq.

171. The causes of injury in 2015-2016 were mainly Algoma’s restructuring from bankruptcy protection,

which created increased costs and market uncertainty over its operations and viability as a supplier.

However, Algoma emerged from bankruptcy protection in November 2018: Exhibit GC-2018-001-067,

Vol. 1 at 1.

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The following table summarizes the domestic industry’s performance during the POI. All

financial performance data of the domestic industry (which mainly consists of Algoma’s results)

gathered by the Tribunal, including percent changes, is confidential, so that not even index results

can be presented.

Table 2

Summary of Domestic Performance Indicators (Index)

Interim

2015

100

2016

100

93

97

83

2017

100

91

103

64

2017

100

2018

100

91

Practical Plant Capacity

Total Production

Production for Domestic Sales

Production for Export Sales

Capacity Utilization Rate (%)

93

91

Market

100

96

99

101

100

89

100

Domestic Sales from Domestic Production

Producers Market Share (%)

Total Direct Employees

100

97

95

98

102

107

85

100

111

109

107

84

Total Wages ($000) - Direct Employment

Total Hours Worked (000) - Direct Employment

Productivity - Tonnes/ Hour Worked (Direct)

Producer Inventories

Inventory as % of Production

100

87

95

88

97

100

125

138

Selling Prices

Domestic Sales from Domestic Production

Total - Subject Countries

Excluded Countries

100

89

84

90

104

98

103

100

111

107

108

Total - Subject Goods Market Share

Excluded Countries - Market Share

100

58

116

100

141

88

Note(s):

1. 2015 = 100 and Interim 2017 = 100

2. Index values are notional, and there is no indexing between a full calendar year and an interim period.

3. The bolded index values under “Selling Prices” indicate the lowest price in the market for that period.

Source: Exhibit GC-2018-001-05B, Vol. 1.1 at 15, 22, 25 and 31.

Algoma publicly presented some significant negative results and trends in key performance

indicators. Specifically, it presented that it was unable to grow its domestic sales, its productivity

declined in 2016, 2017 and interim 2018, and its capacity utilization fell from interim 2017 to

interim 2018. Parties opposed argued that the negative performance was not caused by increased

imports but rather by other factors, mostly related to Algoma’s restructuring.

In terms of trends for key performance indicators in 2017, the domestic industry performed

better in 2017 compared to 2016 despite the increase in subject imports. Its results in 2017 were

generally positive.

Indeed, production for domestic sales, domestic sales from domestic production, total

employment, total hours worked and total wages (as well as financial results) increased in 2017,

compared to declines in 2016.¹⁷²The domestic industry was able to maintain its share of the

172. Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 27, 31 and 32; Exhibit GC-2018-001-005B, Vol. 1.1

at 32.

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expanding market as subject imports took share from imports of U.S. heavy plate.¹⁷³The capacity

utilization rate and inventories in relation to domestic production remained stable.¹⁷⁴Total

production decreased marginally, entirely due to a decrease in production for export sales.

Productivity also declined.¹⁷⁵

As stated above, the majority of subject imports in 2017 entered Canada in the latter half of

2017, so it is not surprising that their impact would not be felt in that year. The selling prices of

subject imports significantly undercut domestic industry prices during 2017 and increasingly in

interim 2018, and were the price leaders throughout the POI (except for 2015); conversely, prices of

imports from the United States were the highest.¹⁷⁶

There was no evidence of price depression at the aggregate level as the selling prices of like

goods increased throughout the POI. However, as conceded by parties opposing, the domestic

industry experienced price suppression as evidenced in the movement in and magnitude of its gross

margin in interim 2018 compared to interim 2017.¹⁷⁷

Moreover, performance for interim 2018 started to show weaknesses particularly in certain

financial results, as well as in total production (both production for domestic and export sales

declined), sales volumes, capacity utilization and volumes of inventories.¹⁷⁸The domestic industry

did not lose market share despite the shrinking market as subject imports continued to gain share at

the expense of U.S. imports.¹⁷⁹

In summary, throughout the POI, the domestic industry’s performance was weak. On

balance, however, the Tribunal finds that the domestic industry did not experience a significant

overall impairment to its position in terms of the duration and magnitude of the impact caused by

the increased imports, and so did not experience serious injury.

On the basis of the preceding examination of the domestic industry’s performance

indicators, the Tribunal finds that the position of the domestic industry has not suffered significant

overall impairment and has therefore not experienced serious injury.

The Tribunal will now examine whether the increased subject imports threaten to cause

serious injury.

173. Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 20-22; Exhibit GC-2018-001-005B, Vol. 1.1 at 21.

174. Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 31.

175. Ibid. at 31-32; Exhibit GC-2018-001-005B, Vol. 1.1 at 32.

176. The degree of undercutting was greater when comparing importers’ landed prices to domestic selling

prices, and indicated undercutting even in 2015.

177. Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 25, 27; see also Exhibit GC-2018-001-070.08

(protected), Vol. 6 at 24; Exhibit GC-2018-001-072.06 (protected), Vol. 6 at 44.

178. Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 27, 31-32; Exhibit GC-2018-001-005B, Vol. 1.1 at

32.

179. Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 20, 21-22; Exhibit GC-2018-001-005B, Vol. 1.1 at

21.

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Threat of serious injury

Having determined that there were increased imports, but that there was no serious injury to

the domestic producers, the Tribunal must determine whether there is a threat of serious injury if

safeguard measures are not imposed.

The Tribunal is of the view that the increased imports of heavy plate into the Canadian

market will continue in their elevated amounts. There are distinct supply and demand factors

contributing to this situation. In terms of supply, the subject imports are being pushed out of their

domestic and other export markets by continuing and increasing excess capacity in the subject

countries and trade restrictions in many key markets. There is also a corresponding demand (or pull)

factor of the Canadian market being relatively high-priced and featuring no trade restrictions on a

number of subject countries.

The evidence before the Tribunal also indicates that the price undercutting, which persisted

through nearly all of the POI, was increasing in magnitude in interim 2018 as compared to prior

periods including interim 2017.¹⁸⁰Even with imports at current levels, it is likely that the existing

price undercutting would continue in the next 12 months if safeguard measures are not imposed.

In view of these circumstances, the Tribunal concludes that, without the protection afforded

by safeguard measures, the injury experienced by the domestic industry that began in interim 2018

will imminently become serious, and that the increased imports will be a principal cause thereof.

The domestic industry argued that it faced a threat of injury, caused by the increased

imports, and especially in light of a continued diversion of subject imports into Canada and the

domestic industry’s vulnerable overall condition. Parties opposing the imposition of safeguard

measures pointed to some of the improving results of the domestic industry in arguing the opposite

view.

As noted above, heavy plate is a commodity product that is sold on the basis of price, and

the high fixed costs of production provide an incentive for steel mills to increase production to

cover these costs.¹⁸¹

It is also important to note that importers who are willing to deal with the extra time

required for offshore heavy plate to be delivered to Canada have obtained the subject goods in large

quantities and at low prices in the past from a wide variety of sources, and there is no reason to

think that they will not continue to seek out new sources in the future.¹⁸²

With this context, the Tribunal began its analysis of threat of serious injury by assessing the

current state of both the Canadian and global markets for heavy plate. In that respect, the Tribunal

considers that current events and indicators are the best predictors of the near future. These included

the recent volumes of subject imports, and likely future impact of recent U.S. trade remedy

measures on imports of heavy plate. In addition, the Tribunal took into account the countermeasures

180. Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 25; Exhibit GC-2018-001-072.06 (protected), Vol. 6

at 14-16.

181. Exhibit GC-2018-001-071.06, Vol. 5 at 27, 45-46; Exhibit GC-2018-001-072.06 (protected), Vol. 6 at

27, 45-46; Plate from China (8 January 2013), RR-2012-001 (CITT) at paras. 99-101.

182. Transcript of Public Hearing at 48-52.

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which Canada placed on imports from the United States in mid-2018 as a response to U.S.

section 232 measures.

Within Canada, the evidence indicates stable demand for heavy plate in the near to medium

term.¹⁸³The extension of U.S. section 232 measures to Canada and Canada’s imposition of

countermeasures has fundamentally changed trade flows between Canada and the United States.

Whereas in the past Canadian plate pricing tended to track the U.S. Midwest price, this is no longer

the case as the higher U.S. price now reflects the additional protection offered by the section 232

measures. Nonetheless, compared to markets other than the United States, plate prices in Canada

are expected to remain relatively high over the short to medium term.¹⁸⁴

Globally, as more fully set out above in the Unforeseen Developments section for steel in

general, the subject countries exhibit significant plate overcapacity of over 40 million tonnes.¹⁸⁵

Their domestic sales, as well as exports to other jurisdictions, are also constrained by increasing

low-priced Chinese exports caused by the slowing Chinese economy.¹⁸⁶There is no evidence to

suggest that demand will increase significantly in other markets to absorb the excess capacity. Also,

the proliferation of trade remedy measures in various jurisdictions, including the United States and

the European Union, is restricting their options for other export sales.¹⁸⁷

As evidence of how quickly and easily global trade flows in heavy plate can change, the

witness for Algoma stated that the surge in subject imports into Canada started when AD/CV

actions in the United States were imposed in early 2017 on almost a dozen countries.¹⁸⁸In fact, data

gathered by the Tribunal indicates that some of the countries that contributed most significantly to

the increase in imports beginning in the second half of 2017 had measures imposed against them as

part of that proceeding.¹⁸⁹The increased import presence during the fall of 2018 also included

sources that had been unheard-of in the Canadian market for decades, such as the Republic of North

Macedonia.¹⁹⁰This further demonstrates that there are ample future sources of subject imports apart

from those countries that were part of the surge in imports in 2017. It also indicates that even though

there are many Canadian AD/CV findings on plate in Canada, the Canadian market remains open to

imports from a wide range of sources.

In the Tribunal’s view, the phenomenon of increased subject imports experienced in the

Canadian market in 2017, and persisting in Q3 2018, will continue in the immediate future if

183. Ibid. at 13, 19, 55; Exhibit GC-2018-001-071.06, Vol. 5 at 59.

184. Transcript of Public Hearing at 13-17; Transcript of In Camera Hearing at 22-23, 27; Exhibit GC-

2018-001-072.06 (protected), Vol. 6 at 60-62, Exhibit GC-2018-001-071.06, Vol. 5 at 60-62.

185. Ibid. at 21.

186. Ibid. at 22-23. Exhibit GC-2018-001-072.06 (protected), Vol. 6 at 22-23.

187. Exhibit GC-2018-001-071.06, Vol. 5 at 19-23; Exhibit GC-2018-001-072.06 (protected), Vol. 6 at

19-23; Exhibit GC-2018-001-005B, Vol. 1.1 at 52; Exhibit GC-2018-001-006B (protected), Vol. 2.1 at

52.

188. Transcript of Public Hearing at 15-16; Exhibit GC-2018-001-005B, Vol. 1.1 at 37 (Table 30).

According to that table, in a decision in early 2017, the United States added the following 10 countries to

be impacted by anti-dumping and/or countervailing measures on plate: Austria, Belgium, Brazil, France,

Germany, Italy, Japan, South Africa, Chinese Taipei and Turkey.

189. Exhibit GC-2018-001-35.21, Vol. 3.1 at 10; Exhibit GC-2018-001-20.10C, Vol. 3 at 8; Exhibit GC-

2018-001-35.22, Vol. 3.1 at 13.

190. Exhibit GC-2018-001-071.06, Vol. 5 at 24, 52, 65-66; Exhibit GC-2018-001-072.06 (protected), Vol. 6

at 24, 52, 65-66, 139; Transcript of Public Hearing at 42.

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safeguard measures are not imposed. Witnesses stated that subject imports have been filling the gap

left by imports of heavy plate from the United States.¹⁹¹Thus, the diversion of subject imports of

heavy plate originally destined for the United States is already occurring.

The most likely scenario is that sales of U.S. imports in Canada will continue to be

displaced by subject imports. First, U.S. imports would continue to face a 25 percent surtax. As

well, high U.S. domestic prices continue to make the domestic U.S. market (which is protected

against subject imports) more attractive for U.S. producers than the Canadian market.¹⁹²U.S.

producers are more likely to walk away from sales and not compete on price in the Canadian

market.

In terms of the future prices of the subject imports, the Tribunal heard confidential

testimony about the unchanging commercial rationale for the persistent undercutting of domestic

prices.¹⁹³Subject import sales and offers are already being made at accounts held by both U.S. or

Canadian producers and such competition will continue.¹⁹⁴Algoma also provided multiple

examples where it competed against low-priced offers from subject countries and reduced its prices

to make the sale.¹⁹⁵

Further, underlying market fundamentals suggest that domestic pricing may weaken in the

future. Although the Canadian price no longer necessarily tracks the Midwest price, that latter price

is forecast to decline from its high point after Q3 2018.¹⁹⁶To the extent Canada faces a similar

downward pricing trend, it will only be exacerbated by increased volumes of low-priced subject

imports.

As well, the unit cost of goods has been increasing in the later part of the POI and

especially in interim 2018,¹⁹⁷and there was no evidence presented that it would start to decrease in

the near term. Future increases in costs would make the domestic industry even more vulnerable to

price suppression.

All the above leads the Tribunal to conclude that increasing volumes of low-priced subject

imports would continue to compete with and displace sales of domestic heavy plate, take sales and

market share which could have otherwise been held by the domestic industry, and cause either

continued price suppression, as seen in interim 2018, or outright price depression.¹⁹⁸

Keeping in mind the fragile state of the domestic industry and the early signs of injury seen

in interim 2018, the evidence shows that such significant future effects would result in significant

lost profits and financial performance at unsustainable levels in the near future i.e. calendar year

2019.¹⁹⁹The Tribunal finds that such a decline in financial performance would have a cascading

overall negative impact on the domestic industry, including preventing Algoma from successfully

191. Ibid. at 52, 54-55.

192. Exhibit GC-2018-001-072.06 (protected), Vol. 6 at 60-62.

193. Transcript of In Camera Hearing at 55.

194. See, for example, Exhibit GC-2018-001-35.19, Vol. 3.1.

195. Transcript of In Camera Hearing at 8; Exhibit GC-2018-001-072.06 (protected), Vol. 6 at 14, 151.

196. Transcript of Public Hearing at 13; Exhibit GC-2018-001-071.06, Vol. 5 at 59, 60-62; Exhibit

GC-2018-001-072.06 (protected), Vol. 6 at 59, 60-62.

197. Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 27.

198. Precise market share information is confidential: Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 22.

199. Exhibit GC-2018-001-072.06 (protected), Vol. 6 at 26.

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emerging from its recent restructuring and returning it to its negative performance as seen in the

earlier part of the POI. Specifically, the impact of such negative financial performance would be

reductions or a halt to investments currently planned by Algoma,²⁰⁰layoffs and lost profits, among

other serious negative consequences. Very quickly, the continuing high levels of volumes of

lower-priced subject imports would lead to a deterioration in the overall position of the domestic

industry to such a degree that it would constitute serious injury.

In sum, the Tribunal concludes that the increased subject imports are a principal cause of a

threat of serious injury.

Given that the evidence indicates that the increase in subject imports is likely to be a

principal cause of threat of serious injury due to continued price suppression and price depression,

the Tribunal will address whether there are other causes of the threat of serious injury which are

more important.

First, the Tribunal considered the effect of further declines in export sales on the domestic

industry; the domestic industry’s export sales already declined 36 percent from 2015 to 2017 and

9 percent from interim 2017 to interim 2018. Although the loss of additional export volumes may

have a negative effect on the domestic industry, it will not be as important as the negative effect of

the subject imports, as export sales constitute a much smaller portion of total production compared

to domestic sales. Consequently, the decline in export volumes, and its effect of increasing the fixed

costs to be borne by domestic sales, would not account for most of the price suppression to be

suffered in the near future. In this respect, it should be noted that the domestic industry has more

than ample capacity to replace any lost export sales with domestic sales.

Second, the Tribunal considered whether imports from the United States, which are the

bulk of the imports of heavy plate into Canada, are a more important cause of the threat of serious

injury than the subject imports. The Tribunal’s data does not support such a proposition. During the

POI, imports from the United States were receding in volume in 2017 and interim 2018, and were

priced comparably with domestic industry prices.²⁰¹As discussed above, there is no reason to think

that imports from the United States will return to Canada in significant volumes, given the current

circumstances where U.S. producers can enjoy higher prices in their protected domestic market.

Finally, none of the important causes of threat of serious injury that may be relevant to

other products being investigated, including significantly diminished future demand, self-inflicted

injury due to domestic producer imports, or intra-industry competition, are applicable to heavy

plate.

To conclude, the Tribunal is of the view that there are no other causes of the threat of

serious injury more important, individually or collectively, than increased subject imports.

Therefore, based on the above review of the evidence, the Tribunal finds that there is a threat of

serious injury of which a principal cause is the increased subject imports.

200. Transcript of Public Hearing at 20-21.

201. Exhibit GC-2018-001-005B, Vol. 1.1 at page 17; Exhibit GC-2018-001-006B (protected), Vol. 2.1

at 23, 25.

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Goods of certain free trade agreement partners

In accordance with the principles discussed in Part III of this report, pursuant to the Order,

and in accordance with sections 20.031, 20.04, 20.05, 20.06 and 20.07 of the CITT Act, the Tribunal

conducted the following analysis with respect to imports from Panama, Peru, Colombia, Honduras

and Korea.

There were no imports of heavy plate from Panama, Peru, Colombia and Honduras during

the POI and therefore imports from none of these sources can be on its own a principal cause of a

threat of serious injury. Accordingly, subject imports from these sources should be excluded from

the application of any remedy.

With regard to Korea, although the volume of subject imports from Korea to Canada

increased in 2017 and interim 2018, the volumes themselves were not nearly as high as those from

the remaining subject countries.²⁰²In terms of selling prices, the prices of imports from Korea

declined by 24 percent in 2016, but then increased by 29 percent in 2017. In interim 2018, the price

of sales of imports from Korea decreased by 4 percent compared to interim 2017.²⁰³According to

Statistics Canada data, in 2017 and throughout the POI, the unit values of imports from Korea were

higher than those from other subject countries.²⁰⁴

Although the Statistics Canada Q3 2018 data shows a marked increase in imports from

Korea when compared to the previous quarters in 2017 and 2018 (which comprised approximately

30 percent of subject imports in that quarter unlike previous periods), this single data point does not

result in the conclusion that imports from Korea are a principal cause of threat of serious injury on

their own.²⁰⁵

The Tribunal has analyzed its confidential information regarding volumes and prices of the

goods from Korea in the POI along with the above evidence.²⁰⁶The evidence confirms the view

that Korea has not been a supplier of sufficient volumes or demonstrated significant

price-leadership in the past and there is nothing in the evidence to lead to the conclusion that the

volumes of imports from Korea will increase substantially nor that prices of Korean heavy plate

would undercut those of the domestic industry, suppress or depress domestic prices and thus cause

any negative effects in future.

Therefore, the Tribunal concludes that subject imports from Korea on their own are not a

principal cause of threat of serious injury.

202. Exhibit GC-2018-001-005B, Vol. 1.1 at 16-17; Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 16.

Certain Korean plate is subject to AD measures in Canada: Plate from Korea et al.

203. Exhibit GC-2018-001-005B, Vol. 1.1 at 26.

204. Exhibit GC-2018-001-071.06, Vol. 5 at 100.

205. Ibid. at 101. As described above, the interim 2017 and interim 2018 Statistics Canada data for the subject

countries as a whole track closely those found in the Statistical Summary. However, the same is not true

with regard to Korea for interim 2017. Therefore, the Q3 2018 Statistics Canada data for Korea may not

be as reliable in terms of assessing trends for that country on its own.

206. Exhibit GC-2018-001-006B (protected), Vol. 2.1 at 16, 20, 23, and 25.

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Given the above finding regarding Korea, the Tribunal must exclude goods imported from

Korea from its analyses concerning increased imports, threat of injury and causation.²⁰⁷

Considering the low volumes and relatively high prices of Korean goods in the past, the

Tribunal’s conclusions with respect of increased imports, serious injury and principal cause of the

threat of serious injury are the same, or even stronger, when imports from Korea are excluded from

that group, as the latter goods are part of other subject imports.

The Tribunal therefore finds that the increased imports (excluding imports from Korea,

Panama, Peru, Colombia and Honduras) are a principal cause of threat of serious injury.

207. This concept that “. . . the scope of the serious injury investigation need not correspond exactly to the

scope of application of a safeguard measure” as long as the injury analysis is done on the basis of the

goods ultimately subject to the measure, is generally referred to as parallelism: U.S. – Wheat Gluten

(22 December 2000), WTO Docs. WT/DS166/AB/R at paras. 96-98: U.S. – Line Pipe (15 February

2002), WTO Docs. WT/DS202/AB/R at paras. 186-187.

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REMEDY RECOMMENDATION

INTRODUCTION

The Tribunal found that imports of heavy plate from the subject countries (other than goods

originating from Korea, Panama, Peru, Colombia and Honduras) are being imported in such

increased quantities and under such conditions, as to be a principal cause of a threat of serious

injury to the domestic industry. Accordingly the Tribunal recommends a remedy in the form of a

TRQ on imports of heavy plate from subject countries, other than goods originating in Korea,

Panama, Peru, Colombia and Honduras, or countries whose goods are eligible for GPT treatment.

Both the in-quota volumes and the above-quota surtaxes are to be liberalized over the three-year

quota period.

The following section explains the reasons for the Tribunal’s choice of remedy, including

the details of the remedy proposed.

CHOICE OF REMEDY

Position of parties

The Tribunal considered all the evidence and arguments presented on the subject of

remedies, including the relative suitability of the three types of remedies available, i.e. surtaxes,

quotas and TRQs. The Tribunal heard witnesses for domestic producers and importers. The

Tribunal also heard a witness testifying on behalf of the United Steelworkers (USW).

Algoma and USW argued in favour of TRQs.²⁰⁸Algoma submitted that a TRQ would

allow imports to remain at historic levels that will minimally disrupt supply for Canadian

customers, while protecting the domestic industry from further injury. The surtax would create

balance, with trade still flowing freely and consumers still having access to imports, but with

Algoma not being threatened with serious injury by surging imports.²⁰⁹Algoma argued in favour of

the current provisional measure, which sets the in-quota volume at 94,301 tonnes, annualized, for

the first year, with an increase of that in-quota of no more than 10 percent in the second and third

years. They also argued for an above-quota surtax of 25 percent, the same rate specified in the

current provisional measure. USW recommended a continuation of the interim safeguard measures,

as enacted on October 11, 2018, with some amendments. It argued for a TRQ, based on a three-year

average of subject imports, applied and renewed on a quarterly basis, with a maximum import level

apportioned to any single country, based on historical import shares between countries.²¹⁰

Importers generally suggested that if a remedy were to be imposed, it should be a TRQ set

according to a three-year average of the most representative years, for a period not exceeding

three years, and be progressively liberalized, if not phased out, over that period.²¹¹Importers that

suggested a specific surtax rate recommended a rate of 10 percent.²¹²

208. Exhibit GC-2018-001-071.06, Vol. 5 at 33, 34; Exhibit GC-2018-001-071.07, Vol. 5 at 27.

209. Exhibit GC-2018-001-071.06, Vol. 5 at 33, 34.

210. Exhibit GC-2018-001-071.07, Vol. 5 at 27, 29, 30.

211. Exhibit GC-2018-001-071.12, Vol. 5 at 17; Exhibit GC-2018-001-071.14, Vol. 5 at 32; Exhibit

GC-2018-001-071.15, Vol. 5 at 27.

212. Exhibit GC-2018-001-071.14, Vol. 5 at 32; Exhibit GC-2018-001-071.15, Vol. 5 at 27.

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Importers suggested that the current “first-come-first-served” method of quota allocation

has been disruptive to the marketplace and created significant uncertainty and should be replaced

with, for example, an allocation system based on historical exporter or country shares.²¹³

Some parties suggested the remedy should exclude imports from the country of an affiliate

company, or their own country. For example, SSAB Central and SSAB AB requested a specific

exclusion for Sweden and Finland or, alternatively, that a TRQ be set for the 3-year average imports

of SSAB Central from its affiliates located in Sweden, Finland and the United States. The

Government of Chinese Taipei requested that Chinese Taipei be exempted from the safeguard

measures.²¹⁴The Government of British Columbia requested a regional exemption for imports, into

that province, of heavy plate from subject countries.²¹⁵The Tribunal rejected these suggestions in

formulating its remedy recommendation.

Tribunal analysis

The Tribunal recognizes the need for imports in the domestic heavy plate market and

believes that a TRQ will provide reasonable access to imports, minimize disruption to the domestic

industry and give the domestic producers time to adjust their operations while the market stabilizes.

The Tribunal also agrees that the current first-come first-served method for administering has

caused considerable disruption and uncertainty in the market.

Specifically, the Tribunal recommends:

 that an in-quota volume representing the total amount of permitted imports at the

in-quota rate be fixed, as required by Article XIII:2(a) of GATT 1994. The Tribunal

recommends that the in-quota volume be set at 100,000 tonnes for the first year.

 that the in-quota volume be increased each year by 10 percent, i.e. to 110,000 tonnes in

the second year and to 121,000 tonnes in the third year.

 that no surtax be applied to the in-quota imports. This will permit a non-injurious level

of imports to enter the country without restriction.

 that the above-quota surtax be set at a declining rate, starting at 20 percent the first year,

15 percent the second year then 10 percent in the third year, to ensure that imports

above the in-quota volume do not cause the continuation of a threat of serious injury.

 that the Governor in Council consider a different method of allocating the in-quota

volume than the first-come first-served basis used for the provisional safeguard

measure.

213. Transcript of Public Hearing at 59; ibid. at 145-146; Exhibit GC-2018-001-071.14, Vol. 5 at 35, 36;

Exhibit GC-2018-001-071.15, Vol. 5 at 29-31.

214. Exhibit GC-2018-001-071.04, Vol. 5 at 23; Exhibit GC-2018-001-071.05, Vol. 5 at 10; Exhibit

GC-2018-001-071.08, Vol. 5 at 3-6; GC-2018-001-071.09, Vol. 5 at 4, 10; Transcript of Public Hearing

at 105-107, 111.

215. Exhibit GC-2018-001-071.03, Vol. 5 at 3.

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Table 3

Recommendation on Remedy for Heavy Plate

(Tonnes)

In-quota Volume

Above-quota Surtax

20 %

First Year

100,000

110,000

121,000

Second Year

Third Year

15 %

10 %

Since the Tribunal determined that imports from Korea are not, on their own, a principal

cause of threat of serious injury, the Tribunal’s recommended remedy should not apply to imports

from Korea. There were no imports of heavy plate from Panama, Peru, Colombia and Honduras

during the POI and therefore imports from none of these sources can be, on its own, a principal

cause of a threat of serious injury. Accordingly, subject imports from these sources should be

excluded from the application of any remedy. Imports from GPT countries are either non-existent

or de minimis.

Consequently, the Tribunal’s recommended remedy should also not apply to imports from

Korea, Panama, Peru, Colombia, Honduras and GPT countries.

The Order excluded imports from the United States, Chile, Mexico, Israel and other CIFTA

beneficiary countries from the subject goods. Consequently, the Tribunal’s recommended remedy

should not apply to imports from these countries.

In arriving at the above recommendation, the Tribunal considered the current state of the

market. Prices (both domestic and import) began moving upwards in the latter part of 2017 after

several U.S. AD/CV duty measures came into force²¹⁶and in 2018 following the initiation of the

U.S. section 232 investigation.²¹⁷Prices of domestic sales from domestic production rose in the first

half of 2018 as did the prices of imports of the subject goods, but to a lesser extent. Consequently,

domestic producers experienced higher price undercutting by subject imports.

The Tribunal considers that a remedy is needed to prevent a deterioration in the domestic

industry’s market share, and allow for increased capacity utilization and improved financial

performance (i.e. increased gross margins and profits). This will in turn allow the domestic industry

to adjust its position in the face of this sudden and unexpected increased level of competition, by

assisting the industry to realize its investment plans.²¹⁸In sum, the recommended safeguard

measures should remedy the threat of serious injury caused by increased subject imports.

The proposed in-quota volume of 100,000 tonnes is based on the average volume of heavy

plate imported from subject countries²¹⁹in the years 2015 to 2018, based on data compiled by the

216. Transcript of Public Hearing at 53-54.

217. Ibid. at 27.

218. Ibid. at 29, 36; Transcript of In Camera Hearing at 13-15.

219. All countries except the U.S., Mexico, Chile, Israel or another CIFTA beneficiary, GPT countries and

Korea.

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Tribunal for 2015 to 2017 and an estimate of 2018 subject country imports extrapolated from

existing data.²²⁰

As suggested by several parties, the in-quota amount is adjusted upwards by 10 percent for

the growth in the market.²²¹The amount of the in-quota volume would be 110,000 tonnes for the

second year and 121,000 tonnes for the third year. This recommended increase is based on the

suggestion of several respondents regarding appropriate quota liberalization.

In the Tribunal’s view, in-quota imports into Canada in the first year of the TRQ should not

exceed 100,000 tonnes, as that could cause injury to Canadian producers. At a lower volume of

in-quota imports, there would be a risk of damaging the international competitiveness of the

downstream manufacturing and construction industries in Canada. The Tribunal notes that imports

of heavy plate have become, over the years, an important means of supplying the needs of the

market.

The surtax proposed by the Tribunal corresponds to the approximate increase in the price of

above-quota imports that the Tribunal believes is necessary to mitigate the threat that imports will

significantly undercut the average selling price of the domestic industry in the near future.²²²This

adjusted price should allow the domestic producers to sell heavy plate at prices similar to those in

the period before the injurious increase in imports. The recommended surtax rate should be able to

decline over time as the domestic market adjusts to its operations to address the threat posed by the

current surge in imports, by covering potential price undercutting that could remain present in the

Canadian market in the foreseeable future.

Quota administration

With respect to the administration of the quota, Algoma submitted that, in order to prevent

“a rush” to market, a quota period-limit should be imposed for each quarter of the year that is equal

to 25 percent of the annual TRQ volume. Should import volumes exceed 25 percent in a given

quarter, a surtax would be imposed. The domestic producers also submitted that the remedy should

impose a quantitative limit so that no single country, or group of countries, benefits from a

disproportionate share of the quota. According to Algoma, imposing a quantitative limit of

23 percent of the in-quota volume to any country or group of countries, as imposed in the

provisional measures, is a fair and reasonable quantitative limit.²²³

The Tribunal also heard from many importers that the current “first-come first-served”

method of quota allocation administered under the provisional measures has caused considerable

uncertainty and disruption in the market.²²⁴The Tribunal recommends that the Governor in Council

220. The estimate of the 2018 subject country imports is based on the same ratio of imports from the subject

countries during interim 2017 when compared to the full year 2017.

221. Exhibit GC-2018-001-071.14, Vol. 5 at 32; Exhibit GC-2018-001-071.15, Vol. 5 at 27; Exhibit

GC-2018-001-071.06, Vol. 5 at 33.

222. The surtax was calculated using the estimated potential level of price undercutting for the period of 2015

to interim 2018, as well as a projection of potential price undercutting thereafter. For the projection

period, the estimated unit selling values of sales from domestic production and imports of the subject

good were calculated by applying the average growth rate of those unit selling values over the POI to

derive forecasted prices for the period up to 2021.

223. Exhibit GC-2018-001-071.06, Vol. 5 at 33, 34; Exhibit GC-2018-001-071.07, Vol. 5 at 27, 30.

224. Transcript of Public Hearing at 59; ibid. at 145.

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should consider alternative methods of allocation, such as quota allocation based on

country-specific considerations, or on a historical exporter share basis in order to preserve the

traditional market shares of suppliers. Changing the allocation method would give importers more

certainty on whether or not their imports will incur a surtax, allowing them to more precisely

determine the appropriate selling price to their customers.

The Tribunal recommends that the Government of Canada periodically review these

measures to ensure that they remain appropriate. This recommendation reflects the fact that

Canadian and global market conditions could change significantly during the period of the

application of the measures. Also, the Canadian government should take account of the manner in

which trade measures on steel are applied in the United States and the European Union and of any

changes that may be made there in response to market or other conditions.

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PART V – CONCRETE REINFORCING BAR

PRODUCT

The second class of goods considered by the Tribunal is concrete reinforcing bar, which is

commonly identified as rebar. The Order provides the following description of this class of

goods:²²⁵

Hot-rolled deformed steel concrete reinforcing bar in straight lengths or coils, commonly

identified as rebar, in various diameters up to 56.4 millimeters, in various finishes.

The following goods are excluded:

• plain round bar;

• fabricated rebar products; and

• 10-mm-diameter (10M) rebar produced to meet the requirements of CSA G30 18.09

(or equivalent standards) and that is coated to meet the requirements of epoxy standard

ASTM A775/A 775M 04a (or equivalent standards) in lengths from 1 foot (30.48 cm)

to 8 feet (243.84 cm).

Rebar, as defined above, is nearly identical to concrete reinforcing bar that has been the

subject of two recent inquiries²²⁶conducted by the Tribunal pursuant to section 42 of SIMA. The

only difference is that stainless steel rebar is not excluded from the description set out in the Order,

whereas it was excluded in the SIMA inquiries. The Tribunal takes judicial notice of, and adopts, the

following factual findings it made in these previous proceedings concerning methods of production

and product characteristics:

 Rebar is produced by casting molten steel into rectangular billets of steel that are

cut-to-length. The billets are then rolled into various sizes of rebar, which is cut to

various lengths depending on the customers’ requirements. Rebar is rolled with

deformations on the bar, which provides gripping power so that concrete adheres to the

bar and provides reinforcing value.

 Uncoated rebar, sometimes referred to as black rebar, is generally used for projects in

non-corrosive environments. On the other hand, anti-corrosion coated rebar is used in

concrete projects that are subjected to corrosive environments, such as those where

road salt is used.

 Fabricated rebar products, which are not covered by the definition, are generally

engineered using computer-automated design programs and are made to the customer’s

unique project requirements. Rebar that is simply cut-to-length is not considered to be a

fabricated rebar product.

 Rebar is produced in Canada in accordance with the National Standard of Canada

CAN/CSA-G30.18-M92 for Billet-Steel Bar for Concrete Reinforcement prepared by

the Standards Association and approved by the Standards Council of Canada.

225. In addition, the Department of Finance published an illustrative list of HS Codes for rebar, which are

7213.10.00.00 and 7214.20.00.00. See Exhibit GC-2018-001-01A, Vol. 1 at 3.

226. See Concrete Reinforcing Bar (9 January 2015), NQ-2014-001 (CITT) [Rebar I] and Concrete

Reinforcing Bar (3 May 2017), NQ-2016-003 (CITT) [Rebar II].

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SUMMARY

The Tribunal finds that, while there has been a significant increase in the importation of

rebar from the subject countries, this increase as well as the conditions under which the subject

rebar is being imported have not caused serious injury, and are not threatening to cause serious

injury, to the domestic industry. The Tribunal therefore does not recommend a remedy in respect of

rebar.

ANALYSIS

The legal principles applicable to the analysis are set out in Part III of this report.

Like or directly competitive goods

The Tribunal must determine whether domestically produced rebar is “like or directly

competitive” goods to the subject imported rebar.

Parties supporting the imposition of a safeguard measure submitted that, in previous

inquiries concerning rebar, the Tribunal found that domestically produced rebar constituted like

goods in relation to the subject goods imported from the covered countries and that nothing on the

record of the present inquiry supports a contrary finding.

Parties opposing the imposition of a safeguard measure agreed that domestically produced

rebar is essentially like or directly competitive goods to the subject imported rebar. However, they

submitted that there are certain products that the domestic industry does not produce, such as

stainless steel rebar, and that, in the absence of domestic production, there is no legal basis to

impose a safeguard measure on that product.

For its part, the Economic Division of the Taipei Economic and Cultural Office in Canada

submitted that, since rebar imported from Chinese Taipei is often individually packaged, cut with

smoother finishes and fit for consumer use, it should not be considered as directly competitive with

domestically produced rebar.

In Rebar I and Rebar II, as well as in Steel Goods, the Tribunal determined that

domestically produced rebar constituted like goods in relation to the subject goods. Indeed, in

Rebar I, the Tribunal concluded that the subject goods and domestically produced rebar were

commodity products that competed with one another in the Canadian marketplace on the basis of

price and were otherwise fully interchangeable.²²⁷

The Tribunal does note that, in the above-referenced inquiries, the subject goods did not

include stainless steel rebar.²²⁸However, stainless steel rebar is not excluded from the subject goods

in the present inquiry. That being said, the evidence on the record is that stainless steel rebar is

produced by at least one domestic producer and, in any event, represents a very small proportion of

the total rebar market in North America.²²⁹Moreover, to the extent that the arguments of the parties

opposing the imposition of a safeguard measure and the Economic Division of the Taipei Economic

and Cultural Office in Canada are intended to raise issues pertaining to classes of goods (i.e.

sub-classes of rebar) or to request exclusions, these matters cannot be addressed as they are outside

the scope of the inquiry.²³⁰

227. Rebar I at para. 47.

228. See Steel Goods at 193; Rebar I at para. 18 and Rebar II at para. 22.

229. Exhibit GC-2018-001-73.08, Vol. 5 at 18; Transcript of Public Hearing at 597, 643-644.

230. See Order and the Tribunal’s Revised Notice of Commencement of Safeguard Inquiry.

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Therefore, for the purpose of this inquiry, the Tribunal finds that domestically produced

rebar, of the same description as the subject goods, is like or directly competitive goods to the

subject imported rebar.

Domestic producers

The domestic producers of rebar are Moly-Cop AltaSteel Ltd., dba AltaSteel (AltaSteel),

ArcelorMittal Long Products Canada G.P. (AMLPC), Gerdau Ameristeel Corporation (Gerdau),

Ivaco Rolling Mills 2004 L.P. (Ivaco) and Max Aicher (North America) Ltd. (MANA).

AltaSteel produces rebar at its facility in Edmonton, Alberta.

AMLPC produces rebar cut to length at its facilities in Contrecœur and Longueuil, Quebec.

It also produces rebar in coils at the Contrecœur facility.

Gerdau produces rebar at its facilities in Whitby and Cambridge, Ontario, and in Selkirk,

Manitoba.

Ivaco produces rebar in irregular wound coils at its facility in L’Orignal, Ontario.

Finally, MANA produces rebar at its facility in Hamilton, Ontario.

In 2017, these five producers together produced approximately 480,000 tonnes of rebar,²³¹

which constitutes all known domestic production of rebar. In the absence of any evidence to the

contrary, the Tribunal finds that AltaSteel, AMLPC, Gerdau, Ivaco and MANA are the producers

as a whole of the like or directly competitive goods and therefore constitute the domestic industry

for the purposes of this inquiry.

Increase in imports

Table 4 shows the volume of imports into Canada of rebar for the period of 2015 to

June 30, 2018, the volume of domestic production for the same period and subject imports as a

percentage of domestic production.

Table 4

Imports and Domestic Production of Rebar

Interim

2015

2016

2017

2018

Total Imports (tonnes)

Percent Change

647,942

645,404

(0)

651,258

1

222,241

415,994

87

Subject Imports (percent change)

Production (tonnes)

Percent Change

15

(21)

136

558,570

574,444

3

480,138

(16)

249,424

280,912

13

Subject Imports as a Percentage of

Production (percentage point change)

8

(4)

46

Source: Exhibit GC-2018-001-07A, Tables 7, 8, 10, 23, 24, Vol. 1.1.

231. Exhibit GC-2018-001-07A, Table 23, Vol. 1.1.

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Parties supporting the imposition of a safeguard measure submitted that there had been two

surges in the volume of subject imports over the POI, first in 2016 and then again in interim 2018,

with the latter being more recent and pronounced than the former.

Parties opposing the imposition of a safeguard measure took the position that there was no

increase in imports at any time during the POI which satisfied the requirements of Canadian law

and the Agreement on Safeguards.²³²

The Tribunal collected the volume of imports of rebar for the period of 2015 to

June 30, 2018. As shown in Table 4, the volume of imports overall, including non-subject imports,

was 647,942 tonnes in 2015, 645,404 tonnes in 2016, and 651,258 tonnes in 2017 for an overall

increase of just 1 percent. However, the volume increased from 222,241 tonnes in interim 2017 to

415,994 tonnes in interim 2018; an increase of 87 percent.

The picture, in absolute terms, is similar when looking at subject imports. The volume of

subject imports decreased by 9 percent from 2015 to 2017.²³³However, the volume suddenly

increased by 136 percent in interim 2018 as compared to interim 2017²³⁴and accounted for much

of the overall increase in imports in interim 2018.²³⁵This increase is sharp and significant even

when considered against the backdrop of a 40 percent expansion of the Canadian rebar market at

the same time.²³⁶In this respect, it is also worth noting that sales in Canada of subject imports in

interim 2018 increased by 98 percent whereas domestic sales from domestic production increased

by only 9 percent.²³⁷Moreover, the rate of the absolute increase in subject imports in interim 2018

was such that the volume of such imports for 2018 as a whole was on pace to far exceed the

volumes of subject imports for any of the preceding years of the POI.

This conclusion is supported by publicly available Statistics Canada data that was supplied

by the domestic industry.²³⁸This data indicates that the trend observed in interim 2018 persisted

beyond June 30, 2018, into the third quarter of 2018 and even into October 2018 when provisional

safeguard measures were imposed.²³⁹While the Statistics Canada data, when compared to the data

contained in the Tribunal’s Statistical Summary for Rebar, underestimates the volume of subject

imports in all periods of the inquiry, it follows the same general trend. Therefore, while it normally

232. At the hearing, the Canadian Coalition for Construction Steel (CCCS), one of the parties opposing the

imposition of a safeguard measure, appeared to change its position and acknowledged that there had

been a significant increase in imports, both in absolute and relative terms. See Transcript of Public

Hearing at 759.

233. Exhibit GC-2018-001-07A, Table 7, Vol. 1.1.

234. The Tribunal notes that a comparison of the volume of subject imports for interim 2017 and 2017 as a

whole shows that the increase in subject imports actually began in the second half of 2017.

235. Exhibit GC-2018-001-08A (protected), Table 7, Vol. 2.1. By comparison, the volume of non-subject

imports increased by 44 percent in interim 2018 as compared to interim 2017. See Exhibit

GC-2018-001-07A, Table 8, Vol. 1.1.

236. Exhibit GC-2018-001-07A, Table 12, Vol. 1.1. The domestic industry argues that the 40 percent

increase in the Canadian rebar market in interim 2018, as compared to interim 2017, is a result of an

increase in inventories resulting from anticipatory purchases and not actual market demand. This will be

addressed further below.

237. Exhibit GC-2018-001-07A, Table 12, Vol. 1.1.

238. Exhibit GC-2018-001-73.06, Vol. 5 at 98-100, 102-105.

239. As stated in Part III, relevant evidence which can be received from parties is not confined to the

Tribunal’s period for data gathering for its statistical summaries.

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hesitates to ascribe much weight to this type of data, the Tribunal is of the view that, in the current

circumstances, it can reasonably rely on the Statistics Canada data to confirm that the trend in

subject imports observed in interim 2018 continued in the third quarter of 2018 and would have,

absent the imposition of provisional safeguard measures, also continued in the fourth quarter.²⁴⁰

A similar trend is also apparent for imports in relative terms. Relative to domestic

production, the volume of subject imports increased by 8 percentage points in 2016 over 2015,

decreased by 4 percentage points in 2017, and then surged by 46 percentage points in interim 2018.

Relative to domestic sales from domestic production, a similar trend was observed with an increase

of 51 percentage points in interim 2018.²⁴¹

Accordingly, by every measure, the increase in subject imports of rebar in interim 2018 has

been recent enough, sudden enough, sharp enough and significant enough.

In contrast, the evidence does not support the domestic industry’s assertion of a recent,

sudden, sharp and significant enough increase in subject imports in 2016. While it is true that the

absolute volume of subject imports increased by 15 percent in 2016 as compared to 2015, this

increase was not, in the Tribunal’s view, particularly sharp and, in any event, it was more than

wiped out by a 21 percent decrease in the volume of subject imports the following year. As

discussed above, the volume of subject imports decreased by 9 percent from 2015 to 2017. In this

respect, the Tribunal is mindful that an increase in imports that satisfies the requirements of the

Agreement on Safeguards “should be evident both in an end-point-to-end-point comparison and in

an analysis of intervening trends over the period”.²⁴²That is not the case here. Indeed, relative to

domestic production, the volume of subject imports increased by only 8 percentage points in 2016.

Similarly, relative to domestic sales from domestic production, the increase was only 6 percentage

points.²⁴³These increases were then followed by decreases in 2017 of 4 and 3 percentage points,

respectively.²⁴⁴

In light of the foregoing, the Tribunal concludes that only the increase in subject imports of

rebar that occurred in interim 2018 has been recent enough, sudden enough, sharp enough and

significant enough, both in absolute terms and relative to domestic production of rebar.

Unforeseen developments and GATT 1994 obligations

Having found that there was such an increase in subject imports in interim 2018, the

Tribunal must consider whether the increase resulted from unforeseen developments and the effect

of Canada’s GATT 1994 obligations.

240. Although there is no Statistics Canada data on the record for the months of November and

December 2018, a witness for the domestic industry indicated that there was a decline in the volume of

subject imports for those months owing to the imposition of provisional safeguard measures by the

Government of Canada. See Transcript of Public Hearing at 606.

241. Exhibit GC-2018-001-07A, Table 10, Vol. 1.1.

242. Argentina – Safeguard Measures on Imports of Footwear (25 June 1999), WTO Docs. WT/DS121/R,

Panel Report at para 8.157, affirmed in Argentina – Safeguard Measures on Imports of Footwear

(adopted 12 January 2000), WTO Docs. WT/DS121/AB/R, Appellate Body Report at para. 129.

243. Exhibit GC-2018-001-07A, Table 10, Vol. 1.1.

244. Ibid.

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Unforeseen developments

Parties supporting the imposition of a safeguard measure submitted that the increase in

subject imports was a result of unforeseen developments, which include global steel overcapacity,

the imposition of trade measures and their subsequent diversionary effects, and the ongoing

economic instability in Turkey associated with the significant devaluation of its currency and rising

inflation.

Parties opposing the imposition of a safeguard measure submitted that the unforeseen

developments alleged by the domestic industry were not the cause of the increase in subject imports

as their timing did not correspond to the increase that occurred in interim 2018. They also submitted

that these developments were not unforeseen.

For the reasons that follow, the Tribunal finds that the increase in the volume of subject

imports in interim 2018 was due to a combination of unforeseen developments, including global

steel overcapacity and the various foreign trade measures which are also the subject of discussion in

other parts of this report. However, the predominant development in the case of rebar was the rapid

and sustained depreciation of Turkey’s currency, the lira, and the resulting impact that it had on the

enforcement of the Tribunal’s finding issued in January 2015 in Rebar I.

In Rebar I, the Tribunal found that the domestic industry had been threatened with injury

by dumped imports from Turkey and Korea, and by dumped and subsidized imports from China.

As a result of this finding, beginning in January 2015, imports of rebar from Turkey, Korea and

China were subject to the discipline of anti-dumping duties. This did not prohibit rebar from these

countries from being imported into Canada; it simply required that they be imported at the

applicable normal values calculated by the CBSA. However, exporters that failed to cooperate with

the CBSA in their enforcement of the Tribunal’s finding were not provided normal values and their

exports of rebar to Canada, if any, would be assessed an anti-dumping duty of 41 percent.²⁴⁵

With this finding in place, imports of Turkish, Korean and Chinese rebar decreased from

large volumes in prior years to zero in 2015 and in 2016.²⁴⁶This occurred despite the fact that at

least one exporter from each country appears to have cooperated with the CBSA and were thus

likely issued normal values.²⁴⁷

In May 2017, the Tribunal issued its finding, in Rebar II, that the dumping of rebar from

Belarus, Chinese Taipei, Hong Kong, Japan, Portugal and Spain had caused injury to the domestic

industry. Imports of rebar from these countries similarly decreased from large volumes in 2015 and

2016 to zero in 2017 and in interim 2018, save for Belarus which exported rebar to Canada during

this last period.²⁴⁸

245. See Rebar I at para. 244.

246. See Exhibit GC-2018-001-08A (protected), Schedule 1, Vol. 2.1. Import data from the CBSA does

indicate that an extremely low amount of Chinese rebar was imported over this period.

247. See the CBSA’s statement of reasons for its final determination with respect to the dumping of rebar

originating in or exported from China, Korea and Turkey, which is available at https://www.cbsa-

asfc.gc.ca/sima-lmsi/i-e/ad1403/ad1403-i14-fd-eng.html.

248. Exhibit GC-2018-001-08A (protected), Schedule 1, Vol. 2.1. One exporter from Belarus appears to have

cooperated with the CBSA and was therefore likely issued normal values. Imports from other exporters

would be assessed an anti-dumping duty of 108.5 percent. See the CBSA’s statement of reasons for its

final determination with respect to the dumping of rebar originating in or exported from Belarus,

Chinese Taipei, Hong Kong, Japan, Portugal and Spain, which is available at https://www.cbsa-

asfc.gc.ca/sima-lmsi/i-e/rb22016/rb22016-fd-eng.html.

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In interim 2017, Turkish rebar began reappearing in the Canadian market. During this

period, imports of Turkish rebar already accounted for more than half of subject imports.²⁴⁹Imports

of Turkish rebar then increased significantly, both in the second half of 2017 and in interim 2018. In

fact, the increase in interim 2018, as compared with interim 2017, was 192 percent.²⁵⁰By this time,

Turkish rebar accounted for nearly three quarters of subject imports, with the remainder mainly

being imports from Belarus and Malaysia.²⁵¹In short, the significant increase in subject imports

observed in interim 2018 was largely attributable to Turkish rebar.

Coinciding with the reappearance of Turkish rebar in the Canadian market were the

Tribunal’s finding in Rebar II, which created an important void in the market, and the accelerating

depreciation of the Turkish lira, which allowed Turkish rebar to be imported at lower values. As the

CBSA normally issues normal values to exporters in their own currency, any depreciation of the

currency has the effect of lowering the price at which goods can be exported to Canada without

incurring anti-dumping duties. The information on the record indicates that the Turkish lira lost

7.2 percent of its value versus the Canadian dollar in 2016, followed by a further 23.3 percent

decline in 2017 and finally another 32.3 percent decline in 2018.²⁵²

While the CBSA conducted re-investigations in 2016, 2017 and 2018 to update normal

values for exporters of Turkish rebar,²⁵³the currency continued to depreciate during the time

between re-investigations, allowing Turkish rebar to be imported at lower values in 2017 and

2018.²⁵⁴When the Tribunal looked at the details for imports during this period, it found that

virtually all imports of Turkish rebar were from exporters that had been issued normal values from

the CBSA.²⁵⁵In the Tribunal’s view, there is a link between the rapid and sustained depreciation of

the Turkish lira, which could not be foreseen in 1994,²⁵⁶and the increase in imports of Turkish

rebar, which account for the large majority of subject imports.

Other developments which could not be foreseen in 1994 and which likely contributed to

the increase in subject imports were the continuing and increasing overcapacity in world steel

production and the inability of successive multilateral efforts to address this overcapacity, trade

remedy measures against rebar from various sources,²⁵⁷and the unilateral imposition of tariffs on

steel products, including rebar, by the United States under section 232 of the Trade Expansion Act

249. Exhibit GC-2018-001-08A (protected), Table 7 and Schedule 1, Vol. 2.1.

250. Exhibit GC-2018-001-07A, Schedule 2, Vol. 1.1.

251. Exhibit GC-2018-001-08A (protected), Table 7 and Schedule 1, Vol. 2.1.

252. Exhibit GC-2018-001-03B, Table 14, Vol. 1.1.

253. Exhibit GC-2018-001-89.06, Vol. 7 at 12, 32-44.

254. The depreciation of the Turkish lira and its impact on normal values was discussed by a number of

witnesses. See, for example, Exhibit GC-2018-001-73.04, Vol. 5 at 59, 75; Exhibit GC-2018-001-73.08,

Vol. 5 at 19; Transcript of Public Hearing at 587. Parties supporting the imposition of a safeguard

measure submitted that outdated normal values have allowed Belarusian rebar to re-enter the Canadian

market in interim 2018. However, no additional evidence was provided in this regard.

255. This is based on import data from the CBSA and responses to the Tribunal’s Importer and Exporter

Questionnaires.

256. The Tribunal has taken note of the arguments raised by the Turkish Steel Exporters’ Association

regarding currency fluctuations. While the Tribunal acknowledges that currency fluctuations per se are

foreseeable, it is of the view that, in this instance, it was the timing, speed and depth of the depreciation

of the modern lira within the context of the broader economic instability in Turkey that could not be

foreseen by negotiators in 1994.

257. See Exhibit GC-2018-001-07A, Tables 26-31, Vol. 1.1. Although the Tribunal recognizes that trade

remedy measures per se are foreseeable, it is of the view that, in this instance, it was their proliferation in

the context of increasing overcapacity in world steel production that could not be foreseen by negotiators

in 1994.

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of 1962, as well as the imposition of provisional safeguard measures on steel products, including

rebar, by the European Union.

However, absent the ongoing economic instability in Turkey, the other unforeseen

developments noted above would not have led to the increase in subject imports observed in interim

2018 or, at the very least, would not have led to such a significant increase. This view is supported

by the fact that, other than imports of rebar from Turkey, Belarus and Malaysia in interim 2018,

there were essentially no significant volumes of subject imports from other countries, including

from those that had been present in the Canadian market prior the Tribunal’s findings in Rebar I

and II.²⁵⁸

GATT 1994 obligations

In 1994, Canada bound the tariff for rebar at zero percent.²⁵⁹Moreover, Canada agreed, by

virtue of Article XI of GATT 1994, not to impose quantitative restrictions. The effect of the

concession and the obligation arising under Articles II:1(a) and XI of GATT 1994 was to prevent

Canada from imposing tariffs above the bound tariff rate, or from imposing quotas, as a means of

addressing the significant increase in imports of rebar in interim 2018.

Serious injury

Having found that there was a significant increase in subject imports in interim 2018, the

Tribunal has to determine whether the domestic industry suffered serious injury.

As the Tribunal has concluded that a significant increase in subject imports of rebar only

occurred in interim 2018, it follows that any injury suffered prior to that period cannot be attributed

to those increased imports. Accordingly, the Tribunal will focus on developments since 2017, but

will also place them in the context of the entire POI.

The following table summarizes the domestic industry’s performance during the POI. As

all financial performance indicators for the domestic industry, including percent changes, are

confidential, they have not been included in the table.

258. Exhibit GC-2018-001-08A (protected), Schedule 1, Vol. 2.1.

259. Exhibit GC-2018-001-66.43, Vol. 1 at 37.

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Table 5

Summary of Domestic Performance Indicators (Index)

Interim

2015

2016

2017

2018

Practical Plant Capacity

Total Production

Production for Domestic Sales

Production for Export Sales

Capacity Utilization Rate (%)

100

103

97

98

86

85

154

87

100

104

113

118

10

103

108

Market

100

103

106

103

115

78

96

88

91

100

116

100

140

109

78

141

103

Domestic Sales from Domestic Production

Producers Market Share (%)

Subject Goods Market Share (%)

Excluded Countries Market Share (%)

Total Direct Employees

100

104

110

109

94

103

108

109

79

100

99

100

108

105

Total Wages ($000) - Direct Employment

Total Hours Worked (000) - Direct Employment

Productivity - Tonnes/ Hour Worked (Direct)

Producer Inventories

Inventory as % of Production

100

70

68

32

37

100

159

141

Selling Prices

Domestic Sales from Domestic Production

Total - Subject Countries

Excluded Countries

100

88

92

88

101

107

102

100

120

114

110

Notes:

1. Index base: 2015 = 100 and interim 2017 = 100

2. Index values are notional, and there is no indexing between a full calendar year and an interim period.

3. The bolded index values under “Selling Prices” indicate the lowest price in the market for that period.

Source: Exhibit GC-2018-001-07A, Tables 6, 13, 16, 23, Vol. 1.1.

Parties supporting the imposition of a safeguard measure noted that the domestic industry

has suffered losses in every period of the inquiry. Moreover, they submitted that the increase in

imports in interim 2018 put a stop to any industry recovery that had been underway following the

Tribunal’s finding in Rebar II, as evidenced by worsening results in interim 2018 as compared to

the second half of 2017. Parties opposing the imposition of a safeguard measure submitted that

virtually all the factors relating to the performance of the domestic industry show positive trends

from interim 2017 to interim 2018.

The evidence shows that, in terms of trends for key performance indicators, the domestic

industry performed as well or better in interim 2018 as compared to the period preceding the

increase in subject imports. As shown in Table 5, the Canadian rebar market contracted by

4 percent from 2015 to 2017, but grew by 40 percent in interim 2018 as compared to interim 2017.

In general, the domestic industry’s performance broadly followed this pattern, with many indicators

trending downward in 2017, but then trending upward in interim 2018.

For example, domestic sales from domestic production decreased by 12 percent from 2015

to 2017, but then increased by 9 percent in interim 2018 as compared to interim 2017.

Similarly, total production (i.e. production for domestic market sales, export sales and

further internal processing) decreased by 14 percent from 2015 to 2017, but increased by 13 percent

in interim 2018 as compared to interim 2017. In terms of production for domestic market sales, it

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increased by 18 percent in interim 2018 as compared to interim 2017. At this pace, total production

for 2018 is expected to reach a level above those of 2015 and 2017, and not far off from the high for

the POI reached in 2016.²⁶⁰

The average selling prices of domestic rebar increased by 1 percent from 2015 to 2017, and

then increased by 20 percent in interim 2018 as compared to interim 2017. The interim 2018 selling

value was by far the highest value observed during the POI.²⁶¹

Inventories held by domestic producers decreased by 68 percent from 2015 to 2017, but

increased by 59 percent in interim 2018 as compared to interim 2017 and, as a result, returned to

2015 levels.²⁶²

The domestic industry’s practical plant capacity decreased by 2 percent from 2015 to 2017

and then increased by 4 percent in interim 2018 as compared to interim 2017. The rate of capacity

utilization for rebar fell by 13 percent from 2015 to 2017, but then increased by 8 percent in interim

2018 as compared to interim 2017. The rate of capacity utilization for other goods (i.e. non-rebar

products)²⁶³produced on the same equipment increased from 2015 to 2017 and increased again in

interim 2018, as compared to interim 2017.²⁶⁴

While the domestic industry’s productivity decreased by 21 percent from 2015 to 2017, this

was followed by an increase of 5 percent in interim 2018 as compared to interim 2017. Total direct

employment and total wages from direct employment essentially remained the same in interim

2018 as compared to interim 2017, while total hours worked from direct employment increased by

8 percent over the same period.

The domestic industry’s share of the market fell by 9 percent in 2017 as compared with

2015, and 22 percent²⁶⁵in interim 2018 as compared to interim 2017. However, this was in the

context of a growing market where the domestic industry still managed to increase domestic sales

and generally improve performance, as attested by the above-noted economic indicators. Moreover,

when compared to the second half of 2017, the domestic industry’s market share actually increased

slightly in interim 2018.²⁶⁶

260. Exhibit GC-2018-001-07A, Table 23, Vol. 1.1.

261. Exhibit GC-2018-001-08A (protected), Table 16, Vol. 2.1.

262. Ibid., Table 23.

263. Other products generally produced on the same equipment are wire rod, special bar quality products and

merchant bar quality products. See Exhibit GC-2018-001-73.04, Vol. 5 at 50; Exhibit GC-2018-001-

73.06, Vol. 5 at 48.

264. Exhibit GC-2018-001-08A (protected), Table 23, Vol. 2.1.

265. The Tribunal notes that market share is, by its nature, already expressed in percentage terms. Thus,

changes to this market share that are also expressed in percentage terms must not be confused with

changes expressed in percentage points. For example, a decrease of 50 percent from an existing market

share of 20 percent would be equivalent to a decrease of 10 percentage points (i.e. 50 percent of

20 percent is equal to 10 percentage points). Only in cases where the initial market share is 100 percent

would the reduction in percentage terms and percentage points be equivalent. In the present case, the

22 percent decrease in market share equates to a lower percentage point decrease. The same holds true

when discussing increases in market share. For example, an increase of 100 percent from an existing

market share of 20 percent would be equivalent to an increase of 20 percentage points (i.e. 100 percent

of 20 percent is equal to 20 percentage points).

266. Exhibit GC-2018-001-08A (protected), Tables 11, 13, Vol. 2.1.

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The financial performance indicators show that there was an improvement in the financial

performance of the domestic industry in interim 2018 as compared to interim 2017 in line with the

majority of the indicators already discussed. In fact, all financial performance indicators showed an

increase or improvement over this period (though a few indicators did worsen slightly in interim

2018 when compared to the second half of the prior year). However, as noted above, the domestic

industry, when considered on an aggregate basis, did suffer losses at the net income level in every

period of the inquiry.²⁶⁷

The Tribunal notes that Gerdau did submit, as part of its case brief, its financial results for

the third quarter of 2018.²⁶⁸Gerdau submitted that these results demonstrate that, by this time, its

financial performance was rapidly deteriorating as a result of the increased volumes of subject

imports and their price effects. The timing of the inquiry prevented the Tribunal from collecting

such results from all domestic producers for inclusion in its Statistical Summary for Rebar, and no

other domestic producers saw fit to submit their Q3 2018 results. The Tribunal is not willing to

place undue weight on the evidence of a single company in regard to the injury suffered by the

domestic industry as a whole.

In terms of trends for key economic indicators, the above analysis demonstrates that the

domestic industry generally performed better in interim 2018 compared to interim 2017, despite the

significant increase in subject imports. Production for domestic sales, capacity utilization, domestic

sales, average selling prices, total hours worked, productivity and all financial performance

indicators increased or improved during this period.

Although the domestic industry did suffer losses at the net income level in every period of

the inquiry, and most certainly suffered some injury in the form of lost market share to subject

imports in interim 2018,²⁶⁹the Tribunal fails to see how a generally improved performance during

this time frame can correspond to injury that is considered serious or, in other words, to a significant

overall impairment in the position of the domestic industry. In that respect, the Tribunal recalls that

the threshold for serious injury is clearly more than that of material injury.²⁷⁰As stated above, any

injury suffered prior to the period during which the significant increase in subject imports took place

cannot be attributed to those imports. Therefore, while the Tribunal concedes that the domestic

industry has suffered some injury in interim 2018 and that a few indicators may have declined

slightly as compared to the second half of 2017, it is of the view that such injury remained below

the threshold for serious injury.

On the basis of the foregoing, the Tribunal finds that the domestic industry did not suffer

serious injury contemporaneously with the increase in subject imports that occurred in interim 2018.

Even supposing that the Tribunal had found that the domestic industry suffered serious

injury in interim 2018, the evidence does not appear to show that the increase in the volume of

subject imports would have been a principal cause of such injury. The Tribunal is mindful that the

following analysis is not essential considering its finding in respect of serious injury. In the present

267. Ibid., Table 18.

268. Exhibit GC-2018-001-74.06 (protected), Vol. 6 at 85.

269. Most of the market share lost by the domestic industry was in favour of subject imports. However, some

was also lost in favour of non-subject rebar imported by the domestic industry itself. See Exhibit

GC-2018-001-08A (protected), Table 13, Vol. 2.1.

270. See Part III.

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case, however, the Tribunal considers it important to nevertheless specifically address arguments of

parties supporting the imposition of a safeguard measure regarding the alleged effects of subject

imports on prices of rebar in Canada.

It is well understood that a key factor in establishing a causal nexus between the subject

imports and serious injury is evidence that the imports have significantly undercut, depressed or

suppressed the prices of domestically produced like or directly competitive goods. Parties

supporting the imposition of a safeguard measure submitted that there is such evidence. Parties

opposing the imposition of a safeguard measure took the opposite view.

As stated by the Tribunal in Rebar I, rebar is a commodity product and price is a key

consideration affecting purchasing decisions.²⁷¹In terms of competition between subject imports

and domestically produced goods, the evidence on the record indicates that it generally takes place

at the level of fabricator purchases (i.e. sales to fabricators).²⁷²This is where the Tribunal focused its

analysis.

The Tribunal’s analysis demonstrates that, taking into consideration adjustments made to

reflect the fact that LMS Limited Partnership, an importer of subject goods, is actually a rebar

fabricator and not a distributor,²⁷³the data contained in the Tribunal’s Statistical Summary only

shows minimal price undercutting at the average annual level by subject imports in 2015 and in

interim 2018.²⁷⁴However, once the recognized $25 to $40 per tonne domestic price premium is

taken into account, price undercutting is eliminated in all periods of the inquiry.²⁷⁵Even if the

Tribunal were to accept a statement from a domestic industry witness to the effect that, in some

cases, the premium is between $0 and $10 per tonne,²⁷⁶this range would still be sufficient to

eliminate price undercutting in interim 2018.

Furthermore, the Tribunal is not convinced by AMLPC’s argument that, if the data is sorted

based on imports that arrive in Eastern Canada and imports that arrive in Western Canada, a clear

pattern of price undercutting is demonstrated.²⁷⁷While the calculations done by AMLPC do show

some price undercutting in Western Canada in 2015 and interim 2018 even when considering the

recognized domestic price premium, the reported volumes of subject imports arriving in Western

Canada show no increases in interim 2018 as compared to interim 2017.

As stated above, the significant increase in subject imports in interim 2018 was largely

attributable to imports from Turkey and, to a lesser extent, imports from Belarus, which both

arrived in Eastern Canada. As for AMLPC’s calculations for Eastern Canada, where imports from

Turkey and Belarus are alleged to compete with domestically produced rebar, they do not show

271. See Rebar I at paras. 100, 280.

272. Exhibit GC-2018-001-73.04, Vol. 5 at 49; Exhibit GC-2018-001-73.06, Vol. 5 at 63; Exhibit GC-2018-

001-73.11, Vol. 5 at 63; Exhibit GC-2018-001-73.05, Vol. 5 at 5; Transcript of Public Hearing at 590,

642, 680.

273. See Exhibit NQ-2016-003-14.18A, Vol. 5 at 1.

274. Exhibit GC-2018-001-08B (protected), Vol. 2.1 at 2.

275. In Rebar I, the Tribunal deducted a representative $30 per tonne in order to account for the price

premium component allegedly enjoyed by domestic producers from the average annual price per tonne

of sales from domestic production. See Rebar I at paras. 139-141. The Tribunal followed the same

approach in Rebar II. See Rebar II at paras. 108, 123.

276. Exhibit GC-2018-001-73.04, Vol. 5 at 51.

277. See Exhibit GC-2018-001-74.04 (protected), Vol. 6 at 21-22.

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price undercutting in any period of the inquiry when considering the recognized domestic price

premium. Moreover, once domestic industry prices are adjusted by removing AltaSteel’s sales,²⁷⁸

there is no price undercutting in any period of the inquiry, other than 2015, even before factoring in

the domestic price premium.

The Tribunal also considered specific allegations of price undercutting made in witness

statements.²⁷⁹While the Tribunal recognizes that the data included in the Statistical Summary for

Rebar relates to actual sales and does not reflect low price offers that were matched by domestic

producers, it notes that the quantum of the alleged undercutting is many orders of magnitude larger

than what is shown in the Tribunal’s average annual data and questionnaire responses, thereby

casting serious doubt on the reliability of the allegations.²⁸⁰

In light of the foregoing, the Tribunal finds that, contrary to the allegations made by the

parties supporting the imposition of a safeguard measure, there is little evidence of price

undercutting—let alone undercutting that can be characterized as significant.

Turning to price depression and suppression, the data in the Statistical Summary indicates

that the average delivered selling value of domestic rebar rose by 15 percent in 2017 and then by

20 percent in interim 2018 as compared to interim 2017.²⁸¹The data also indicates that, although

the cost of goods sold on a per tonne basis increased in 2017 and then again in interim 2018 as

compared to interim 2017, those increases were at a lower rate than those of the average delivered

selling value over the corresponding periods.²⁸²Thus, it is clear that the subject imports neither

depressed nor suppressed prices for domestically produced rebar in interim 2018.

On the basis of the foregoing, even if the Tribunal had found that the domestic industry had

suffered serious injury in interim 2018, the increase in subject imports during that period would not

have constituted a principal cause of such injury.

The Tribunal will now examine whether the increase in subject imports is a principal cause

of a threat of serious injury.

278. AMLPC made certain assumptions in performing its calculations. Notably, it assumed that domestic

sales in Western Canada were uniquely those of AltaSteel and that domestic sales in Eastern Canada

were those of the domestic industry, including AltaSteel. It also assumed that imports that arrive in

Eastern Canada and imports that arrive in Western Canada do not compete with each other (i.e. they

each remain in the part of the country where they arrived). Given that AltaSteel is located in Edmonton,

Alberta, and that it describes itself as the primary domestic rebar supplier in Western Canada, the

Tribunal adjusted domestic industry prices for Eastern Canada by removing AltaSteel’s sales from the

calculation.

279. Exhibit GC-2018-001-74.04 (protected), Vol. 6 at 54-55, 132-39; Exhibit GC-2018-001-74.05

(protected), Vol. 6 at 8, 19-23; Exhibit GC-2018-001-74.06 (protected), Vol. 6 at 70-72.

280. The Tribunal reviewed questionnaire responses for importers and domestic producers and found that

average sales values for the importers and producers concerned for the period during which the alleged

undercutting took place almost never reflected the claimed level of undercutting. The large majority of

allegations pertained to Turkish rebar.

281. Exhibit GC-2018-001-07A, Table 17, Vol. 1.1.

282. See Exhibit GC-2018-001-08A (protected), Table 18, Vol. 2.1. The same statement can also be made

with respect to the cost of goods manufactured.

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Threat of serious injury

In examining whether the increase in subject imports in interim 2018, absent the imposition

of safeguard measures, is a principal cause of threat of serious injury, the Tribunal primarily focused

on changes and developments in the Canadian market expected during the remainder of 2019.

Parties supporting the imposition of a safeguard measure submitted that a sustained high

volume of subject imports caused by global trade measures and their diversionary effects, outdated

normal values for Turkish and Belarusian exporters, and global steel overcapacity will result in a

significant reduction in domestic market pricing for rebar which will, in turn, cause serious injury to

the domestic industry.

Parties opposing the imposition of a safeguard measure submitted that there is no threat of

serious injury to the domestic industry given that there is a lack of evidence pointing to a sustained

increase in imports; and the performance of the domestic industry improved in interim 2018—and

is expected to continue to do so in the near term.

For the reasons that follow, the Tribunal is of the view that the significant increase in

subject imports observed in interim 2018, which was largely attributable to Turkish rebar, will

likely not be sustained at similar levels in 2019. Moreover, while inventories of rebar held by

fabricators may reduce domestic sales in the near term as the inventories are partially consumed,

that injury will likely not be of such severity and duration as to be considered serious.

As explained above in the Unforeseen Developments section, the increase of subject

imports in interim 2018 resulted primarily from the rapid depreciation of the Turkish lira and the

ensuing impact it had on the CBSA’s enforcement of the Tribunal’s finding in Rebar I. Indeed, the

conduct of re-investigations on a roughly annual basis by the CBSA, combined with the rapid

depreciation of the lira, allowed Turkish rebar purchased from exporters who had been issued

normal values expressed in Turkish lira to be imported into Canada at lower prices without being

subject to anti-dumping duties.

However, on December 18, 2018, the CBSA issued two notices indicating that it had

concluded normal value reviews to update the normal values applicable to certain rebar exported to

Canada by two separate Turkish exporters.²⁸³The updated normal values came into effect the same

day the notices were issued. Notably, both notices included the following statement:

During the course of the normal value review, representations and case arguments were

received on behalf of counsel for the Canadian producers. Issues raised in these

submissions include: deficiencies and completeness of exporter’s response and adjustments

to normal values due to rebar price fluctuations and the declining value of the Turkish Lira.

The information submitted in these documents was given due consideration by the CBSA

prior to the conclusion of this normal value review. The information on the record shows a

volatile exchange rate for the Turkish Lira and high levels of inflation in Turkey. To

address these factors the CBSA issued the normal values to [name of exporter] in U.S.

Dollars.²⁸⁴

283. Exhibit GC-2018-001-66.47, Vol. 1 at 1-6.

284. Ibid. at 2, 5.

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The Tribunal understands from these notices that the domestic producers participated in the

review by making representations and arguments.²⁸⁵Additionally, and more importantly for the

purposes of this threat analysis, the CBSA acknowledged the volatility of the Turkish lira, as well as

the high levels of inflation in Turkey, and consequently issued revised normal values in U.S. dollars

to the two concerned exporters. Given the relatively stable Canada-United States exchange rate, it

follows that the conditions that led to the significant increase in imports of rebar from Turkey

during the recent past should not repeat themselves in 2019 and beyond.

When pressed at the hearing, a witness for the domestic industry recognized that the

issuance of normal values in U.S. dollars may reduce the volume of rebar from Turkey being

imported into Canada.²⁸⁶Yet, in responding to questions from the Tribunal, the same witness noted

that the new normal values issued in U.S. dollars were only for two exporters and that, given the

number of exporters in Turkey, this did not give the domestic industry any comfort.²⁸⁷

The two exporters who were issued revised normal values in U.S. dollars by the CBSA on

December 18, 2018, are the only exporters that currently have normal values that have shipped

rebar to Canada during the POI.²⁸⁸Furthermore, it is entirely reasonable to assume that, should the

issues related to the depreciation of the Turkish lira become a problem for other exporters, the

CBSA will deal with them in a similar and effective manner.

It must also be borne in mind that, without the “advantage” of a rapidly depreciating lira,

Turkish exporters were completely absent from the Canadian market in 2015 and in 2016²⁸⁹

following the Tribunal’s finding in Rebar I, despite the fact that at least one exporter had normal

values during this period.²⁹⁰In light of the foregoing analysis, the Tribunal concludes that imports

of rebar from Turkey will not likely continue at levels seen in late 2017 and interim 2018.

As for the prospect of a significant increase in imports of Belarusian rebar in 2019, the

Tribunal notes that revised normal values were issued to a Belarusian exporter on May 4, 2018.²⁹¹

Import data from the CBSA indicates that all imports of Belarusian rebar subsequent to the

Tribunal’s finding in Rebar II took place in interim 2018 before those revised normal values were

issued. Statistics Canada data on the record also indicates that there were no imports of rebar from

Belarus in the third quarter of 2018 and in the month of October 2018.²⁹²Similar to the situation

with Turkey, it is reasonable to assume that, should currency and inflation-related issues wreak

havoc on normal values issued to Belarusian exporters, the CBSA will deal with these in the same

manner as it has dealt with the Turkish issues.

285. This was confirmed at the hearing by a witness for the domestic industry. See Transcript of Public

Hearing at 631-633.

286. Transcript of Public Hearing at 637.

287. Ibid. at 587-588.

288. The two exporters in question are Çolakoğlu Metalurji A.S. and IÇDAŞ Celik Enrji Tersane ve Ulasim

Sanayi A.S. See Exhibit GC-2018-001-66.47, Vol. 1 at 1, 4 and import data from the CBSA.

289. See Exhibit GC-2018-001-08A (protected), Schedule 1, Vol. 2.1.

290. See the CBSA’s statement of reasons for its final determination with respect to the dumping of rebar

originating in or exported from China, Korea and Turkey, which is available at https://www.cbsa-

asfc.gc.ca/sima-lmsi/i-e/ad1403/ad1403-i14-fd-eng.html. See also Exhibit GC-2018-001-89.06, Vol. 7 at

12, 39-40.

291. Exhibit GC-2018-001-89.06, Vol. 7 at 34.

292. Exhibit GC-2018-001-73.06, Vol. 5 at 99-100.

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At the hearing, witnesses for the domestic industry noted that, even if the issues with

Turkey are addressed, there are other countries that will simply take its place.²⁹³Given the large

number of rebar-producing countries,²⁹⁴the Tribunal does not dispute that some of these countries

will naturally seek to fill part of the void created by the likely decrease in subject imports from

Turkey and Belarus. In addition, the overcapacity in world steel production, trade remedy measures

and global trade measures, such as the section 232 tariffs and the European Union safeguard

measures, will likely cause diversionary pressure which could, absent other mitigating factors, result

in subject imports completely filling that void.

However, this must be tempered by the fact that, on July 1, 2018, the Government of

Canada began applying countermeasures on imports of certain products, including rebar from the

United States, in response to the section 232 tariffs. Statistics Canada data show that imports of

rebar from the United States subsequently decreased in the third quarter of 2018 by more than

50 percent from previous quarters.²⁹⁵The Tribunal is of the view that the domestic industry has an

opportunity to gain market share as a result of the void created by both the likely decrease in subject

imports from Turkey and Belarus, as well as the likely decrease in imports from the United States.

There is evidence on the record which indicates that imports from Egypt, Indonesia, Italy,

Malaysia, Mexico, the Philippines, Singapore and Vietnam could potentially fill the above

mentioned void.²⁹⁶With respect to Mexico, the terms of the Order are clear: the Tribunal’s inquiry

must not consider imports of rebar from Mexico. Of the remaining countries, imports from

Indonesia, Malaysia, the Philippines, Singapore and Vietnam arrive, or would arrive, in Western

Canada whereas imports from Egypt and Italy arrive, or would arrive, in Eastern Canada.

Given the evidence that there are significant costs associated with shipping rebar from

Western to Eastern Canada and vice versa,²⁹⁷subject imports arriving in Western Canada from

Asian-Pacific countries will very likely remain there and compete mainly with domestic rebar

produced by AltaSteel²⁹⁸for the share of the market vacated by imports of rebar from the United

States due to the application of the Canadian countermeasures discussed above.²⁹⁹The decrease in

293. Transcript of Public Hearing at 589-590.

294. Exhibit GC-2018-001-74.04 (protected), Vol. 6 at 153-154.

295. Exhibit GC-2018-001-73.06, Vol. 5 at 99.

296. See Exhibit GC-2018-001-08A (protected), Schedule 1, Vol. 2.1; Exhibit GC-2018-001-73.06, Vol. 5

at 99; Exhibit GC-2018-001-52.03, Vol. 3.2 at 10; Transcript of In Camera Hearing at 185, 192, 211;

Transcript of Public Hearing at 655, 677.

297. See Exhibit GC-2018-001-73.02, Vol. 5 at 31; Exhibit GC-2018-001-74.11 (protected), Vol. 6 at 36;

Exhibit GC-2018-001-90.05 (protected), Vol. 8 at 31; Transcript of Public Hearing at 652, 654;

Transcript of In Camera Hearing at 187-188, 197-198.

298. The evidence on the record indicates that domestic producers other than AltaSteel, which are located in

Ontario and Quebec, have traditionally shipped minimal amounts of rebar to Western Canada and

British Columbia in particular (see Exhibit GC-2018-001-73.04, Vol. 5 at 112; Exhibit GC-2018-001-

73.11, Vol. 5 at 39, 41, 48, 52; Transcript of Public Hearing at 652-53). Although Gerdau contends that

it is currently making efforts to increase sales in British Columbia, the Tribunal is not persuaded that any

additional contribution to fixed costs resulting from an increase in production attributable to a fourth

crew at its Whitby mill would be sufficient to overcome high shipping costs and allow it to be

competitive in that market.

299. The Tribunal heard testimony that imports of rebar from the United States have historically represented a

significant portion of the British Columbia market and that total imports from the United States

decreased by half after the imposition of the Canadian countermeasures. See Transcript of Public

Hearing at 575, 604, 616, 621-622. See also Exhibit GC-2018-001-73.06, Vol. 5 at 99.

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subject imports from Turkey and Belarus, which arrive in Eastern Canada, will have no foreseeable

impact on this situation, as they remain in the East.³⁰⁰Under these conditions, the Tribunal is of the

view that, while the volume of subject imports will certainly increase in Western Canada and in

British Columbia in particular, it will likely be at the expense of imports from the United States,

with total imports remaining at or below historical levels.³⁰¹

In Eastern Canada, the likely decrease in subject imports from Turkey and Belarus will

provide domestic producers with an opportunity to regain lost market share. While imports from

Egypt, Italy, or any other potential source for that matter, could, in theory, take over most of that

share, the Tribunal views this possibility as remote. There have been relatively little imports of rebar

from Italy during the POI and there have been none from Egypt.³⁰²While it is axiomatic that other

potential sources of supply will always vie for available market share, the Tribunal cannot

recommend the imposition of a safeguard measure on this basis alone—there must be a sustained

increase in imports that threatens to cause serious injury to the domestic industry.

In this case, the Tribunal is not persuaded that the increase in subject imports observed in

interim 2018 will be maintained at similar levels in 2019 such that it would warrant the imposition

of a safeguard measure. The Tribunal remarks that the domestic industry is already benefitting from

protection afforded by its findings in Rebar I and II, which reduces the risk of diversion. Should the

domestic industry believe that it is being injured by the importation of dumped or subsidized rebar

from countries that are not covered by these findings, it would be open to it to file another complaint

with the CBSA pursuant to SIMA.

Given the likely decrease in the volume of subject imports in 2019, as compared to interim

2018, the effect of such reduced imports on prices of domestically produced rebar is expected to be

minimal at most. The Tribunal recalls that it already found that there was little evidence of price

undercutting and no evidence of price depression and suppression in interim 2018, when imports of

rebar from Turkey accounted for nearly three quarters of subject imports. Given that rebar from

Turkey is said to sell at lower prices than rebar from other countries,³⁰³it is reasonable to assume

that a decrease in imports of rebar from Turkey would result in higher prices and thus make any

alleged price effects for 2019 even less probable.

Notwithstanding the above conclusions regarding the likely volume of subject imports in

2019 and their likely price effects, the Tribunal must still determine whether the increase in subject

imports that occurred in interim 2018, which has already been found not to have caused injury to

the domestic industry, threatens to cause serious injury in the near future.

300. Although there is evidence that Turkish rebar has been offered to customers in Western Canada, there is

no evidence of any actual sales. See Exhibit GC-2018-001-73.05, Vol. 5 at 14.

301. The Tribunal heard testimony that subject imports are replacing imports of rebar from the Northwestern

United States (see Transcript of In Camera Hearing at 239). Although AltaSteel confirmed that it gained

market share as a result of the Canadian countermeasures and the Tribunal’s finding in Rebar II (see

Exhibit GC-2018-001-73.05, Vol. 5 at 10-11), there is evidence to suggest that further gains, especially

in British Columbia, may be constrained by other factors (see, for example, Transcript of Public

Hearing at 652-653 and Exhibit GC-2018-001-73.11, Vol. 5 at 51).

302. Based on import data from the CBSA and responses to the Tribunal’s Importers’ Questionnaire. With

respect to Italy, it is conceivable that it may choose to focus on the European Union market following

the European Union’s imposition of safeguard measures on steel products, including rebar.

303. Transcript of Public Hearing at 589-591.

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Parties supporting the imposition of a safeguard measure submitted that the increase in

subject imports in interim 2018 has created a significant inventory overhang that threatens domestic

industry sales in 2019 in light of the fact that actual demand for rebar is projected to be relatively

flat. Parties opposing the imposition of a safeguard measure submitted that the increase in subject

imports reflects the growth in the Canadian rebar market due to rapidly increasing demand.

The evidence on the record indicates that demand for rebar in the Canadian market in 2018

was expected to be within the range of historical average demand. Indeed, a number of witnesses

estimated demand for rebar in 2018 at levels that were consistent with demand seen in previous

years.³⁰⁴Accepting that this is the case, the 40 percent increase in the market in interim 2018, as

compared to interim 2017,³⁰⁵suggests that there was likely an inventory buildup with fabricators,

rather than an actual increase in demand.³⁰⁶The maximum potential size of this likely inventory

overhang can be approximated by annualizing total market sales for interim 2018 and deducting

estimated demand from the result. This calculation yields a substantial inventory overhang, which is

within the same range as the amount put forth by the domestic industry.³⁰⁷

While there is some evidence on the record that confirms that fabricators are in fact holding

higher than usual levels of inventories,³⁰⁸the Tribunal does not have sufficient information to

corroborate the approximation performed above. Moreover, the Tribunal is mindful of the fact that

part of the 40 percent increase in the market in interim 2018 is attributable to sales of non-subject

imports and sales from domestic production, which increased by 44 and 9 percent, respectively, in

interim 2018 as compared to interim 2017.³⁰⁹Put another way, in terms of volume, less than two

thirds of the increase in the market in interim 2018 was attributable to the increase in sales of

subject imports.³¹⁰Thus, the Tribunal is of the view that the increase in subject imports in interim

2018 should not be considered as being the sole contributor to the inventory overhang.³¹¹

As for expected demand for rebar in the Canadian market in 2019, the Tribunal was

presented with conflicting evidence. Parties supporting the imposition of a safeguard measure

referred to a number of economic forecasts by Canada’s major banks and other organizations to

304. Exhibit GC-2018-001-74.06 (protected), Vol. 6 at 61; Exhibit GC-2018-001-73.04, Vol. 5 at 58; Exhibit

GC-2018-001-73.11, Vol. 5 at 30, 36, 63; Transcript of In Camera Hearing at 190.

305. Exhibit GC-2018-001-07A, Table 12, Vol. 1.1.

306. Inventories held by fabricators consist of rebar that has been sold by domestic producers and importers.

This must be distinguished from inventories held by domestic producers and importers, which have not

yet been sold and do not form part of the market.

307. See Exhibit GC-2018-001-74.06 (protected), Vol. 6 at 25-26; Gerdau’s Aid to Argument (protected) at

Tab 4, Vol. 18; Transcript of In Camera Hearing at 190.

308. Exhibit GC-2018-001-73.11, Vol. 5 at 38; Exhibit GC-2018-001-74.06 (protected), Vol. 6 at 73-74;

Exhibit GC-2018-001-74.09 (protected), Vol. 6 at 5; Transcript of In Camera Hearing at 236-237;

Transcript of Public Hearing at 577-578, 646.

309. Exhibit GC-2018-001-07A, Table 12, Vol. 1.1.

310. See Exhibit GC-2018-001-08A (protected), Table 11, Vol. 2.1.

311. Although a witness for AMLPC testified that domestically produced rebar and imports from the United

States are not typically used to build inventory, a witness for Salit Steel, a fabricator and distributor of

steel products, confirmed that it stores both domestic and foreign steel, including steel from the United

States (see Transcript of Public Hearing at 602-603, 647-648). It is also very likely that some imports

from the United States were used to build inventory prior to the coming into force of the

countermeasures imposed in response to the section 232 tariffs.

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support their view that market growth would be minimal at best,³¹²whereas parties opposing such a

measure mainly relied on one fabricator’s knowledge of the market to support their claim that

overall growth in the construction sector would result in higher demand.³¹³The Tribunal need not

settle this issue as, either way, its ultimate conclusion on the issue of whether the inventory

overhang threatens to cause serious injury to the domestic industry would remain the same.

Therefore, for the purposes of its analysis, the Tribunal will assume that demand for rebar

in 2019 will be relatively flat and that, consequently, part of this demand will be supplied from

existing inventories rather than new sales. Put another way, until inventories are depleted, demand

for rebar will lag and the domestic industry can be expected to experience a reduction in sales. In

Rebar I, the Tribunal found that an inventory overhang would be consumed and continue to have an

adverse impact on the domestic industry for two quarters.³¹⁴In the current proceeding, witnesses for

the domestic industry testified that, following the Tribunal’s finding in Rebar II, it took

approximately three quarters for the inventory overhang to be consumed and the expectation is that

it would take five to six months for the current inventory to be flushed out.³¹⁵The Tribunal thus

finds it reasonable to assume that the current inventory overhang will be consumed, at the latest, by

the end of the second quarter of 2019−approximately three quarters after the imposition of

provisional safeguard measures and a little more than six months after the CBSA issued revised

normal values to two Turkish exporters.

Finally, the Tribunal heard testimony that the inventory overhang is indeed having an

impact on some domestic producers’ sales for certain accounts for 2019, as well as on crewing and

production levels.³¹⁶It is very likely that some of this injury is being at least partially offset by the

effects of the provisional safeguard measures and the countermeasures in response to the section

232 tariffs.³¹⁷In fact, witnesses confirmed that prices for rebar are currently near all-time highs.³¹⁸

In any event, while the domestic industry may experience some injury in the form of a reduction in

sales resulting from the inventory overhang, the Tribunal is of the view that this injury will likely

not be of such severity and duration as to constitute serious injury or, in other words, a significant

overall impairment in the position of the domestic industry. As previously indicated, the threshold

for serious injury is clearly more than that of material injury.

Based on the above review of the evidence, the Tribunal finds that the increased imports are

not a principal cause of threat of serious injury.

Conclusions

The Tribunal finds that, while there has been a significant increase in the importation of

subject rebar into Canada, this increase as well as the conditions under which the subject rebar is

being imported have not caused serious injury and are not threatening to cause serious injury to

312. See, for example, Exhibit GC-2018-001-73.06, Vol. 5 at 24-25; Exhibit GC-2018-001-74.06 (protected),

Vol. 6 at 202; Exhibit GC-2018-001-89.05, Vol. 7 at 18-19.

313. See Exhibit GC-2018-001-73.11, Vol. 5 at 36-38.

314. See Rebar I at para. 242.

315. Transcript of Public Hearing at 568-70, 580; Transcript of In Camera Hearing at 186.

316. Transcript of Public Hearing at 566, 571. See also Exhibit GC-2018-001-74.06 (protected), Vol. 6 at 58,

74, 87; Exhibit GC-2018-001-73.04, Vol. 5 at 56; Exhibit GC-2018-001-73.07, Vol. 5 at 41; Exhibit

GC-2018-001-90.05 (protected), Vol. 8 at 27-28.

317. See Transcript of Public Hearing at 606; Transcript of In Camera Hearing at 186.

318. Exhibit GC-2018-001-74.11 (protected), Vol. 6 at 32; Transcript of In Camera Hearing at 233.

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domestic producers of like or directly competitive goods. In light of these findings, the Tribunal

does not need to consider whether imports from Canada’s free trade partners are a principal cause of

the serious injury or threat thereof, and the Tribunal does not recommend a remedy in respect of

rebar.

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PART VI – ENERGY TUBULAR PRODUCTS

PRODUCT

The third class of goods considered by the Tribunal is energy tubular products (ETP).³¹⁹

The Order provides the following description of this class of goods:³²⁰

Carbon and alloy steel energy tubular products, including line pipe, tubing, and casing,

finished or unfinished, welded or seamless, having a nominal outside diameter from

2.375 inches (60.3 mm) to 60 inches (1,524 mm) (with all dimensions being plus or minus

allowable tolerances contained in the applicable standards), heat treated or not heat treated,

regardless of length, wall thickness, surface finish (coated or uncoated), and end finish

(plain, bevelled, threaded, or threaded and coupled), in all grades, meeting or supplied to

meet American Petroleum Institute (API) 5L, API 5L-B, API 5CT, Canadian Standards

Association (CSA) Z245.1, International Standards Organization (ISO) 3183, American

Society for Testing and Materials (ASTM) ASTM A333, ASTM A106, ASTM A53-B or

their equivalents or enhanced proprietary standards, whether or not actually certified or

stenciled, whether or not meeting specifications for other end uses, including single-

certified, dual-certified or multiple-certified, for use in oil and gas, piling pipe, or other

applications.

For greater certainty, this class includes casing and tubing that are referred to as “green

tubes” in the industry. These are formed tubes with the requisite chemistry and dimensions

of casing or tubing, but that require further processing before they may be used in a well.

They are included in this class as unfinished, non-heat treated, or plain end pipe. The

finishing required may be heat treatment, threading, coupling, testing, or any combination

of these processes.

The following goods are excluded:



Drill pipe, pup joints, couplings, coupling stock, galvanized or stainless steel line

pipe, and casing or tubing containing 10.5% or more by weight chromium;



Submerged arc longitudinal welded line pipe, regardless of grade, outside

diameter and wall thickness, in lengths of 60 feet (18.288 m) with no girth welds

for exclusive use in slurry or tailings piping systems in oil sands projects and

marked “For Use as Slurry/Tailings Pipe Only”. For greater certainty, use in a

pipeline meeting CSA Z-662 or as pressure piping meeting CSA B51 Code is not

permitted under this exclusion;



Submerged arc longitudinal welded line pipe, regardless of outside diameter, wall

thickness and length, for exclusive use in high-temperature steam distribution

319. With respect to this class of goods, on October 30, 2018, the Tribunal issued a direction requesting that,

as part of their response to the Tribunal’s questionnaires, domestic producers and importers provide

additional information indicating the approximate percentage of domestic production and imports

constituting an energy (as compared to a non-energy) tubular product. The data collected by the Tribunal

showed that non-energy tubular products accounted for a very small proportion of the total production

for domestic sales and of the total imports of the subject goods during the period of investigation, as

reported in the domestic producers and importers’ responses to the Tribunal’s questionnaires.

320. In addition, the Department of Finance published an illustrative list of HS Codes for ETP:

7304.19.00.10; 7304.19.00.20; 7304.29.00.11; 7304.29.00.19; 7304.29.00.21; 7304.29.00.29;

7304.29.00.31; 7304.29.00.39; 7304.29.00.81; 7304.29.00.89; 7305.11.00.10; 7305.11.00.20;

7305.12.00.10; 7305.12.00.30; 7305.19.00.10; 7305.19.00.20; 7306.19.00.10; 7306.19.00.90;

7306.29.00.11; 7306.29.00.19; 7306.29.00.51; 7306.29.00.59; 7306.29.00.61 and 7306.29.00.69.

Exhibit GC-2018-001-01A, Vol. 1 at 5.

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pipelines and marked “For Steam Distribution Only”, certified to meet the

requirements of CSA Z662-15 Clause 14 or Annex I and certified to have proven

fatigue and creep test properties as provided in sections I.2.3.2 and I.3.2.1 of CSA

Z662-15 as established by means of a creep test of no less than 10,000 hours

carried out in accordance with ASTM E139;



Unfinished seamless carbon or alloy steel line pipe in the form of mother tubes

having outside diameters of 184, 197, 210, 235, 260, 286, 328, 350, 368, 377, 394,

402, 419, 426, 450, 475, 480, 500, 521, 530, 560, 585 or 610 mm, in wall

thicknesses from 9 mm to 110 mm and in lengths ranging from 7.72 m to 15.24 m,

not stenciled as meeting any line pipe product specification, but imported for use

in the production, and not solely for finishing, of seamless line pipe made to any

one or several of API 5L, CSAZ245.1, ISO 3183, ASTM A333, ASTM A335,

ASTM A106, ASTM A53 or their equivalents;

ASME SA 672 or ASME SA 691 electric-fusion welded steel pipe as certified

under the ASME “Boiler and Pressure Vessel Code” rules (and stencilled with at

least one of the aforementioned standards), of a length not to exceed 15 feet

(4.572 m), for use other than in a CSA Z-662 pipeline application and imported

with authorized inspection certificates and applicable ASME Partial Data Reports;



Line pipe, regardless of grade, outside diameter and wall thickness, single

stenciled as “DNV-OS-F101” for exclusive use in offshore applications and

marked “For Offshore Applications Only”; and

Welded line pipe having nominal outside diameters from 18 inches to 24 inches

(610 mm) (with all dimensions being plus or minus allowable tolerances contained

in the applicable standards), regardless of grade and wall thickness, with a

manganese content of no less than 16% percent by weight, for exclusive use in

slurry, tailings, and pressure piping systems in oil sands projects, and marked “Not

for CSA Z-662 Applications”. For greater certainty, use in a pipeline meeting

CSA Z-662 is not permitted under this exclusion.

The ETP class of goods comprises products that have been included in previous SIMA

investigations: oil country tubular goods (OCTG), seamless casing, line pipe and large diameter line

pipe. The Tribunal takes judicial notice of, and adopts, the following factual findings it made in

these previous proceedings concerning methods of production and product characteristics:

 OCTG are carbon or alloy steel pipes used for the exploration and exploitation of

oil and natural gas. OCTG is manufactured by the seamless or by the electric-

resistance welding (ERW) process, and can be subdivided into casing and tubing.

Casing is used to prevent the walls of an oil or gas well from collapsing, both

during drilling and after completion of the well. Tubing is used within the casing to

convey oil and gas to the surface. OCTG meet or are supplied to meet API

specification 5CT, in all applicable grades.³²¹

321. Seamless Carbon or Alloy Steel Oil and Gas Well Casing (10 March 2008), NQ-2007-001 (CITT)

[Seamless Casing NQ] at paras. 15-23; Seamless Carbon or Alloy Steel Oil and Gas Well Casing

(11 March 2013), RR-2012-002 [Seamless Casing 1^streview] at paras. 16-23; Seamless Carbon or Alloy

Steel Oil and Gas Well Casing (28 November 2018), RR-2017-006 (CITT) [Seamless Casing 2^nd

review] at paras. 14-16; Oil Country Tubular Goods (23 March 2010), NQ-2009-004 (CITT) [OCTG I]

at paras. 23-29; Oil Country Tubular Goods (2 March 2015), RR-2014-003 (CITT) [OCTG I 1^stReview]

at paras. 9-11; Oil Country Tubular Goods (2 April 2015), NQ-2014-002 (CITT) [OCTG II] at

paras. 20-22.

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 Line pipe from 2.375 inches (60.3 mm) up to and including 24 inches

(609.6 mm³²²), in nominal outside diameter (“small diameter line pipe”) is pipe

that is sold for oil and gas transmission purposes or process piping purposes. Small

diameter line pipe is used by the oil and gas industry in pipelines for the gathering

and distribution of oil and gas, or as process pipe used in steam generation facilities

for steam-assisted gravity drainage, petrochemical plants, upgraders, gas

transmission facilities, and fabrication of modules. Line pipe may be manufactured

by the seamless or welded process. The Canadian market for oil and gas line pipe

is governed by two main design codes depending on whether the line pipe is for

pipelines or for process piping. Pipelines must conform or be equivalent to CSA

Z662 (oil and gas pipeline systems), and process piping must conform or be

equivalent to ASME B3l.1. These systems standards cover multiple pipe standards

and can cover multiple grades of pipe. Examples of pipe standards include: CSA

Z245.1, API 5L, ISO 3183, ASTM A333, ASTM A53-B, and ASTM A106. Pipe

manufactured to a particular standard may be compatible with the requirements of

another standard, i.e. a particular pipe may be certified as complying with multiple

standards if all the requirements of each standard/grade are met for that particular

pipe.³²³

 Large diameter line pipe, defined as line pipe of a diameter greater than 24 inches

(609.6 mm) and less than or equal to 60 inches (1,524 mm), is used in the oil and

gas sector primarily in pipelines for the transmission of oil and natural gas products

over long distances, but also in a variety of mining applications, including as slurry

pipe in oil sands operations. The Canadian market for large diameter line pipe is

governed by applicable line pipe specifications including Canadian Standards

Association (CSA) specification Z245.1 for line pipe used in pipeline applications.

Oil and gas transmission pipelines must, in turn, for example, conform to CSA

Z662 (Oil and Gas Pipeline Systems). However, international trade in line pipe is

governed primarily by API specification 5L. A particular line pipe may be certified

and stenciled as complying with multiple standards if all the requirements of each

standard/grade are met (leading to dual-, triple-, and further multiple-stenciled line

pipe). Large diameter line pipe is manufactured by using two main production

processes: the helical submerged arc welded (HSAW) and the longitudinal

submerged arc welded (LSAW) methods. It is also subjected to a range of highly

advanced and specialized tests and/or coating mediums to reflect industry

standards and purchaser-driven technical specifications. Large diameter line pipe is

used in many different end uses, some of which have their own requisite testing

before a mill can be certified to produce large diameter line pipe to industry

standards.³²⁴

322. In the product definition in Carbon and Alloy Steel Line Pipe (29 March 2016), NQ-2015-002 (CITT)

[Line Pipe I] and Welded Large Diameter Carbon and Alloy Steel Line Pipe (20 October 2016),

NQ-2016-001 [Large Diameter Line Pipe], the CBSA equated 24 inches with 609.6 mm. In Carbon and

Alloy Steel Line Pipe (4 January 2018), NQ-2017-002 (CITT) [Line Pipe II], 24 inches was equated with

610 mm.

323. See Line Pipe I at para. 20; Line Pipe II at para.12.

324. Large Diameter Line Pipe at paras. 4-5, 33-38.

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 OCTG and small diameter line pipe are commodity products that are traded largely

on the basis of price.³²⁵In contrast, large diameter line pipe is neither a commodity

product nor a capital good; it is best described as a hybrid product that remains

subject to price-driven considerations when purchased by end users in the oil and

gas and extraction sectors alike.³²⁶

SUMMARY

The Tribunal finds that, while there has been a significant increase in the importation of

ETP from the subject countries, this increase as well as the conditions under which the subject ETP

are being imported have not caused serious injury, and are not threatening to cause serious injury, to

the domestic industry. The Tribunal therefore does not recommend a remedy in respect of energy

tubular products.

ANALYSIS

The legal principles applicable to the analysis are set out in Part III of this report.

Like or directly competitive goods

The Tribunal must determine whether domestically produced ETP is “like or directly

competitive” goods to the subject imported ETP.

Parties supporting the imposition of a safeguard measure submitted that domestically

produced ETP constituted like goods in relation to the imported subject goods.

Parties opposing the imposition of a safeguard measure argued the following: (1) the

domestic producers are incapable of supplying certain types of ETP through domestic production;

(2) the Tribunal cannot attribute injury to imports of what is not manufactured in Canada; and

(3) there is no legal basis to impose a safeguard measure where there is no domestic industry for a

particular product. Certain parties opposing argued that the ETP class of goods, as defined in the

Order, actually conflates distinct classes of goods.³²⁷These parties argued that, as a result of the

inclusion of products which are not all “like” each other, the aggregate pricing data collected by the

Tribunal precludes any meaningful price comparisons, particularly as the product mix may vary.

They also argued that there is a risk that the Tribunal could recommend the imposition of safeguard

measures on imported OCTG by improperly attributing injury caused by imported line pipe to

imported OCTG, or vice versa.

325. See Seamless Casing 1^streview at para. 120; Seamless Casing 2^ndreview at para. 73; OCTG I at

paras. 141-142; OCTG I 1^stReview at paras. 122-133; OCTG II at para. 125; Line Pipe I at paras. 105,

217, 249; Line Pipe II at para. 34.

326. Large Diameter Line Pipe at para. 38.

327. These parties each classified the various types of ETP into different product categories. One party

proposed the following classification: (i) carbon OCTG grades; (ii) alloy OCTG grades; (iii) small

diameter line pipe; and (iv) large diameter line pipe: Exhibit GC-2018-001-75.29, Vol. 5 at 31. Another

party proposed the following classification: (i) seamless OCTG; (ii) welded OCTG; (iii) line pipe below

16” in outside diameter (OD); and (iv) line pipe in excess of 16” OD: Exhibit GC-2018-001-75.27,

Vol. 5 at 10.

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While the Tribunal recognizes that there may be some validity in the arguments presented

by parties opposed, the Tribunal is bound by the terms of the Order in Council, which direct the

Tribunal to consider ETP as a single class of goods:

In carrying out its mandate, the Tribunal must . . . conduct its analysis taking into account

all goods of each class described in the schedule, and . . . conduct its analysis on the basis of

domestic producers of like or directly competitive goods, as defined in section 3 of the

Canadian International Trade Tribunal Regulations, for each class described in the

schedule. . . .³²⁸

ETP are produced in a variety of diameters and grades across a wide range of product

types. Nonetheless, the Tribunal determines that comparable domestic ETP and imported ETP

compete with one another in the Canadian marketplace on the basis of price and that they have the

same general end uses.

Therefore, for purposes of this inquiry, the Tribunal finds that domestically produced ETP

of the same description as the subject goods are like or directly competitive goods in relation to the

subject imported ETP.³²⁹

Domestic producers

The domestic producers of ETP are Bri-Steel Corporation (Bri-Steel), Evraz Inc. NA

Canada and the Canadian National Steel Corporation (collectively, Evraz), Tenaris Canada (which

includes Tenaris Global Services (Canada) Inc., Algoma Tubes Inc. and Prudential Steel ULC—

collectively, Tenaris) and Welded Tube of Canada (Welded Tube).

The domestic industry’s production capabilities are as follows:

 Bri-Steel manufactures seamless pipe at its Edmonton facility.³³⁰

 Evraz manufactures ERW small diameter line pipe, HSAW large diameter line pipe

and ERW tubing in Regina, Saskatchewan, ERW casing in Calgary, Alberta, ERW

small diameter line pipe and casing in Red Deer, Alberta and ERW small diameter line

pipe, Double Submerged Arc Welded (DSAW) large diameter line pipe, and ERW

casing in Camrose, Alberta.³³¹

 Tenaris produces seamless OCTG and small diameter line pipe at Algoma Tubes in

Sault Ste. Marie, Ontario, and ERW OCTG and small diameter line pipe at Prudential

Steel in Calgary, Alberta.³³²

328. Order in Council, Section 2(1)(a)-(b).

329. To ensure the representativeness and accuracy of its analysis of the price effects of the subject goods

(given the potential effect of product mix issues on aggregate ETP pricing data), the Tribunal collected

additional pricing data from ETP producers and importers with respect to eight benchmark products

within this class of goods. The eight benchmark products are: (i) 6 5/8” OD (Outside Diameter)

Uncoated Line Pipe; (ii) 8 5/8” OD Uncoated Line Pipe; (iii) 12 3/4” OD Uncoated Line Pipe; (iv) 24”

OD Uncoated Line Pipe; (v) J55 Seamless Casing; (vi) L80 Seamless Casing; (vii) J55 ERW Casing;

and (viii) L80 ERW Casing. Exhibit GC-2018-001-09E, Vol. 1.1 at 7.

330. Exhibit GC-2018-001-24.01, Vol. 3 at 3.

331. Exhibit GC-2018-001-24.05A, Vol. 3 at 8-9, 15.

332. Exhibit GC-2018-001-24.04D, Vol. 3 at 4-5.

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 Welded Tube produces ERW casing and has facilities in Concord, Port Colborne, and

Welland, Ontario.³³³

It is not disputed that Bri-Steel, Evraz, Tenaris and Welded Tube account for all known

domestic production of ETP and, therefore, represent the entirety of the domestic industry.

Therefore, in the absence of any evidence to the contrary, the Tribunal finds they are the producers

as a whole of the like or directly competitive goods and that they constitute the “domestic industry”

of like or competitive products.

Increase in imports

Parties opposing the imposition of a safeguard measure argued that there was no increase in

imports which satisfied the requirements of Canadian law and the Agreement on Safeguards; parties

supporting the imposition of a safeguard measure held the contrary position.

With respect to absolute volumes of imports, Table 6 shows the volume of ETP imports

into Canada for the POI.

Table 6

Imports of Energy Tubular Products

(Tonnes)

Interim

2015

2016

2017

2018

Subject

Countries

Total

499,913

307,424

534,681

252,735

335,255

736,957

460,357

838,892

395,259

452,176

Imports

Source: Exhibit GC-2018-001-09B, Table 10, Vol. 1.1.

Table 6 shows that, in absolute terms, the volume of subject imports decreased by

approximately 192,000 tonnes in 2016, but then increased by approximately 227,000 tonnes in

2017 for a net increase of approximately 35,000 tonnes over the three years. In percentage terms,

subject imports decreased by 39 percent in 2016 and then increased by 74 percent in 2017 for a net

increase of 7 percent.³³⁴The ratio of subject imports relative to domestic production decreased by

6 percentage points from 2015 to 2016 and then remained stable from 2016 to 2017.³³⁵Looking at

annual trends in the volume of subject imports, the Tribunal does not find that the increase in 2017

alone or the increase from 2015 to 2017 can be characterized as significant. The rate of increase in

subject imports during the 2015 to 2017 period was less than the growth in the market.³³⁶

333. Exhibit GC-2018-001-24.03B, Vol. 3 at 2-3.

334. Exhibit GC-2018-001-009B, Tables 10, 11, Vol. 1.1.

335. Ibid., Table 13 at 27.

336. Ibid., Table 10 at 24; Exhibit GC-2018-001-010B (protected), Table 14, Vol. 2.1.

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However, as seen in Table 6, in interim 2018, the volume of subject imports increased by

approximately 82,000 tonnes, which represented an increase of 33 percent over interim 2017. Also,

in interim 2018, the ratio of subject imports to domestic production increased by 2 percentage

points.³³⁷It is difficult to pinpoint when the additional increase in the volume of subject imports

observed in 2018 began, but according to credible testimony during the hearing, it began sometime

in the latter part of 2017.³³⁸

In the Tribunal’s view, the increase in subject imports in interim 2018 is recent, sudden and

sharp enough. It is also significant enough. In terms of its duration, the increase was observed

within a six-month period and builds off of the increase that had started in 2017. The increase is also

significant in terms of the volumes at issue and of their share of the Canadian market.³³⁹Contrary to

the assertion of certain parties opposed, the increase was greater than the increase in the total

market.³⁴⁰Finally, it cannot be ignored, from a contextual point of view, that the increase in subject

goods in interim 2018 represented a 27 percent increase relative to domestic sales of domestic

production when compared to interim 2017.³⁴¹

The domestic industry submitted publicly available Statistics Canada data that, they

asserted, shows that the increase in imports continued beyond interim 2018, into Q3 2018.³⁴²Parties

opposing the imposition of a safeguard measure objected to the Tribunal relying on data beyond

June 30, 2018.

The Tribunal determined that, in the case of ETP, Statistics Canada data provided a

reasonably reliable indication of imports in Q3 2018. This data suggests that the increase in imports

from subject countries did continue in Q3 2018, when compared to the same period in 2017.³⁴³

Therefore, the Tribunal is of the view that it can reasonably rely on the Statistics Canada data to

confirm that the trend in subject imports observed in interim 2018 continued in Q3 2018.³⁴⁴

337. Exhibit GC-2018-001-009B, Table 13, Vol. 1.1 at 27.

338. Exhibit GC-2018-001-75.19, Vol. 5 at 46; Transcript of Public Hearing at 1044-1045, 1049-1050, 1128

and 1132-1133. While seasonal factors may have had some influence on drilling activities (and, hence,

import trends) in the second half of 2017, the Tribunal believes that the difference between volumes of

subject imports in interim 2017 and interim 2018 supports the view that the increase in subject imports

likely became more acute sometime in Q3 or Q4 2017.

339. Exhibit GC-2018-001-10B (protected), Table 16, Vol. 1.1 at 30.

340. Exhibit GC-2018-001-009B, Tables 11 and 15, Vol. 1.1 at 25 and 29.

341. Ibid., Table 13 at 27.

342. Exhibit GC-2018-001-75.17, Vol. 5 at Attachment A-1.

343. The Tribunal conducted an analysis to assess the reliability of the Statistics Canada import volume data

regarding ETP by comparing the Statistics Canada data for 2015, 2016, 2017, interim 2017 and interim

2018 with the import data in the Tribunal’s Statistical Summary for ETP for each respective period. The

Tribunal’s analysis determined that its data represented between 91 and 100 percent of the Statistics

Canada data for these periods. Therefore, the Tribunal has concluded that the Statistics Canada data for

imports of ETP in Q3 2018 is reliable for the purposes of its inquiry regarding this class of goods.

344. It is also reasonable to assume that the upward trend observed in interim 2018 and Q3 2018 would have

continued in Q4 2018 but for the imposition of provisional safeguard measures by the Government of

Canada, which blurs the picture. In this respect, although the provisional safeguard measures are likely

to have impacted the volume of subject imports in November and December 2018, there is no Statistics

Canada data on the record for these months. In light of the lead time between the placing of an order and

the delivery of subject ETP, the Tribunal does not form an opinion as to whether the imposition of the

provisional safeguard measures resulted in a decline of subject import volumes in those months.

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In light of the foregoing, the Tribunal concludes that the volume of subject ETP imports

increased in interim 2018, and that this increase was recent enough, sudden enough, sharp enough

and significant enough.

Unforeseen developments and GATT 1994 obligations

Having found that there was such an increase in subject imports of ETP in interim 2018, the

Tribunal must consider whether the increase resulted from unforeseen developments and the effect

of Canada’s GATT 1994 obligations.

Unforeseen developments

Parties supporting the imposition of a safeguard measure submitted that the following were

developments which could not be reasonably foreseen by Canadian negotiators in 1994 and were

directly linked to the increase in subject imports:

 global steel overcapacity, in particular for ETP;

 the U.S. section 232 investigation and measures, the responses to these measures by

other countries and the resulting diversion of ETP to Canada; and

 the imposition of anti-dumping measures in 2018 by the United States on large

diameter line pipe from a number of countries, including Canada.

Parties opposing the imposition of a safeguard submitted that these developments were not

“unforeseen” and could not be linked to the increase in subject imports.

For the reasons that follow, the Tribunal finds that the increase in imports was due to a

combination of unforeseen developments. The overarching unforeseen development with respect to

ETP is the continuing unresolved and substantially increasing overcapacity in world steel

production, including ETP production, which could not be foreseen in 1994.

The developments in excess capacity for steel generally, and in China in particular, have

been described in Part III above. With respect to excess capacity for ETP specifically, according to

Metal Bulletin Research (MBR) OCTG Intelligence Service Data, in 2017 the global production

capacity for OCTG alone (i.e. not counting global capacity for line pipe) was roughly twice the

global demand. This excess capacity was equivalent to almost 20 times the total Canadian OCTG

consumption as reported by MBR.³⁴⁵Given that MBR also establishes that North American

consumption exceeds North American capacity, the global overcapacity for OCTG can be

attributed to non-NAFTA countries—and, therefore, largely to subject countries—particularly

345. Exhibit GC-2018-001-76.19 (protected), Vol. 6 at 156, 159. The Tribunal views the MBR data

concerning OCTG in Canada as reasonable. The Tribunal compared the Canadian consumption of

OCTG in 2017 from MBR OCTG Intelligence Service Data (Exhibit GC-2018-001-76.19 (protected),

Vol. 6 at 157) to the Canadian ETP market in the Statistical Summary (Exhibit GC-2018-001-10B

(protected), Table 14, Vol. 2.1 at 28). The Tribunal is of the view that the MBR OCTG consumption

data for Canada is reasonable for the OCTG portion of the overall Canadian ETP market given the

breakdown observed between imports of OCTG and line pipe, based on the HS Code breakdown in

CBSA’s FIRM data and producers’ and importers’ questionnaire responses.

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China.³⁴⁶The data gathered by the Tribunal also shows an excess capacity from foreign producers

from subject countries vastly exceeding the total Canadian market.³⁴⁷

The other unforeseen developments that have led to the increase in subject imports are the

U.S. section 232 measures and the extent of the resulting trade diversion of ETP to Canada. In this

respect, the U.S. section 232 measures added to the trade-diverting effects of the numerous trade

remedies that were already in place around the world against ETP from the subject countries.³⁴⁸

The evidence before the Tribunal indicates that the announcement and eventual imposition

by the United States of the section 232 measures led to a diversion of ETP imports to the Canadian

market sometime during the second half of 2017 and interim 2018. Witnesses for the domestic

industry outlined these dynamics in a cogent fashion. In particular, they explained that as soon as

the section 232 investigation was announced in April 2017, non-NAFTA exporters began looking

for new markets, and they began to see more aggressive offers in the market. By the end of

Q3 2017 and into Q4 2017, they started to see a very sudden and significant increase of imports

from non-NAFTA countries.³⁴⁹These explanations are borne out by the data before the Tribunal,

which supports the view that the increase in subject imports likely became more acute sometime in

Q3 or Q4 2017.³⁵⁰The data also shows that the exports to the United States of foreign producers

who responded to the Tribunal’s questionnaire decreased by 32 percent from interim 2017 to

interim 2018, while their exports to Canada increased by 41 percent during the same period.³⁵¹

Having discussed the relationship between the increase in subject imports and the

unforeseen developments, the Tribunal cannot ignore, however, the fact that, as will be discussed

later, the increase in subject imports was also in part due to the incapacity of the domestic producers

to respond to the increase in demand for ETP quickly enough.

In light of all of the above, the Tribunal finds that the evidence on record demonstrates that

the main causes of the increased volumes of subject imports in interim 2018 are the global

overcapacity, including in some of the main subject sources of ETP imports into Canada, as well as

the announcement and imposition of the U.S. section 232 measures.

GATT 1994 obligations

In 1994, Canada bound the tariff for ETP at zero percent.³⁵²Moreover, Canada agreed, by

virtue of Article XI of GATT 1994, not to impose quantitative restrictions. The effect of the

concession and the obligations arising under Articles II:1(a) and XI of the GATT 1994 was to

346. Exhibit GC-2018-001-76.19 (protected), Vol. 6 at 156, 158-159.

347. Exhibit GC-2018-001-10B (protected), Table 47, Vol. 2.1 at 60.

348. There are 63 AD/CV measures in place by WTO Members against ETP. The Tribunal also notes that in

August 2018, the United States imposed provisional anti-dumping duties on large diameter line pipe

from Canada, China, Korea, India, Turkey and Greece. The United States imposed provisional

countervailing duties on imports of the same goods from China, Korea, India, and Turkey in June 2018.

Exhibit GC-2018-001-75.17, Vol. 5 at 106-107.

349. Exhibit GC-2018-001-75.19, Vol. 5 at 46; Transcript of Public Hearing at 1045, 1049-1050, 1128 and

1132-1133.

350. See the discussion in the “Increase in imports” section above.

351. Exhibit GC-2018-001-009B, Table 47, Vol. 1.1, at 60. The countermeasures imposed by Canada on

imports of steel products from the United States also likely contributed to an increase in subject imports

after their imposition in July 2018 (i.e. in Q3 2018 and beyond).

352. Exhibit GC-2018-001-066.43, Vol. 1 at 44-45.

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prevent Canada from imposing tariffs above the bound tariff rate, or from imposing quotas, as a

means of addressing the significant increase in imports of ETP in interim 2018.

Serious injury

Having found that there was a significant increase in subject imports in interim 2018, the

Tribunal must now determine whether the domestic industry suffered serious injury. The Tribunal’s

analysis focuses on developments in the interim 2018 period, while placing them in the context of

developments during the entire POI.

Evraz argued that, if the Tribunal finds that a major proportion of the domestic industry (as

opposed to the domestic industry “as a whole”) has been injured, the Tribunal may reach the

conclusion that the domestic industry has suffered serious injury. This argument finds no support in

Canadian law, the Agreement on Safeguards, or precedent.³⁵³When the Tribunal collects data for

the entire domestic industry, it assesses injury with respect to the entire domestic industry. In the

present case, the Tribunal did collect data for the entire domestic industry. As a result, it will make

its serious injury determination on the basis of the industry as a whole.

The following table summarizes the domestic industry’s performance during the POI. As

all financial performance indicators for the domestic industry, including percent changes, are

confidential, they have not been included in the table.

Table 7

Summary of Domestic Performance Indicators (Index)

Interim

2015

100

2016

103

67

110

24

2017

108

116

160

74

2017

100

2018

105

129

110

171

123

Practical Plant Capacity

Total Production

Production for Domestic Sales

Production for Export Sales

Capacity Utilization Rate (%)

65

108

Market

100

84

108

128

112

137

123

100

113

104

92

Domestic Sales from Production

Producers’ Market Share (%)

Total Direct Employees

100

66

61

63

112

109

120

97

100

125

129

119

108

Total Wages ($000) - Direct Employment

Total Hours Worked (000) - Direct Employment

Productivity - Tonnes/ Hour Worked (Direct)

105

Producers’ Inventories (Tonnes)

Inventory as % of Production

100

77

116

122

105

100

189

147

Selling Prices

Domestic Sales from Domestic Production

Total Subject Countries

Excluded Countries

100

93

87

81

96

104

96

100

118

112

115

Total - Subject Goods - Market Share

Excluded Countries - Market Share

100

82

85

93

73

100

123

63

Note(s):

1. 2015 = 100 and Interim 2017 = 100

2. Index values are notional, and there is no indexing between a full calendar year and an interim period.

3. The bolded index values under “Selling Prices” indicate the lowest price in the market for that period.

Source: Exhibit GC-2018-001-09B, Table 9, Vol. 1.1 at 23; Exhibit GC-2018-001-010B (protected), Tables 16, 19, 26, Vol. 2.1 at 30, 33, 39.

353. See Part III above.

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Parties supporting the imposition of a safeguard measure argued that the increased volumes

of subject imports caused serious injury to the domestic industry. They asserted that the subject

imports took sales and, thus, market share, away from the domestic industry, which resulted in an

increase in its inventories and negatively impacted its profitability. For their part, parties opposing

the imposition of a safeguard measure submitted that the domestic industry was not seriously

injured as a result of subject imports.

It is not in dispute that the domestic industry’s performance during the POI was severely

impacted by the sharp and sudden contraction in demand for ETP due to a sharp decline in energy

prices at the end of 2014. Energy prices and the ETP market remained depressed until the end of

2016/early 2017, when they started to recover.³⁵⁴In 2017 as a whole, the total market increased by

33 percent over 2016,³⁵⁵though witnesses testified that demand in 2017 remained well below

where it had been in 2013-2014.³⁵⁶The market increased by 13 percent in interim 2018 compared

to interim 2017.³⁵⁷

Also of relevance to the performance of the domestic industry during the POI are the

affirmative findings of injury by the Tribunal in the context of SIMA inquiries concerning small

diameter line pipe from China and Korea, and large diameter line pipe from China and Japan.³⁵⁸In

these three SIMA cases, the Tribunal considered the performance of the domestic industry during

periods overlapping with the POI in the present inquiry and found that the domestic industry

producing in these segments of the ETP industry had been injured as a result of dumped and

subsidized imports.

The table above demonstrates an improvement in the performance of the domestic industry

in interim 2018 as compared to interim 2017, notwithstanding the significant increase in subject

imports in that period. Domestic sales increased throughout the POI and increased by 4 percent in

interim 2018 over interim 2017.³⁵⁹The domestic industry’s total production increased by 29 percent

in interim 2018 over interim 2017, while production for domestic sales increased by 10 percent.³⁶⁰

The domestic industry’s practical plant capacity increased throughout the POI, albeit by a small

margin, whereas the capacity utilization rate increased significantly in interim 2018 as compared to

interim 2017.³⁶¹The industry’s productivity in tonnes per hour worked increased by 8 percent in

interim 2018 compared to interim 2017.³⁶²

Direct employment increased by 25 percent in interim 2018, while direct employment

wages increased in interim 2018 by 29 percent.³⁶³However, the domestic producers indicated that

354. Transcript of Public Hearing at 1048; ibid. at 1201-1205; Seamless Casing 2^ndreview at para. 56-57.

355. Exhibit GC-2018-001-009B, Table 15, Vol. 1.1 at 29.

356. Transcript of Public Hearing at 1237, 1295.

357. Exhibit GC-2018-001-009B, Table 15, Vol. 1.1 at 29.

358. The Tribunal made affirmative injury determinations covering portions of the POI in Line Pipe I at

para. 199; Line Pipe II at paras. 93, 106; and Large Diameter Line Pipe at para. 214.

359. Exhibit GC-2018-001-009B, Table 9, Vol. 1.1 at 23.

360. Ibid., Table 27 at 40.

361. Ibid.; Exhibit GC-2018-001-010B (protected), Table 26, Vol. 2.1 at 39.

362. Exhibit GC-2018-001-009B, Table 27, Vol. 1.1 at 40.

363. Ibid.

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they had to lay off employees in the second half of 2018 and early 2019, which would change the

trajectory of the positive employment trends observed in the Statistical Summary.³⁶⁴

However, the Tribunal cannot ignore that some indicators trended downward in

interim 2018. First, in terms of market share, sales of domestic production decreased by 8 percent in

interim 2018.³⁶⁵Nonetheless, this decrease must be considered together with an increase in the

domestic industry’s sales of subject imports and in the market share for those sales.³⁶⁶Second,

domestic producers’ inventories of domestically produced ETP increased by 89 percent in interim

2018 over interim 2017.³⁶⁷This increase must also be contextualized. As will be discussed below,

witnesses explained that inventories were depleted during the difficult period of 2016 and had to be

replenished in 2017 as the market was recovering. It must also be noted that importers’ inventories

also increased during the same period, albeit to a much smaller extent, which suggests that the

increase in producers’ inventories may have other causes than increased subject import volumes.³⁶⁸

As well, several elements of the financial performance of the domestic industry³⁶⁹

deteriorated in interim 2018 when compared with the performance in interim 2017.³⁷⁰

The above picture indicates that the domestic industry has suffered some injury. However,

the test in this part of the analysis is not whether the domestic industry has experienced injury or

even material injury, but whether it has experienced “serious injury”.³⁷¹In this case, the Tribunal

considers that the injury suffered by the domestic injury does not rise to the level of serious injury or

represent a “significant overall impairment” in the position of the domestic industry.

When the Tribunal considers the overall performance of the domestic industry during the

relevant period, it finds that, despite some difficulties experienced in interim 2018, the domestic

industry’s position has greatly improved since the fall in oil prices in 2014. Almost all major

indicators show an improvement since 2015 and 2016.³⁷²This general improvement in the

condition of the domestic industry over the POI cannot be ignored when determining whether the

injury it suffered in interim 2018 is a significant overall impairment of its position. As a result, even

if the performance of the domestic industry deteriorated somewhat in interim 2018, it did not do so

to such an extent that it resulted in a significant overall impairment of its position, and therefore in

serious injury.

364. Exhibit GC-2018-001-75.11, Vol. 5 at 16; Exhibit GC-2018-001-75.19, Vol. 5 at 20 and 77.

365. Exhibit GC-2018-001-009B, Table 9, Vol. 1.1. The Tribunal notes that market share is, by its nature,

already expressed in percentage terms. Thus, changes to this market share that are also expressed in

percentage terms must not be confused with changes expressed in percentage points.

366. Exhibit GC-2018-001-010B (protected), Tables 14 and 16, Vol. 2.1 at 28 and 30.

367. Exhibit GC-2018-001-009B, Table 9, Vol. 1.1 at 16.

368. Ibid., Table 34 at 46.

369. As noted above, the data concerning financial performance indicators for the domestic industry gathered

by the Tribunal, including percent change and indices, is confidential.

370. Exhibit GC-2018-001-010B, Tables 21-23, Vol. 2.1 at 33-35. The Tribunal further notes that, as part of

its case brief, one of the domestic producers submitted its financial results for Q3 2018. As Q3 2018 is

outside the POI covered by the questionnaires, no other domestic producers submitted their Q3 2018

results. The Tribunal is not willing to place undue weight on the evidence of a single company in regard

to the injury suffered by the domestic industry as a whole.

371. The requirements for what constitutes “serious injury” have been described in Part III (Legal

Framework) of this report.

372. Exhibit GC-2018-001-010B (protected), Table 8, Vol. 2.1 at 22.

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With respect to the causal link between the increase in subject imports and the injury

suffered by the domestic industry, the Tribunal first recalls that subject imports gained market share

in interim 2018. They did so at the expense of both the domestic industry and non-subject (i.e. U.S.)

imports.³⁷³However, as noted above, the domestic industry’s sales of subject imports and the

market share of these sales increased in interim 2018, making up for part of the decrease in the

domestic industry’s market share for sales from domestic production.

As indicated in other sections of this report, a key factor in establishing a causal nexus

between subject imports and serious injury is evidence that the imports have significantly undercut,

depressed or suppressed the prices of the domestically produced like or directly competitive goods.

The Tribunal has noted in previous SIMA findings that OCTG and small diameter line pipe are

commodity products, with price being a key consideration affecting purchasing decisions.³⁷⁴

The evidence before the Tribunal confirms that price is an important consideration,

provided the products meet the requirements and the delivery schedule desired by the purchaser.³⁷⁵

However, despite what is alleged by parties in support of a safeguard measure, the evidence

indicates that the subject imports have not had significant effects on the price of domestic like and

directly competitive goods.

Although the aggregate pricing data contained in the Tribunal’s Statistical Summary shows

undercutting by subject imports in interim 2018 when the comparison is performed using the import

prices, there is no undercutting when the sales prices of imports are compared to the sales prices of

domestic ETP.³⁷⁶

Similarly, the benchmark pricing data shows that, in interim 2018, the import prices of

subject goods undercut the prices of the domestic like goods for six of the seven benchmark

products for which there was competition,³⁷⁷with the extent of the price undercutting greater in

interim 2018 than in interim 2017 for all but one of the benchmark products.³⁷⁸However, at the

level of the sales of imports, there was undercutting in interim 2018 for only one benchmark

product out of seven for which there was competition between subject imports and the domestic

like goods.³⁷⁹

It follows from all of the above that the level and extent of price undercutting observed in

interim 2018 cannot be characterized as significant.

373. Ibid., Table 16 at 30.

374. See above, product section.

375. Transcript of Public Hearing at 1196, 1294-1295, 1301-1303.

376. Exhibit GC-2018-001-010B (protected), Tables 17 and 19, Vol. 2.1 at 31, 33. Competition between

subject imports and domestic ETP takes place both at the distributor and at the end-user level. Based on

the responses to the Tribunal’s questionnaires, the vast majority of subject imports were imported by

distributors who in turn sold the goods to end users.

377. Exhibit GC-2018-001-009E, Table 27, Vol. 1.1 at 35.

378. Exhibit GC-2018-001-010E (protected), Tables 19-22, Vol. 2.1 at 21-24.

379. Exhibit GC-2018-001-09E, Table 28, Vol. 1.1 at 36.

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As for price depression, the evidence before the Tribunal shows that the prices of domestic

ETP increased in interim 2018.³⁸⁰The Tribunal cannot therefore conclude that there was price

depression.

In terms of price suppression, the evidence³⁸¹gives credence to allegations that competition

with subject imports prevented domestic producers from recovering the entirety of increasing raw

material costs, and suggests that some price suppression resulting from subject imports occurred

during the POI. However, the relatively limited extent of such suppression, together with the limited

price undercutting, is not significant enough to support a strong causal nexus between the increase

in the volume of subject imports and any injury that the domestic industry experienced in interim

2018.

Also key to the determination of a causal relationship is whether there are any causes of the

injury that cannot be attributed to subject imports. In this regard, the evidence on the record shows

certain forms of self-inflicted injury.

The evidence suggests that the increased market share of subject imports in interim 2018

was in part attributable to the domestic industry’s inability to ramp up production quickly enough to

satisfy fast-growing domestic demand, thereby causing importers and certain domestic producers to

fulfil orders with imported ETP.³⁸²In respect of the latter, the evidence establishes that the domestic

industry’s own imports of the subject goods displaced domestically produced ETP throughout the

POI, including in interim 2018. Tenaris accounted for all of the domestic industry’s imports from

the subject countries during the POI,³⁸³and a significant portion of these imports are from Tenaris’

Mexican affiliate, TAMSA.³⁸⁴The evidence before the Tribunal suggests that, while certain of

these imports involved specialty products not made in Canada, a significant portion of these

substitutable products (or similar products) could have been produced in Canada (by Tenaris or

other domestic producers).³⁸⁵In this respect, a witness from Evraz indicated that imports from

NAFTA countries, including Mexico, are in direct competition with its production and sales in

Canada.³⁸⁶

For this reason, even though Tenaris’ imports from Mexico were generally priced higher

than other subject imports and domestic ETP,³⁸⁷the evidence establishes that they displaced

Canadian production and sales of ETP by the domestic industry.

Tenaris’ imports of subject goods from Mexico resulted from a corporate decision by

Tenaris to idle its Canadian operations and supply the weak Canadian market with imports from

380. Exhibit GC-2018-001-009B, Table 20, Vol. 1.1; Exhibit GC-2018-001-010E (protected), Tables 3-18,

Vol. 2.1 at 5-20.

381. Exhibit GC-2018-001-010B (protected), Table 21, Vol. 2.1 at 35.

382. Transcript of Public Hearing at 1204-1206; Exhibit GC-2018-001-75.19, Vol. 5 at 72.

383. Exhibit GC-2018-001-009B, Tables 1 and 11, Vol. 1.1 at 12 and 25.

384. Transcript of Public Hearing at 1081-1082; Exhibit GC-2018-001-009B, Table 1, Vol. 1.1 at 12;

Exhibit GC-2018-001-010B (protected), Table 10, Vol. 2.1 at 24.

385. Exhibit GC-2018-001-75.19, Vol. 5 at 72; Transcript of Public Hearing at 1052, 1081-1082, 1139;

Transcript of In Camera Hearing at 314, 318-319; Exhibit GC-2018-001-25.04G (protected), Vol. 4.

386. Transcript of Public Hearing at 1139.

387. Exhibit GC-2018-001-010B (protected) Tables 17 and 19, Vol. 2.1 at 31 and 33; Exhibit GC-2018-001-

010E (protected), Tables 3-18, Vol. 2.1 at 11-26.

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TAMSA.³⁸⁸Tenaris argued that it did so in order to maintain its market position and relationship

with its clients during the period when its Canadian production facilities were suspended.³⁸⁹

However, although decreasing somewhat, significant volumes of subject imports from TAMSA

continued into interim 2018, i.e. even after Tenaris’ Canadian facilities had resumed operating.³⁹⁰

Tenaris sought to justify its import strategy as a reasonable business and commercial

strategy. That may be so, but the Tribunal cannot simply accept Tenaris’ explanations as a valid

consideration for not treating this strategy as having resulted in self-inflicted injury for the purpose

of its analysis. The present inquiry is intended to determine whether safeguard measures should be

imposed in order to protect the domestic industry against the injury that the subject imports are

alleged to have caused. Considered from the point of view of the domestic industry as a whole (and

even considered from the viewpoint of Tenaris’ Canadian operations), Tenaris’ imports from

TAMSA and from other subject countries had the effect of displacing Canadian production. The

domestic industry’s imports from all subject countries increased by 8 percent in interim 2018

compared to interim 2017,³⁹¹substituting for domestic production and domestic sales from

domestic production. The replacement of domestic production by subject imports also means that

the domestic industry is less able to benefit from economies of scale, thereby spreading domestic

producers’ fixed costs over a smaller base than would otherwise be the case. Thus, the evidence

before the Tribunal indicates that a portion of any injury experienced by the domestic industry is

self-inflicted.

Finally, the evidence on the record indicates that the domestic producers operate within a

very competitive market.³⁹²Aggressive sales strategies by some domestic producers have

intensified this competition.³⁹³Without reaching a definitive conclusion on the issue, the Tribunal

considers that intra-industry competition is an important factor of injury to the domestic industry.

For all of the above reasons, the Tribunal concludes that the increase in the subject imports

in interim 2018 did not cause serious injury to the domestic industry; and, to the extent that the

domestic industry suffered a lesser degree of injury, it was largely self-inflicted.

Threat of serious injury

Having determined that the domestic industry did not suffer serious injury and, in addition,

that increased volumes of imports were not a principal cause of the injury suffered by the domestic

producers in interim 2018, the Tribunal must now determine whether the increased volumes of

subject imports are a principal cause of threat of serious injury.

388. Transcript of Public Hearing at 1059-1061. Tenaris suspended production activities at its Canadian

facilities during part of the POI, while the market recovered. Witnesses for Tenaris indicated that during

the POI, Tenaris postponed resuming production in Canada until there was sustained demand for a given

product (i.e. X tonnes for 4-6 months) sufficient to justify resuming production activities. In the

meantime, Tenaris supplied Canadian demand through imports from TAMSA. Exhibit GC-2018-001-

75.19, Vol. 5 at 73 at para. 29.

389. Exhibit GC-2018-001-075.19, Vol. 5 at 71-73; Transcript of Public Hearing at 1060.

390. Exhibit GC-2018-001-009B, Tables 1 and 11, Vol. 1.1 at 12 and 25.

391. Ibid., Table 11 at 25.

392. Transcript of Public Hearing at 1251; Transcript of In Camera Hearing at 386-387, 389-390.

393. Transcript of Public Hearing at 1251; Transcript of In Camera Hearing at 375-378.

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The Tribunal’s analysis of this question focuses on the changes in circumstances and

developments expected during the remainder of 2019 that may result in the domestic industry’s

situation deteriorating into one of serious injury. The Tribunal takes into consideration, as relevant

context to its analysis, the fact that although the domestic industry’s situation improved during the

latter part of the POI, it likely remains fragile, in particular as a result of the impact of the downturn

in the ETP market earlier in the POI.³⁹⁴Moreover, in performing its threat of injury analysis, the

Tribunal is mindful that a determination of threat is to be based on “facts” and not on

“conjecture”.³⁹⁵

Parties supporting the imposition of a safeguard measure submitted that subject imports

threaten to cause serious injury to the domestic industry unless a safeguard measure is imposed.

Their allegations in this respect rely on a projected increase in subject imports volumes at prices that

would make it impossible for the domestic industry to recoup increasing raw materials costs. The

same parties also argued that importers stockpiled subject imports during the POI, resulting in a

large inventory overhang that will take some time to work through and will negatively impact

demand and ETP prices in the coming months. They project that the inventory overhang and future

subject imports will have an injurious impact on, inter alia, their sales, production and employment

levels.

Parties opposing the imposition of a safeguard measure contested these arguments and

argued that subject imports do not threaten to injure the domestic industry, adding that factors other

than the increased volumes of subject imports threaten to injure the domestic industry.

For the reasons that follow, the Tribunal is of the view that the increased volumes of subject

imports are not a principal cause of threat of injury.

The Tribunal begins its analysis by assessing the current state of the Canadian market for

ETP. At the end of 2018, Canadian oil prices were low, and the difference between Canadian and

U.S. oil prices was at the greatest level seen during the POI.³⁹⁶This led the government of Alberta

to impose an 8.7 percent mandatory cut in oil production for 2019.³⁹⁷As a result of these measures

and the anticipated low oil prices,³⁹⁸it is projected that there will be less oil drilling in 2019 than in

2018, resulting in a decrease in demand for ETP in the Canadian market.³⁹⁹A witness for the

domestic industry explained that the number of drilling rigs operating in 2018 in Canada was down

by 30 percent from 2017 and that he expected 2019 levels to be at least 10 percent below those of

2018.⁴⁰⁰

394. As noted above, the domestic industry also suffered injury during the POI as a result of dumped and

subsidized imports from some of the subject countries. See Line Pipe I at para. 199; Line Pipe II at

paras. 93, 106; and Large Diameter Line Pipe at para. 214.

395. See the discussion concerning threat of injury in Part III (Legal Framework) above.

396. Transcript of Public Hearing at 1215; Exhibit GC-2018-001-075.17, Vol. 5 at 146. The discount of

Canadian compared to U.S. oil prices is attributed, among other factors, to transportation bottlenecks—

insufficient railroad or pipeline infrastructure—constraining the delivery of Western Canadian oil to

market. Transcript of Public Hearing at 1280; Exhibit GC-2018-001-075.19, Vol. 5 at 78.

397. Exhibit GC-2018-001-075.12, Vol. 5 at 40-42.

398. A witness indicated that unless there is an improvement in the dynamics within the oil and gas industry,

there will be significant downward pressures on prices in 2019. Transcript of Public Hearing at 1293.

399. Transcript of Public Hearing at 1291-1293; Exhibit GC-2018-001-075.17, Vol. 5 at 53.

400. Transcript of Public Hearing at 1047.

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The projected contraction in the Canadian ETP market means that fewer subject imports

will be drawn into the market. In this context, the Tribunal is not convinced that there will be a

sustained increase in the volume of subject imports. As indicated above, diversion of ETP imports

into Canada began in late 2017 and early 2018.⁴⁰¹In other words, the U.S. section 232 measures are

not a new development likely to lead to sustained increases in subject imports. In addition, the

Statistics Canada data for Q3 2018, a period during which the section 232 measures were in place,

shows that the increase in the volume of subject imports stabilized, albeit remaining at a high

level.⁴⁰²Furthermore, although the European Union imposed definitive TRQ on a series of steel

products,⁴⁰³the fact that the increase in subject imports volumes stabilized in Q3, a period during

which the provisional EU measures were in place, does not point to the likelihood that injurious

levels of ETP will be diverted from the European Union into Canada in the coming months as a

result. Finally, there is no evidence to the effect that new sources of subject imports are likely to

appear and seek to increase their imports to Canada. This is especially true given that no new

significant sources of subject imports appeared when the market was expanding, which makes it

unlikely, all other factors being equal, that they would be attracted to the Canadian market when it is

contracting.

For these reasons, notwithstanding the large excess capacity in the global ETP industry, in

particular in subject countries, and the fact that subject countries’ access to other markets has been

curtailed (including as a result of the imposition by the United States of new countervailing and

anti-dumping measures on large diameter line pipe in June and August 2018), the evidence on the

record does not indicate that subject import volumes are likely to see sustained increases during the

remainder of 2019 in the event that no definitive safeguard measure is imposed and provisional

measures are lifted.

In any event, there will likely be more “room” in the market as U.S. imports diminish. U.S.

imports accounted for 36 percent of imports in 2017, but decreased sharply to only represent

26 percent of imports in interim 2018.⁴⁰⁴They can be expected to decrease further as a result of the

25 percent countermeasure on U.S. imports applied by Canada effective July 1, 2018. Both the

domestic industry and the subject imports will likely compete for the market share vacated as a

result of the expected decline in U.S. imports.⁴⁰⁵

Parties supporting the imposition of a safeguard measure also argued that the increased

volumes of subject imports have led to the creation of a large overhang of subject imports inventory

that will undermine future sales and drive down prices for several months. The Statistical Summary

401. See above, section on unforeseen developments.

402. See above, section on increase in imports.

403. Exhibit GC-2018-001-66.44, Vol. 1 at 2. The European Union’s TRQs are based on the average volume

of imports into the European Union over the past three years, plus 5 percent, with a 25 percent out-of-

quota tariff. The steel product categories subject to the EU measures include “other seamless tubes”,

“large welded tubes” and “other welded pipes”, which overlap with the ETP class of goods as defined in

the Order.

404. Exhibit GC-2018-001-009B, Tables 11-12, Vol. 1.1. The Tribunal notes, however, that a significant

portion of the U.S. imports were imports of green tubes by a domestic producer that transforms these

green tubes into finished OCTG in its Canadian facilities. A significant portion of the decrease in U.S.

imports was due to a decrease in this domestic producer’s U.S. imports.

405. The domestic industry has likely had time to adjust to the new market reality post-imposition of the

Canadian countermeasures and to position itself so as to respond more effectively to domestic demand

and to compete for the market share being vacated by U.S. imports.

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data shows that inventories increased in the latter part of the POI, particularly in interim 2018.⁴⁰⁶

However, the Tribunal heard testimony that indicated that the current level of inventories is not as

great as it was in 2015-2016 and that because inventories were depleted by the end of 2016, they

needed to be replenished.⁴⁰⁷In addition, to the extent that there is indeed an inventory overhang in

the market, the evidence shows that domestic producers, through their imports and through their

domestic production, contributed as much as importers did in creating it.⁴⁰⁸

Turning to the likely future price effects of subject imports, the Tribunal concluded above

that although there was some undercutting by subject imports, the extent of the undercutting was

limited. The aggregate pricing evidence collected by the Tribunal suggests that, on average, the

price of subject imports at the import price and sales levels has been increasing since 2017.⁴⁰⁹The

benchmark pricing data shows a similar trend for the majority of the benchmark products, at both

the import price and at the sales price levels.⁴¹⁰This being the case, nothing on the record suggests

that the level of price undercutting is likely to significantly increase during the remainder of 2019

and that injury would materialize in any greater degree as a consequence.⁴¹¹Likewise for price

suppression: the evidence⁴¹²does not support a conclusion that subject imports will contribute more

to price suppression in the near term than during the POI.

In addition, the Tribunal notes that witnesses for end users of large diameter line pipe

alleged that Evraz, the sole Canadian producer of that type of ETP, has committed its available

capacity and will not be in a position to supply all upcoming demand for large diameter line pipe.⁴¹³

Evraz countered that its facilities will have unused capacity in 2019.⁴¹⁴Although the evidence

before the Tribunal does not allow it to reach a definitive conclusion in this respect, it suggests that

a significant portion of Evraz’ capacity for the production of large diameter line pipe has already

been booked. The same end-user witnesses also testified that, in any event, they need to diversify

their sources of supply to reduce commercial and technical risks and ensure security of supply, and

had concerns about the safeguard measure creating a monopoly.⁴¹⁵These two considerations lead

the Tribunal to believe that the subject imports are unlikely to have a serious impact on the

performance of the segment of the domestic industry producing large diameter line pipe.

In view of the above, the Tribunal concludes that increased volumes of subject imports are

not a principal cause of threat of serious injury to the domestic industry. For the sake of

completeness, the Tribunal now considers other causes of threat of injury to the domestic industry

for the remainder of 2019.

In its serious injury analysis, the Tribunal concluded that imports of the subject goods by

the domestic industry have displaced domestic sales from domestic production during the POI,

406. Exhibit GC-2018-001-009B, Table 34, Vol. 1.1.

407. Transcript of Public Hearing at 1204-1205, 1242, 1244, 1282-1283, 1311.

408. Exhibit GC-2018-001-010B (protected), Tables 26, 34, Vol. 2.1 at 32, 46.

409. Exhibit GC-2018-001-009B, Tables 17-20, Vol. 1.1 at 31-34.

410. Exhibit GC-2018-001-010E (protected), Tables 3-18, Vol. 2.1 at 5-20.

411. In addition, it is reasonable to assume that subject imports in 2019 will essentially be of the same origin

as in interim 2018. As noted above, there is no evidence to the effect that imports from other sources

would increase in the near term.

412. Inter alia, Exhibit GC-2018-001-010B (protected), Table 21, Vol. 2.1 at 35.

413. Transcript of Public Hearing at 1259-1260, 1283-1286.

414. Exhibit GC-2018-001-75.17, Vol. 5 at 72; Exhibit GC-2018-001-76.17 (protected), Vol. 6 at 72-73.

415. Transcript of Public Hearing at 1260-1261, 1269, 1281.

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including in interim 2018. The evidence does not suggest that the domestic producers are likely to

significantly curb their imports of the subject goods. First, as noted above, volumes of subject

imports by the domestic industry were on an upward trend in interim 2018, increasing by 8 percent

compared to interim 2017, and they accounted for a significant share of the subject imports.⁴¹⁶A

substantial share of Tenaris’ imports from Mexico during the POI were products that Tenaris itself

could have manufactured in Canada or that other Canadian producers could have produced as

substitutes.⁴¹⁷The Tribunal is of the view that Tenaris’ subject country imports, including those

from Mexico, are likely to continue at high volumes. There is no evidence that Tenaris is

considering changing its current corporate approach of supplying the Canadian market with imports

from TAMSA in Mexico in the foreseeable future.⁴¹⁸In light of the foregoing and in light of

projected market conditions, the Tribunal concludes that subject imports by the domestic industry

are likely to continue at high volumes during the period relevant for its threat of injury assessment.

Another factor that is likely to constitute an important cause of threat of injury is the

decreased level of demand in the Canadian market. The evidence shows that the domestic

industry’s performance throughout the POI was significantly impacted by fluctuations in demand

for ETP in the Canadian market and the generally depressed state of the market compared to the

pre-crisis period, i.e. 2013 and 2014. Going forward, as noted above, industry participants forecast

that the market will slow down compared to 2018. The weakening ETP market projected for the

remainder of 2019 is likely to have a significant impact on the situation of the domestic industry, in

the form of lost sales, decreased production, and the possible related worsening in profitability,

employment and other indicators. The projected relatively low demand for 2019 is likely to be a

greater cause of threat of injury than any other cause identified before the Tribunal, including the

increased volumes of subject imports.

Finally, the Tribunal cannot ignore the difficulties that the domestic industry is confronted

with at this time in terms of its access to the U.S. market. Despite the fact that the domestic

industry’s exports increased in interim 2018, the evidence on record strongly suggests that the

domestic industry will likely suffer injury as a result of the application by the United States of the

section 232 measures on Canadian exports of ETP.⁴¹⁹The loss of export volumes necessarily has a

negative impact on the domestic industry (for instance by impacting Canadian producers’ ability to

benefit from economies of scale).

As for the segment of the domestic industry that produces large diameter line pipe, the

effect of the U.S. section 232 measures is compounded by the imposition, by the United States, of

anti-dumping duties on imports from a number of countries, including Canada.⁴²⁰

Moreover, as indicated above,⁴²¹intra-industry competition has been a factor of injury to

the domestic industry. The evidence does not indicate that this is likely to materially change in the

416. Exhibit GC-2018-001-009B, Table 11, Vol. 1.1 at 25; Exhibit GC-2018-001-010B (protected),

Table 12, Vol. 2.1 at 26.

417. See above, injury section.

418. Transcript of Public Hearing at 1057.

419. Exhibit GC-2018-001-075.25, Vol. 5 at 30, 34; Exhibit GC-2018-001-75.11, Vol. 5 at 38 at para. 47;

Transcript of Public Hearing at 1112.

420. Exhibit GC-2018-001-075.17, Vol. 5 at 64 at para. 14, and at 107-109. The U.S. authorities had not

issued their final determination at the time the record in the present inquiry closed.

421. See above, section on injury.

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future. As a result, this situation is likely to continue to pose a threat of injury to the domestic

industry.

Finally, the parties opposing the imposition of a safeguard measure raised a number of

other factors that, in their view, either mitigate the injury suffered by the domestic industry or

threaten to injure the domestic industry. They argued, in particular, that the domestic producers are

unable to supply the entire range of ETP required by Canadian customers and that Canadian

distributors/importers are unable to source ETP from the domestic industry directly. In light of its

findings above, the Tribunal need not consider these arguments in more detail.

For the foregoing reasons, the evidence on record does not support a conclusion that

increased volumes of subject imports are a principal cause of threat of serious injury to the domestic

industry: subject imports are not a significant cause of threat of serious injury to the domestic

industry, and part of the injury resulting from subject imports will be self-induced. Moreover, other

factors threaten to injure the domestic industry, including one—the projected decline in demand for

ETP—which is a more important cause of injury than subject imports.

Conclusions

The Tribunal finds that, while there has been a significant increase in the importation of

subject ETP, this increase as well as the conditions under which the subject ETP are being imported

have not caused serious injury to domestic producers of like or directly competitive goods and, even

if the injury suffered by the domestic industry were serious, the increase in subject imports is not a

principal cause of that injury. Moreover, the increase in subject imports is not a principal cause of

threat of serious injury, and other factors are more important causes of likely future injury to the

domestic industry. In light of these findings, the Tribunal does not need to consider whether imports

from Canada’s free trade partners are a principal cause of the serious injury or threat thereof, and the

Tribunal does not recommend a remedy in respect of ETP.

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PART VII – HOT-ROLLED SHEET

PRODUCT

The fourth class of goods considered by the Tribunal is hot-rolled sheet (HRS). The Order

describes the class of goods as follows:⁴²²

Flat hot-rolled carbon and alloy steel sheet and strip, including secondary or nonprime

material, in various widths from 0.75 inches (19 mm) and wider, and



for product in coil form, in thicknesses from 0.054 inches to 0.625 inches

(1.37 mm to 15.875 mm),



for product that is cut to length, in thicknesses from 0.054 inches up to but

not including 0.187 inches (1.37 mm up to but not including 4.75 mm).

The following goods are excluded:



flat-rolled stainless steel sheet and strip; and

flat hot-rolled, cut to length alloy steel products containing no less than 11.5

percent manganese, in thicknesses from 0.12 inches to 0.19 inches (3 mm to

4.75 mm).⁴²³

HRS has been the subject of previous SIMA proceedings. In those proceedings, the

Tribunal has made numerous factual findings in terms of methods of production and product

characteristics for HRS. Those findings are relevant here,⁴²⁴and the Tribunal takes judicial notice

and adopts them.

For the purposes of this report, it is sufficient to recall that, while details may vary from mill

to mill, the process by which HRS is produced is generally the same for all domestic mills. HRS is

rolled on a continuous strip mill at temperatures above 870°C (1600°F) from an incoming hot slab

up to 9 inches (229 mm) thick produced in a basic oxygen furnace or an electric arc furnace. During

hot rolling, surface oxide (scale) forms, which is not acceptable for some applications. This scale

may be removed by acid pickling.

Furthermore, HRS is primarily a generic commodity product. Most HRS is sold by the

domestic industry in coiled form. It may be sold as such in the open (or merchant) market or may be

used by domestic mills as feedstock for further internal processing.

In the merchant market, HRS is used in the following applications, among others:

422. Exhibit GC-2018-001-01, Vol. 1 at 10.

423. In addition, the Department of Finance published an illustrative list of HS Codes for HRS:

7208.25.00.00; 7208.26.00.00; 7208.27.00.00; 7208.36.00.00; 7208.37.00.10; 7208.37.00.20;

7208.37.00.50; 7208.38.00.10; 7208.38.00.20; 7208,38.00.50; 7208.39.00.00; 7208.53.00.00;

7208.54.00.00; 7208.90.00.00; 7211.14.00.90; 7211.19.00.90; 7225.30.00.00; and 7226.91.00.00.

Exhibit GC-2018-001-01A, Vol. 1 at 5.

424. See HRS from Brazil et al. (12 August 2016), RR-2015-002 (CITT) [HRS 4^thReview] at paras. 8-12;

HRS from China et al. (15 August 2011), RR-2010-001 (CITT) [HRS 3^rdReview] at paras. 18-23; HRS

from Bulgaria et al. (16 August 2006), RR-2005-002 (CITT) [HRS 2^ndReview] at paras. 12-15; HRS

from France et al. (30 June 2004), RR-2003-002 (CITT) [HRS 1^stReview] at paras. 15-19; HRS from

Chinese Taipei et al. (17 August 2001), NQ-2001-001 (CITT) [HRS 2^ndInquiry] at 4-5; HRS from

Romania et al. (2 July 1999), NQ-98-004 (CITT) [HRS 1^stInquiry] at 4-5.

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 various manufacturing applications, i.e. brackets, trailer applications and drawn sheets;

 various construction/structural applications, i.e. bridges, buildings, railway cars, guard

rails and sheet pilings;

 the manufacture of various agricultural products, i.e. tractors, ground tillers and disks

used in tilling; and

 the manufacture of automobiles, i.e. frames, bumpers, wheels, hood hinges, brake

shoes, seat tracking, wheel rims, impact support, washer base and automotive brace.

HRS is also used by domestic mills as feedstock or substrate for the manufacture of further

internally processed goods or value-added products, such as cold-rolled steel sheet and

corrosion-resistant steel sheet—key inputs in the production of automotive vehicles.

SUMMARY

The Tribunal finds that HRS imported from the subject countries is not being imported in

such increased quantities as to cause or threaten to cause serious injury to the domestic industry.

Given that a safeguard measure can only be applied if a product is being imported in such increased

quantities, the Tribunal does not recommend a remedy in respect of HRS.

ANALYSIS

The legal principles applicable to the analysis are set out in Part III of this report.

Like or directly competitive goods

To determine whether domestically produced HRS is “like or directly competitive” to the

subject imported HRS, the Tribunal considered its physical and market characteristics.

Domestic HRS is identical to, or has uses and other characteristics that closely resemble,

the imported HRS that is the subject of this inquiry. On the basis of evidence on the record and for

the purpose of this inquiry, the Tribunal finds that domestically produced HRS is like or directly

competitive goods to the imported HRS, which is consistent with findings from previous SIMA

proceedings.⁴²⁵

Parties opposing the imposition of safeguard measures argued that some of the imported

HRS is of a higher quality than the domestic HRS. They also argued that the domestic producers

cannot produce some of the subject imports and that the domestic industry cannot ship to Western

Canada. The Tribunal considered these arguments not to be relevant to a like-product analysis in the

context of this safeguard inquiry. Those arguments may be relevant in the context of a like-product

analysis under SIMA where parties can argue that there is more than a single class of goods within

the definition of like goods or in the context of an exclusion request. However, the Order expressly

indicates that HRS constitutes a single class of goods and specifically instructed the Tribunal not to

hear any motion to exclude any good from a class of goods or that would otherwise limit the scope

of the inquiry, determination or recommendations.

425. HRS 4^thReview at paras. 31-36; HRS 3^rdReview at paras. 73-76; HRS 2^ndReview at paras. 38-41; HRS

1^stReview at paras. 56-59; HRS 2^ndInquiry at 11-12; HRS 1^stInquiry at 16.

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Domestic producers

The domestic producers of HRS are Algoma Steel Inc. (Algoma), Stelco Inc. (Stelco),

ArcelorMittal Dofasco G.P. (AMD) and Evraz Inc. NA Canada (Evraz), collectively the “domestic

producers”.

Parties opposing the imposition of a safeguard measure did not present any evidence or

argument that there were any other significant domestic producers of HRS.

Accordingly, the Tribunal finds that the collective output of these domestic producers

constitutes a major proportion of the total domestic production of HRS.

Increase in imports

The Tribunal collected the volume of imports of HRS for the POI, i.e. January 1, 2015, to

June 30, 2018. Due to confidentiality reasons, the specific volumes of subject imports cannot be

reproduced here.

Parties opposing the imposition of a safeguard measure argued that the subject imports

have not increased such as to be sufficient for the purposes of the requirements of Canadian and

international law. They argued in particular that the import volumes were stable over the POI.

Parties supporting the imposition of a safeguard measure argued that the volume of subject imports

has surged.

In terms of absolute volumes of HRS, there was a minimal decrease in 2016 as compared

to 2015 (i.e. 1 percent), a much more substantial decrease in 2017 (i.e. 34 percent), for a net

decrease of 35 percent over the three years, and a 32 percent increase in interim 2018. Although

recent and sudden enough, the Tribunal found that this latter increase was not sharp enough, or

significant enough. Rather, the rate of increase over interim 2017 suggested that subject imports

were at most on course to return to their 2015 or 2016 levels. The increased volume of subject

imports in interim 2018 was insignificant—even trivial—relative to the domestic producers’ sales

in Canada, and took place in the context of a growing market.

Moreover, relative to the size of the overall Canadian market, the increase in volume in

interim 2018 was far from significant enough to be a cause or threat of serious injury. To add

further context regarding the structure of the market, the annual consumption of HRS in Canada

(i.e. total domestic production minus export sales plus imports) is approximately 8 million tonnes.

Over half of domestic HRS production is consumed as substrate feedstock for further internal

processing into cold-rolled and other higher-value steel products. The “other half” of domestic HRS

production is traded in the merchant market, which is supplied primarily by the domestic producers

(often pursuant to manufacturing supply chain contracts).

Both hot-rolled and further processed cold-rolled and corrosion-resistant steel sheet have

many applications in the highly integrated Canada-U.S. automotive industry located in Southern

Ontario and the adjacent Great Lakes states. Consistent with the reality of a unified cross-border

automotive industry, a very large portion of the total HRS imports into Canada come from the

United States—imports which have been excluded from this inquiry pursuant to the Order.⁴²⁶It

426. The volume of total imports, including non-subject imports from the United States, was 620,003 tonnes

in 2015, 602,265 tonnes in 2016 and 735,065 tonnes in 2017. The volume in interim 2017 was

378,171 tonnes and the volume in interim 2018 was 334,554 tonnes. Exhibit GC-2018-001-012A

(protected), Table 6, Vol. 2.1.

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follows that HRS imports from the subject countries constitute only a small percent of total HRS

imports and represent a minimal percent of the merchant market, let alone of annual Canadian HRS

production or consumption.

Additionally, relative to domestic production, subject imports did not increase at all during

the POI. In fact, the only movement was a decrease of 1 percentage point in 2017. In the other years

of the POI, the relative volumes were flat.

Relying on publicly available Statistics Canada data, rather than the import data collected

by the Tribunal for the POI, the domestic producers argued that an “increase in imports” in Q3 2018

strongly supports a finding that the U.S. section 232 measures enacted at the end of Q1 and

Q2 2018 have resulted in actual diversion of HRS into the Canadian market. In this regard, they

submitted that the volume of subject imports for Q3 2018 (i.e. 53,594 tonnes) exceeded the total for

the first two quarters of 2018 combined and that, further, a comparison of Q3 2018 vs. Q3 2017

shows an increase of 59 percent in the volume of subject imports, while a comparison of 9-months

2018 vs. 9-months 2017 shows an increase of 31 percent. While the domestic producers

acknowledge that Q3 2018 falls outside the POI, they argue that (1) the Order contemplates the

consideration of the most recently available information and only specifies a start-date for the POI

(with no end date); (2) it is reasonable and necessary for the Tribunal to consider the conditions

prevailing in the most recent timeframe; and (3) where such information is available and

demonstrates a relevant trend, it is highly germane to the Tribunal’s analysis.

The parties opposing the imposition of a safeguard measure fundamentally opposed the

domestic producers’ reliance on the Q3 2018 data for purposes of meeting the “increase in imports”

element. Their main argument is that the import volumes relied upon by the domestic producers for

Q3 2018 are based on data from Statistics Canada, which differ significantly from the import

volumes found in the Tribunal’s Statistical Summary for HRS that were based on questionnaire

responses and the application of the Tribunal’s methodology for calculating non-reported volumes.

They also argued that Q3 2018 data regarding an increase in imports should not be used to trigger

an injury analysis that would lack the complete Q3 2018 dataset regarding financial and operating

performance needed to assess injury or causation.

The Tribunal determined that the volume of subject HRS imports set out in the Statistics

Canada data for the Tribunal’s POI is substantially larger than those volumes shown in the

confidential Statistical Summary. As well, the trends in volumes in the two data sets are different,

especially from interim 2017 to interim 2018. Therefore, Statistics Canada data regarding HRS

imports does not constitute reliable evidence that the Tribunal can use, and the Tribunal gave no

weight to Q3 2018 evidence in its “surge” analysis described above.

Accordingly, the Tribunal concludes that subject imports of HRS are not being imported in

sufficiently increased quantities.

Unforeseen developments and GATT 1994 obligations

Having found there has not been a sufficient increase in HRS imports from subject

countries, it is not necessary to consider whether an increase in imports resulted from unforeseen

developments and the effect of Canada’s GATT 1994 obligations.

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Serious injury

Having found no sufficient increase in HRS imports from subject countries, the Tribunal

does not need to consider whether the domestic industry has experienced serious injury. Indeed, the

domestic producers expressly indicated that they are not claiming serious injury.⁴²⁷For the sake of

completeness, however, the Tribunal will briefly analyze whether there was evidence of serious

injury.

The following table summarizes the domestic producers’ performance during the POI. All

financial performance data of the domestic producers, gathered by the Tribunal, including percent

changes, is confidential, so that only index results can be presented.

Table 8

Summary of Domestic Performance Indicators (Index)

Interim

2015

2016

2017

2018

Practical Plant Capacity

100

102

100

101

Total Production

100

103

109

113

101

109

118

121

107

100

109

113

126

108

Production for Domestic Sales

Production for Export Sales

Capacity Utilization Rate (%)

Market

100

105

107

102

116

100

109

113

104

Domestic Sales from Domestic Production

Producers Market Share (%)

Total Direct Employees

100

97

101

95

102

109

102

107

100

106

113

110

100

Total Wages ($000) - Direct Employment

Total Hours Worked (000) - Direct Employment

Productivity - Tonnes/ Hour Worked (Direct)

108

Producer Inventories

Inventory as % of Production

100

126

123

184

168

100

150

138

Selling Prices

Domestic Sales from Domestic Production

Total - Subject Countries

Excluded Countries

100

97

84

100

117

115

100

109

108

Total - Subject Goods Market Share

Excluded Countries - Market Share

100

91

92

56

113

100

107

80

Note(s):

1. 2015 = 100 and Interim 2017 = 100

2. Index values are notional, and there is no indexing between a full calendar year and an interim period.

3. The bolded index values under “Selling Prices” indicate the lowest price in the market for that period.

Source: Exhibit GC-2018-001-11A, Vol. 1.1 at 15, 22, 25 and 31.

The Tribunal notes that, even if it considered the increased level of imports experienced in

interim 2018 to be “recent, sharp, sudden and significant”, the increased imports from subject

countries would not have been a principal cause of serious injury to the domestic industry.

427. Exhibit GC-2018-001-77.05, Vol. 5 at para. 7; Exhibit GC-2018-001-77.04, Vol. 5 at para. 7; Exhibit

GC-2018-001-77.06, Vol. 5 at para. 7.

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The performance of the domestic industry has not deteriorated. On the contrary, in interim

2018, the capacity utilization rate was 90 percent—the highest at any point during the POI⁴²⁸—and

output, sales and market share were all up compared to interim 2017.⁴²⁹The domestic producers’

gross margin and net income continued to improve over the POI, having their strongest financial

performance in interim 2018.⁴³⁰Similarly, compared to interim 2017, the price of domestically

produced HRS was stronger.⁴³¹Cash flow was also better,⁴³²as were employment and wages.⁴³³

Very few indicators were trending negatively.

Therefore the Tribunal finds that the domestic industry has not suffered significant overall

impairment, i.e. serious injury.

Threat of serious injury

Given that the Tribunal has found that HRS is not being imported from subject countries in

“such increased quantities” so as to permit the imposition of a safeguard measure, it is also not

necessary to assess whether such an increase in imports is threatening to cause serious injury.

However, the parties made extensive submissions on the question of threat of serious injury, so the

Tribunal has prepared an overview of whether the evidence suggests such a threat.

As explained in Part III, a determination of threat must be based on “facts” not

“conjecture”, and there must be a high degree of likelihood that serious injury will materialize in the

very near future. Therefore, the Tribunal focused on conditions, changes and developments in the

Canadian market expected before the end of 2019.

The domestic producers argued that the increase in subject imports will be sustained by

virtue of:

(1) the increased number of anti-dumping/countervailing measures in place that will

likely divert volume to Canada;

(2) excess capacity on a global and country-specific basis;

(3) growth in capacity outpacing growth in demand—both globally and on a

country-specific basis;

(4) China being the principal driver of global overcapacity and disruption;

(5) the U.S. 232 measures having already resulted in actual diversion of HRS to the

Canadian market (citing shipments from a number of countries in Q3 2018); and

(6) the structure of the Canadian market (with global steel traders and large service

centres), which allows for the importation of large quantities of HRS in a very short

period of time.

In terms of likely price effects, the domestic producers submitted that the pricing activities

of the subject countries over the POI indicate that injurious price undercutting will continue in the

428. Exhibit GC-2018-001-011A, Table 4, Vol. 1.1.

429. Ibid., Table 5; Exhibit GC-2018-001-12A (protected), Table 12, Vol. 2.1.

430. Exhibit GC-2018-001-012A (protected), Table 17, Vol. 2.1.

431. Ibid., Table 15.

432. Ibid., Table 21.

433. Ibid., Table 22.

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future. In terms of price depression, they indicate that Algoma and AMD have been forced to

reduce their respective prices in Q3 2018. In terms of forecasting the price trends without the

safeguard measure, they indicate that “the domestic producers have benefited from relatively high

pricing in 2018, particularly in the second and third quarter of the year.”⁴³⁴However, this pricing

has already peaked and is projected to decline through the end of 2019.

For their part, the parties opposed focused their submissions almost exclusively on the

absence of an “increase in imports” and did not substantively address the domestic producers’ threat

allegations. They generally argued that there is no evidence that the trade measures by other WTO

members have caused or are likely to cause trade diversion to the Canadian market. Furthermore,

they noted the current, healthy state of the domestic industry and submitted that the domestic

industry is far from being on the brink of a significant overall impairment.

The Tribunal is of the view that much of the evidence of threat of serious injury relied upon

by the domestic producers is unsupported; and there is not a high degree of likelihood that serious

injury is imminent.

As discussed above, the volume of subject imports started to trend upwards in

interim 2018, and evidence was presented that this continued into Q3 2018. The domestic producers

indicated that they enjoyed relatively high prices until recently due to the anti-dumping measure

imposed by the Tribunal on imports from China, Chinese Taipei, India and Ukraine.⁴³⁵The

Tribunal notes that the imposition of the U.S. section 232 measures caused a substantial increase in

the price of steel during the same period.⁴³⁶

The U.S. section 232 measures were extended to include Canadian steel on June 1, 2018,

prompting Canada to impose countermeasures on U.S. steel products effective July 1, 2018.⁴³⁷It

was indicated that certain Canadian and U.S. suppliers have chosen to absorb the border charge to

maintain important cross-border customer relationships.⁴³⁸It is clear to the Tribunal that a primary

source for a threat of serious injury to the domestic HRS industry is the continuation of these two-

way trade barriers, which are acting as a quintessential “spanner in the North American automotive

works” given the importance of access to the U.S. market in general, and of the frictionless

movement of steel and other inputs along cross-border manufacturing supply chains in particular.⁴³⁹

There are some grounds for concern that the domestic industry will face headwinds in the

near future in terms of potentially increasing subject imports and consequent price effects. Given

the Tribunal’s previous finding that there was no indication of existing injury, let alone serious

injury, it is, however, clear that it would take a sudden and dramatic deterioration in the state of the

domestic industry’s economic performance for it to suffer “significant overall impairment”—the

standard that must be met for an injurious situation to be qualified as “serious”, as established earlier

in this report.

434. Exhibit GC-2018-001-77.05, Vol. 5 at para. 64.

435. Ibid. at paras. 7-8 and 64.

436. Transcript of Public Hearing at 200-201.

437. Ibid. at 201-202.

438. Ibid. at 204-205.

439. The domestic industry was not only able to maintain its export sales but actually increased them over the

POI. Exhibit GC-2018-001-011A, Table 23, Vol. 1.1.

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Such a dramatic change in the fortunes of the domestic HRS industry relative to its current

positive position would logically require a future substantial surge in imports—likely at injurious

low prices notwithstanding the existence of anti-dumping measures⁴⁴⁰against many HRS exporters.

Despite the arguments presented by the domestic producers, there is insufficient evidence that such

a dramatic change in circumstances is likely. Furthermore, the Tribunal has no authority to

recommend a safeguard remedy against a possible future surge in imports of subject goods. Such a

remedy would clearly be inconsistent with Canada’s international trade obligations under the WTO

Agreement on Safeguards.

Therefore, the Tribunal finds that the subject imports, had they been found to be increased,

do not threaten serious injury to the domestic industry.

Conclusions

The Tribunal finds that there has been no significant increase in subject imports of HRS

and that, in any event, it would have found no serious injury or threat thereof. In light of these

findings, the Tribunal does not need to consider whether imports from Canada’s free trade partners

are a principal cause of the serious injury or threat thereof, and the Tribunal does not recommend a

remedy in respect of HRS.

440. Ibid., Table 27.

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PART VIII – PRE-PAINTED STEEL

PRODUCT

The fifth class of goods considered by the Tribunal is pre-painted steel. The Order describes

the class of goods as follows:⁴⁴¹

Pre-painted flat-rolled products of non-alloy and alloy steel (net including stainless steel)

which are painted, varnished or coated with plastics on at least one side, in coils or cut

lengths, in thicknesses up to 0.079 inches (2.0066 mm) and widths up to 61.5 inches

(1562.1 mm) with all dimensions being plus or minus allowable tolerances contained in the

applicable standards.

The following goods are excluded:



products with a final coating of zinc-dust (a zinc-rich paint, containing by weight

70% or more of zinc); and



products with a substrate with a metallic coating of chromium.

The Tribunal has not previously dealt with pre-painted steel in the context of SIMA

proceedings.

The Tribunal’s key findings on methods of production and product characteristics of

pre-painted steel are as follows:

 pre-painted steel (known in other jurisdictions as painted or coated steel) is a

high-value-added flat-rolled steel product. It is generally produced by coating

flat-rolled steel with paint;⁴⁴²

 substrates used to produce pre-painted steel include cold-rolled steel,

corrosion-resistant steel and galvalume steel;⁴⁴³

 there are a wide variety of paints that provide different protective and decorative

attributes, resulting in a wide range of final pre-painted steel prices;⁴⁴⁴

 end uses for pre-painted steel include roofing, major appliances, pre-engineered

buildings, automotive parts, light fixtures and ceiling grid systems;⁴⁴⁵and

 a unique aspect of pre-painted steel (which constrains the ability to switch suppliers) is

the importance of a consistent colour palette for replacements or extensions.⁴⁴⁶

SUMMARY

The Tribunal finds that pre-painted steel imported from the subject countries is not being

imported in such increased quantities as to cause or threaten to cause serious injury to the domestic

441. In addition, the Department of Finance published an illustrative list of HS Codes for pre-painted steel,

which are 7210.70.00.00 and 7212.40.00.00: Exhibit GC-2018-001-01A, Vol. 1 at 6.

442. Exhibit GC-2018-001-79.06, Vol. 5 at 6.

443. Ibid.

444. Ibid. at 48; Transcript of Public Hearing at 373-374.

445. Exhibit GC-2018-001-79.06, Vol. 5 at 6.

446. Transcript of Public Hearing at 413, 428.

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industry. Given that a safeguard measure can only be applied if a product is being imported in such

increased quantities, the Tribunal does not recommend a remedy for pre-painted steel.

ANALYSIS

The legal principles applicable to the analysis are set out in Part III of this report.

Like or directly competitive goods

To determine whether domestically produced pre-painted steel is “like or directly

competitive” to the subject imported pre-painted steel, the Tribunal considered its physical and

market characteristics.

Domestic pre-painted steel is identical to, or has uses and other characteristics that closely

resemble, the imported pre-painted steel that is the subject of this inquiry.⁴⁴⁷On the basis of

evidence on the record and for the purpose of this inquiry, the Tribunal finds that domestically

produced pre-painted steel is a like or directly competitive good to the subject imported pre-painted

steel.

Parties opposing the imposition of safeguard measures argued that some of the imported

pre-painted steel is of a higher quality than the domestic pre-painted steel. They also argued that the

domestic producers cannot produce some of the subject imports and that the domestic industry

cannot ship to Western Canada. The Tribunal considered these arguments to be irrelevant to a like-

product analysis in the context of this safeguard inquiry. Those arguments may be relevant in the

context of a like-product analysis under SIMA where it is argued that there is more than a single

class of goods within the definition of like goods or in the context of an exclusion request.

However, the Order expressly indicates that pre-painted steel constitutes a single class of goods and

specifically instructed the Tribunal to not hear any motion to exclude any good from a class of

goods or that would otherwise limit the scope of the inquiry, determination or recommendations.

Domestic producers

The domestic producers of pre-painted steel are ArcelorMittal Dofasco G.P. (AMD), Stelco

Inc. (Stelco) and Continuous Colour Coat (CCC).⁴⁴⁸

Parties opposing the imposition of a safeguard measure argued that there are no domestic

producers of pre-painted steel in Canada as no single entity manufactures the steel substrate and

paints the steel to make pre-painted steel, and, therefore, that the tolling operation used by AMD

and Stelco cannot be considered domestic production. However, the Tribunal has previously stated

the opposite regarding very similar finishing processes in Aluminum Extrusions:⁴⁴⁹

447. Exhibit GC-2018-001-079.06, Vol. 5 at 48.

448. In addition to their response to the Producers’ Questionnaire, AMD and Stelco filed briefs and witness

statements with the Tribunal whereas CCC did not file any additional materials. There was a potential

domestic producer identified late in the proceeding – Jemline Strapping. Its production in 2017 is likely

an insignificant part of total domestic production; accordingly, its information was not taken into account

in the preparation of the Statistical Summary.

449. (17 March 2009), NQ-2008-003 (CITT) at paras. 52, 141.

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Domestic producers of aluminum extrusions may offer finishes and fabrication services as

part of their aluminum extrusion manufacturing process. Types of finishes primarily

include: mechanical, bright dip, anodizing, electrolytic colour, powder coat and liquid

paint. Types of fabrication services primarily include: fabrication, assembly and computer

numerical control (CNC) machining. These services are offered in-house or are sub-

contracted out to another firm that specializes in that particular service.

. . .

With respect to finishers and fabricators of aluminum extrusion products, the Tribunal

heard evidence that, when the domestic producers of aluminum extrusions outsource the

fabrication or finishing of aluminum extrusion products, the subcontractors do those

operations on behalf of the extruders and are essentially service providers. The extrusions

that are outsourced for finishing and fabrication remain the extruder’s property and are

generally returned to the extruders that, in turn, sell the products to their customers. In

effect, aluminum extrusion products are provided to finishers and fabricators on a tolling

basis. In view of this evidence, the Tribunal is not convinced that finishers and fabricators

that provide services to the aforementioned domestic producers of aluminum extrusions by

performing certain processing steps on their products actually produce like goods. Since the

extruders retain ownership of the outsourced products throughout this process and then sell

the finished products to their customers, the Tribunal is of the view that the products that

are sent to finishers and fabricators and then returned to the domestic producers of

aluminum extrusions must be considered as part of the domestic production of the

extruders.⁴⁵⁰

[Emphasis added]

The evidence is that AMD (or Stelco, as the case may be) retain ownership of the steel

substrate at all times, pay the painting company (Baycoat) for the painting, and then resell the

finished goods.⁴⁵¹The Tribunal is therefore of the view that AMD and Stelco are domestic

producers.

Accordingly, the Tribunal considers that the collective output of the three producers listed

above constitutes a major proportion of total domestic production of pre-painted steel.

Increase in imports

Table 9 shows the volume of imports of pre-painted steel for the POI, i.e. January 1, 2015,

to June 30, 2018.

450. See also Stainless Steel Round Bar (4 September 1998), NQ-98-001 (CITT) at 10: “As the Tribunal has

determined that stainless steel round bar produced by Atlas which undergoes an intermediate process in

the United States on a tolling basis should be considered part of domestic production, the Tribunal has

not revised the data on imports as shown in the import tables of its staff report” [emphasis added]. See

also Carbon Steel Welded Pipe (11 December 2012), NQ-2012-003 (CITT) at paras. 66-68.

451. Exhibit GC-2018-001-079.06, Vol. 5 at 45.

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Table 9

Total Imports

(Tonnes)

Interim

TONNES

2015

2016

2017

2018

Total - Subject Countries

Total - Imports

81,584

94,040

110,488

136,307

52,839

66,522

54,905

71,439

131,432 127,278

Source: Exhibit GC-2018-001-05B, Vol. 1.1 at 16.

Parties opposing the imposition of a safeguard measure argued that these increases are not

sufficient for the purposes of the requirements of Canadian and international law. They argued in

particular that the import volumes were stable over the POI. Parties supporting the imposition of a

safeguard measure argued that the volume of subject imports has surged.

In the Tribunal’s view, these increases were neither sudden nor sharp nor significant,

whether considering year-to-year, interim comparisons, or the period from 2015 to 2017.

In terms of absolute numbers, Table 9 shows that the volume of subject imports increased

by approximately 12,500 tonnes in 2016 and 16,500 tonnes in 2017, for a total increase of

29,000 tonnes from 2015 to 2017. In interim 2018, the volume of subject imports increased by

approximately 2,100 tonnes only. In percentage terms, these volumes represented an overall

increase of 35 percent in 2017 as compared to 2015 and four percent in interim 2018 as compared

to 2017.

The Tribunal does not consider that the increase in subject imports was significant. First,

the increase in any given year of the POI represented “less than a boatload” of offshore pre-painted

steel.⁴⁵²Further, relative to domestic production, the details of which production are confidential,

subject imports increased by just one percentage point in 2016 as compared to 2015, eight

percentage points in 2017 as compared to 2016, and three percentage points in interim 2018 as

compared to interim 2017. Similarly, the volume of subject imports relative to domestic sales of

domestic production increased by only nine percentage points in 2017 (after not having increased at

all in 2016) and by four percentage points in interim 2018.⁴⁵³Finally, the additional volumes of

subject imports represented a very small portion of the Canadian market. For example, the

additional volume of subject imports in interim 2018 accounted for just one percent of the

market.⁴⁵⁴

While recent enough, even if the Tribunal had considered the increase in subject imports

significant, the increases were not sudden enough or sharp enough to satisfy the requirements of

Canadian law or the Agreement on Safeguards. In particular, the increases were gradual and in

452. Transcript of Public Hearing at 523.

453. Exhibit GC-2018-001-13A, Vol. 1.1 at 11.

454. Ibid. at 15, 19.

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stable magnitudes: 15 percent in 2016 over 2015 and 17 percent in 2017 over 2016. The four

percent increase in interim 2018 was small and indicates that the increase is actually decelerating.

The domestic industry submitted Statistics Canada data showing an eight percent increase

in the volume of subject imports in the first three quarters of 2018 as compared to the same period

in 2017.⁴⁵⁵In terms of assessing the most recent trends in the volume of subject imports, the

Tribunal determined that, in the case of pre-painted steel, Statistics Canada data were reliable and

useful, with the data from earlier periods tracking closely those in the Statistical Summary.⁴⁵⁶

However, in the Tribunal’s view, this information supports the finding that the increase has not been

sharp and, in fact, may be tapering off.

Accordingly, the Tribunal concludes that subject imports of pre-painted steel are not being

imported in sufficiently increased quantities.

Unforeseen developments and GATT 1994 obligations

Having found no sufficient increase in pre-painted steel imports from subject countries, it is

not necessary to consider whether an increase in imports resulted from unforeseen developments

and the effect of Canada’s GATT 1994 obligations.

Serious injury

Having found no significant increase in pre-painted steel imports from subject countries,

the Tribunal does not need to consider whether the domestic industry has experienced serious

injury. For the sake of completeness, however, the Tribunal will also briefly analyze whether there

was evidence of serious injury.

The following table summarizes the domestic producers’ performance during the POI. All

financial performance data of the domestic producers gathered by the Tribunal, including percent

changes, is confidential, so that not even index results can be presented.

The Tribunal notes that, even if it considered the increased level of imports experienced to

be “recent, sudden, sharp and significant”, the increased imports from subject countries would not

have been a principal cause of serious injury to the domestic industry.

The performance of the domestic industry has been good throughout the POI. Domestic

production and the rate of capacity utilization remained relatively stable in the POI. The domestic

industry’s domestic sales were stable, except for interim 2018, but the domestic producers’ market

share was unaffected; it remained stable for the entire POI. The inventory held by the domestic

producers during the 2015 to 2017 period decreased every year; there was an increase only in

455. Exhibit GC-2018-001-080.06 (protected), Vol. 6 at 66.

456. The Tribunal conducted an analysis to assess the accuracy of the Statistics Canada import volume data

regarding pre-painted steel by comparing the first half 2017 and first half 2018 Statistics Canada data

with the data regarding these same periods as presented in the Tribunal’s Statistical Summary for

Pre-painted Steel. The Tribunal’s analysis showed that its own data represented 105 percent and

100 percent of the Statistics Canada data for first half 2017 and first half 2018, respectively. Therefore,

the Tribunal has concluded that the Statistics Canada data for imports of pre-painted steel in Q3 2018 is

reliable and useful for the purposes of its inquiry regarding this class of goods: Exhibit GC-2018-001-

079.06, Vol. 5 at 104; Transcript of Public Hearing at 362.

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interim 2018. The industry’s productivity in tonnes per hour showed a significant overall decline in

2017 and interim 2018, but at the same time both employment and wages improved significantly.

While all financial performance indicators for the domestic industry are confidential, the financial

performance of the domestic industry was positive and improving.⁴⁵⁷

Table 10

Summary of Domestic Performance Indicators (Index)

Interim

2015

2016

2017

2018

Practical Plant Capacity

100

111

100

Total Production

100

113

115

97

112

111

101

100

98

97

104

98

Production for Domestic Sales

Production for Export Sales

Capacity Utilization Rate (%)

113

Market

100

107

115

107

113

105

100

101

96

Domestic Sales from Domestic Production

Producers Market Share (%)

Total Direct Employees

100

103

98

105

82

100

98

102

76

Total Wages ($000) - Direct Employment

Total Hours Worked (000) - Direct Employment

Productivity – Tonnes / Hour Worked (Direct)

115

136

129

Producer Inventories

Inventory as % of Production

100

115

102

116

103

100

102

105

Selling Prices

Domestic Sales from Domestic Production

Total - Subject Countries

Excluded Countries

100

103

105

112

105

112

100

107

102

Total - Subject Goods Market Share

Excluded Countries - Market Share

100

107

62

121

48

100

105

117

Note(s):

1. 2015 = 100 and interim 2017 = 100

2. Index values are notional, and there is no indexing between a full calendar year and an interim period.

3. The bolded index values under “Selling Prices” indicate the lowest price in the market for that period.

Source: Exhibit GC-2018-001-13A, Vol. 1.1 at 14, 21, 24 and 30.

Moreover, the evidence does not indicate that the increased imports were a principal cause

of any injury. A key factor in establishing a causal nexus between the subject imports and serious

injury is evidence that the imports have significantly undercut, depressed or suppressed the prices of

the domestically produced like or directly competitive goods. In this respect, the record shows little

or no evidence of any price undercutting, price depression or price suppression.⁴⁵⁸

Stelco alleged that “[e]vidence of price suppression related to Safeguard Country price

undercutting is also evident from the Tribunal’s record”. The domestic industry argued that the

Tribunal should compare its selling prices to importers’ purchase prices, i.e. exporters’ selling

prices, to properly assess price competition. If the Tribunal were to accept this methodology for this

457. Public submissions indicated that “[t]he domestic industry’s profitability did increase on a consolidated

basis over the POI”. Exhibit GC-2018-001-079.05, Vol. 5 at 19.

458. Exhibit GC-2018-001-13A, Vol. 1.1 at 24.

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product, such an analysis would show significant price undercutting;⁴⁵⁹however, there would

remain no evidence of price depression or price suppression.

Stelco argued that the Tribunal should find price suppression in the sense of preventing

price increases that would have otherwise likely occurred. It compared U.S. and Canadian pricing

and argued that Canadian prices were lower than the historic gap would suggest and that, therefore,

there was price suppression. However, the mere existence or widening of such a gap is not

sufficient evidence of price suppression. There was neither evidence of rising costs showing a “cost-

price squeeze” that is often the reason for price suppression, nor evidence that the domestic industry

attempted to raise overall prices but was unsuccessful due to competition from imports.

Therefore the Tribunal finds that the domestic industry did not suffer significant overall

impairment, i.e. serious injury, and that even if it did, the subject imports are not a principal cause

thereof.

Threat of serious injury

Given that the Tribunal has found that pre-painted steel is not being imported from subject

countries in “such increased quantities” so as to permit the imposition of a safeguard measure, it is

also not necessary to assess whether such an increase in imports is threatening to cause serious

injury. However, the parties made extensive submissions on the question of threat of serious injury,

so the Tribunal has prepared an overview of whether the evidence suggests such a threat.

As explained in Part III, a determination of threat must be based on “facts” not

“conjecture”, and there must be a high degree of likelihood that serious injury will materialize in the

very near future. Therefore, the Tribunal focused on conditions, changes and developments in the

Canadian market expected before the end of 2019.

The Tribunal is of the view that much of the evidence of threat of serious injury relied upon

by the domestic producers is unsupported and there is not a high degree of likelihood that serious

injury is imminent.

AMD pointed to excess capacity in the subject countries and the risk of diversion as a result

of recent trade measures, in attempting to show that subject imports will increase further (and

compete at lower prices).

Firstly, the Tribunal is of the view that the argument predicting a significant increase in the

volume of subject imports in the future is speculative and was not adequately supported by positive

evidence. Overcapacity alone does not establish that subject imports will increase in volume in the

near to medium term.⁴⁶⁰

Secondly, it should be recalled that trends in recent volumes of subject imports do not by

themselves show that further increases will occur. Absolute volumes of subject imports show only a

459. Ibid. at 22, 24.

460. Although the capacity reported by foreign producers that responded to the Tribunal’s questionnaire is

small in relation to the capacity cited in the evidence submitted by AMD, it is not reflective of significant

overcapacity unlike the latter data: Exhibit GC-2018-001-13A, Vol. 1.1 at 49.

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marginal increase in interim 2018. It is also notable that subject import prices increased throughout

the POI.⁴⁶¹

On the contrary, witnesses questioned by the Tribunal did not see an increase in future

imports or a risk of diversion.⁴⁶²This is confirmed by the Tribunal’s data set out above, which

essentially saw steady volumes of subject imports, especially when compared to domestic

production.

Regarding diversion in the future, the Tribunal also took into account the various trade

measures imposed in the United States.

Regarding the impact of the AD/CV measures covering pre-painted steel in the United

States, these date back to 2016 for the majority of sources shipping to Canada, i.e. Korea, Chinese

Taipei and China.⁴⁶³Most of any diversion resulting from these measures was absorbed into the

Canadian market some time ago.

The Tribunal also notes that U.S. section 232 measures seem to have had no effect

regarding diversion. On the contrary, as described above, in the latest interim period, i.e.

immediately prior to and just after the imposition of U.S. section 232 measures, subject imports

increased the least during all the POI. Subject imports in Q3 2018 followed the same pattern of

modest growth. The evidence thus does not point to the likelihood that injurious levels of

pre-painted steel will be diverted from the United States into Canada in the near future.

The European Union’s final safeguard measures continue to allow for imports into that

market, at normal tariff rates, of volumes based on the average volume of imports into the European

Union over the past three years plus five percent. The domestic industry essentially withdrew its

claims that these measures would result in diversion in the immediate future of subject goods

otherwise destined for the European Union.⁴⁶⁴In the Tribunal’s opinion as well, the evidence does

not point to the likelihood that injurious levels of pre-painted steel will be diverted from the

European Union into Canada in the near future.

Accordingly, the Tribunal concludes that the facts on the record do not support the

conclusion that the current volume of imports is likely to increase significantly in the near future.

Further, the subject imports, despite allegedly undercutting domestic prices, did not cause

serious injury, and the Tribunal sees no evidence that there is any change in circumstances so that

they threaten to cause serious injury in the near future. This is especially true given the relative lack

of injury in the POI and the marginal increases in recent import volumes. Absent some impending

dramatic change in circumstances (which was not shown by the evidence), the subject imports do

not pose a threat of injury, i.e. they will not seriously injure the domestic industry in the near future.

461. Ibid. at 24.

462. Transcript of In Camera Hearing at 161-162, 173-174.

463. Exhibit GC-2018-001-13A, Vol. 1.1 at 34. Witnesses stated that the diversion of Chinese goods as a

result of U.S. measures occurred early in this period but that goods from Chinese Taipei and Korea

(which were subject to lower duties in the United States) continued to be shipped to the United States

until the imposition of U.S. section 232 measures; Transcript of Public Hearing at 359.

464. Exhibit GC-2018-001-079.06A, Vol. 5 at 1-16.

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Therefore, the Tribunal finds that the subject imports, had they been found to be imported

in increased quantities, do not threaten serious injury to the domestic industry.

Conclusions

The Tribunal finds that there has been no significant increase in subject imports of

pre-painted steel and that, in any event, it would have found no serious injury of threat thereof. In

light of these findings, the Tribunal does not need to consider whether imports from Canada’s free

trade partners are a principal cause of the serious injury or threat thereof, and the Tribunal does not

recommend a remedy in respect of pre-painted steel.

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PART IX – STAINLESS STEEL WIRE

PRODUCT

The sixth class of goods considered by the Tribunal is stainless steel wire (SSW). The

Order describes this class of goods as follows:

Cold drawn and cold drawn and annealed, stainless steel round wire, up to 0.256 inches

(6.50 mm) in maximum solid cross-sectional dimension; and cold drawn, and cold drawn

and annealed, stainless steel cold-rolled profile wire, up to 0.031 square inches (0.787 sq.

mm) in maximum solid cross-sectional area.⁴⁶⁵

The first part of this definition is similar to the description of SSW in a 2004 injury inquiry

by the Tribunal. However, that proceeding did not include profile wire.⁴⁶⁶There were also

numerous exclusions made in the 2004 proceeding, including stainless steel wire in diameters of

0.032 inches (0.813 mm) and smaller and nickel-coated stainless steel wire.⁴⁶⁷Nonetheless, in those

proceedings, the Tribunal made numerous factual findings in terms of methods of production and

product characteristics for SSW. On the basis of the evidence on the record for this inquiry,⁴⁶⁸the

Tribunal considers those findings to still be relevant, takes judicial notice and adopts the following:

 The production process is essentially the cold drawing of stainless steel rod of

appropriate alloy composition through one or more dies. As the wire is drawn to

smaller diameters, annealing operations are performed to allow it to be further drawn to

its finished size and specification.⁴⁶⁹

 The wire may be treated to provide special surface conditions or appearance, including

matte and diamond finishes. In addition, coatings may be applied to serve as lubricants

in subsequent processing or manufacturing operations.⁴⁷⁰

 Much of the stainless steel wire consumed in Canada is sold for further manufacture, in

various categories that include cold-heading and forming wire, fine wire (wire in

diameters of 0.032 inches 0.813 mm and smaller), belting wire and spring wire. The

wire is used in the manufacture of various products, such as cold-headed pins, nails,

bolts, screws, rivets, hinges, springs, racks, grills, hooks, rings and similar formed parts,

filters, wire lines and continuous wire conveyor belts.⁴⁷¹

 Stainless steel wire can also be sold in the form of finished products, such as welding

wire in metal-inert gas, tungsten-inert gas and sub-arc product forms, and lashing wire.

Welding wire is used, among other things, as part of a welding process to bond parts

465. In addition, the Department of Finance published an illustrative list of HS Codes for SSW:

7223.00.00.10 and 7223.00.00.20. “Backgrounder – Support for Canadian Steel Producers Through

Provisional Safeguards on Certain Steel Imports”, Department of Finance Canada, October 11, 2018;

Exhibit GC-2018-001-01A, Vol. 1 at 6.

466. Certain Stainless Steel Wire (30 July 2004), NQ-2004-001 (CITT) [SSW Injury Inquiry] and Stainless

Steel Wire (29 July 2009), RR-2008-004 (CITT).

467. SSW Injury Inquiry at paras. 96-118.

468. For instance, see Tom Dodds’ Statement at Exhibit GC-2018-001-82.05 (protected), Vol. 6 at paras. 4-9;

Transcript of Public Hearing at 980-983 and 987.

469. SSW Injury Inquiry at para. 14.

470. Ibid. at para. 15.

471. Ibid. at para. 17.

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used in manufacturing equipment and products made from stainless steel plate or tubes.

Lashing wire, due to its strength and corrosion resistance, is used in the telephone and

cable industries to support signal-carrying cables made of other materials.⁴⁷²

 All the different types of wire also have similar market characteristics, such as pricing

structure and channels of distribution, as well as the same general uses that require

corrosion-resistance properties.⁴⁷³

SUMMARY

The Tribunal finds that SSW imported from the subject countries (other than goods

originating in Korea, Panama, Peru, Colombia and Honduras) is being imported in such increased

quantities and under such conditions as to be a principal cause of a threat of serious injury to the

domestic industry. Therefore, the Tribunal recommends a remedy in the form of a TRQ on imports

of SSW from subject countries, other than goods originating in Korea, Panama, Peru, Colombia,

Honduras, or countries whose goods are eligible for GPT treatment.

ANALYSIS

The legal principles applicable to the analysis are set out in Part III of this report.

Like or directly competitive goods

To determine whether domestically produced SSW is “like or directly competitive” to the

subject imported SSW, the Tribunal considered its physical and market characteristics.

SSW can be produced in a variety of sizes and diameters across a wide range of product

types, including different alloying elements, chemical makeup, finish or treatments, according to

client specifications and product type.⁴⁷⁴However, the Tribunal determined that domestic SSW and

imported SSW compete with one another (i.e. similar pricing structure and channels of distribution)

and have the same general end uses.⁴⁷⁵Therefore, on the basis of evidence on the record and for the

purpose of this inquiry, the Tribunal finds that domestically produced SSW is like or directly

competitive goods to the imported SSW.

RGL Reservoir Management Inc. (RGL), an end user of SSW in Alberta, argued that CWI

Industries, Ltd. (CWI), the sole domestic producer of SSW, does not produce the specific type of

SSW (i.e. cold-rolled shaped SSW) that it requires for building wire wrap screens used for sand

control in heavy oil production.⁴⁷⁶The Tribunal considered this argument not to be relevant to a

like-product analysis in the context of this safeguard inquiry. That type of argument may be relevant

in the context of a like-product analysis under the Special Import Measures Act (SIMA), where

parties can argue that there is more than a single class of goods within the definition of like goods or

in the context of an exclusion request. However, in the context of this particular safeguard inquiry,

the Order expressly indicates that SSW constitutes a single class of goods and specifically instructed

the Tribunal not to hear any motion to exclude any good from a class of goods or that would

otherwise limit the scope of the inquiry, determination or recommendations.

472. Ibid. at para. 18.

473. Ibid. at para. 40.

474. Exhibit GC-2018-001-81.05, Vol. 5 at 48-49.

475. For example, see Transcript of Public Hearing at 980-981.

476. Exhibit GC-2018-001-81.03, Vol. 5 at 3.

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Domestic producers

CWI (or the domestic industry) is the sole Canadian producer of SSW. In addition to its

current facility in Perth, Ontario, it also has production facilities in the United States and the United

Kingdom.⁴⁷⁷

Parties opposing a safeguard measure did not present any evidence or argument that there

were any other significant domestic producers. Therefore, the Tribunal finds that the output of CWI

constitutes the total domestic production of SSW.

Increase in imports

The Tribunal collected data on the volume of imports, from January 1, 2015, to June 30,

2018. Due to confidentiality reasons, the specific volumes of subject imports cannot be reproduced

here. Therefore, where possible, the Tribunal relies on the publicly available percent change tables

for the analysis that follows.

Parties opposing a safeguard measure took the position that the volume of imports from

subject countries has not increased sufficiently to justify the imposition of such a measure under

Canadian law and the Agreement on Safeguards. In contrast, CWI submitted that there was a recent,

sudden, sharp and significant increase in the volume of subject imports in interim 2018 as compared

to interim 2017 in both absolute and relative terms.

Compared to the six other products, the actual tonnages of the subject imports (as well as

those of the excluded imports) were very small throughout the POI. Therefore, the changes in

absolute volumes were also very small. In percentage terms, the volume of subject imports

decreased by 1 percent in 2016 as compared to 2015 and increased by 9 percent in 2017 as

compared to 2016, for a net increase of 8 percent over the three-year period. However, in

interim 2018, the volume of subject imports increased by 82 percent as compared to

interim 2017.⁴⁷⁸Moreover, the rate of the increase in subject imports in interim 2018 was such that

the volume of subject imports for 2018 as a whole was on pace to exceed the volumes of subject

imports for any of the preceding years of the POI.

The increase in subject imports relative to domestic production in interim 2018 was almost

as sharp. Relative to domestic production, the volume of subject imports decreased by

20 percentage points in 2016, increased by 3 percentage points in 2017, and then increased by

84 percentage points in interim 2018 as compared to interim 2017.⁴⁷⁹In fact, in interim 2018, the

volume of subject imports rose to exceed the volume of domestic production.

Therefore, the increase in subject imports of SSW in interim 2018 was clearly recent,

sudden, and sharp enough to cause injury to CWI. The increase was also significant enough when

viewed in the context of the Canadian market, which grew by 21 percent in interim 2018. Relative

to domestic sales from domestic production, the volume of subject imports in interim 2018 was

142 percentage points greater than in interim 2017.

477. In March 2017, CWI announced the closure of its facility in Erin, Ontario, and the closure was

completed as of March 2018. The closure is discussed in further detail later in this chapter.

478. Exhibit GC-2018-001-15A, Table 7, Vol. 1.1.

479. Exhibit GC-2018-001-15B, Table 9, Vol. 1.1.

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CWI submitted that publicly available Statistics Canada data support the conclusion that the

surge in subject imports continued into Q3 2018 and October 2018.⁴⁸⁰The Tribunal determined

that, in the case of SSW, these Statistics Canada data do not provide a reasonably reliable indication

of subject imports beyond the POI, because the trends and volumes in the Statistics Canada data are

very different than those in the Statistical Summary.⁴⁸¹

In conclusion, the volume of subject imports of SSW increased in interim 2018 both

absolutely and relatively, and these increases have been recent, sharp, sudden and significant.

Unforeseen developments and GATT 1994 obligations

Having found that there has been such an increase in subject imports in interim 2018, the

Tribunal must consider whether the increase resulted from unforeseen developments and the effect

of Canada’s GATT 1994 obligations.

Unforeseen developments

CWI submitted that the significant increase in imports in 2018 resulted from the following

unforeseen developments: (1) trade measures and the subsequent diversion of SSW imports; (2) the

Canadian countermeasures against the United States; and (3) global overcapacity for SSW.⁴⁸²It

also noted that the Order already recognized the following events in terms of unforeseen

developments: “. . . global overcapacity in steel production and the fact that a number of WTO

members have taken or are considering taking measure to restrict importation of steel into their

markets . . .”.

Parties opposing a safeguard measure submitted that these developments were not

“unforeseen” and that they could not be linked to the increase in subject imports.

For the reasons that follow, the Tribunal finds that the increase in subject imports was due

to a combination of unforeseen developments.

There are no industry publications that track global SSW capacity.⁴⁸³As such, in addition

to the information in its Statistical Summary, the Tribunal relied on the global overcapacity data for

steel generally as a proxy for overarching trends in the SSW market.

The developments in excess capacity for steel generally have been described in Part II

above. Here the Tribunal recalls that the continuing unresolved and substantially increasing

overcapacity in world steel production could not be foreseen in 1994.

As for SSW specifically, Table 41 of the Tribunal’s Statistical Summary provides an

overview of the responses provided by five foreign producers. Even based on this small sample, it is

clear that foreign production of subject goods, let alone capacity, is many times larger than the total

Canadian market. The Tribunal finds this to be a strong indication of the extent of overproduction

and excess capacity of SSW.

480. Exhibit GC-2018-001-81.05, Vol. 5 at 16-18.

481. Exhibit GC-2018-001-15A, Table 6, Vol. 1.1 and Exhibit GC-2018-001-82.05 (protected), Vol. 6 at 96.

482. Exhibit GC-2018-001-82.05 (protected), Vol. 6 at 7.

483. Exhibit GC-2018-001-81.05, Vol. 5 at paras. 98 and 101.

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Additionally, Table 41 indicates that a large majority of foreign production of SSW is

intended for export markets. Furthermore, export sales to Canada increased by 61 percent in

interim 2018 while export sales to the United States decreased by 6 percent in the same period.⁴⁸⁴

The Tribunal finds this to be evidence of the diversion of exports by the subject countries, likely due

to market uncertainty preceding the final imposition of U.S. section 232 measures.

In this regard, CWI testified that it had seen a “big change” in the presence of the subject

imports over the past year as “their focus . . . has moved away from the US.”⁴⁸⁵CWI also submitted

that it had experienced an immediate impact of section 232 measures in Canada, as the volume and

offers of subject imports increased significantly.⁴⁸⁶

The Tribunal has no doubt that overcapacity, generally, in combination with the effect of

the U.S. section 232 measures, led to the particular surge of SSW into Canada in interim 2018, and

that these circumstances were unforeseen.

GATT 1994 obligations

In 1994, Canada agreed not to impose quantitative restrictions and bound the tariff for SSW

at zero percent.⁴⁸⁷The effect of the concession, and the obligation arising under Articles II:1(a) and

XI of GATT 1994, was to prevent Canada from imposing tariffs above the bound tariff rate or

quotas as a means of addressing the significant increase in imports of SSW in 2018.

Serious injury

Having found that there was a significant increase in subject imports in interim 2018, the

Tribunal has to determine whether such an increase is a principal cause of serious injury to the

domestic industry.

As the Tribunal has concluded that a significant increase in subject imports of SSW only

occurred in interim 2018, it follows that any injury suffered prior to that period cannot be attributed

to those increased imports. Accordingly, the Tribunal will focus on developments during the second

half of 2017 and interim 2018, but will also place them in the context of the entire POI.

CWI argued that the subject imports undercut its pricing consistently and by significant

margins and that this price undercutting has forced its pricing downward, which was an important

part of the reason that it was forced to close its facility in Erin, Ontario.⁴⁸⁸It also argued that the

imposition of the U.S. section 232 measures caused an immediate diversion of subject imports into

Canada and that the Canadian countermeasures displaced U.S. imports with those from subject

countries. Without any safeguard protection, CWI indicated that it will be forced to seriously

evaluate moving its remaining production equipment to its U.S. facilities.

Parties opposing the imposition of safeguard measures were mostly unrepresented by

counsel and, thus, did not have access to the Tribunal’s confidential record. They generally argued

that the standard for “serious injury” in the safeguard context is “very high” and “exacting” and that

484. Exhibit GC-2018-001-15A, Table 41, Vol. 1.1.

485. Transcript of Public Hearing at 991.

486. Exhibit GC-2018-001-82.05 (protected), Vol. 6 at 79-81.

487. Exhibit GC-2018-001-066.43, Vol. 1 at 33 et seq.

488. Exhibit GC-2018-001-81.05, Vol. 5 at 51.

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the evidence on the record did not meet that high standard. They also argued that the trends in the

imports from subject countries did not coincide with changes in the injury factors and that any

injury caused by other factors must not be attributed to the increase in subject imports. Additionally,

RGL submitted that imports of shaped SSW are priced similarly to domestically produced shaped

wire and are, as a result, not a cause of injury.⁴⁸⁹RGL further submitted that CWI has not been

supplying the oil and gas market in Western Canada and, therefore, that CWI should not be

impacted by subject imports in that region.⁴⁹⁰

The following table summarizes the domestic industry’s performance during the POI. As

all financial performance indicators for the domestic industry, including the percent changes, are

confidential, they have not been included in the table.

Table 11

Summary of Domestic Performance Indicators (Index)

Interim

2015

2016

2017

2018

Practical Plant Capacity

100

59

Total Production

100

134

128

139

134

137

129

146

137

100

50

44

57

84

Production for Domestic Sales

Production for Export Sales

Capacity Utilization Rate (%)

Market

100

98

99

101

129

104

81

100

121

59

49

Domestic Sales from Domestic Production

Producers Market Share (%)

Total Direct Employees

Total Wages ($000) - Direct Employment

100

91

95

93

94

100

74

65

Total Hours Worked (000) - Direct Employment

Productivity - Tonnes/ Hour Worked (Direct)

100

90

148

91

151

100

74

68

Producer Inventories

Inventory as % of Production

100

98

74

86

62

100

57

114

Selling Prices

Domestic Sales from Domestic Production

Total - Subject Countries

Excluded Countries

100

87

101

95

89

100

94

100

105

103

105

Total - Subject Goods Market Share

Excluded Countries - Market Share

100

104

95

83

139

100

150

120

Note(s):

1. 2015 = 100 and Interim 2017 = 100

2. Index values are notional, and there is no indexing between a full calendar year and an interim period.

3. The bolded index values under “Selling Prices” indicate the lowest price in the market for that period.

Source: Exhibit GC-2018-001-15A, Vol. 1.1 at 15, 22, 25 and 31.

In terms of trends for key performance indicators, CWI’s performance generally suffered in

interim 2018 as compared to interim 2017. Practical plant capacity, total production, production for

domestic sales and export sales and capacity utilization decreased, significantly so, in some

instances. Similarly, productivity, total employment, total hours worked and wages were also down.

489. Exhibit GC-2018-001-81.03, Vol. 5 at 7.

490. Ibid.

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The domestic industry’s share of the market also fell significantly as it lost share to both subject

imports and U.S. imports, although more to the former.

CWI submitted more than a dozen account-specific allegations of either lost sales and/or

price depression due to competition from subject imports, with some of those related to lost sales

occurring in interim 2018.⁴⁹¹The allegations were uncontroverted and show lost sales to two

different subject countries.

However, the financial performance indicators show that, both in terms of percentage and

on a per-unit basis, gross margin and net income improved from 2015 to 2017.⁴⁹²Further, in

interim 2018, gross margins remained flat while net income became positive for the first time

during the POI.⁴⁹³Return on investment and cash flow also improved in interim 2018. In the

Tribunal’s view, the positive financial results in interim 2018 reflect the diverse effects of the sale in

March 2018 of CWI’s facility in Erin, Ontario. For example, without the one-time proceeds from

the sale, CWI would have experienced another loss at the net income level in interim 2018.⁴⁹⁴

It is clear that CWI’s otherwise weakened performance in interim 2018 stems principally

from the closure of the Erin plant that was completed in March 2018. By way of example, practical

plant capacity decreased by 41 percent between interim 2018 and interim 2017. The same can be

said for other factors like total production, production for domestic and export sales, market share as

well as the employment/wage factors.

However, the Tribunal does not accept CWI’s argument that the closure of the Erin facility

was due to the increase in subject imports. The Tribunal first notes that CWI itself did not identify

the increase in imports as a principal cause of the closure; rather, it acknowledged that a variety

factors contributed to the decision to close it.⁴⁹⁵Further, the decision to close the facility took place

before the increase in subject imports in interim 2018; the closure was announced in March 2017.⁴⁹⁶

As such, the closure cannot be attributed to the increase in imports in interim 2018, and CWI’s

counsel went as far as acknowledging this conclusion in responding to questions from the

Tribunal.⁴⁹⁷

The Tribunal also considered whether subject imports had significantly undercut, depressed

or suppressed the prices of domestically produced like or directly competitive goods. While there is

evidence of price undercutting in interim 2018, there is little or no evidence of price depression or

price suppression during this time.

CWI’s average selling price increased in interim 2018 as compared to interim 2017 and it

remained the price leader in the market.⁴⁹⁸However, on the basis of the Tribunal’s confidential

record, it is clear that the prices from certain countries such as Germany and Japan were very high

491. Exhibit GC-2018-001-82.05 (protected), Vol. 6 at 80-81, 104.

492. Exhibit GC-2018-001-16A (protected), Table 17, Vol. 2.1.

493. Ibid.

494. Exhibit GC-2018-001-82.05 (protected), Vol. 6 at 8 and 27.

495. Ibid. at 49; Transcript of Public Hearing at 997-998.

496. Ibid. at 997.

497. Ibid. at 1012.

498. Exhibit GC-2018-001-16A (protected), Tables 13 and 15, Vol. 2.1. Comparing CWI’s average selling

price to the average landed price of subject imports indicates substantial undercutting in both interim

2017 and 2018.

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and, despite their small volumes, disproportionally affected the average selling price of subject

imports. On the other hand, imports from China and India, two of the largest sources of subject

imports, were priced much lower and undercut CWI’s selling prices.

As for price depression, CWI submitted that, following the closure of the Erin plant, its

product mix shifted toward higher-priced products.⁴⁹⁹Therefore, comparing CWI’s average price in

interim 2018 to its average price in interim 2017 is not useful in terms of identifying whether there

was price depression. Further, according to CWI, the U.S. section 232 measures caused an artificial

increase in SSW prices across North America in 2018.⁵⁰⁰Finally, CWI submitted pricing data by

type of SSW, which show some products having higher prices in Q2 2018 compared to Q1 2018

and others having lower prices, but with the “total” price still being higher.⁵⁰¹

As mentioned, CWI’s gross margin percentage remained stable from interim 2017 to

interim 2018 so there was no price suppression.

On the basis of the preceding, the Tribunal finds that, even if the position of the domestic

industry suffered a significant overall impairment, i.e. serious injury, in interim 2018, the increase in

subject imports is not a principal cause of that injury. Most of the negative performance in interim

2018 stems from the closure of the Erin facility which, as determined above, was itself not caused

by the increase in the subject imports.

The Tribunal will go on to examine whether the increase in subject imports is a principal

cause of a threat of serious injury.

Threat of serious injury

The Tribunal will now determine whether the increase in subject imports in interim 2018,

absent the imposition of safeguard measures, is a principal cause of threat of serious injury. The

Tribunal primarily focused its threat analysis on the predicted changes and developments in the

Canadian market expected during the remainder of 2019.

CWI submitted that certain countries continue to ship SSW to Canada in high volumes

notwithstanding the imposition of the provisional safeguard measures, and that the increase is likely

to continue in light of the global overcapacity and the diversionary effect of global trade measures.

CWI argued that the subject imports will continue to result in price undercutting, price depression

and price suppression, and indicated that it was increasingly vulnerable to low-priced subject

imports. Citing the closing of its Erin facility and its continued poor financial performance, CWI

suggested that, without the protection of safeguard measures, it would have no choice but to move

its remaining Canadian production to the United States.

Parties opposing the imposition of safeguard measures were mostly unrepresented by

counsel and thus did not have access to the Tribunal’s confidential record. As such, relying heavily

on the jurisprudence from the WTO, they generally argued that the standard for “serious injury”,

even in the context of threat, is “very high” and “exacting”, and that the evidence on the record did

not meet that high standard. They also argued that any threat of serious injury must be “clearly

499. Exhibit GC-2018-001-81.05, Vol. 5 at 54.

500. Exhibit GC-2018-001-82.05 (protected), Vol. 6 at 24 and 32; and Tom Dodds’ Statement of Evidence

(ibid. at 75).

501. Ibid. at 75.

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imminent” and such a determination shall be based on facts and not merely on allegations,

conjecture or remote possibility.

Additionally, and similar to its above-noted arguments regarding serious injury, RGL

submitted that imports of shaped SSW are priced similarly to domestically produced shaped wire

and are, as a result, not a cause of threat of injury.⁵⁰²RGL further submitted that CWI has not been

supplying the oil and gas market in Western Canada and, therefore, CWI should not be impacted by

imports in that region.⁵⁰³RGL argued that increase imports of shaped SSW will likely stay at

current levels.⁵⁰⁴

The Tribunal will conduct its threat analysis by considering the following: the current state

of the domestic industry and the SSW market; the likely future volume of subject imports in light of

the diversionary trade remedies and global overcapacity; and the effect of continuing increases in

subject imports on the domestic industry.

The Tribunal notes the following comments made by CWI’s counsel: “The catalyst for this

whole safeguard proceeding . . . is the 232 imposition of duties in March 2018, but unlike the case

for some other products, with stainless steel wire you have a domestic industry that was already

suffering in terms of its sales in Canada even before the 232.”⁵⁰⁵The Tribunal agrees with this

assessment. CWI was financially vulnerable even before the collective effect of the diversionary

trade remedy measures and global overcapacity. It remains on the verge of becoming unprofitable

and shuttering its Perth facility, notwithstanding the temporary financial boost that resulted from the

sale of its Erin facility.

Historically, imports from the United States have accounted for a significant share of the

Canadian SSW market, i.e. approximately 35 percent from 2015 to 2017.⁵⁰⁶However, the

extension of U.S. section 232 measures to Canada and Canada’s imposition of countermeasures

have fundamentally changed trade flows between Canada and the United States. Prior to the

imposition of the U.S. section 232 measures, CWI considered North America to be “one

market”.⁵⁰⁷For the time being, CWI (and SSW suppliers from around the world) will be less able to

export to the United States due to section 232 measures. Further, there is less need for U.S. suppliers

to look to export markets, given the domestic market opportunity created by the U.S. section 232

protection.

On the other hand, the same U.S. section 232 measures give offshore suppliers an

important reason to look to Canada. As more fully set out above in the Unforeseen Developments

section, the steel industries of the subject countries exhibit significant overcapacity generally and,

on the basis of the responses from foreign exporters, specifically with respect to SSW. There is no

evidence to suggest that demand will increase significantly in other markets to absorb the excess

capacity. Also, trade remedy measures in the European Union against SSW imports from India will

continue to restrict India’s options with regard to that market.

502. Exhibit GC-2018-001-81.03, Vol. 5 at 7.

503. Ibid.

504. Exhibit GC-2018-001-81.03, Vol. 5 at 8.

505. Transcript of Public Hearing at 1007.

506. Exhibit GC-2018-001-81.05, Vol. 5 at 50.

507. Transcript of Public Hearing at 990.

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The evidence indicates that the domestic SSW market will be, at best, stable in the near- to

medium-term with a potential, slight slowdown in Western Canada.⁵⁰⁸Currently, CWI cannot fully

supply the domestic market and, therefore, part of the demand must be met by imports. In the

Tribunal’s view, the phenomenon of increased subject imports experienced in the Canadian market

in interim 2018 is likely to continue in the immediate future if safeguard measures are not imposed.

Witnesses stated that subject imports have already been filling the gap left by U.S. imports of

SSW,⁵⁰⁹thus indicating that exporters in subject countries have increased their interest and presence

in the Canadian market. In terms of supply, the subject imports are being pushed out of their

domestic and other export markets by continuing and increasing excess capacity in the subject

countries.⁵¹⁰In terms of demand, the Canadian market is relatively high-priced and has no trade

restrictions.

CWI further testified that since the imposition of the Canadian countermeasures, purchasers

who historically purchased SSW from the United States have been pushed to shop around to avoid

the additional 25 percent cost.⁵¹¹They have noticed a notable decrease in U.S. SSW available in the

Canadian market since the surge of imports in interim 2018.⁵¹²

Similarly, the subject imports are competing against domestic SSW. CWI provided an

uncontested, comprehensive list of more than a dozen account-specific allegations of either lost

sales and/or price depression due to competition from subject imports. By far the largest loss of

revenue occurred in July 2018 when CWI was significantly undercut by SSW from India.⁵¹³The

list shows the severe degree of price undercutting faced by CWI in relation to the subject imports,

including several allegations from recent months in Q3 2018.⁵¹⁴The Tribunal agrees with CWI’s

assertion that the result of this recent and consistent undercutting is resulting in lower domestic

selling prices as CWI attempts to meet or beat the prices of the subject imports.⁵¹⁵

The Tribunal also heard testimony that CWI has seen significant price increases for its

feedstock (i.e. wire rod) from U.S. suppliers.⁵¹⁶CWI indicated that prices for its feedstock from the

United States have generally increased, notwithstanding the fact that these imports are no longer

covered by the U.S. section 232 measures and Canada’s countermeasures.⁵¹⁷Given the recent and

consistent pricing pressure experienced by CWI due to the subject imports, the Tribunal can only

conclude that CWI will not be able to raise its prices to cover these cost increases and will

experience price suppression.

All the above leads the Tribunal to conclude that increasing volumes of low-priced subject

imports will continue to compete with and displace sales of domestic SSW, take sales and market

share away from an already vulnerable domestic industry, and cause either significant price

suppression or outright price depression. Keeping in mind the precarious state of CWI and the early

signs of injury seen in interim 2018, the evidence shows that such significant future negative price

508. Exhibit GC-2018-001-81.05, Vol. 5 at 70; Transcript of Public Hearing at 1006.

509. Exhibit GC-2018-001-81.05, Vol. 5 at 50-51; Transcript of Public Hearing at 991.

510. Exhibit GC-2018-001-15A, Table 41, Vol. 1.1.

511. Exhibit GC-2018-001-81.05, Vol. 5 at 19. Transcript of In Camera Hearing at 289-290.

512. Exhibit GC-2018-001-81.05, Vol. 5 at 50-51.

513. Ibid. at 81.

514. Ibid. at 76-78; Exhibit GC-2018-001-82.05 (protected), Vol. 6 at 104.

515. Exhibit GC-2018-001-81.05, Vol. 5 at 70.

516. Transcript of Public Hearing at 1002.

517. Ibid. at 988.

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effects would result in significant lost profits and financial performance at unsustainable levels in

the near future.

In sum, the Tribunal concludes that the continued increase in subject imports is likely to be

a principal cause of a threat of serious injury. In view of these circumstances, the Tribunal

concludes that, without the protection afforded by safeguard measures, the injury experienced by

CWI that began in interim 2018 will imminently become serious, and that the increase of subject

imports is a principal cause thereof.

Given that the evidence indicates that the increase in subject imports is a principal cause of

threat of serious injury, the Tribunal will address whether there are other causes of the threat of

serious injury which are more important.

First, the Tribunal considered whether CWI’s decision to shut its Erin facility was a more

important cause of future serious injury than the subject imports. There is no doubt that the closure

of the Erin facility created a void in the market, as CWI could not immediately increase production

volumes to offset the loss of capacity, especially in the face of large volumes of low-priced subject

imports.⁵¹⁸However, the Tribunal heard that CWI transferred some of the equipment from Erin to

its remaining Perth facility, with the hope of being able to manufacture the lower-end products that

had previously been produced at Erin.⁵¹⁹CWI has also made capital investments to increase its

capacity for shape/profile wire and welding wire.⁵²⁰With additional crew levels, CWI will be able

to further increase capacity and production.⁵²¹Therefore, in the future, assuming the absence of

injurious volumes of subject imports, CWI will be able to produce a large enough volume of SSW

at its Perth facility to make it a viable and potentially profitable operation. Accordingly, the closure

of the Erin facility is not a more important cause of threat of serious injury than the subject imports.

The Tribunal also considered the effect of further declines in export sales by CWI. As

indicated in the Statistical Summary, CWI’s export sales had already declined by 43 percent in

interim 2018 compared to interim 2017. Nonetheless, in interim 2018, its volume of export sales

was larger than the volume of domestic sales. Although the loss of additional export volumes will

have a negative effect on CWI, it will not be more important than the negative effect of the subject

imports. While the closure of the Erin facility leaves CWI capacity-constrained (in that it cannot

fully meet domestic SSW demand), a gap has been created in the domestic market by the exit of the

U.S. imports. CWI could offset lost export sales by filling this domestic market gap, thereby

sustaining its Perth operation.

The Tribunal also considered RGL’s argument that CWI has not been supplying Western

Canada and that, therefore, it could not be impacted by subject imports in that region. However,

CWI witnesses testified that it has customers in British Columbia, has made sales in Alberta over

the last two years and has a distribution centre in Alberta. As such, the Tribunal does not consider

this factor to be a more important cause of threat of serious injury than the subject imports.

518. Exhibit GC-2018-001-82.05 (protected), Vol. 6 at 51 and 53.

519. Transcript of Public Hearing at 997-1001.

520. Exhibit GC-2018-001-82.05 (protected), Vol. 6 at 62; Transcript of Public Hearing at 1001.

521. Exhibit GC-2018-001-82.05 (protected), Vol. 6 at 36, 49 and 62.

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Finally, none of the important causes of threat of serious injury that may be relevant to

other products being investigated, including significantly diminished future demand, self-inflicted

injury due to domestic producer imports, or intra-industry competition, are applicable to SSW.

To conclude, the Tribunal is of the view that there are no other causes of the threat of

serious injury more important, individually or collectively, than the increased subject imports.

Therefore, based on the above review of the evidence, the Tribunal finds that there is a threat of

serious injury of which a principal cause is the increase in subject imports.

Goods of certain free trade agreement partners

In accordance with the principles discussed in Part III of this report, pursuant to the Order,

and in accordance with sections 20.031, 20.04, 20.05, 20.06 and 20.07 of the Canadian

International Trade Tribunal Act, the Tribunal conducted the following analysis with respect to

imports from Panama, Peru, Colombia, Honduras and Korea.

There were no imports of SSW from Panama, Peru, Colombia and Honduras during the

POI and, therefore, imports from none of these sources can be on their own a principal cause of a

threat of serious injury.⁵²²Accordingly, subject imports from these sources should be excluded

from the application of any remedy.

With regard to Korea, although the volume of subject imports from that country increased

in 2017 and interim 2018, it did so at only half the rate of subject imports generally.⁵²³Moreover,

the volume of subject imports from Korea was not nearly as large as the volume of imports from the

other subject countries.⁵²⁴In terms of selling prices, while the price of imports from Korea

decreased by 2 percent in interim 2018,⁵²⁵the Korean price remained higher than that of the

domestic industry.⁵²⁶

The Tribunal analyzed its confidential information regarding volumes and prices of the

goods from Korea during the POI along with the above evidence. The evidence confirms the view

that Korea has not supplied sufficient volumes or been a significant price leader in the past; there is

nothing in the evidence to lead to the conclusion that the volumes of imports from Korea will

increase substantially or that prices of Korean SSW will significantly undercut those of CWI, or

suppress or depress domestic prices thereby causing any negative effects in future.⁵²⁷

Therefore, the Tribunal concludes that subject imports from Korea, on their own, are not a

principal cause of threat of serious injury.

522. Exhibit GC-2018-001-16A (protected), Schedule 4, Vol. 2.1.

523. Exhibit GC-2018-001-15A, Table 7, Vol. 1.1.

524. Exhibit GC-2018-001-16A (protected), Schedule 3, Vol. 2.1.

525. Ibid., Table 16.

526. Ibid., Table 15. In interim 2018, the selling price of subject imports from Korea was lower than the

average selling price of subject imports generally. However, as explained above, there were some

imports of very high-priced stainless steel wire that skewed the average.

527. The Tribunal notes that, as part of its Injury Allegation Summary Table (Exhibit GC-2018-001-82.05

(protected), Vol. 6 at 104), CWI alleged that it lost sales to subject imports from Korea imported by a

particular importer; however, Table 2 of the Tribunal’s Statistical Summary indicates that that particular

importer did not import subject imports from Korea during the POI.

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Given the above finding regarding Korea, the Tribunal must re-conduct its increased

imports, serious injury, threat of serious injury and causation analyses by treating imports from

Korea as excluded goods.

Considering the low volumes and relatively high prices of Korean goods in the past, the

Tribunal’s conclusions with respect of increased imports, serious injury and principal cause of the

threat of serious injury (being the remaining subject imports) are the same or even stronger when

imports from Korea are excluded from that group.

Therefore, the Tribunal finds that the increased imports (excluding imports from Korea,

Panama, Peru, Colombia and Honduras) are a principal cause of threat of serious injury.

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REMEDY RECOMMENDATION

INTRODUCTION

The Tribunal finds that imports of SSW from the subject countries (other than goods

originating in Panama, Peru, Colombia, Honduras and Korea) are being imported in such increased

quantities and under such conditions as to be a principal cause of a threat of serious injury to the

domestic industry. Accordingly, the Tribunal recommends a remedy in the form of a TRQ on

imports of SSW from subject countries, other than goods originating in Panama, Peru, Colombia,

Honduras or Korea, or countries whose goods are eligible for GPT treatment. Both the in-quota

volume and the above-quota surtaxes are to be liberalized over the three-year quota period.

This following section explains the reasons for the Tribunal’s choice of remedy, including

details of the remedy proposed.

CHOICE OF REMEDY

Position of parties

The Tribunal considered all the evidence and arguments presented on the subject of

remedies, including the relative suitability of the three types of remedies available, i.e. surtaxes,

quotas and TRQs. The Tribunal heard witnesses for CWI and one importer, RGL. The Tribunal

also heard statements at the hearing from the governments of India and Thailand.

CWI argued in favour of a more restrictive quota volume than was applied provisionally by

the Department of Finance.⁵²⁸CWI argued that the recommended quota should be 20 percent less

than the present quota⁵²⁹in its first year of implementation in order to permit CWI to regain market

share, and to give the market a full year to stabilize.⁵³⁰More specifically, CWI suggested a quota of

1,618 tonnes for the first year, 2,022 tonnes for the second year and 2,426 tonnes for the third

year.⁵³¹Additionally, CWI argued in favour of applying an in-quota surtax of 12 percent for

welding wire and shape/profile wire because it is consistently forced to lower prices to

unsustainable levels to compete with low-priced subject imports for these types of products.⁵³²CWI

argued in favour of a 25 percent above-quota surtax for all SSW products over the three-year

period.⁵³³

RGL, an importer of SSW, did not provide any specific arguments for a remedy. It argued

against maintaining a surtax on SSW and argued in favour of providing a regional exemption to

Alberta or an exemption for imports from the European Union.⁵³⁴

528. Exhibit GC-2018-001-81.05, Vol. 5 at 34.

529. The provisional quota for SSW is 1,868 tonnes, which gives an annualized volume of 3,409 tonnes. See

https://www.fin.gc.ca/n18/data/18-090-order-decret-bil.pdf at page 7.

530. Exhibit GC-2018-001-81.05, Vol. 5 at 35.

531. Ibid. at 36.

532. Exhibit GC-2018-001-81.05, Vol. 5 at 35. The suggested in-quota tariff rate is a reflection of the average

price depression for these types of SSW in the three most recent import intelligence reports submitted by

CWI.

533. Exhibit GC-2018-001-81.05, Vol. 5 at 35.

534. Exhibit GC-2018-001-81.03, Vol. 5 at 10.

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The Government of Chinese Taipei and the European Union Commission argued in favour

of a TRQ in their written submissions.⁵³⁵The Government of Chinese Taipei did not provide details

for their TRQ recommendation. The European Union Commission argued that only a volume-type

measure like a TRQ would be adequate in this inquiry.⁵³⁶The European Union Commission

suggested that the TRQ be based on the average imports of the last three years, determined for each

supplying country, and that the safeguard duty only apply to import volumes that exceed the

quota.⁵³⁷

Tribunal analysis

The Tribunal accepts CWI’s arguments with respect to the type of remedy that should be

imposed and, accordingly, recommends a TRQ for three years.

Specifically, the Tribunal recommends:

 that an in-quota volume representing the total amount of permitted subject country

imports at the in-quota rate be fixed, as required by Article XIII:2(a) of GATT 1994.

The Tribunal recommends that the in-quota volume be set at 2,800 tonnes for the first

year.

 that the in-quota volume be increased each year by 10 percent, i.e. to 3,080 tonnes in

the second year and to 3,388 tonnes in the third year.⁵³⁸

 that no surtax be applied to the in-quota imports. This will permit a non-injurious level

of imports to enter the country without restriction.

 that the above-quota surtax be set at a declining rate, starting at 25 percent in the first

year, 15 percent in the second year and 5 percent in the third year to ensure that imports

above the in-quota volume do not cause the continuation of a threat of serious injury.

 that the Governor in Council consider a different method of allocating the in-quota

volume than the first-come first-served basis used for the provisional safeguard

measure.

Table 12

Recommendation on Remedy for Stainless Steel Wire

(tonnes)

In-quota Volume

Above-quota Surtax

First Year

2,800

3,080

3,388

25%

15%

5%

Second Year

Third Year

Since the Tribunal determined that Korean imports are not, on their own, a principal cause

of threat of serious injury, the Tribunal’s recommended remedy should not apply to imports from

Korea.

535. Exhibit GC-2018-001-81.04, Vol. 5 at 9; Exhibit GC-2018-001-81.02, Vol. 5 at 3.

536. Exhibit GC-2018-001-81.02, Vol. 5 at 3.

537. Ibid.

538. The proposed quota volumes would be lower than the annualized provisional level over the entire three

years.

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Imports from GPT countries are either non-existent or de minimis.

The Order excluded imports from the United States, Chile, Mexico, Israel and other CIFTA

beneficiary countries from the subject goods. Consequently, the Tribunal’s recommended remedy

should not apply to imports from these countries.

In arriving at the above recommendation, the Tribunal considered that the market for SSW

in Canada was mature and would remain stable over the next several years.⁵³⁹It also considered

that, even if CWI is able to increase is output to the maximum extent, it will not be able to fully

satisfy domestic demand and, therefore, imports of SSW will be necessary. Finally, the Tribunal

considered that U.S. imports of SSW will not entirely disappear from the domestic market, even

though they are likely to be significantly lower than in the past.⁵⁴⁰

The challenge is to determine a quota volume and surtax rate that will provide reasonable

access to imports, minimize disruption to the domestic industry and allow the market to stabilize.

The TRQ should allow reasonable time for CWI to consolidate and expand capacity while allowing

imports to fill the existing gap in a mature market place. At the same time, the volume of in-quota

imports should be sufficient to not risk damaging the international competitiveness of the

downstream manufacturing industries in Canada. The surtax should ensure that prices of above-

quota imports are at non-injurious levels.

The proposed in-quota volume of 2,800 tonnes⁵⁴¹in the first year reflects the following

elements: the average quantity of SSW imported from subject countries (excluding Korea) in the

years 2015 to 2017;⁵⁴²an assessment of CWI’s theoretical maximum capacity at its Perth facility;⁵⁴³

and the potential level of U.S. imports.⁵⁴⁴Traditionally, imports have originated in the United States

and subject countries.⁵⁴⁵With U.S. imports playing a significantly reduced role in the Canadian

market due to Canadian countermeasures, subject imports must fill the gap in the market.

The surtax proposed by the Tribunal corresponds to the approximate increase in the price of

the above-quota imports that the Tribunal believes is necessary to mitigate the threat that imports

will significantly suppress the average selling price of the domestic industry in the near future.⁵⁴⁶

539. Exhibit GC-2018-001-81.05, Vol. 5 at 70.

540. In this regard, the Tribunal notes the testimony of CWI witnesses that some of their U.S. customers were

willing to absorb the 25 percent surtax. See Transcript of Public Hearing at 996. In the Tribunal’s view,

it is reasonable to believe that some Canadian customers will behave similarly with regard to U.S.

imports.

541. In its submissions, CWI proposed that the quota be 20 percent less than the present quota in its first year

of implementation. See Exhibit GC-2018-001-81.05, Vol. 5 at 35.

542. Given that the surge in imports occurred in interim 2018, the Tribunal did not consider it appropriate to

extrapolate an import volume for that year to include in the calculation of the average volume of subject

imports.

543. Exhibit GC-2018-001-82.05 (protected), Vol. 6 at 62, 103. Transcript of In-Camera Hearing at 301. In

its submissions and testimony, CWI proposed different capacity levels and future sales with safeguard

protection. The Tribunal took account of the range of these estimates when recommending the first year

quota volume.

544. Exhibit GC-2018-001-81.05, Vol. 5 at 35.

545. Exhibit GC-2018-001-16A (protected), Tables 6 and 8, Vol. 2.1.

546. The surtax was calculated using the estimated potential level of price undercutting for the period of 2015

to interim 2018, as well as a projection of the maximum potential price undercutting thereafter using

import landed values against the price of domestic sales in the market. See Exhibit GC-2018-001-16A

(protected), Tables 13 and 15, Vol. 2.1. For the projection period, the estimated unit selling values of

sales from domestic production and import landed value of the subject good were calculated by applying

the average growth rate of those unit selling values over the POI to derive forecasted prices until 2021.

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The suggested surtax in the first year is also recommended by CWI in its submissions.⁵⁴⁷

A

declining surtax will allow for a gradual liberalization of safeguard measures as CWI adjusts to the

market. As CWI consolidates and expands its plant capacity, it will be in a better position to

compete with imports of SSW products once safeguard protections are finally lifted.

CWI argued for an in-quota surtax of 12 percent on welding and profile/shape wire to

alleviate pricing pressures from low-priced subject imports of these particular SSW products.⁵⁴⁸

The Tribunal recalls that the Order directed it to not “hear any motion . . . that would otherwise limit

scope of the . . . recommendations”. In the Tribunal’s view, having a separate in-quota rate for

welding and profile/shape wire would limit the scope of its remedy recommendation for SSW. In

any event, the Tribunal is not convinced that CWI can supply the entire Canadian market with these

SSW products and, therefore, believes that applying an in-quota surtax would unduly burden

importers.

Quota administration

The Tribunal recommends that the Government of Canada periodically review these

measures to ensure that they remain appropriate. This recommendation reflects the fact that

Canadian and global market conditions could change significantly during the period of the

application of the measures. Also, the Canadian government should take account of the manner in

which trade measures on steel are applied in the United States and the European Union and of any

changes that may be made there in response to market or other conditions.

547. Exhibit GC-2018-001-81.05, Vol. 5 at 35.

548. Ibid.

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PART X – WIRE ROD

PRODUCT

The seventh class of goods considered by the Tribunal is wire rod. The Order describes the

class of goods as follows:

Certain hot‐rolled products of carbon steel and alloy steel, in coils, of approximately round

cross section, less than 19.00 mm in actual solid cross‐sectional diameter.

The following goods are excluded:



stainless steel;

tool steel;

high‐nickel steel;

ball bearing steel; and

concrete reinforcing bars and rods (also known as rebar).⁵⁴⁹

The Tribunal has not previously dealt with wire rod in the context of SIMA proceedings.

Wire rod is produced in diameters up to 18.7 mm.⁵⁵⁰The basic manufacturing process for

all wire rod consists of steelmaking, casting, hot-rolling, coiling and cooling.⁵⁵¹The equipment,

machinery and production facilities are the same for all wire rod production.⁵⁵²Wire rod is sold in

irregularly wound coils for further wire drawing and finishing by wire drawers and other end

users.⁵⁵³

There are five basic types of wire rod, including welding quality, mesh quality (low

carbon), industrial quality (low carbon), high carbon quality and cold-heading quality.⁵⁵⁴There are

significant differences in pricing for different types of wire rod.⁵⁵⁵Areas of application for wire rod

include the following:

 tire bead and tire cord;⁵⁵⁶

 steel wire;⁵⁵⁷

 wire mesh;⁵⁵⁸

549. In addition, the Department of Finance published an illustrative list of HS Codes for wire rod, which are

7213.20.00.10, 7213.91.00.11, 7213.91.00.21, 7213.91.00.31, 7213.99.00.10, 7213.99.00.30,

7213.99.00.50 and 7227.90.00.10. Exhibit GC-2018-001-01A, Vol. 1 at 6-7.

550. Exhibit GC-2018-001-83.06, Vol. 5 at 6.

551. Ibid.

552. Ibid.

553. Ibid.

554. Ibid. at 49.

555. Ibid. at 6.

556. Ibid. at 7, 49, 50; Exhibit GC-2018-001-83.09, Vol. 5 at 18; Exhibit GC-2018-001-47.08, Vol. 3.1,

Question 4; Exhibit GC-2018-001-32.03, Vol. 3, Question 7.

557. Exhibit GC-2018-001-47.15, Vol. 3.1, Question 4.

558. Transcript of Public Hearing at 866, 875; Exhibit GC-2018-001-83.06, Vol. 5 at 50; Exhibit GC-2018-

001-47.04, Vol. 3.1, Question 4; Exhibit GC-2018-001-47.05, Vol. 3.1, Question 4; Exhibit GC-2018-

001-47.09, Vol. 3.1, Question 4; Exhibit GC-2018-001-32.02, Vol. 3, Question 7; Exhibit GC-2018-

001-32.03, Vol. 3, Question 7.

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 nails;⁵⁵⁹

 springs;⁵⁶⁰

 fencing;⁵⁶¹

 wire rope;⁵⁶²

 welding consumables;⁵⁶³

 screws;⁵⁶⁴and

 electric welded chains.⁵⁶⁵

SUMMARY

The Tribunal finds that wire rod imported from the subject countries is not being imported

in such increased quantities as to cause or threaten to cause serious injury to the domestic industry.

Given that a safeguard measure can only be applied if a product is being imported in such increased

quantities, the Tribunal does not recommend a remedy for wire rod.

ANALYSIS

The legal principles applicable to the analysis are set out in Part III of this report.

Like or directly competitive goods

To determine whether domestically produced wire rod is “like or directly competitive” to

subject wire rod, the Tribunal considered the goods’ physical and market characteristics.

Ivaco Rolling Mills 2004 LP (Ivaco), a party supporting the imposition of a safeguard

measure, submitted that “domestically produced wire rod products constitute like or directly

competitive goods to the Subject Goods”.⁵⁶⁶Parties opposed to a safeguard measure made several

arguments, including the following:

559. Transcript of Public Hearing at 821; Exhibit GC-2018-001-83.06, Vol. 5 at 49-50; Exhibit GC-2018-

001-47.04, Vol. 3.1, Question 4; Exhibit GC-2018-001-47.07, Vol. 3.1, Question 4; Exhibit GC-2018-

001-32.02, Vol. 3, Question 7.

560. Transcript of Public Hearing at 821; Exhibit GC-2018-001-83.06, Vol. 5 at 50; Exhibit GC-2018-001-

47.13, Vol. 3.1, Question 4; Exhibit GC-2018-001-32.02, Vol. 3, Question 7; Exhibit GC-2018-001-

32.03, Vol. 3, Question 7.

561. Transcript of Public Hearing at 866; Exhibit GC-2018-001-83.06, Vol. 5 at 49-50; Exhibit GC-2018-

001-47.09, Vol. 3.1, Question 4; Exhibit GC-2018-001-32.03, Vol. 3, Question 7.

562. Transcript of Public Hearing at 821; Exhibit GC-2018-001-83.06, Vol. 5 at 50; Exhibit GC-2018-001-

32.03, Vol. 3, Question 7.

563. Transcript of Public Hearing at 823; Exhibit GC-2018-001-32.02, Vol. 3, Question 7.

564. Transcript of Public Hearing at 822; Exhibit GC-2018-001-32.02, Vol. 3, Question 7; Exhibit GC-2018-

001-32.03, Vol. 3, Question 7.

565. Transcript of Public Hearing at 821.

566. Exhibit GC-2018-001-83.06, Vol. 5 at 8.

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(i) imported wire rod does not fall within the definition of “like or directly competitive

goods” in the Canadian International Trade Tribunal Regulations;⁵⁶⁷

(ii) the domestic industry does not produce goods that are like or directly competitive to

a specific type of imported wire rod;⁵⁶⁸

(iii) there are two distinct types of wire rod (low carbon commodity and high carbon

specialty) that are neither identical nor substitutable, and therefore are not like or

directly competitive to the subject goods;⁵⁶⁹and,

(iv) it is not clear which types of wire rod are produced domestically, and whether such

wire rod is like or directly competitive with imported wire rod.⁵⁷⁰

However, as stated in Part III, for the purposes of this inquiry, the imported “good” or

“product” at issue is wire rod as described in the product description. While the market may

distinguish between low carbon commodity and high carbon specialty wire rod based on their

chemical composition and use, the Order expressly indicated that these products constitute a single

class of goods and specifically instructed the Tribunal not to hear any motion to exclude any good

from a class or that would otherwise limit the scope of the inquiry, determination or

recommendations.⁵⁷¹The question therefore is whether domestic wire rod meeting the product

description in the Order is identical to, or has uses and other characteristics that closely resemble,

the imported wire rod.

On the basis of evidence on the record, and notwithstanding any differences between

subsets of wire rod, the Tribunal finds that domestically produced wire rod is like or directly

competitive to the imported wire rod that is the subject of this inquiry.

Domestic producers

The domestic producers of wire rod are Ivaco and ArcelorMittal Long Products Canada

G.P. (AMLPC) (collectively, the domestic producers).⁵⁷²

Michelin North America (Canada) Inc. (Michelin), a party opposed to a safeguard measure,

argued that Ivaco should be excluded from consideration as part of the domestic industry on the

basis that it does not produce a subset of wire rod that is like or directly competitive to the subset of

wire rod imported by Michelin.⁵⁷³However, no party alleged that Ivaco produces none of the wire

rod that is like or directly competitive to wire rod imported from subject countries. The Tribunal

reiterates that the good or product that is subject to the inquiry is wire rod falling within the product

567. Exhibit GC-2018-001-83.09, Vol. 5 at 6.

568. Exhibit GC-2018-001-83.08, Vol. 5 at para. 25; Exhibit GC-2018-001-99.01, Vol. 7 at para. 7;

Transcript of Public Hearing 949, 952.

569. Exhibit GC-2018-001-83.08, Vol. 5 at 6; Exhibit GC-2018-001-83.09, Vol. 5 at 6; Exhibit GC-2018-01-

83.01, Vol. 5 at 5.

570. Exhibit GC-2018-001-99.01, Vol. 7 at 7.

571. Exhibit GC-2018-001-01, Vol. 1 at 5-6.

572. Exhibit GC-2018-001-17A, Vol. 1.1 at 9. Ivaco and AMLPC both completed the Tribunal’s Producers’

Questionnaire, but only Ivaco submitted a case brief. Ivaco’s brief includes a letter from AMLPC stating

that it “supports the imposition of a safeguard measure to stabilize the Canadian market against

disruptive, low-priced imports”. Counsel for Ivaco is also counsel for AMLPC regarding other classes of

goods subject to the inquiry.

573. Exhibit GC-2018-001-83.09, Vol. 5 at 6.

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description. The fact that there may be subsets of that good is immaterial for the purpose of

identifying the domestic producers.

Production volume data is confidential and cannot be reproduced here to establish that the

collective output of Ivaco and AMLPC is a major proportion of total domestic wire rod production.

However, on the basis of Ivaco’s uncontested submission that it and AMLPC constitute a major

proportion of total domestic wire rod production,⁵⁷⁴the Tribunal finds that the collective output of

Ivaco and AMLPC constitutes a major proportion of the total domestic production of wire rod.

Increase in imports

The Tribunal collected the volume of imports of wire rod for the POI, i.e. January 1, 2015,

to June 30, 2018. Due to confidentiality reasons, the specific volumes of subject imports cannot be

reproduced here. Therefore, where possible, the Tribunal relies on the publicly available percent

change tables for the analysis that follows.⁵⁷⁵

The domestic industry submitted publicly available Statistics Canada data for the HS Codes

identified by the Department of Finance that, it asserted, show that the increase in the volume of

imports in 2016 was not nearly as large as suggested by the data on the Tribunal record,⁵⁷⁶and that

the 13 percent increase in interim 2018 is likely understated.⁵⁷⁷Tree Island Industries Ltd., a party

opposed, argued that the Statistics Canada data were of questionable quality and probative value

because, in part, no witnesses were proposed who could give evidence on methodology, and there

was no reason to believe that the domestic industry’s evidence is accurate, persuasive or superior to

evidence on the record.⁵⁷⁸

The Tribunal determined that, in the case of wire rod, these Statistics Canada data do not

provide a reasonably reliable indication of imports in interim 2018, because the trends in the

Statistics Canada data are very different than those in the Statistical Summary.⁵⁷⁹Further, the

Statistics Canada data, when compared to the data contained in the Statistical Summary for Wire

Rod, underestimate the volume of subject imports in all periods of the POI.⁵⁸⁰

As well, Ivaco submitted that wire rod is imported under HS Codes not reflected in the

Department of Finance’s illustrative list. Ivaco’s witnesses’ statements reflect their understanding

that wire rod is also being shipped under HS Codes 7213.91.00.29, 7213.91.00.39 and

7213.91.00.19. The Tribunal’s methodological approach to questionnaire data collection has been

explained in Part I. In the case of wire rod, questionnaire respondents should have reported wire rod

being imported under all HS Codes,⁵⁸¹not just those included in the illustrative list. To the extent

574. Exhibit GC-2018-001-83.06, Vol. 5 at 7. AMLPC did not submit a case brief (supra, note 24).

575. Exhibit GC-2018-001-17A, Vol. 1.1 at 16, 18.

576. Exhibit GC-2018-001-83.06, Vol. 5 at 10-11.

577. Exhibit GC-2018-001-99.04, Vol. 7 at 4.

578. Exhibit GC-2018-001-99.03, Vol. 7 at 3.

579. The Statistics Canada data is at Exhibit GC-2018-001-83.06, Vol. 5 at 117, and the Statistical Summary

data is at Exhibit GC-2018-001-17A, Table 7, Vol. 1.1 at 15.

580. The Statistics Canada data is at Exhibit GC-2018-001-83.06, Vol. 5 at 117, and the Statistical Summary

data is at Exhibit GC-2018-001-17A, Table 7, Vol. 1.1 at 15.

581. Except HS Codes for stainless steel, tool steel, high‐nickel steel, ball bearing steel, and concrete

reinforcing bars/rods (also known as rebar), as excluded by the Order (Exhibit GC-2018-001-01, Vol. 1

at 10).

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that they did so, the data is in the Statistical Summary. The Tribunal sees no reason to rely on the

trends in the expanded Statistics Canada data presented by Ivaco.

In absolute terms, import volumes were virtually unchanged in 2017 as compared to

2015.⁵⁸²While imports increased by 31 percent in 2016, they decreased by 24 percent in 2017,

meaning that there was only a small increase in imports over the 2015 to 2017 period.⁵⁸³Table 8 of

the Statistical Summary shows a 13 percent increase in interim 2018 over interim 2017,⁵⁸⁴which is

the focus of the domestic producers’ claim of a significant increase.

The Tribunal finds that although the absolute increase in interim 2018 was recent, it was

not sudden, sharp or significant. Import volumes fluctuated from January 1, 2015, to the end of

2017, both in absolute terms and relative to domestic production. The increase in interim 2018 is

within that trend and reflects part of a gradual increase. The 13 percent increase in interim 2018 is

not significant, as this additional volume accounts for a very small part of the Canadian market in

interim 2018. In addition, the rate of increase puts the subject imports on pace to return to a volume

that was just shy of the 2017 volume—nothing more.

In terms of imports relative to domestic production, Table 11 of the Statistical Summary

shows that subject imports increased by ten percentage points in 2016 but then decreased by

12 percentage points in 2017. Imports only had a six percentage point increase in interim 2018 as

compared to interim 2017.

Accordingly, the Tribunal concludes that subject imports of wire rod are not being

imported in sufficiently increased quantities.

Unforeseen developments and GATT 1994 obligations

Having found no sufficient increase in wire rod imports from subject countries, it is not

necessary to consider whether an increase in imports resulted from unforeseen developments and

the effect of Canada’s GATT 1994 obligations.

Serious injury

Having found no sufficient increase in wire rod imports from subject countries, the

Tribunal does not need to consider whether the domestic industry has experienced serious injury.

For the sake of completeness, however, the Tribunal will briefly analyze whether there was

evidence of serious injury.

The table below summarizes the domestic industry’s performance indicators during the

POI. The domestic producers’ performance data, gathered by the Tribunal, is confidential and

cannot be reproduced here. Therefore, the table provides indexed results.

The Tribunal notes that, even if it considered the increased level of imports experienced in

2018 to be “recent, sudden, sharp and significant”, the increased imports from subject countries are

not a principal cause of serious injury to the domestic industry.

582. Exhibit GC-2018-001-18A (protected), Vol. 2.1 at 15.

583. Exhibit GC-2018-001-17A, Table 8, Vol 1.1 at 16.

584. Exhibit GC-2018-001-18A (protected), Vol. 2.1 at 15.

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Table 13

Summary of Domestic Performance Indicators (Index)

Interim

2017

2015

2016

2017

2018

Practical Plant Capacity

Total Production

Production for Domestic Sales

Production for Export Sales

Capacity Utilization Rate (%)

100

104

108

102

104

100

105

109

100

105

100

98

99

97

98

Market

100

115

102

88

113

64

106

111

105

95

100

106

95

89

107

231

Domestic Sales from Domestic Production

Producers Market Share (%)

Subject Goods Market Share (%)

Excluded Countries Market Share (%)

113

Total Direct Employees

100

105

108

106

97

108

113

105

99

100

N/A

101

100

101

N/A

Total Wages ($000) - Direct Employment

Total Hours Worked (000) - Direct Employment

Productivity – Tonnes / Hour Worked (Direct)

Producer Inventories

Inventory as % of Production

100

88

85

118

113

100

113

116

Selling Prices

Domestic Sales from Domestic Production

Total - Subject Countries

Excluded Countries

100

96

89

88

111

116

99

100

112

119

115

Note(s):

1. 2015 = 100 and Interim 2017 = 100

2. Index values are notional, and there is no indexing between a full calendar year and an interim period.

3. The bolded index values under “Selling Prices” indicate the lowest price in the market for that period.

Source: Exhibit GC-2018-001-17A, Vol. 1.1 at 14 and 31; Exhibit GC-2018-001-18A (protected), Vol. 2.1 at 21, 24 and 30.

The table shows that the performance of the domestic industry has changed little since the

alleged surge in subject imports. Domestic production for domestic sales increased modestly from

2015 through 2017, with a slight decrease in interim 2018. Practical plant capacity from 2015

through interim 2018 was unchanged. The capacity utilization rate also increased modestly from

2015 through 2017, but then decreased slightly in interim 2018. In short, these performance

indicators were relatively stable. Domestic sales of domestically produced wire rod increased

slightly from 2015 to 2017. Both domestic sales and market share decreased in interim 2018.

However, the total apparent market increased in 2016 and 2017 compared to 2015, and again in

interim 2018 over interim 2017. Selling prices for domestic sales of domestic production, imports

from subject countries, and imports from excluded countries all decreased in 2016, but increased in

2017 and interim 2018. Finally, productivity in tonnes per hour increased in 2016, then remained

fairly stable in 2017 (with no data available for interim 2018). Direct employment improved from

2015 to interim 2018, and wages improved from 2015 to 2017, with no change in interim 2018.

Overall, the indicators reflected in Table 13 for interim 2018 are equal to or higher than interim

2017, or down only slightly.⁵⁸⁵

In terms of the domestic industry’s financial performance, the data is confidential and

cannot be reproduced here.⁵⁸⁶The confidential evidence indicates that the domestic industry’s

585. Exhibit GC-2018-001-17A, Table 24, Vol 1.1.

586. Exhibit GC-2018-001-18B (protected), Vol. 2.1.

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profitability, in terms of domestic sales, increased on a consolidated basis over the POI.⁵⁸⁷Indeed,

Ivaco focused its oral argument on the threat of injury and appeared to acknowledge that the

financial performance indicators cannot support a finding of serious injury.⁵⁸⁸

Therefore the Tribunal finds that the domestic industry has not suffered significant overall

impairment, i.e. serious injury.

Threat of serious injury

Given that the Tribunal has found that wire rod is not being imported from subject

countries in “such increased quantities” so as to permit the imposition of a safeguard measure, it is

not necessary to assess whether an increase in imports is threatening to cause serious injury.

However, the parties made extensive submissions on the question of threat of serious injury, so the

Tribunal has prepared an overview of whether the evidence suggests such a threat.

As explained in Part III, a determination of threat must be based on “facts” not

“conjecture”, and there must be a high degree of likelihood that serious injury will materialize in the

very near future. Therefore, the Tribunal focused on conditions, changes and developments in the

Canadian market as can be expected before the end of 2019.

Ivaco submitted that the upward trend in the volume of subject imports would continue.⁵⁸⁹

Ivaco referred to excess capacity overseas and to a serious risk of diversion resulting from trade

measures in other jurisdictions.⁵⁹⁰The Statistical Summary shows significant global wire rod

overcapacity—averaging 40 percent capacity utilization from 2015 to interim 2018, and practical

plant capacity increasing in 2017 and interim 2018.⁵⁹¹Ivaco submitted a confidential table

purporting to show “potential” diversion resulting from U.S. and EU measures.⁵⁹²

Parties opposed to the imposition of a measure argued that (i) the alleged threat of future

diversion makes this case premature because the threat must be a “present threat”;⁵⁹³(ii) the

evidence does not establish that diversion will happen “overnight”;⁵⁹⁴and (iii) it is not clear when

diversion would occur and why it would happen at a particular time.⁵⁹⁵Parties opposed to the

imposition of a measure also argued that a claim of a risk of diversion based on speculation about

future imports does not establish whether (or when) diversion is likely to occur.⁵⁹⁶

The Tribunal is of the view that much of the evidence of threat of serious injury relied upon

by the domestic producers is unsupported; and there is not a high degree of likelihood that serious

injury is imminent.

587. Ibid., Table 18, Vol. 2.1 at 1.

588. Transcript of Public Hearing at 892.

589. Exhibit GC-2018-001-83.06, Vol. 5 at 24.

590. Transcript of Public Hearing at 897-899.

591. Exhibit GC-2018-001-18A (protected), Table 44, Vol. 2.1 at 49.

592. Exhibit GC-2018-001-84.06 (protected), Table 11, Vol. 6 at 24-25, as modified by Exhibit GC-2018-

001-100.04a, Vol. 18 at 6.

593. Transcript of Public Hearing at 932.

594. Ibid. at 938.

595. Ibid.

596. Ibid.

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The argument predicting continued or increased volumes of subject imports in the future is

not adequately supported by positive evidence. Overcapacity does not, in and of itself, establish a

threat of serious injury. Rather, there must be positive evidence showing that the overcapacity leads

to imminent significant overall impairment. Similarly, the evidence must show existing or

impending diversion leading to such impairment materializing in the very near future. “Potential”

diversion alone does not establish threat.

In terms of likely future prices, Ivaco submitted that the subject imports would have

significant adverse price effects on the price of domestic wire rod. Ivaco relied upon the argument

that there was existing price undercutting in 2018 and that domestic prices were “starting to fall”.⁵⁹⁷

However, the confidential record shows that prices actually increased from 2016 to 2017, and again

in interim 2018 over interim 2017. Further, contrary to Ivaco’s claim, there was no price

undercutting in 2017 or interim 2018 when looking at the market as whole.⁵⁹⁸Looking to the future,

the Tribunal is not convinced that these trends would change imminently.

The Tribunal is mindful of Ivaco’s contention that commodity and specialty wire rod are

subject to different pricing dynamics. The Tribunal considered Ivaco’s price undercutting table and

arguments, which indicate price undercutting and were primarily based on (i) confidential evidence

regarding specific transactions and product-subset-specific pricing; (ii) comparisons using just

landed prices for a mix of both end users and distributors; and (iii) Statistics Canada data.⁵⁹⁹

First, the Tribunal does not accept that, for this product, the appropriate price comparison is

the domestic selling price to the landed import price. For this reason, the Tribunal relied on average

market prices in the Statistical Summary, which reflect the value of import purchases by end users

and import sales by distributors, and, as noted above, shows no price undercutting in 2017 or

interim 2018.⁶⁰⁰Second, even if the Tribunal were to accept Ivaco’s analysis for low carbon

commodity wire rod as being the appropriate comparison, it notes that the degree of undercutting in

interim 2018 was minimal. Finally, as for the comparison with Statistics Canada data, the Tribunal

has already indicated that it does not consider these data to be reliable proxies for the subject goods.

The Tribunal also finds that there is no indication that market prices will be adversely

affected by subject imports in the near future.

Ivaco also argued that the domestic industry will lose domestic sales and market share to

subject imports.⁶⁰¹However, as discussed above, the domestic producers’ financial performance

has been improving since 2015, with interim 2018 data strongly suggesting that full year 2018

would show a further improvement.⁶⁰²There is little or no positive evidence that the domestic

industry will imminently experience a significant overall impairment.

In light of the above review of the threat of injury factors, and the negative determination

regarding the “increase in imports” element, the Tribunal is of the view that the domestic producers’

threat of injury arguments are unduly speculative and based on conjecture, with insufficient positive

evidence of threat.

597. Ibid. at 898-899.

598. Exhibit GC-2018-001-18A (protected), Tables 16 and 17, Vol. 2.1.

599. Exhibit GC-2018-001-84.06 (protected), Vol. 6 at 18.

600. Supra, note 50.

601. Trasnscript of Public Hearing at 895-896.

602. Exhibit GC-2018-001-18B (protected), Table 18, Vol. 2.1 at 1.

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Moreover, in the absence of wire rod being imported “in such increased quantities”, the

Tribunal has no authority to recommend a safeguard remedy against a possible future increase in

imports of subject goods. Such a remedy would clearly be inconsistent with Canada’s international

trade obligations under the World Trade Organization Agreement on Safeguards.

Therefore, the Tribunal finds that the subject imports, had they been found to be increased,

do not threaten serious injury to the domestic industry.

Conclusions

The Tribunal finds that there has been no significant increase in subject imports of wire rod

and that, in any event, the evidence does not indicate serious injury or a threat thereof. In light of

these findings, the Tribunal does not need to consider whether imports from Canada’s free trade

partners are a principal cause of the serious injury or threat thereof, and the Tribunal does not

recommend a remedy in respect of wire rod.

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APPENDIX I – LIST OF PARTICIPANTS

Domestic Producers

Counsel/Representatives

Algoma Steel Inc. (formerly Essar Steel

Algoma Inc.)

Stelco Inc.

Benjamin P. Bedard

R. Benjamin Mills

Linden Dales

Shannel Rajan

David Plotkin

Lydia Blois

ArcelorMittal Dofasco G.P.

Paul Conlin

M. Drew Tyler

Shannon McSheffrey

Jeremy D’Souza

ArcelorMittal Long Products Canada G.P.

Paul Conlin

M. Drew Tyler

Shannon McSheffrey

David Plotkin

Jeremy D’Souza

Bri-Steel Manufacturing

Central Wire Industries

Neil Rasmussen

Benjamin P. Bedard

Paul Conlin

R. Benjamin Mills

M. Drew Tyler

Linden Dales

Shannel Rajan

Greg Landry

Shannon McSheffrey

Lydia Blois

David Plotkin

Jeremy D’Souza

Manon Carpentier

Evraz Inc. NA Canada and the Canadian National

Steel Corporation

Christopher J. Kent

Gerry Stobo

Gerdau Ameristeel Corporation

Christopher J. Cochlin

Andrew M. Lanouette

Hugh Seong Seok Lee

Marc McLaren-Caux

Michael Milne

Susana May Yon Lee

Cynthia Wallace

Darren D’Sa

E. Melisa Celebican

Richard L. Boyce

Ivaco Rolling Mills 2004 LP

Benjamin P. Bedard

R. Benjamin Mills

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Linden Dales

Shannel Rajan

Jeremy D’Souza

Lydia Blois

Max Aicher (North America) Ltd.

Tenaris Canada

Geoffrey C. Kubrick

Jonathan P. O’Hara

Lucas Kokot

Lisa Page

Marie-Ève Jean

Moly-Cap AltaSteel Ltd. d.b.a. AltaSteel

Benjamin P. Bedard

R. Benjamin Mills

Linden Dales

Shannel Rajan

Lydia Blois

Nova Tube Inc. / Nova Steel Inc.

SSAB Central Inc.

Paul Conlin

Shannel Rajan

Richard A. Wagner

Alison G. FitzGerald

Ali Tejpar

Welded Tube of Canada Corp.

Lawrence L. Herman

Importers/Exporters/Others

Counsel/Representatives

2045662 Alberta Inc.

Garrett SE Hamilton

Alberta Pressure Vessel Manufacturers’ Association Victoria Bazan

Borusan Mannesmann Boru Sanayi ve Ticaret A.Ş.

Çelik İhracatçilari Birliği (Steel Exporters’

Association Turkey)

Çolakoğlu Metalurji A.S.

Habaş Sinai ve Tibbi Gazlar İstihsal Endüstrisi A.S.

Icdas Celik Enerji Tersane ve Ulasim San.A.S.

Imco International Steel Trading Inc.

Alberta Tubular Products Ltd.

Christopher J. Kent

Gerry Stobo

Christopher J. Cochlin

Andrew M. Lanouette

Hugh Seong Seok Lee

Marc McLaren-Caux

Michael Milne

Susana May Yon Lee

Cynthia Wallace

Darren D’Sa

E. Melisa Celebican

BAM-JJM-Manson Joint Venture

Irene Stewart

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Baoshan Iron & Steel Co., Ltd.

Benxi Beitai Gaosu Steel Wire Rod Co., Ltd.

British Steel Limited

Li Yangxi

Zhao Jiguang

Damian Hargreaves

Canadian Coalition for Construction Steel

Imperial Oil Limited

LNG Canada Development Inc.

POSCO

Jesse Goldman

Milos Barutciski

Matthew Kronby

Julia Webster

Erica Lindberg

Jacob Mantle

Sam Levy

POSCO Daewoo America Corp.

Canadian Natural Resources Limited

Coastal Gas Link Pipeline Project

Riyaz Dattu

Gajan Sathananthan

Cantak Corporation

Peter Clark

Cascadia Metals Ltd.

Husteel Canada Co., Ltd.

Husteel Co., Ltd.

Daehyun Yeo

William Bradley

JFE Steel Corporation

Jindal Saw Limited

Mertex Canada Ltd.

Nippon Steel & Sumitomo Metal Corporation

Salzgitter Mannesmann International (Canada) Inc.

The Peak Group of Companies

Venture Steel Inc.

Wirth Steel

China Iron and Steel Association

Yang Chen

Lin Li

China Steel Corporation

Ming-Yuan Chen

Wen-Chou Li

Chung Hung Steel Corporation

Dongbu Steel Co., Ltd. / Dongbu Incheon Steel

Easy Building Products Ltd.

Keun Chae Na

Darrel H. Pearson

Sabrina A. Bandali

Enbridge Pipelines Inc.

Welspun Corp Limited

Paul M. Lalonde

James M. Wishart

Anca Sattler

Ereğli Demir ve Çelik Fqabrikalari T.A.Ş.

Arda Onkök

(Erdemir)/İskenderun Demir ve Çelik A.Ş. (İsdemir)

Gateway Tubulars Ltd.

Christopher J. Kent

Gerry Stobo

Christopher J. Cochlin

Andrew M. Lanouette

Hugh Seong Seok Lee

Marc McLaren-Caux

Michael Milne

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Susana Lee

Cynthia Wallace

Darren D’Sa

Roger Forsyth

Gibbs Wire & Steel Company of Canada, Ltd.

Hallmark Tubulars Ltd.

Greg Tereposky

Vincent DeRose

Jennifer Radford

Daniel Hohnstein

Chirani Mudunkotuwa

Alejandro Barragan

High Strength Plates & Profiles Inc.

Hoa Phat Hai Duong Steel Joint Stock Company

Hoa Phat Hung Yen Steel Company Limited

Hyundai Steel Company

Jason Brock

Nguyen Viet Thang

Nguyen Thi To Hoai

Vincent Routhier

John H. Reiterowski

Jiangsu Shagang International Trade Co., Ltd.

Sun Fei

Knightsbridge International Corp.

TMK-Artrom S.A.

Cyndee Todgham Cherniak

Heather Innes

Anumeet Toor

Korea Iron and Steel Association

Maanshan Iron & Steel Co., Ltd.

Major Pipe & Supply Ltd.

Haram Chun

Wang Hongbing

Zach St. Croix

J. Eric VanGinkel

Maple Reinders Constructors Ltd.

Michelin North America (Canada) Inc.

Michael Kaylor

John M. Peterson

Pacific Tubulars Ltd.

Gordon LaFortune

Tree Island Industries Ltd.

PAO Severstal

George V. Bishaev

Thrideep S. Pillai

Ching-Hang Lin

Fitrianto

Precision Metals / Venus Wire Industries Pvt. Ltd.

Prosperity Tieh Enterprise Co., Ltd.

PT.Raajratna Wire

PT Gunawan Dianjaya Steel, Tbk.

PT Putra Baja Deli

Gunato Gunawan

Kok Wie

QBD Cooling Systems Inc.

RGL Resevoir Management Inc.

SeAH Steel Corporation

David Gonsalves

Hansine Ullberg Kostelecky

Ki Yung Joon

Shell Canada Limited

Dan Kolenick

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Southern Steel Berhad

Southern Steel Rod Sdn Bhd

SSAB AB (publ)

Chan Weng Weng

Cheah Yin Lian

Richard A. Wagner

Alison G. FitzGerald

Ali Tejpar

Superior Metals & Alloys Inc.

The TMK Group

Clarence (Clary) Brunet

Mikhail Adoniev

Ekaterina Shteynberg

Tianjin Pipe (Group) Corporation

TransCanada PipeLines Limited

Zhang Jun

Riyaz Dattu

Gajan Sathananthan

Jacob Schmidt

Vallourec Canada, Inc.

James McIlroy

James Nurcombe

Rakesh Agarwal

Larry Kryska

Variperm (Canada) Limited

Viraj Profiles Limited

Western Alliance Tubulars Inc.

Zhejiang P.R.P.T. Prepainted Technology Co. Ltd.

Wen Xiaoqiong

Unions

Counsel/Representatives

United Steelworkers

Craig Logie

Fiona Campbell

Christopher Somerville

Jacob Millar

Daphne H. Hooper

Governments

Counsel/Representatives

Australian Government

Elizabeth Young

Leah Littlepage

Delegation of the European Union to Canada

Economic Division of the Taipei Economic and

Cultural Office in Canada

Susan Chi-Chuan Hu

Embassy of the United Mexican States

Embassy of Ukraine to Canada

Government of Alberta

Rolando Ricardo Paniagua Taboada

Oleh Khavroniuk

Kyle Dylan Dickson-Smith

Gustavo Lunazzi

Government of Argentina

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Government of Brazil - Embassy in Ottawa

Marcelo Ramos Araujo

Felipe Gomes Sequeiros

Clarissa Souza Della Nina

Ricardo Gaudieley Fleury

Marília Oliveira Barbosa

Government of British Columbia

Government of India

Nathaniel Carnegie

Rasika Chaube

Sudipt Parth

Government of Indonesia

Pradnyawati

Yulastiawarman Zakaria

Christhophorus Barutu

Government of Newfoundland and Labrador

Government of Saskatchewan

Government of Turkey

Jeffrey Thomas

Rob Swallow

Özgür Volkan AĞAR

Hasan Kocasoy

Government of Viet Nam

Korean Government

Chu Thang Trung

Kyoungsoo Lee

Haekwan Chung

Ministry of Economic Development and Trade of

Ukraine

Nataliya Sydoruk

Ministry of Economic Development of the Russian

Federation

Oleg Plaksin

Ministry of Economy of the United Arab Emirates

Karim Toumi

Ministry of Industry and Trade of the Russian

Federation

Konstantin Kim

Province of Nova Scotia

Vincent DeRose

Jennifer Radford

Daniel Hohnstein

Chirani Mudunkotuwa

Alejandro Barragan

Royal Norwegian Embassy in Ottawa

Andreas Aure

Thai Trade Centre (Royal Thai Government)

Thanakrit Luangasnathip

Trade Representation of the Russian Federation in

Canada

Valerii Maksimov

Iaroslav Zemliachenko

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APPENDIX II – WITNESSES APPEARING BEFORE THE TRIBUNAL

Heavy Plate

Laura Devoni

Manager – Trade and Economics

Algoma

Robert W. Dionisi

Chief Commercial Officer

Algoma

Kalyan Ghosh

President and Chief Executive Officer

Algoma

Fernando Ferreira

President

Acier Wirth Steel

Jonathan Adkins

John Kallio

Vice President

Salzgitter Mannesmann International (Canada)

Inc

Recording Secretary

United Steelworkers Local 2251

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Concrete Reinforcing Bar

Roger Paiva

Henry Wegiel

Vice President and Merchant Operations

Gerdau

Director – Government and Trade Relations

Corporate Affairs

ArcelorMittal Dofasco

François Perras

President and CEO

ArcelorMittal Long Products Canada

Steven Cohen

President and CEO

Salit Steel

Tim McMenamin

Wayne Thiessen

Vice President

Controller

Ferrostaal Steel Canada Inc.

Gerdau Ameristeel Corporation

Dan Potter

Dan Bourdon

Vice President Purchasing

Salit Steel

Regional Sales Representative, Rebar North

Gerdau Long Steel North America

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Energy Tubular Products

David McHattie

Guillermo Moreno

Vice-President Institutional Relations – Canada President – Managing Director Canada

Tenaris

Kelly Smith

David Coffin

V.P. Sales and Business Development - OCTG / Vice President Sales

Line Pipe

Evraz

Evraz North America

Olesya Afanasyeva

VP of Finance

Evraz North America

Mike Service

Director, SCM Category Management

Enbridge Inc.

Jim Phalen

Director, Canada Sales and Marketing

Vallourec Canada Inc.

Richard Shields

President

Pacific Tubulars Ltd.

Philippe Girard

Marius Bordieanu

Manager, SCM, Drilling and Completions

Suncor Energy Inc.

Director, Oil Sands and In Situ Drilling

Engineering

Suncor Energy Inc.

Trevor D. Schmidt

Category Manager, Line Pipe Supply Chain

Management

TransCanada PipeLines Limited

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Hot-rolled Sheet

Laura Devoni

Andrew Connor

Manager – Trade and Economics

Algoma

VP Commercial

ArcelorMittal Dofasco

Henry Wegiel

Beric Sykes

Senior Vice President

Nova Steel Inc.

Director – Government and Trade Relations

Corporate Affairs

ArcelorMittal Dofasco

Trevor Harris

Vice President, Corporate Affairs

Stelco

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Pre-painted Steel

Henry Wegiel

Director – Government and Trade Relations

Corporate Affairs

Sylvia Mielke

Owner

Knightsbridge International Corp

ArcelorMittal Dofasco

Vasudha Seth

General Manager, Marketing

ArcelorMittal Dofasco

Michelle Moravac

Director, Sales and Marketing

Stelco

Trevor Harris

Vice President, Corporate Affairs

Stelco

Jim Ritchie

CEO

Cascadia Metals Ltd.

Mark Friesen

Director of Sales and Procurement

Cascadia Metals Ltd.

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Stainless Steel Wire

T.J. (Tom) Dodds

Paul From

Vice President, Commercial

Central Wire Industries

President and CEO

CWI Group of Companies

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Wire Rod

François Perras

Philippe Boulanger

President and CEO

ArcelorMittal Long Products Canada

Vice-President and Chief Marketing Officer

ArcelorMittal Long Products Canada

Francis Miner

Deron Dunbar

Manager, Trade and Contract Management

IVACO

Director of Sales and Marketing

IVACO Rolling Mills LP

Mike Johnson

Nancy Davies

Senior Buyer, Purchasing

Michelin North America, Inc.

VP Finance and CFO

Tree Island Steel

Remy Stachowiak

Chief Operating Officer

Tree Island Steel

Dale R. MacLean

President and CEO

Tree Island Steel

Brian Liu

James R. Baske

Sr. Director, Strategic Procurement and

Operations Management

Tree Island Steel

President and CEO

HEICO Metal Processing Group

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APPENDIX III – ATSSC STAFF INVOLVED IN THE INQUIRY

EXECUTIVE DIRECTOR AND GENERAL COUNSEL

Nick Covelli

TRADE REMEDIES INVESTIGATIONS

Director and Chief Economist

Analysts

Greg Gallo

Rebecca Campbell

Rhonda Heintzman

Mark Howell

Core Team

Shawn Jeffrey

Chelsea Lappin

Gayatri Shankarraman

Jyotsna Venkatesh

Students

Mylène Lanthier

Shiu Li

Joseph Long

Grant MacDougall

Heidi Matuschka

Matthew Smith

Josée St-Amand

Patrick Stidwill

Jonas Welisch

Nicholas Anderson

Chandrika Ayyalasomayajula

Kyle Benak

Vikram Iyer

Jason Komm

Marwo Hachi

Data Services Advisors

Julie Charlebois

Marie-Josée Monette

LEGAL SERVICES

Senior Counsel

Counsel

Roger Nassrallah

Kirsten Goodwin

Martin Goyette

Peter Jarosz

Alain Xatruch

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REGISTRY AND COMMUNICATIONS

Communications and Editorial

Registrar

Services

Michel Parent

Suzanne Cullen

Mélanie Lalonde

Pierre Lemieux

Martin Pelchat

Deputy Registrar

Haley Raynor

Registry Officers

Julie Lescom

Abigail Shearman

Véronique Vallée

Mailroom and Registry

Jason Fitzpatrick

Arthur Grenon

Chelsea McKiver

Sara Pelletier

Esther Song-Ledlow

Lindsay Vincelli

Émilie Larocque

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