The Canadian government says it will impose a 25 per cent surtax on some foreign steel products in a bid to head off dumping.
The Finance Department said “excessive imports” are harming the steel industry, prompting it to impose a surtax on seven products that range from rebar to wire rods.
The surtax, which begins Oct. 25, will be in place for 200 days, pending an inquiry by the Canadian International Trade Tribunal into whether longer-lasting safeguards are necessary, the government said.
The announcement comes more than three months after Canada imposed tariffs on $16.6 billion worth of American goods in retaliation for hefty U.S. tariffs on Canadian steel and aluminum.
The government also announced Thursday that some Canadian manufacturers can now import those products from the U.S. without paying the surtaxes that have applied since July 1. A portion of the relief will be temporary, offered until Canadian producers are able to adequately meet domestic demand.
The exemption applies on a case-by-case basis to companies that applied for it, and pertains to American steel, aluminum and certain other products.
The products affected by the fresh tariffs go into structures from condominiums to dams and bridges, “which encompasses a heck of a lot of steel,” said Jesse Goldman, a lawyer representing the Canadian Coalition for Construction Steel.
He said the surtax puts the construction steel industry in “a very dire position” because of Canada’s limited domestic steel supply.
“Because of the actual quota amounts for this type of steel from non-U.S. sources, U.S. steel is going to come into Canada at record high prices. They will simply pass on the 25 per cent retaliatory tariffs to their Canadian customers.”
The surtax on steel plates and other products could “jeopardize” mega-projects in Newfoundland, which relies almost exclusively on foreign steel, primarily from Europe, Goldman said.
A lot of imported structural steel has been put toward the refurbishment of the Parliament buildings, he added. “It’s more ironic than intentional, but it gives you an example of the importance of imported steel in Canada.”
The country’s geography deters West Coast buyers from purchasing from central Canadian mills. It costs more than four times extra to ship a tonne of steel to Vancouver from Ontario than it does from China or Korea, said Richard Lyall, president of the Residential Construction Council of Ontario.
With rebar an essential component in residential towers, the new steel tariff could boost the price of new condos in Vancouver by up to $10,000 per unit, Lyall said.
“Housing affordability got thrown under the bus on this one,” he said.
Finance Minister Bill Morneau is slated to address the Commons international trade committee Tuesday on its study of how tariffs are impacting Canadian businesses and workers.
MORNEAU’S FIRST ANNOUNCEMENT RE SAFEGUARDS
Finance Minister Bill Morneau will impose immediate global tariffs and quotas designed to deflect a damaging flood of steel imports into Canadian markets as a result of U.S. levies.
The “provisional safeguard” measures on seven steel products — considered emergency actions by the World Trade Organization — will apply to all countries including China, but will provide specific exemptions for the United States, Mexico and developing countries.
The government will also provide relief in the form of refunds on import tariffs paid on imported U.S. steel and aluminum products that are in short supply in Canada.
“This is an adjustment mechanism giving the industry time to take a breather and deal with the surge of imports into this country,” said Lawrence Herman, an international trade lawyer at Herman and Associates, who is representing smaller steel firms involved in the issue. “Steel was flowing into Canada, there was a need for the government to take action.”
The safeguards are intended to prevent a damaging surge in imports by establishing a ceiling on the amount of each product allowed into the country under standard duties — set at the average of the past three years of import volumes. All imports exceeding that amount will face a tariff of 25 per cent.
The measures come into force on Oct. 25 and will remain in place for 200 days pending a full independent review of the evidence by the Canadian International Trade Tribunal (CITT) — the quasi-judicial body tasked with making a final recommendation to Morneau on whether the evidence warrants “final safeguards” that would last for three years.
The seven products affected are concrete reinforcing bar, steel plate, hot-rolled sheet used in auto manufacturing, energy tubular products, pre-painted steel, stainless steel and wire rod.
Canada is currently negotiating with the U.S. to remove tariffs of 25 per cent on steel and 10 per cent on aluminum imposed in June. Though U.S. President Donald Trump had said the removal of those tariffs was contingent on the revamping of NAFTA, he has yet to lift them following the announcement of the new U.S.-Mexico-Canada trade agreement last week. Canada currently has retaliatory tariffs in place on $16 billion worth of U.S. steel and other products.
The U.S. is exempted from the safeguard measures because it is already subject to retaliatory tariffs, the Finance Ministry said in a release. Imports from the U.S. were also found to have not “contributed importantly” to injury or threat of injury to the market, the release states. All imports from Mexico — with the exception of energy tubular and wire rod products — will also be excluded, as they don’t represent a significant share of imports.
The safeguard announcement prompted immediate concerns about potential supply shortages. A coalition of construction companies, called the Canadian Coalition for Construction Steel, previously warned that the Canadian industry cannot produce enough steel to supply the market and domestic steelmakers simply don’t make some products they require. Restricting the supply of those products could prompt a hike in prices that won’t be compensated by tariff refunds, they cautioned yesterday.
“My clients are very disappointed and feel like their concerns haven’t penetrated the government and were sacrificed to the interests of the Canadian steel industry,” Jesse Goldman, a partner at Borden Ladner Gervais LLP, representing the coalition. “Cutting off third-country imports will create a shortage, which means importers will be desperate for steel. This is a blank cheque for U.S. and Canadian steel producers to raise prices and we expect they will do so immediately.”
… the Canadian industry cannot produce enough steel to supply the market
and domestic steelmakers simply don’t make some products required
“The Government recognizes that Canadian countermeasures against U.S. imports can create challenges for Canadian manufacturers that rely on steel and aluminum imported from the U.S.,” the Finance Department said in a statement.
In August, Morneau launched a 15-day public consultation process on possible safeguards, saying increases in imports had been detected. The European Union imposed provisional tariff rate quotas in July citing evidence that steel was being diverted into its markets as a result of U.S. tariffs. The EU tariffs on 23 steel products are also set at the average of imports over the past three years, with a 25 per cent tariff set for volumes exceeding those amounts.
“This is not a process that was undertaken capriciously or without evidence,” said Joe Galimberti, president of the Canadian Steel Producers Association. “The government was presented with evidence of a significant increase in import volumes and is proceeding with safeguards. Given the global climate, that is appropriate.”