On Friday, Dec. 5, 2014, the Canada Border Services Agency initiated an anti-dumping and subsidy investigation into imports of solar panels and solar modules from China. 

In Canada, anti-dumping/subsidy proceedings are bifurcated, with the CBSA determining the amount of dumping/subsidy, and the Canadian International Trade Tribunal (CITT) determining whether the dumping/subsidy has caused or is threatening to cause injury to domestic producers. Both a finding of dumping/subsidy and a finding of injury are needed for an order imposing anti-dumping/countervailing duties to be put in place.

The timelines move very quickly. Only counsel or consultants who are representing an exporter or importer can have access to the confidential materials on behalf of their client, though non-confidential version materials are available to unrepresented exporters and importers. 

In what could become something of a replay of the U.S.-China solar panel dumping dispute of 2012-2014, the Canada Border Services Agency ("CBSA") is now considering a complaint that Chinese solar panels are being dumped into the Canadian market. This is obviously a matter of critical concern to Chinese solar panel manufacturers seeking to sell solar panels into fast growing Canadian solar energy markets. It is also a matter of grave concern to local industry participants, who benefit from continued growth in the solar markets and, ultimately, to Canadian electricity consumers who will ultimately gain or lose from solar panel market price distortions (however they are caused).

What is 'Dumping'?

"Dumping" occurs when exported goods are sold to importers in Canada at a price that is lower than the selling price in the export market (i.e. the country in which the goods are manufactured), or when exported goods are sold at prices that are lower than the cost of production.

Canada's anti-dumping system is a bifurcated proceeding with many steps. The CBSA determines whether imported goods are dumped or subsidized, and the Canadian International Trade Tribunal ("CITT") determines whether the dumped or subsidized imported goods caused or threaten to cause material injury to the production of like goods in Canada. Duties will not be put in place unless there is both dumping and/or a subsidy, and injury to the Canadian industry.

Initiation of Investigation

The CBSA initiates an investigation if there is a "properly documented complaint". This is normally determined within 21 days of filing, though this period can start anew if the CBSA needs more information.

If the CBSA finds the complaint to be properly documented, it will consider whether to start an investigation within the next 30-45 days. For the CBSA to investigate, the complaint has to be supported by Canadian producers who comprise at least 25% of Canadian production, and there must be greater support for the complaint than opposition. Second, there must be sufficient initial evidence of dumping or subsidizing and that this has caused injury to a major proportion of the domestic industry.

If an investigation is initiated, all known importers and exporters of solar panels will be notified.

CITT Preliminary Injury Inquiry

If the CBSA initiates an investigation, the CITT will then hold a preliminary inquiry into whether injury has been caused or is threatened to be caused to the Canadian industry by the dumped or subsidized solar panels. Its decision is made within 60 days and normally is based solely on submissions in writing. The threshold to find preliminary injury is quite low. The CBSA's investigation into the amount of dumping or subsidy can only continue if the CITT finds preliminary injury.

CBSA – Preliminary Determination

In the first phase of its investigation, the CBSA obtains information from exporters and importers (and the foreign government in the case of a subsidy investigation) to determine if the goods are being sold at dumped or subsidized prices.

Importers and exporters are asked to respond to requests for information and may be visited to verify responses. Exporters who participate in the investigation can obtain exporter specific "normal values", which will determine the amount of duty owing if a final determination of injury is made. Exporters who do not participate will be required to pay a non-cooperative rate of duty, which may be significantly higher. Within 90 days of the start of the investigation (or 135, if the time is extended), the CBSA will either end its investigation if it finds no dumping or subsidy, or will issue a preliminary determination of dumping and subsidizing.

If a preliminary determination is made, imported goods will be subject to a provisional duty that starts on the day the determination is made and ends on the day the CITT issues its final injury decision.

CITT Material Injury Inquiry

If the CBSA makes a preliminary determination of dumping or subsidy, the CITT will undertake a material injury inquiry and will make a finding within 120 days. This takes the form of an oral hearing that normally lasts one week. A panel of three CITT Members will decide whether the dumped or subsidized product caused or threatens to cause material injury to production in Canada, based on factors such as lost sales, lost market share, price erosion, price suppression, decreased profits, layoffs, significant increases in the volume of dumped goods, and underutilization of capacity by the domestic industry.

CBSA Final Determination of Dumping

The CBSA makes its final determination of dumping within 90 days of its preliminary determination. The decision normally is released shortly before the CITT hearing.

Although anti-dumping and countervail duties vary widely from case to case, and among individual exporters, they are often set at a prohibitive rate. As an example, anti-dumping duties recently imposed by the U.S. against solar panel imports from China and Taiwan are reported to average 49% but are as high as 165% for some exporters. If injury is found, the anti-dumping duties will be in place for a five-year period, after which there is an expiry review.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.