Gypsum industry hit with new Canadian duty case

Gypsum board is the focus of an investigation into dumping—a form of international price discrimination in which the price of the product when sold in the importing country is less than the price for the same product in the exporting country’s market. Photo © BigStockPhoto
Gypsum board is the focus of an investigation into dumping—a form of international price discrimination in which the price of the product when sold in the importing country is less than the price for the same product in the exporting country’s market.
Photo © BigStockPhoto

By Brenda C. Swick and Dylan E. Augruso
On June 8, 2016, the Canada Border Services Agency (CBSA) initiated an anti-dumping investigation into gypsum board originating in or exported from the United States into Canada. The complaint filed by CertainTeed Gypsum Canada Inc. (GCI) of Mississauga, Ont., alleged gypsum board was being sold at unfair prices into the provinces of British Columbia, Alberta, Saskatchewan, and Manitoba, as well as the Yukon and Northwest Territories (i.e. Western Canada). The company represents the sole producer of gypsum board in the Western Canadian market.

What is dumping?
Dumping is a form of international price discrimination, in which the price of the product when sold in the importing country is less than the price for the same product in the exporting country’s market. Anti-dumping laws are intended to protect Canada’s domestic industry against unfairly traded goods from other countries.

GCI has alleged certain gypsum board originating in or exported from the United States has been dumped into Western Canada because its normal value exceeds the export price to importers in Western Canada. The normal value is determined by the price in the exporter’s domestic market, the price charged by the exporter in another country, or a calculation based on the combination of the exporter’s production costs, other expenses, and normal profit margins.

The complaint
GCI contends that jobs, profits, and productivity in Canada are being negatively impacted by the price discrimination between American-produced and domestically produced gypsum board because the U.S. version is fundamentally similar to its Canadian equivalent. Both Canadian and U.S. suppliers produce gypsum board that meets the specifications of Canadian consumers, and both products are commonly used interchangeably. Since gypsum board is sold as a commodity-type product, it is retailed primarily on the basis of price.

GCI has alleged dumped gypsum board has captured Canadian sales and market share by undercutting prices. As a result, it has been forced to discount prices in order to retain sales. GCI claims it has foregone price increases and sought to offset increased costs due to the allegedly dumped imports. CBSA found the evidence provided by GCI of price undercutting, lost sales and market share, negative financial results, and reduced production and factory capacity utilization to be well-supported and sufficiently linked to the allegedly dumped goods. Thus, it launched its dumping investigation on June 8, 2016.

The process
Canadian anti-dumping investigations are a bifurcated, two-stage process.

First, CBSA is responsible for determining the margin of dumping and amount of dumping duties payable on importations into Canada. CBSA has requested information from 25 potential exporters and 36 potential importers relating to gypsum board imported into Western Canada in the 2015 calendar year. This information will be used to compare the foreign producers’ export price to the normal value to determine whether gypsum board has been dumped.

Second, once CBSA has initiated a dumping investigation, the Canadian International Trade Tribunal (CITT) is responsible for determining whether the dumped imports are causing injury to the Canadian industry.

If CBSA makes a dumping determination and CITT finds such dumping is causing material injury to the Canadian industry, anti-dumping duties will be applied to all shipments of gypsum board for at least the next five years.

The upcoming key dates in this investigation are as follows:

  • September 6: CBSA will issue its preliminary dumping determination;
  • September 7: CITT will initiate its injury inquiry;
  • December 5: CBSA will issue its final determination of dumping; and
  • January 5, 2017: CITT will issue its final determination of injury.

What it means for Canadian importers and end-users of gypsum
This investigation may adversely affect Canadian importers, distributors, retailers, and users of U.S. gypsum board. In the event of an affirmative injury determination by CITT, anti-dumping duties will be applied on imports of gypsum for five years until at least January 5, 2022. Canada has previously imposed dumping duties on gypsum board at an average rate of 28 per cent.

The consequences of anti-dumping duties for U.S. exporters include substantial loss of profit, and even an inability to compete in the Canadian market during the term in which the duties are imposed. The result can be equally disadvantageous to domestic importers, distributors, retailers, and end-users as anti-dumping duties inevitably translate into increased prices for goods.

It is therefore critical interested parties act now to protect their interests throughout the investigation process.

Protect your interests
There are many avenues for importers, distributors, retailers, and users of gypsum board to participate in the CITT process to protect and promote their interests.

Advocate for a ‘no injury’ finding
The CITT investigation will focus on the extent of injury caused by gypsum board imports that are deemed to have been dumped. CITT will only impose anti-dumping duties if there is evidence of injury to Canadian industry as a result of the dumping. Importers, retailers, distributors, and end-users can participate in the CITT process to argue duties ought not to be imposed on imports of gypsum board.

Apply for an exclusion
During the CITT process, interested parties may apply for exclusions from any duties imposed on American-produced gypsum.

Request a public interest hearing
It is possible to request a public hearing be held to determine whether the imposition of duties is in the public interest. Previous cases have seen duties reduced by two-thirds.

Interested parties are advised to act early and employ a dual legal and advocacy approach to ensure they protect their interests during the CITT’s investigation.

SwickBrenda6.15-3x4.5Brenda C. Swick is a member in Dickinson Wright LLP in Toronto. Her practice focuses on government contracting, anti-trust, regulatory compliance, anti-corruption, export controls and economic sanctions, trade remedies, customs and judicial review of government decisions. Swick also has a practice in international trade and investment law. She can be reached at bswick@dickinsonwright.com.

 

IMG_9254b4x6colourDylan E. Augruso is a student-at-law in Dickinson Wright LLP in Toronto. He can be reached at daugruso@dickinsonwright.com.

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