Memorandum D14-1-9

In Brief

Ottawa, June 26, 2000

Subject

Information pertaining to the acceptance, enforcement, and renewal of undertakings in dumping and subsidy investigations

1. This Memorandum is being revised to reflect changes to the Special Import Measures Act regarding the administration of undertakings in dumping and subsidy investigations.

2. In a dumping investigation, an undertaking is an offer made voluntarily by an exporter to increase the selling price of goods so that the margin of dumping or the injury to Canadian industry is eliminated. In a subsidy investigation, an undertaking is a voluntary offer by a foreign government or an exporter to eliminate the subsidy or the injurious effects of the subsidizing.

3. The effect of the acceptance of an undertaking is to suspend the collection of provisional duty, anti-dumping, or countervailing duty and, except for the situation described in paragraph 17, to suspend the dumping or subsidy investigation.

4. The changes include provisions for: interested parties to make comments before an undertaking is accepted; and the acceptance of additional undertakings provided that an injury finding is not in effect.

Memorandum D14-1-9

Ottawa, June 26, 2000

Subject

Information pertaining to the acceptance, enforcement, and renewal of undertakings in dumping and subsidy investigations

This Memorandum explains the administration and enforcement procedures in relation to undertakings under the Special Import Measures Act.

GUIDELINES AND GENERAL INFORMATION

Definition of an Undertaking in a Dumping Investigation

1. An undertaking is an offer made voluntarily by an exporter to the Commissioner of Customs and Revenue to increase the selling price of goods so that the margin of dumping or the injury to Canadian industry is eliminated. An undertaking takes the form of a written commitment to adhere to specific conditions in exporting goods subject to an investigation. Attached to this Memorandum is an illustrative example of the information included in an undertaking in a dumping investigation. Although undertakings are tailored to the specific circumstances of each investigation, this example covers the essential features which must be addressed.

Definition of an Undertaking in a Subsidy Investigation

2. In a subsidy investigation, an undertaking is a voluntary offer by a foreign government to:

(a) eliminate the subsidy;

(b) limit the amount of subsidy on the goods exported;

(c) limit the quantity of goods shipped to Canada that are subsidized; or

(d) otherwise eliminate the injurious effects of the subsidizing.

3. In a subsidy investigation, an undertaking can also be an offer made voluntarily by an exporter, with the written consent of the government of the country of export, to increase the selling price of the goods to the importer so that the injurious effect of the subsidy is eliminated.

Effect of the Acceptance of an Undertaking

4. The collection of provisional duty, anti-dumping duty, or countervailing duty is suspended and, except for the situation described in paragraph 17, the dumping or subsidy investigation is suspended.

Consultations and Time Limit for Offering an Undertaking

5. Before accepting an undertaking aimed at the elimination of injury, the Canada Customs and Revenue Agency (CCRA) normally consults with the complainant to seek its views on the levels of pricing necessary to eliminate the injury caused by the dumping or subsidizing. These consultations are necessarily general in nature because of the need to protect confidential information submitted by the exporter or foreign government. Such discussions may not be needed before accepting an undertaking that proposes to fully eliminate the estimated margin of dumping or the amount of subsidy.

6. An undertaking can only be accepted by the Commissioner after a preliminary determination of dumping or subsidizing has been made. On the other hand, the Commissioner will not accept an undertaking after the issuance of a final determination of dumping or subsidizing.

7. Undertakings should be offered as early in the process as possible, and no later than 60 days after the preliminary determination of dumping or subsidizing, to allow sufficient time for a complete analysis. Undertaking offers may be revised by the exporter or the foreign government as a result of consultations with the CCRA.

8. Any party who wishes to be notified when the CCRA receives an undertaking offer must inform the CCRA that it wishes to be notified. The CCRA will notify those parties and post notice on the CCRA Web site that an undertaking offer has been received. Interested parties have nine days from the day the CCRA receives the undertaking offer to provide comments on its acceptability. The Commissioner is required to consider these representations prior to deciding whether to accept the undertaking.

Requirements

9. Section 49 of the Special Import Measures Act contains the requirements for the acceptance of undertakings by the Commissioner.

10. In a dumping investigation, written undertaking offers must be made individually by exporters involved in the investigation. The undertaking option may, however, be discussed with a representative from an association or a group of exporters. In a subsidy investigation, written undertaking offers must be made by the government of the country of export or by the individual exporters with the consent of the government of the country of export.

11. Undertaking offers by exporters in a dumping investigation, or by governments or exporters in a subsidy investigation, must account for "all or substantially all" of the dumped or subsidized imports under investigation. The term "all or substantially all" is normally interpreted to mean 85% or more of the volume of dumped or subsidized imports under investigation. However, representation of 85% of the volume of dumped or subsidized goods does not necessarily mean that the undertaking will be accepted. For example, if an exporter not included in the 85% has the potential to ship large quantities of dumped goods to Canada, it may be concluded that a sufficient percentage of the trade is not covered by the undertaking.

12. In cases involving exports from more than one country, undertakings can be accepted from exporters in a dumping investigation, or governments or exporters in a subsidy investigation, representing "all or substantially all" of the imports from these countries collectively. Therefore, it is not always necessary to obtain undertakings from exporters or governments in each country covered by the investigation. However, undertakings cannot be accepted and the investigation suspended for some exporters or some countries while the investigation continues for others. When the criteria to accept undertakings have been met, the investigation is suspended for all exporters and countries.

13. Price increases proposed in an undertaking must not be higher than necessary to eliminate the estimated margin of dumping in a dumping investigation or the estimated amount of subsidy in a subsidy investigation.

14. Undertakings must be practicable to administer. To facilitate the administration of an undertaking, exporters in a dumping investigation, and foreign governments or exporters in a subsidy investigation, are required to provide information on their domestic markets and export sales to Canada and allow for verification of that information on a regular basis.

Amendments of an Undertaking

15. Once an undertaking is accepted, it can be amended at any time in accordance with its terms. Amendments are usually made to update the selling prices in the undertaking in order to reflect changes in market conditions. An undertaking can also be amended to cover exports of products included in the product definition of the goods under investigation but not already specified in the undertaking.

Confidentiality of an Undertaking

16. The Special Import Measures Act contains provisions for the treatment and disclosure of confidential information and non-confidential information. An undertaking offer submitted to the CCRA for purposes of a proceeding under the Special Import Measures Act is subject to the confidentiality provisions of the Act and therefore must be accompanied by a non-confidential edited version or a non-confidential summary of the offer.

Request to Complete the Investigation and the Inquiry

17. When presenting an undertaking offer, an exporter in a dumping investigation, or a foreign government in a subsidy investigation, can request that the investigation by the CCRA and the inquiry by the Canadian International Trade Tribunal be completed with the view of making a final determination as to whether there is dumping or subsidizing and consequent injury.

18. The request to complete the investigation must be presented to the CCRA simultaneously with the undertaking offer. At the same time, a request to complete the injury inquiry must also be made to the Canadian International Trade Tribunal.

19. If the Canadian International Trade Tribunal issues an injury finding, the undertaking remains in effect and, as long as the undertaking is complied with, no anti-dumping or countervailing duties are collected. As mentioned in paragraph 23, a finding of no injury by the Canadian International Trade Tribunal terminates the undertaking as well as the investigation.

Termination of an Undertaking

20. The Commissioner must terminate an undertaking if, within 30 days of the date of the notice of acceptance of the undertaking but before a finding by the Canadian International Trade Tribunal, the Commissioner receives a written request to terminate the undertaking from:

(a) an importer or an exporter of the goods or a complainant in a dumping investigation; or

(b) an importer or an exporter of the goods or a government of the country of export or a complainant in a subsidy investigation.

21. The Commissioner can also terminate an undertaking because the terms of the undertaking have been violated or because of new information or new circumstances.

22. If the investigation is continued while an undertaking is in place, as explained in paragraph 17, the undertaking would be terminated if the Commissioner ends the investigation because:

(a) there has been no dumping or subsidizing of the goods; or

(b) the margin of dumping or the amount of the subsidy is insignificant.

23. If the investigation is continued while an undertaking is in place and the Canadian International Trade Tribunal subsequently issues a finding of no injury, the Commissioner will terminate the undertaking.

24. Except where there is an injury finding in effect, an undertaking can be terminated at any time, if the Commissioner is satisfied that the dumping, subsidizing, or injury, as the case may be, would no longer exist if the undertaking was terminated.

Resumption of the Investigation

25. If an undertaking is terminated for reasons mentioned in paragraphs 20 and 21, the Commissioner will resume the investigation from where it was suspended.

Additional Undertakings

26. Except where there is an injury finding in effect, the Commissioner can accept an undertaking from an exporter or a government in a subsidy case which has not previously offered an undertaking provided that the conditions for acceptance of an undertaking have been satisfied. These conditions are specified in paragraphs 9 to 14.

Review and Renewal of an Undertaking

27. Except where the Canadian International Trade Tribunal has made an injury finding, the Special Import Measures Act requires that an undertaking be reviewed by the Commissioner at least every five years in order to determine if it still serves the purpose for which it was intended. If so, it is renewed and the investigation continues to be suspended. If, on the other hand, the Commissioner determines that the undertaking is no longer required, it expires immediately. However, if the Canadian International Trade Tribunal has issued an injury finding, the Commissioner cannot review the need for continuing the undertaking or allow it to expire. In this situation, the undertaking remains in place until the Canadian International Trade Tribunal rescinds its injury finding. If the Canadian International Trade Tribunal does not review its finding within five years, the finding automatically expires and all proceedings in respect of the investigation, including undertakings, are terminated. The Commissioner may, if necessary, terminate the undertaking at any time for the reasons contained in paragraph 21. In such a situation, anti-dumping or countervailing duties, as the case may be, are levied on all dumped or subsidized imports. See paragraphs 32 and 33 for details about liability for the payment of such duty.

28. An application for a review by the Federal Court of Appeal or a review by a panel under the North American Free Trade Agreement (NAFTA) of a decision by the Commissioner to renew or not to renew an undertaking, may be made under the Special Import Measures Act.

Suspension of Collection of Provisional, Anti-dumping, and Countervailing Duties

29. Section 50 of the Special Import Measures Act states that once an undertaking is accepted, the investigation is suspended unless a request to complete the investigation is received as explained in paragraph 17. Whether or not a request to continue the investigation is received, no provisional duty, anti-dumping duty, or countervailing duty is collected as long as the undertaking is in force and there is compliance with the undertaking. This situation continues unless the undertaking is terminated because of a violation, new information, changed circumstances, or because a request to terminate has been received by a designated party, as described in paragraph 20.

Posting of Bonds Prior to the Undertaking

30. A bond received at the regional customs office after the preliminary determination but before the acceptance of an undertaking may be retained indefinitely, in cases where the investigation is suspended following the acceptance of an undertaking. Indeed, when no request to complete the investigation is subsequently received, the bond covering the goods imported from the date of the preliminary determination to the date of acceptance of the undertaking may be held until all proceedings in the investigation are terminated. To avoid paying fees to maintain the bond, however, importers can make a cash payment to the regional customs office for the provisional duty and have the bond returned.

31. Further information with respect to refunds of provisional duty and bonds may be found in Memorandum D14-1-5, Procedures for Release From Customs of Goods Subject to Provisional Duty Under the Special Import Measures Act and for Control of Bonds Used to Secure Payment of Provisional Duty.

Liability for Payment of Anti-dumping and Countervailing Duty for Goods Released Before an Injury Finding by the Canadian International Trade Tribunal

32. In accordance with section 4 of the Special Import Measures Act, liability for the payment of anti-dumping or countervailing duty, in respect of any goods that are subject to an undertaking that has been terminated for a reason other than a violation, and released prior to the finding by the Canadian International Trade Tribunal, begins on the day on which the preliminary determination was made and ends on the day that the undertaking was accepted. The liability also recommences on the day on which the notice of termination of the undertaking was given and ends on the day of the finding by the Canadian International Trade Tribunal.

33. In accordance with section 4 of the Special Import Measures Act, liability for the payment of anti-dumping or countervailing duty, in respect of any goods that are subject to an undertaking that has been terminated because of a violation and released prior to the finding by the Canadian International Trade Tribunal, begins on the day on which the preliminary determination was made and ends on the day that the undertaking was accepted. The liability for payment also recommences on the day on which the undertaking was violated or the 90th day before the day on which notice of the termination of the undertaking was given, whichever date is later, and ends on the day of the finding by the Canadian International Trade Tribunal.

Liability for Payment of Anti-dumping and Countervailing Duty for Goods Released After an Injury Finding by the Canadian International Trade Tribunal

34. In accordance with sections 3 and 4 of the Special Import Measures Act, when goods are subject to both an undertaking and a finding of injury by the Canadian International Trade Tribunal and are released after that finding, liability for the payment of anti-dumping or countervailing duty in respect of the subject goods begins when the undertaking is violated or when the Commissioner terminates the undertaking because of new information or new circumstances.

APPENDIX A

EXAMPLE FORMAT OF AN UNDERTAKING IN A DUMPING INVESTIGATION

Undertaking offered by (name of company, country of origin/export) to the Commissioner of Customs and Revenue.

1. (Name and location of company), hereinafter also referred to as "the Company," offers to the Commissioner of Customs and Revenue, hereinafter also referred to as "the Commissioner," the undertaking described below and in appendices (make reference to the specific appendices attached, for example: B, C, and D) which are attached to and form an integral part of this undertaking concerning (brief description of subject goods), as defined in paragraph 2, which are the subject of a dumping investigation initiated by the Commissioner on (date of initiation) and for which the Commissioner issued a preliminary determination of (dumping/subsidizing) on (date of the preliminary determination).

2. This undertaking pertains only to those goods named by the Commissioner in the above-noted preliminary determination. Such goods are defined as:

(Product description as defined in the preliminary determination)

and are referred to in this undertaking as "the subject goods."

3. The Company agrees not to sell the subject goods for export to Canada at prices lower than (state terms of undertaking, for example, specify whether prices are FOB, CIF, and indicate location) prices stipulated in the grid in Appendix B.

4. The Company agrees not to circumvent this undertaking by any means including the sale or shipment of the subject goods to Canada through a subsidiary, branch, agent, or other Company, or by the shipment of the subject goods to Canada from a country other than (country of origin/export).

5. The Company agrees to provide to the Canada Customs and Revenue Agency, hereinafter also referred to in this undertaking as "the CCRA," copies of documents described in Appendix C.

6. The Company agrees to provide on the Canada Customs Invoice and/or the Commercial Invoice submitted to meet the CCRA invoicing requirements, the information described in Appendix D.

7. The Company agrees that prior to the execution of any sale for export to Canada of new products, models, or sizes which fall within the definition of the subject goods in paragraph 2, but are not referred to specifically in Appendix B, to notify the CCRA of such sale, to provide any information that may be requested by the CCRA at that time to determine an appropriate undertaking price, and to amend Appendix B of this undertaking to include such new products, models, or sizes.

8. The Company agrees to provide such additional information which may be required by the CCRA to demonstrate adherence to this undertaking and to permit, upon request, verification by CCRA officials of any such information provided.

9. The Company agrees to advise the CCRA of any changes in circumstances from those which prevailed at the time that this undertaking was accepted. This would include changes in domestic prices, unit costs and expenses (including freight and warehousing), or terms of delivery to Canada. The Company agrees, at the discretion of the CCRA, to amend this undertaking, including appendices, in whole or in part, to take into account any such changes in circumstances.

10. The Company agrees that this undertaking shall take effect (on the date of its acceptance by the Commissioner) and shall apply to all subject goods released by the CCRA on or after this date.

11. The Company acknowledges the authority of the Commissioner to terminate this undertaking at any time after its acceptance where the Commissioner:

(a) is satisfied that the undertaking has been or is being violated;

(b) is of the opinion that, as a result of new information not available at the time of the acceptance of the undertaking, the undertaking would have not been accepted; or

(c) is of the opinion that, as a result of changed circumstances, the undertaking no longer fulfills its objectives.

12. The Company shall give the Commissioner written notice of its intention to withdraw from this undertaking at least 30 days prior to the date of such withdrawal.

13. This undertaking shall be binding upon all successors and assigns of the Company.

In witness whereof the Company has hereto affixed its corporate seal, attested by its duly authorized officer(s) on this _______ day of ________________, 20___.

14. This undertaking document and the attached Appendices B, C, and D are stamped "confidential" as they contain sensitive commercial information relating to our business operations.

APPENDIX B

1. This Appendix is attached to and forms an integral part of the undertaking submitted by (name and location of company) to the Commissioner of Customs and Revenue, on (date of submission).

2. In accordance with paragraph 3 of the undertaking, the Company agrees not to sell the subject goods to importers in Canada at prices lower than the prices stipulated in the following grid and as amended from time to time:

UNDERTAKING PRICE GRID

Product
(class/model/number/size) Product Description Undertaking Price

3. All prices are quoted in (state the currency of settlement and the unit of measure if appropriate), (state terms of sale, for example, specify whether prices are FOB, CIF, and indicate location). The selling prices in the undertaking price grid shall apply to shipments of the subject goods that are imported into Canada (on or after the date of acceptance of this undertaking by the Commissioner or such other date as may be appropriate).

In witness whereof the Company has hereto affixed its corporate seal, attested by its duly authorized officer(s) on this _______ day of ________________, 20___.

APPENDIX C

1. This Appendix is attached to and forms an integral part of the undertaking submitted by (name and location of company) to the Commissioner of Customs and Revenue, on (date of submission).

2. In accordance with paragraph 5 of the undertaking, the Company agrees to provide the CCRA with the following documents:

(a) Each time there is a price change in the Company's domestic market, a copy of the notification letter, if any, sent to customers along with the revised price lists. These documents will be faxed immediately to the attention of the Director of (Division), Anti-dumping and Countervailing Directorate, accompanied by a covering letter referring to this undertaking. The original documents will be forwarded to the CCRA by express delivery to the address in paragraph (c) below;

(b) An amended Appendix B will also be faxed at the same time as the transmittal is being made in accordance with paragraph (a) above. The amendment will reflect the revised undertaking prices calculated by (details regarding methodology used in amending Appendix B including an explicit restatement of the terms of sale, currency of settlement, and unit of measure where required), to the current prices in effect as stipulated in the undertaking price grid contained in Appendix B. The original document will be forwarded to the CCRA by express delivery in conjunction with the documents noted in paragraph (a) above; and

(c) (State other documents which will be provided and when they will be provided.) These documents will be forwarded under a covering letter referring to this undertaking to:

In witness whereof the Company has hereto affixed its corporate seal, attested by its duly authorized officer(s) on this _______ day of ________________, 20___.

APPENDIX D

1. This Appendix is attached to and forms an integral part of the undertaking submitted by (name and location of company) to the Commissioner of Customs and Revenue, on (date of submission).

2. In accordance with paragraph 6 of the undertaking, the Company agrees to provide on the Canada Customs Invoice and/or the Commercial Invoice, submitted to meet Canada Customs invoicing requirements with respect to each shipment of the subject goods, the following information:

(a) Customer's order number and date of order;

(b) Product (class/model/number/size, etc.);

(c) Product description in sufficient detail to match the applicable description of the subject goods found in the undertaking price grid in Appendix B;

(d) Terms and conditions of sale;

(e) Quantity of (product) in (unit of measurement) for each (class/model/number/size, etc.); and

(f) Unit price of the (product) in (currency of settlement) for each (class/model/number/size, etc.).

3. In addition, the Company agrees to certify on each document: "These prices are in accordance with (name of company)'s current undertaking accepted by the Commissioner of Customs and Revenue, on (date of acceptance by the Commissioner)."

In witness whereof the Company has hereto affixed its corporate seal, attested by its duly authorized officer(s) on this _______ day of ________________, 20___.

REFERENCES

ISSUING OFFICE -

Anti-dumping and Countervailing Directorate

LEGISLATIVE REFERENCES -

Special Import Measures Act

HEADQUARTERS FILE -

4205-12

SUPERSEDED MEMORANDA "D" -

D14-1-9, March 14, 1997

OTHER REFERENCES -

D14-1-5, D14-1-6

Services provided by the Canada Customs and Revenue Agency are available in both official languages.

This Memorandum is issued under the authority of the Commissioner of Customs and Revenue.