Clearit.ca's Blog on Customs Brokerage and News Updates
Trade protectionism — the practice of deliberately limiting imports to encourage domestic industry — is alive and well in today’s world, even with a record number of free trade agreements in force. Protectionism in Canada isn’t that overt, but it does exist, and the government has a few legal tools to regulate trade if they determine it’s needed.
In 1984, Canada’s Special Import Measures Act (SIMA) came into force. The Act provides protection to Canadian producers who are being harmed by dumping or subsidizing of goods into Canada, and is the primary example of protectionism in Canada importers will run in to.
With modern amendments according to Canada’s duties under trade agreements, SIMA might be relevant to your imports someday — and you’re going to want to know all about it if it is.
Customs Anti-Dumping Duty
Anti-dumping duty is assessed whenever it’s found that an imported product is being sold to Canadians at a price that is lower than comparable prices in the exporting country. If it is found that imported purses are being sold at a lower rate than they were in the country they shipped from, an anti-dumping duty rate would be applied.
Whether or not dumping has occurred is assessed based on the foreign supplier’s domestic selling price. If the normal value of the imported goods in question is lower than most competitors, but not lower than the export cost — the normal value — then dumping has not occurred, and protectionist measures won’t be applied.
Canada Border Services Agency (CBSA) works with the Canadian International Trade Tribunal to administer anti-dumping duties. Ultimately, anti-dumping duties are meant to discourage dumping by reducing the extra profit importers might have made with lower costs — which is the intended effect of protectionism.
Special Countervailing Duty
Subsidizing, in the context of international trade, is the practice of financially backing a producer or exporter to sell their product at a lower cost than the import destination’s market value. When this happens, customs applies a countervailing duty.
Generally, goods are subsidised by governments. If a foreign government has made a financial contribution to the production, transportation, or sale of a good, and that import has had an impact on Canadian industry, the good has been subsidised. This can come in the form of a loan at a preferential rate, or grants or tax incentives.
If it’s determined that subsidizing has occurred, CBSA and the Canadian International Trade Tribunal will administer countervailing duties.
Rights and Responsibilities under SIMA
Penalties are applied to goods in violation of SIMA after an investigation. Investigations typically occur after a complaint is received and take about seven months.
Because large amounts of goods sold at costs lower than market value can harm Canadian industry and make life harder for legitimate importers, alerting CBSA of potential dumping or subsidizing is important. Canadian producers and producers’ associations can file complaints. Complaints must include information on the Canadian good affected, the competing good, the conditions in the Canadian market, and the conditions in the domestic industry. There must be proof that shows harm has been done and protectionism is required.
If the Canadian International Trade Tribunal determines that a significant dent has been made in any Canadian industry, CBSA then imposes anti-dumping or countervailing duties. These protectionist measures are usually imposed for a period of five years, after which there is a reassessment.
To avoid being the target of any protectionist measures under SIMA, Canadian importers should regularly review CBSA’s Measures in Force. If you’re an importer of goods subject to SIMA, you’ll have to self-assess any applicable duties — we can help with that as your expert customs broker partner.
In addition to accurate self-assessment, if you’re importing SIMA goods, you’ll have to ensure you:
- Properly and thoroughly describe your imported goods;
- Use the proper SIMA code(s); and
- Maintain proper records — within Canada, even if you’re a Non-Resident Importer — of your SIMA goods.