Request for the establishment of a panel by Canada – solar products
Assistant U.S. Trade Representative, Western Hemisphere
Office of the U.S. Trade Representative
c/o Paul E. Morris
1401 Constitution Avenue N.W.
Washington, D.C. 20230
Telephone No.: 202-482-5438
Fax No.: 202-482-0148
Request for the establishment of a panel by Canada
- On December 22, 2020, the Government of Canada ("Canada") requested consultations with the Government of the United States of America (the "United States" or "U.S.") pursuant to Article 31.4 of the Canada-United States-Mexico Agreement ("CUSMA")Footnote 1 with respect to the imposition and ongoing application of an emergency action (or safeguard measure) by the United States on imports of crystalline silicon photovoltaic cells (whether or not partially or fully assembled into other products) ("CSPV products"), including from Canada.
- Canada held consultations with the United States on January 28, 2021, with a view to reaching a satisfactory resolution of the matter. These consultations failed to settle the dispute.
- Therefore, pursuant to Article 31.6 of CUSMA, Canada requests the establishment of a panel to examine this matter in accordance with terms of reference established pursuant to Article 31.7 of CUSMA.
Measures at Issue
- The United States imposed a safeguard measure on CSPV products and later continued that measure pursuant to the following Presidential proclamations:
- Proclamation 9693 of January 23, 2018 – To Facilitate Positive Adjustment to Competition from Imports of Certain Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled Into Other Products) and for Other PurposesFootnote 2; and
- Proclamation 10101 of October 13, 2020 – To Further Facilitate Positive Adjustment to Competition from Imports of Certain Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled into Other Products)Footnote 3.
- The safeguard measure was based on the United States International Trade Commission's ("USITC") determination on injury, its remedy recommendations, and its report provided to the President on November 3, 2017 in USITC Investigation No. TA-201-75.Footnote 4 On November 27, 2017, the United States Trade Representative requested that the USITC identify any unforeseen developments that led to the CSPV products at issue being imported into the United States in such increased quantities to cause serious injury, following which the USITC forwarded a supplemental report to the President on December 27, 2017.Footnote 5 The United States’ continuation and modification of the safeguard measure following the USITC's mid-term review was based on the USITC mid-term determination and report provided to the President on February 7, 2020.Footnote 6
- Under U.S. law, the USITC was required to make findings in respect of NAFTA countries, including Canada, as to whether imports from a NAFTA country account for a substantial share of total imports and whether those imports contribute importantly to serious injury. At the time of the original investigation, this requirement was set out in Section 311 of the NAFTA Implementation Act, 19 U.S.C. § 3371. This provision was subsequently replaced by Section 301 of the USMCA Implementation Act, 19 U.S.C. § 4551, following the entry into force of CUSMA. U.S. law sets out that, following the USITC's determinations, the President shall also determine whether imports from Canada account for a substantial share of imports and contribute importantly to serious injury, as originally set out in Section 312 of the NAFTA Implementation Act, 19 U.S.C. § 3372, and subsequently replaced by Section 302 of the USMCA Implementation Act, 19.U.S.C. § 4552.
- The safeguard measure imposed by the United States consisted of a 30 percent additional import tariff on certain CSPV products. Pursuant to Proclamation 9693, the duty rate declined to 25 percent in 2019 and 20 percent in 2020. The measure also included a zero-percent tariff-rate quota for imported CSPV cells, up to 2.5 GW per year, quantities above which CSPV cells would be subject to the additional import tariff. Following the USITC’s mid-term review of the safeguard measure, on October 13, 2020, the President elected to continue and modify the safeguard measure. Specifically, in Proclamation 10101, the President made additional determinations to revoke the prior exclusion of certain solar panels from the measure, and to increase the duty rate of the safeguard tariff during the fourth year of the application of the measure, from 15 percent to 18 percent, for all CSPV products covered by the measure.
- The USITC’s original safeguard determination found that imports of CSPV products from Canada (including CSPV cells incorporated into CSPV solar modules in Canada) were not a substantial share of imports, nor did those imports from Canada contribute importantly to serious injury. In accordance with this negative finding, the USITC recommended that the President exclude imports from Canada from the safeguard measure. Notwithstanding, the President elected to include CSPV imports from Canada in the U.S. safeguard measure, and imposed the safeguard tariff on imports of CSPV products from Canada beginning on February 7, 2017. The President further failed to exclude imports from Canada from the safeguard measure upon continuing and modifying the safeguard measure following the mid-term review.
- This request also concerns any amendments, successor, replacement, or implementing measures and any exemptions applied or other related measures to those mentioned above, as well as any underlying reports, memoranda and other documents supporting the safeguard measure.
Legal Basis of the Complaint
- From the time the safeguard measure was first taken, it was inconsistent with Articles 302, 802 and 803 of NAFTA, as Canada set out in its July 23, 2018 letter to the United States requesting consultations under Article 2006 of NAFTA, to which the United States failed to respond. The application of the safeguard measure continued following the signature of CUSMA on November 30, 2018 and its coming into force on July 1, 2020, whereby the aforementioned NAFTA obligations were replicated with equivalent obligations under CUSMA. Following the CUSMA’s entry into force, the United States continued the safeguard measure and increased the duty rate in Proclamation 10101 of October 13, 2020, which constituted a new decision and determination made while CUSMA was fully in force.
- The tariffs imposed under the safeguard measure continue to apply to imports from Canada as of the date of this request. This is despite the fact that Chapter 10 of CUSMA requires that imports from Canada be excluded from an emergency action unless those imports account for both a substantial share of total imports and contribute importantly to serious injury caused by imports. The USITC found that neither of the two conditions for inclusion was met.
- In addition, Chapter 10 of CUSMA prohibits a party from imposing restrictions on a good that would have the effect of reducing imports below the trend over a recent period with allowance for reasonable growth. The United States failed to observe this prohibition in taking its emergency action and continues to fail to observe this prohibition with respect to imports from Canada.
- Canada considers that the above measures are inconsistent with the obligations of the United States under:
- Articles 2.4.1 and 2.4.2 of CUSMA, as the United States has impermissibly increased an existing customs duty or adopted an additional customs duty on CSPV products from Canada and applied customs duties at rates that exceeds the amounts set out in its Schedule;
- Articles 10.2.1 and 10.2.2 of CUSMA, as the United States has failed to exclude imports from Canada from its emergency action on imports of CSPV products despite the fact that imports from Canada did not account for a substantial share of imports and did not contribute importantly to the serious injury caused by imports. Only one of these conditions needed to be met for Canada to be excluded, and in this instance both conditions were met. Canada notes, in particular, that the USITC determined that CSPV products from Canada did not account for a substantial share of total imports and did not contribute importantly to serious injury caused by imports, and recommended that Canada be excluded from the safeguard measure. Notwithstanding, the United States imposed the safeguard measure against imports from Canada;
- Article 10.2.5 of CUSMA, as the United States imposed restrictions on imports from Canada in a manner that had the effect of reducing imports from Canada below the trend of imports of CSPV products from Canada over a recent representative base period with allowance for reasonable growth. The United States did not include any mechanism in the safeguard measure to ensure that imports from Canada would not be reduced, and the effect of the safeguard has been a drastic decline in imports;
- Article 10.3 of CUSMA, as such, as through 19 U.S.C. § 4552, the United States failed to entrust determinations of serious injury, or threat thereof, in emergency action proceedings to a competent investigating authority, subject to review only by judicial or administrative tribunals and ensure that negative injury determinations are not subject to modification, except by such review. Article 10.1(c) of CUSMA designates "the United States International Trade Commission, or its successor" as the competent investigating authority. The President is not designated under CUSMA as a competent investigating authority entrusted to conduct safeguard investigations. Accordingly, the designation of the President under 19.U.S.C. § 4552 to make determinations (which may contradict the USITC's final determinations) on whether imports of a CUSMA country account for a substantial share of imports and contribute importantly to serious injury is as such inconsistent with CUSMA;
- Article 10.3 of CUSMA, as applied, as the President modified the USITC's negative injury determination by failing to exclude imports from Canada from the emergency action in spite of a final determination by the competent investigating authority that Canada's imports did not account for a substantial share of imports and did not contribute importantly to serious injury caused by imports.
- The measure of the United States described above nullifies or impairs benefits accruing to Canada directly or indirectly under CUSMA.
- Therefore, pursuant to Article 31.6.1 of CUSMA, Canada requests that a panel be established to examine this matter, with terms of reference established pursuant to Article 31.7 of CUSMA. Canada proposes that, pursuant to Article 31.9.1(a) of CUSMA, the panel be comprised of three members.
Assistant Deputy Minister, Trade Policy and Negotiations
Original signed on June 18, 2021
c.c. Álvaro Castro Espinosa, Secretary
TMEC Secretariat, Mexican Section
Sean Clark, Secretary
CUSMA Secretariat, Canadian Section
Kirsten Hillman, Ambassador
Embassy of Canada to the United States
Shane Spelliscy, Director General
Trade Law Bureau
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