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NEWS RELEASES

August 29, 2003 (3:15 p.m. EDT) No. 122

CANADA REJECTS U.S. DEPARTMENT OF COMMERCE

FINAL DETERMINATIONS ON WHEAT

The Government of Canada today rejected a U.S. Department of Commerce (DOC) finding that Canadian durum and hard red spring wheat shipments to the United States are subsidized and are being dumped in the U.S. market.

The overall investigations will conclude in mid-October. The U.S. International Trade Commission (ITC) has 45 days to issue its final determination as to whether imports of Canadian wheat covered by these investigations are causing or threatening to cause material injury to U.S. domestic wheat producers. Final duties would only apply in the event of an affirmative ruling by the ITC.

"We are disappointed with the U.S. Department of Commerce findings," said International Trade Minister Pierre Pettigrew. "Canadian wheat exports to the United States are fairly traded. They are not subsidized. We will assess the Commerce Department's findings to determine the most appropriate action."

In the countervailing duty investigation, the DOC examined Canadian financial and transportation policies and programs related to the wheat sector. It determined that Canada subsidized durum wheat and hard red spring wheat at a rate of 5.29 percent.

"To say the least, I am unhappy with the U.S. Department of Commerce determinations regarding our wheat trade," said Ralph Goodale, Minister responsible for the Canadian Wheat Board. "Canada follows the rules of international trade and will continue business as usual while we decide the best avenues of response to the American decisions."

"The Department of Commerce findings contradict our view that Canada neither subsidizes wheat shipments to the U.S. nor dumps wheat into the American market," said Agriculture and Agri-Food Minister Lyle Vanclief. "The Government of Canada will defend the interests of Canadian wheat producers."

"The Government of Canada's approach has been to foster a grain handling system that is as efficient and market-oriented as possible," said Transport Minister David Collenette. "Canada's policies do not distort trade with the United States."

The DOC's anti-dumping investigation determined that Canadian durum and hard red spring wheat were being sold at less than fair value in the U.S. It has accused Canada of dumping durum wheat and hard red spring wheat at a rate of 8.26 percent and 8.87 percent respectively.

On October 23, 2002, the U.S. Department of Commerce initiated countervail and anti-dumping investigations on durum and hard red spring wheat from Canada in response to petitions by U.S. wheat producers.

An affirmative preliminary injury finding was reached by the ITC on November 19, 2002.

The preliminary determinations in the countervail investigations were announced by the DOC on March 4, 2003, and the preliminary anti-dumping determinations were issued on May 2, 2003.

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Backgrounders are attached.

For further information, media representatives may contact:

This document is also available on the Department of Foreign Affairs and International Trade's Internet site: http://www.dfait-maeci.gc.ca

Backgrounder

COUNTERVAIL AND ANTI-DUMPING INVESTIGATIONS

What is a countervailing duty?

A countervailing duty is a special duty imposed to protect domestic industry from injury caused by imports that are found to have received subsidies provided by a foreign government. Subsidies that are generally available (i.e. that are not directed specifically at an enterprise, industry or group of enterprises or industries) are not countervailable.

What is dumping?

Dumping is the sale of goods in a foreign market at prices below those charged for comparable sales in the home market or that are below the cost of producing the goods.

What is an anti-dumping duty?

An anti-dumping duty is a special duty imposed to protect domestic industry from injury caused by imports that are found to have been dumped.

When can a countervailing duty or an anti-dumping duty be applied? What determines the duty levels?

A countervailing or anti-dumping duty can only be applied if it has been established in an investigation that imported goods have been subsidized or have been dumped and that such subsidized or dumped imports are causing material injury, or threatening to cause such injury to the domestic industry. The level of the duty reflects the amount of subsidy or of dumping found in the investigation.

Where are the rules governing countervail and anti-dumping investigations found?

The international rules governing the conduct of countervail and anti-dumping duty investigations are part of the World Trade Organization (WTO) framework. Specifically, two WTO agreements apply: the Agreement on Subsidies and Countervailing Measures and the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the Anti-Dumping Agreement).

Which agencies are involved in countervail and anti-dumping investigations in the United States?

The U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) are involved. In the case of a countervail investigation, the DOC determines whether a foreign government is directly or indirectly providing a countervailable subsidy for the manufacture, production or exportation of merchandise imported into or sold in the United States.

In contrast to a countervail investigation that examines government policies and practices, in an anti-dumping investigation the Department of Commerce looks at the pricing practices of individual enterprises.

The ITC determines whether the U.S. industry producing the like goods has been materially injured, or threatened with material injury, by reason of subsidized or dumped imports. Thus, the ITC final determination on injury follows a final determination by the DOC that subsidization or dumping exists. If the ITC final determination is that such injury exists, a countervailing or anti-dumping duty equal to the amount of the subsidy or dumping found is imposed on imports of the merchandise in question.

Can Canada appeal an unfavourable outcome?

There are two options, depending on the facts of the case. (1) U.S. final determinations of subsidy, dumping and injury are subject to judicial review in the U.S. courts or a binational panel review under Chapter 19 of NAFTA. Such reviews focus on compliance with the relevant U.S. trade remedy law. (2) If a countervail or anti-dumping investigation does not meet the requirements set out in the World Trade Organization framework, it may be challenged at the WTO.

Backgrounder

Current Investigations: History

On September 13, 2002, the North Dakota Wheat Commission and the U.S. Durum Growers Association filed petitions seeking anti-dumping and countervailing duties on imports of both durum and hard red spring wheat from Canada. Specifically, they alleged that the Government of Canada and the Canadian Wheat Board (CWB) subsidize both of these products; that the CWB sells these products for less than full market value in the United States; and that, as a result of these imports, U.S. domestic industries are being materially injured.

On October 23, 2002, the U.S. Department of Commerce initiated countervailing and anti-dumping investigations on durum and hard red spring wheat from Canada.

On November 19, 2002, the U.S. International Trade Commission (ITC) made an affirmative preliminary injury determination on wheat imports from Canada. An affirmative preliminary determination means that, in the view of the ITC, there are some indications that imports of Canadian wheat are causing or threatening to cause material injury to U.S. domestic wheat producers.

The preliminary determinations in the countervail investigations were announced on March 4, 2003. The Department of Commerce determined on a preliminary basis that two Canadian programs represented countervailable subsidies: the provision of government railcars and the guarantee of Canadian Wheat Board borrowing. Provisional duties of 3.94% resulted for durum and hard red spring wheat.

The preliminary determinations in the anti-dumping investigations were announced on May 2, 2003. The Department of Commerce determined on a preliminary basis that durum and hard red spring wheat from Canada was being sold in the United States at prices lower than those prevailing in Canada or below full cost. Provisional duties of 8.15% on durum and 6.12% on hard red spring wheat resulted.

On August 29, 2003, the Department of Commerce announced affirmative final determinations in its countervail and anti-dumping investigations. The outcome was as follows: final countervail rate of 5.29% for durum and hard red spring wheat; final anti-dumping rates of 8.26% for durum; and 8.87% for hard red spring wheat.

The ITC final determination regarding injury is due in mid-October.