China Focus

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©2009 Blak, Cassls & Grao LLPWTO Pal Rls Agaist Chis Tariff o Import Ato Parts

WTO Pal Rls Agaist Chis Tariffo Import Ato PartsROy MILLen And SARO TuRneR (STudenT-AT-LAW)

On July 18, 2008, a Wold Tade Oganization (WTO)

dispute settlement panel found that China’s taiff on

impoted auto pats violated WTO law, in paticula,

the Geneal Ageement on Taiffs and Tade (GATT).

The panel also found that the taiff contavened the

scheduled taiff commitments China had pomised aspat of its 2001 WTO accession ageement to incease

access to its automobile maket and not to teat pats as

whole cas.

Cental to the dispute was a 2005 Chinese egulation

that imposed a 60% local content equiement on all

domestically poduced automobiles. Pat of China’s

WTO accession package set a maximum taiff of 25%

on impoted whole vehicles and a maximum taiff

of 10% on impoted auto pats. Howeve, the 2005

Chinese egulation imposed a 25% taiff on auto pats if

the pats constituted 40% o moe of any domestically

assembled vehicle.

Canada’s fome ministe of tade, David Emeson, said

that the high taiff made it “uneconomic” fo Canadian

pats supplies to expot to China, and it cost Canadian

auto companies hundeds of millions of dollas in lost

evenues. In addition, because of the elative incease

in the cost of expoting to China, the taiff put pessue

on foeign companies to shift poduction to China.

In effect, the taiff opeated as a subsidy to Chinese

poduces and a tax on foeign poduces.

Petubed by the Chinese egulation, the Euopean

Communities, the United States and Canada (as

co-complainants) challenged its validity in 2006 byequesting the establishment of a WTO dispute settle-

ment panel. Duing the heaings, the WTO panel also

consideed thid-paty submissions fom Agentina,

Japan, Mexico, Austalia and Bazil, most of whom

alleged that China was in violation of WTO law.

Pusuant to a equest by the United States, the panel

issued thee sepaate sets of conclusions, one fo each

of the co-complainants. With espect to impoted auto

pats in geneal, thee wee common theads within

each set of conclusions and ecommendations. In each

case, the panel found that the Chinese taiff violated

GATT Aticle III:2, III:4 and XX(d).

Defined boadly, Aticle III of the GATT – national

teatment on intenal taxation & egulation – states that

Membes may not use intenal measues to disciminate

between domestic goods and those impoted fom

Membes, that is to say that impots ae accoded“national teatment”. Aticle XX lists a seies of geneal

exceptions that gants Membes pemission to apply

non-abitay and non-disciminatoy measues against

cetain impots fo paticula easons including, unde

paagaph (d), those necessay to secue compliance

with laws that ae not inconsistent with the GATT.

The co-complainants agued that China’s 25% taiff on

impoted auto pats violated Aticle III:2 of the GATT,

which eads as follows: “[t]he poducts of the teitoy

of any Membe [i.e., county] impoted into the teitoy

of any othe Membe shall not be subject, diectly o

indiectly, to intenal taxes o othe intenal chagesof any kind in excess of those applied diectly o

indiectly, to like domestic poducts.” In ageeing with

the co-complainants, the panel easoned that the taiff

subjected impoted auto pats to an intenal chage in

excess of that applied to like domestic auto pats.

The co-complainants also agued successfully that the

taiff violated Aticle III:4 of the GATT. The elevant

pat of Aticle III:4 states that “[t]he poducts of the

teitoy of any Membe paty impoted into the teitoy

of any othe Membe shall be accoded teatment no

less favouable than that accoded to like poducts of

national oigin in espect of all laws, egulations andequiements affecting thei intenal sale, offeing fo

sale, puchase, tanspotation, distibution o use....”

The thee elements of Aticle III:4 ae: 1) the impoted

and domestic poducts ae “like poducts”; 2) the

measue at issue is a “law, egulation, o equiement

affecting thei intenal sale”; and 3) the impoted pod-

ucts ae accoded “less favouable” teatment than that

accoded to like domestic poducts.

Itratioal Tra & Ivstmt–Chia Focs

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Januay 2009Blake, Cassels & Gaydon LLP

Montéal Ottawa Toonto Calgay Vancouve New Yok Chicago London Beijing blaks.com

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©2009 Blak, Cassls & Grao LLP

With espect to meeting the fist element of the

Aticle III:4 test, the panel found that the only diffeence

between the auto pats used to manufactue vehicles

in China was oigin. The panel easoned that the mee

fact that a good had Chinese oigin did not ende it

“unlike” an impoted good. With egad to the second

element, the panel concluded that the measues wee

“laws o egulations” in that they wee mandatoy fo all

vehicle manufactues using impoted pats. On the final

element, the panel found that since the tax on impoted

auto pats was “in excess” of that on domestically

poduced auto pats, the impoted pats wee teated

less favouably.

Aticle XX(d) of the GATT has two elements that mustbe shown in ode fo a measue to be justified unde

the paagaph. Fist, the measue must be designed to

“secue compliance” with laws o egulations that ae

not themselves inconsistent with some povision of the

GATT; and second, the measue must be “necessay”

to secue such compliance. In its submissions, China

agued that the auto pats egulations secued compli-

ance with China’s taiff scheduled eductions negotiated

as pat of its WTO accession commitments in 2001 in

that the measues pevent foeign expotes, who wee

peviously taking advantage of lowe taiff ates fo auto

pats, fom shipping moto vehicles to China in seveal

lage pieces. In ejecting this agument, the WTO panel

found that China had not adequately explained how

what China claimed amounted to “cicumvention” of

the taiff povisions fo moto vehicles was inconsistent

with the obligations unde its taiff schedule and hence

needed to be pevented by a 25% taiff.

In spite of its fist loss at a WTO panel uling, China

emains esolute that its local content measues ae

a legitimate manne to dete foeign automakes fom

shipping vehicles to China in lage pieces as a way to

avoid the 25% taiff on whole cas. Accodingly, China

filed a notice of appeal to the WTO dispute settlement

appellate body on Septembe 15, 2008 and a final deci-sion on this matte emains outstanding.


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WTO Pal Rls Agaist Chis Tariff o Import Ato Parts PAGE 2

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yar-I-Rviw: Atimpig aSbsi Actios Affctig ChisProctsGReG KAnARGeLIdIS And eLySIA VAn ZeyL

The People’s republic of China (PrC) has inceasingly

become a taget of Canadian manufactues who

complain that Chinese expotes ae selling “dumped”

o “subsidized” goods into Canada, theeby causing

“mateial injuy” to Canada’s domestic industies. This

tend continued thoughout 2008. This aticle discusses

a numbe of the actions involving Chinese expots which

wee initiated o concluded in Canada ove the couse of

this yea.

Chinese expotes may want to emain mindful of the

duties that have been imposed on cetain expots fom

the PrC because these additional duties can significantly

add to the costs of doing business in Canada. Moeove,

Chinese expotes should be conscious of the possibility

that they, too, may find themselves subject to such

investigations in the futue. In ode to avoid the imposi-

tion of additional duties, expotes should fist take cae

to ensue that they do not dump poducts into Canada

and, second, in the event that an investigation is initi-

ated, consideation should be given to full paticipation

in the pocess.

CAnAdIAn RuLeS On duMPInG InVeSTIGATIOnSPusuant to intenational tade ules, whee expotes

ae found to be dumping goods into Canada (that is,

selling goods into Canada at pices that ae lowe than

in China, whee the goods ae poduced) and this dump-

ing causes mateial injuy to Canadian manufactues,

Canada is authoized to impose an “antidumping” duty

equal to the magin of dumping, as detemined by the

Canada Bode Sevices Agency (CBSA). Futhemoe, if

a county is found to be unfaily subsidizing its expot-

es, Canada is authoized to impose a “countevailing

duty” equal to the amount of the subsidy expessed asa pecentage of the expot pice of the goods. These

duties emain in place fo five yeas and can be enewed

fo additional tems of five yeas.

duMPInG And SuBSIdy deCISIOnS In 2008Two dumping and subsidy cases involving goods

expoted fom China wee decided by the Canadian

Intenational Tade Tibunal (CITT) in 2008. The two

inquiies in question involved Seamless Carbon and Alloy

Steel Oil and Gas Well Casingsand

Carbon Steel WeldedPipe. Both inquiies wee the esult of fomal complaints

filed by the espective Canadian manufactues in 2007.

In both cases, antidumping and countevailing duties

wee ultimately imposed on impoted goods fom China.

The fist case, which was decided on Mach 10, 2008,

is Seamless Carbon and Alloy Steel Oil and Gas Well

Casings. The goods at issue ae commonly efeed

to as oil county tubula goods (o OCTG), and ae

compised of dill pipe, casing and tubing employed in

oil and gas extaction. Chinese expotes wee found to

be dumping the goods at a weighted aveage magin of

62%. The goods wee also found to be subsidized by

the PrC at a weighted aveage amount of 19% of theexpot pice. Although the CITT found that the dumped

and subsidized impots fom China had not caused

injuy to the Canadian industy, it found that the goods

wee enteing Canada at pices that wee likely to have

a significant depessing o suppessing effect on the

pice of Canadian goods and theefoe that the Chinese

impots theatened to cause injuy to the domestic

industy. On this basis, antidumping and countevailing

duties wee imposed on impots fom the PrC.

The second case decided by the CITT in 2008, Carbon

Steel Welded Pipe, also involved the steel industy.

The goods at issue in this case, commonly efeedto as standad pipe, ae used in a numbe of applica-

tions including plumbing and heating, ai conditioning,

and spinkle systems fo fie potection. The CBSA

estimated that the weighted oveall aveage magins

of dumping and subsidy wee 141% and 73%, espec-

tively. In a decision eleased in August 2008, the CITT

concluded that these dumped and subsidized goods,

when impoted fom the PrC, caused mateial injuy to

the domestic industy. Accodingly, antidumping and

countevailing duties wee imposed.

duMPInG And SuBSIdy ALLeGATIOnS MAde In 2008

Two cases against Chinese expotes wee filed in 2008and ae cuently undeway at the CITT. The fist such

case is Thermoelectric Containers. In Novembe 2008,

the CITT conducted a fomal heaing into the dumping

and subsidization of themoelectic containes oiginat-

ing in, o expoted fom, the PrC. This fomal heaing

followed the CBSA’s peliminay conclusion that 100%

of the Chinese impots of themoelectic containes

wee dumped into the Canadian maket at an estimated


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oveall aveage magin of 71%, the CBSA finding that

all subject goods impoted fom the PrC benefited fom

unfai subsidies and the CITT’s peliminay uling that

these factos povided a easonable indication of injuy

to the domestic industy. On Novembe 10, 2008,

the CBSA made a final detemination of dumping and

subsidization in espect of one expote named Mobicool

(16.7% dumping magin, 0.8% subsidy magin) and all

othe expotes (37% dumping magin, 14.1% subsidy

magin). A decision in this case will be issued on

Decembe 11, 2008, and the easons fo the decision

will be eleased on Decembe 29, 2008.

The second ongoing case involving Chinese goods,

Aluminum Extrusions, is expected to be head by theCITT in ealy 2009. The CBSA estimated at the time of

initiation of the dumping and subsidy investigations that

93.5% of the subject goods wee sold into the Canadian

maketplace at dumped pices and the estimated oveall

weighted aveage magin of dumping was 40.5%.

Moeove, the CBSA found that between Januay 1,

2007 and June 30, 2008, 89.5% of goods impoted

fom the PrC benefited fom subsidies, and the amount

of those subsidies was on aveage equal to 26% of the

expot pice of the goods. The CITT made a peliminay

detemination that these factos povided a easonable

indication of injuy to the domestic industy. In a pelimi-

nay detemination made on Novembe 17, 2008, the

CBSA estimated the aveage magin of dumping to be

102% and the amount of subsidy to be 17%, theeby

imposing povisional duties amounting to 119% on

goods impoted fom the PrC.

Re-InVeSTIGATIOnS InTO exISTInG duMPInGFIndInGSAs a geneal ule, evey 12 to 18 months afte the impo-

sition of antidumping o countevailing duties, the CBSA

conducts e-investigations into existing findings. The

e-investigations epesent an oppotunity fo expotes

to povide updated infomation about the vaiables thataffect the nomal values of thei dumped poducts. The

CBSA sends out questionnaies to expotes and equests

that they update thei manufactuing infomation so that

the CBSA can ecalculate the antidumping and counte-

vailing duties imposed on thei poducts. It is thus an

oppotunity fo expotes to obtain lowe nomal values

(and lowe antidumping duties) o to demonstate that

they ae not actually dumping poducts. It is impotant to

note that expotes ae not equied to wait fo the CBSA

to initiate a e-investigation to update thei manufactuing

infomation. Whee an expote becomes awae of

changes to domestic pices, maket conditions o costs

associated with poduction and sales, they should infom

the CBSA so that nomal values can be eviewed and

updated, whee necessay, to eflect cuent conditions.

In 2008, two e-investigations wee initiated and thee

wee concluded that involved Chinese-oigin goods. The

two that wee initiated in the yea wee in espect of

the following goods: Certain Carbon Steel and Stainless

Steel Fasteners, and Laminate Flooring. At the time of

witing, these e-investigations had not been concluded.

The CBSA concluded, duing 2008, e-investigations

involving the following Chinese goods: Wood Slats,Bicycles and Copper Pipe Fittings. In the Wood Slats

e-investigation, the CBSA did not eceive any additional

infomation fom expotes and theefoe nomal values

wee detemined in accodance with a ministeial

specification, which was calculated by advancing the

expot pice by 120%. In the CBSA’s e-investigation

into Bicycles, 21 expotes fom the PrC wee pemitted

to equest inteim nomal values. Inteim values wee

evoked fo one Chinese company that did not povide

sufficient infomation on nomal values in esponse

to the CBSA’s equest. The Copper Pipe Fittings

e-investigation esulted in new nomal values fo two

expotes fom the PrC. Fo all othe expotes, nomalvalues will be detemined in accodance with a ministe-

ial specification, which is calculated by advancing the

expot pice of the goods by 242%. Also, duing the

Copper Pipe Fittings e-investigation, the CBSA indicated

that two expotes fom the PrC aleady have specific

amounts of subsidy. Fo all othe expotes of subject

goods fom the PrC, the amount of subsidy is equal to

17.73 Chinese renminbi pe kilogam.

ReVIeWS uPOn exPIRATIOn OF FIVe-yeAR duTyTeRMSAn expiy eview may be initiated by the CITT, whee

waanted, nea the end of a five-yea tem duing whichantidumping and/o countevailing duties have been

imposed on cetain goods impoted o expoted into

Canada. The expiy eview pocess consists of:

a equest fo submissions fom industy paticipants•

on whethe an expiy eview should be initiated;

an investigation by the CBSA concening the•

likelihood that the expiation of duties will esult in a

continuation o esumption of dumping; and



CONT’D ON PAGE 5





an inquiy by the CITT of whethe the expiation•

of the duties will esult in injuy o etadation to the

Canadian industy.

In 2008, only one expiy eview was decided, Certain

Carbon Steel Pipe Nipples and Adaptor Fittings, which

concened expots fom the PrC. The CBSA concluded

that the expiy of duties would likely esult in the

continuation o esumption of dumping by expotes

fom the PrC. An analysis of the evidence on ecod

indicated that goods continued to be dumped even

while the finding was in effect and, in spite of the

antidumping duties, Chinese poduces of the subject

goods had shown a enewed inteest in selling to the

Canadian maket. Moeove, because of the lack ofpaticipation of expotes in the eview pocess, the

CBSA infeed that expotes wee likely not able to sell

goods to Canada at non-dumped pices. The CBSA also

gave some consideation to the fact that antidumping

and countevailing duties existed in othe juisdictions in

espect of simila goods fom the PrC.

Accodingly, the CITT conducted an inquiy to detemine

whethe the esumption of dumping would likely esult

in injuy o etadation to the Canadian industy. In

consideing the likely impact on the domestic industy,

the CITT took into account economic factos, including

a potential decline in output, sales, maket shae, pof-its, poductivity, etun on investments and utilization

of poduction capacity and potential negative effects on

cash flow, inventoies, employment, wages, gowth o

the ability to aise capital. Despite a slowdown in the

esidential housing secto, the CITT was of the view

that Canada was likely an attactive expot destination

and if the ode wee escinded, the subject goods

would likely ente Canada in substantial volumes and

at vey low pices. Because of stagnant demand and

the likely pesence of significant volumes of low-piced

impots fom the PrC, the CITT concluded that the

domestic industy was likely to expeience significant

lost sales volumes and maket shae, and significantpice depession, as well as pice suppession in the

event that input costs incease. Thus, the esumption

of dumping was likely to cause mateial injuy to the

domestic industy and the CITT continued its finding in

espect of cabon steel pipe nipples and adapto fittings.

The only expiy eview initiated (but not concluded) in2008 affecting impots fom the PrC concens Wood

Slats. The eview was announced in August 2008,

following which an investigation was fomally initiated

on Novembe 10, 2008. The public heaing in this

matte is scheduled to occu in May 2009.

InTeRIM ReVIeWSAt any time afte the making of an ode o finding

pusuant to an injuy inquiy, the CITT may, on its own

initiative o by equest, conduct an inteim eview of

any aspect of the ode o finding. Afte eceiving a

equest fo an inteim eview, the CITT must fist decide

whethe the inteim eview is waanted. This decisionis usually eached afte consideing whethe thee is a

easonable indication that sufficient new elevant facts

have aisen since the issuance of the existing finding

o ode, o that thee has been sufficient change in

the cicumstances that led to the finding o ode in

question. An inteim eview may also be waanted

whee thee ae sufficient elevant facts that, although

in existence duing the pevious inquiy o eview, wee

not put into evidence and wee not discoveable by the

execise of easonable diligence at that time.

In 2008, the CITT conducted an inteim eview with

egads to the dumping and subsidizing of CertainFasteners impoted fom the PrC and Chinese Taipei

(Taiwan). The eview was in esponse to a equest fom

a Canadian window and doos company fo an exclu-

sion fom the CITT’s injuy finding fo cetain patented

scews impoted fom Taiwan. Having satisfied the CITT

that an inteim eview was waanted, a heaing took

place by way of witten submissions. Afte consideing

the aguments of the applicant, one company that

epesented the domestic industy, one impote and

one Taiwanese expote, the CITT was of the view that

ganting the exclusion fo the patented scew would

potentially estict competition between the applicant

and othe end uses and that boadening the exclusionto cove geneic impoted scews would have an injui-

ous effect on the domestic industy, notwithstanding

consent to the exclusion by the domestic industy. Fo

this eason, the CITT opted not to amend its ealie

decision.

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Stat-Ow etrpriss, natioalScrit a Ivstmt Caaa Act:How Far Ca Propos AmmtsGo?CLIFF SOSnOW, eLySIA VAn ZeyL And

KATHRyn AuBRey-HORVATH (STudenT-AT-LAW)

Chinese, and indeed all non-Canadian, investos who

plan to invest in Canada though the establishment o

acquisition of a Canadian business, must pay caeful

attention to the Investment Canada Act (ICA). In some

cases, the ICA equies tansactions to be appoved by

the Ministe of Industy and/o the Ministe of Canadian

Heitage as being of net benefit to Canada befoe theymay poceed.

In ecent yeas, in esponse to public inteest in the

gowth of foeign diect investment in Canada, paticu-

laly in elation to cetain sectos of the economy – such

as the mining, natual esouce, and militay sectos

– politicians have focused on the adequacy of the ICA

to potect Canadian inteests, while at the same time

attacting sufficient foeign diect investment. In this

egad, discussions have focused on thee main issues:

amending the ICA to addess the absence of a•

“national secuity” test;

amending the ICA thesholds and pocess fo ICA•

mege eview (as set out in the Competition Policy

review Panel repot eleased in June 2008, and then

late endosed by the fedeal govenment in its Thone

Speech on Novembe 19, 2008); and

addessing investments by State-Owned Entepises•

(SOEs).

If Canada wee to amend the ICA to addess these

concens, howeve, questions aise, in light of its inte-

national tade and investment obligations, as to how fa

the govenment can actually go in amending the legal

famewok fo investment in Canada.

LeGAL FRAMeWORK FOR InVeSTMenT In CAnAdATh ICAThe pupose of the ICA is to encouage investment

in Canada “that contibutes to economic gowth and

employment oppotunities” and to povide fo a eview

of cetain investments in Canadian companies to ensue

that such investment is of “net benefit to Canada”. In

making this detemination, the Ministe will apply the

pinciples set out in the ICA. The Ministe will conside

the plans of the investo and the undetakings it submits

in elation to:

the impact of the investment on the level and natue•

of economic activity in Canada;

paticipation by Canadians in the newly acquied•

business and in the industy in which the business foms

a pat;

the impact on poductivity, efficiency, technological•

development and innovation;

the impact on domestic competition;•

compatibility with industial, economic and cultual•

policies;

the impact on Canada’s ability to compete globally.•

These factos apply to all investos, including SOEs.

Howeve, additional ules apply to SOEs as set out in

the SOE Guidelines.

Th SOe GilisThe SOE Guidelines note that in addition to the above,

the Ministe will examine the following citeia when

eviewing applications fo eview fom an SOE:

the copoate govenance and epoting stuctue of•

the SOE – this examination will include whethe the SOEadhees to Canadian standads of copoate govenance

(including, fo example, commitments to tanspaency

and disclosue, independent membes of the boad,

independent audit committees, and equitable teatment

of shaeholdes); and

whethe the Canadian business to be acquied by the•

SOE will have the ability to continue to opeate on a

commecial basis egading whee to expot, whee to

pocess, the paticipation of Canadians in its opeations

in Canada, suppot of ongoing r&D, and appopiate

levels of capital expenditues to maintain the Canadian

business in a globally competitive position.

The SOE Guidelines suggest that to ensue that an

acquisition by an SOE is of “net benefit to Canada”,

the foeign investo may submit specific undetakings,

including the appointment of Canadians as independent

diectos on the boad of diectos, the employment

of Canadians in senio management positions, the

incopoation of the business in Canada, and the listing

of shaes of the acquiing company o the Canadian

business being acquied on a Canadian stock exchange.

Januay 2009

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Iformatio Tcholog

The SOE Guidelines claify that the Ministe will

continue to examine SOEs in a manne simila to how

the Ministe examines all othe foeign investos, i.e.,

whethe the investment is likely to be of net benefit to

Canada. In this egad, the Canadian govenment has

not ceated any additional appaent baies fo invest-

ments by foeign SOEs into Canada. At the same time,

the SOE Guidelines suggest that SOEs must demon-

state some degee of tanspaency in thei opeations

and govenance, and thei commitment to continue the

opeation of the Canadian business to be acquied on a

commecial basis.

nATIOnAL SeCuRITy And CALL FOR AMendMenTS

On May 8, 2008, the Ministe efused to appove theacquisition of MacDonald, Dettwile and Associates

Ltd. by a U.S. company called Alliant Techsystems Inc.

At the time, this decision was speculated to be based

lagely on concens ove national secuity (although

the Ministe’s easons ae not public). This move was

applauded by Paliament and the public, and suggested

an acceptance of national secuity as a gound fo not

appoving a tansaction.

In June 2008, the Competition Policy review Panel

repot was eleased noting:

“The Panel believes that it is in Canada’s inteests in

a post-9/11 wold to have in place an explicit nationalsecuity test to suppot its tade and investment poli-

cies. As such, we support the Minister of Industry’s

statement that the government intends to carefully

consider the creation of a new review requirement for

transactions that raise “national security” concerns.

We respectfully suggest that the scope of this review

requirement should be aligned with that of the

investment review process used by the Committee on

Foreign Investment in the United States. This would

bing Canada into line with othe counties that have

intoduced a national secuity sceening pocedue,

including the United Kingdom, China, Japan and

Gemany.

The Panel also welcomes the Ministe of Industy’s

ecent claification concening the ICA’s application

to state-owned entepises. We believe that the new

guidelines will impove tanspaency in the administa-

tion of the ICA [emphasis added ].”

Moe ecently, on Novembe 19, 2008, the fedeal

govenment, in its Thone Speech, announced its

intention to intoduce legislation to “expand the

oppotunities fo Canadian fims to benefit fom foeign

investment” and to safeguad “Canada’s national

secuity”. In doing so, it announced its intention to

make the changes to the ICA as set out in the afoe-

mentioned Competition Policy review Panel repot.

COMMenTSIf Canada wee to change the ICA, any such amend-

ment cannot boaden the scope of eview by Canada

of foeign investments. Any amendment of the

ICA – even if to simply include an expess national

secuity test – would need to be caefully scutinizedfom the pespective of Canada’s intenational tade

and investment obligations to detemine whethe any

such obligations ae violated. Similaly, intoduction

of new legislation to ceate a national secuity eview

mechanism would also need to be tested against such

obligations.

With espect to SOEs, it is unlikely that the Canadian

govenment would wish to be viewed as blocking

foeign investment without a stong justification fo

doing so. As Canadian Intenational Tade Ministe

David Emeson made clea at a gala fo the Canada

China Business Council in Beijing on Januay 10,2008, China’s investment – even by SOEs – is sought

afte: “Let me be clea ... Canada welcomes Chinese

investment. Canada emains open and welcomes

foeign investment – both pivate and state-owned.”

The pesident of the CCBC (a fome Canadian ministe

of intenational tade and Canadian ambassado to

the WTO) eaffimed this sentiment: “[Canada] must

welcome investment fom China, including FDI by the

State-Owned Entepises, and unde pope cicum-

stances, investments in Canada’s natual esouces

secto.”

With the etun of Paliament on Januay 26, 2009, it

emains to be seen whethe amendment poposals will

come to fuition, and in light of the economic condi-

tions facing all majo OECD counties, whethe they

ae willing to enact any ules elating to SOEs specifi-

cally and isk chilling the much needed foeign diect

investment Canada equies as a small open economy.

BlltiMay 2008

Stat-Ow etrpriss, natioal Scrit a Ivstmt Caaa Act: How Far Ca Propos Ammts Go?


BlltiJanuay 2009

PAGE 7





Foo Saft Lgislatio: A CotiigCocr of th Caaia Govrmt,Importrs a Chis SpplirsCLIFF SOSnOW And eLySIA VAn ZeyL

Ealie in 2008, the Canadian govenment intoducedlegislation that would impose oneous equiements oncompanies that impot consume poducts fom Chineseand othe foeign supplies. This legislation, efeedto as the Consumer Products Safety Act , followedseveal ecent high-pofile ecalls affecting toys, food,toothpaste and phamaceuticals, many of which weeimpoted fom China. As a esult of the poposed

legislation, Chinese and othe non-Canadian supplieswould have been faced with an inceasing numbe ofequests fo detailed poduct infomation, includingdocumentation of safety testing, fom Canadian impot-es and distibutos. Although the Consumer Products

Safety Act , also efeed to as Bill C-52, did not becomelaw because of the ecent Canadian election, thegovenment’s election platfom indicates that potectingCanadians fom unsafe impoted poducts emains ahigh pioity. Accodingly, the govenment is likely toe-intoduce a bill in Paliament in the coming session.

Although it is unknown at this point whethe the bill,when intoduced, will be identical to o amended fom

what was oiginally put fowad, pudence suggeststhat now may be a good oppotunity fo impotes andthei Chinese and othe foeign supplies that may beaffected by the eventual legislation to conside howthey may play a ole in shaping the legal famewok fosuch consume poduct law. In the meantime, it maybe wise fo impotes, manufactues and supplies andothes potentially affected by the legislation to beginimplementing compliance mechanisms so that when thelegislation comes into effect, they will have establishedappopiate best pactices and due diligence mecha-nisms to avoid any futue liability.

CeRTAIn OBLIGATIOnS LIKeLy TO ReSuRFACe In neWLeGISLATIOnAlthough no one can be cetain exactly what thenew legislation will contain, thee ae cetain boadpohibitions and obligations that ae likely to be includedin any new bill when e-intoduced in this session ofPaliament.

Consistent with the govenment’s election platfom,any new consume poducts safety legislation is likelyto pohibit Canadians fom impoting, manufactuing,advetising o selling consume poducts that ae identi-fied as posing a dange to human health o safety. Theelikely will be mandatoy ecall povisions empoweingthe govenment to pohibit in Canada the impotation,manufactue, advetisement o sale of poducts thatpose health o safety isks to consumes. The legislationmay also equie those who sell consume poductsin Canada to advise the govenment of any deaths,injuies, seious advese effects o ecalls occuing inCanada and aboad elated to the poduct. These obliga-tions could be oneous fo impotes, manufactuesand distibutos as they will essentially be equied tocontinuously monito the poducts they sell, both inCanada and elsewhee in the wold.

Unde the peviously intoduced legislation, the Ministeof Health was given the powe to ode impotesand Canadian manufactues to conduct testing onconsume poducts and to povide documents, within ape-detemined time-fame, containing the esults of suchtests. These budensome obligations may esuface in thenew legislation. Consideing that intenational suppliesmay not be equied to comply with equivalent standadsin thei home county, thee is no guaantee that such

infomation o ecods even exist.Any new legislation is likely to impose steep penaltieson impotes and manufactues who knowingly exposeCanadians to dange, as well as on diectos, offices, oagents who have diected, authoized o acquiesced insuch copoate activity.

COMMenTARyGiven the level of citicism in the maketplace onChinese impots in light of ecent ecalls, it is impotantthat Chinese supplies undestand the esponsibilitiesthe new legislation may impose on Canadian impot-es. Pudent Chinese supplies may want to conside

eviewing thei safety testing pocedues and consideengaging in inceased safety infomation-shaing withCanadian impotes if they have not aleady done so.Poviding Canadian impotes with documentationegading safety testing and infoming them of anypoduct ecalls will not only help to shield thei Canadianimpotes fom liability, but it may help maintain andstengthen existing business elationships.

BlltiJanuay 2009

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