In the Sucro Can Sourcing LLC (“Sucro Can”) decision issued on January 5, 2024 (Appeal EA-2022-002), the Canadian International Trade Tribunal (“CITT”) allowed Sucro Can’s appeal of the enforcement action taken by the Canada Border Services Agency (“CBSA”) to impose anti-dumping duties on imported shipments of Brazilian sugar which were previously transshipped through a Foreign Trade Zone (“FTZ”) located in the United States.

The CITT agreed that the imported sugar was in fact exported from Brazil and not from the United States and should therefore not be subject to anti-dumping duties as it was outside the scope of its order in respect of the dumping of refined sugar originating in or exported from the United States.

Background

Sucro Can purchased bulk refined granulated cane sugar from a supplier located in Brazil (“Refined Sugar”). The Refined Sugar was first shipped by ocean freighter to a FTZ located in the United States, where it was stored for a certain period of time. The Refined Sugar was shipped by truck from the U.S. (in bond) to a refinery in Canada operated by a Sucro Can related entity.

No anti-dumping duties were levied or paid by Sucro Can upon importation of the Refined Sugar into Canada. The CBSA subsequently issued several Detailed Adjustment Statements to Sucro Can assessing anti-dumping duties against the Refined Sugar, on the basis that it was subject to the orders issued by the CITT on August 6, 2021 with respect to dumped sugar “originating in or exported from” several subject countries including the United States (but not Brazil) (collectively, the “Order”).

Sucro Can disagreed with CBSA’s enforcement action and filed requests for re-determination on the basis that the Refined Sugar fell outside the scope of the Order, as it was exported from Brazil and not from the United States. The requests for re-determination were denied by the CBSA, giving rise to this appeal.

Key Legal Issue

The CITT had to determine how the notion of “exported from” should be interpreted for the purpose of imposing anti-dumping duties on imported goods pursuant to the Special Import Measures Act (“SIMA”). Specifically, the actual question to be decided was whether the Refined Sugar was “exported from” the United States (which could give rise to the imposition of anti-dumping duties) or Brazil (with the result that no anti-dumping duties should be levied).

Positions of the Parties

Sucro Can

Sucro Can argued that the imposition of anti-dumping duties is a limited remedy that can only apply to goods that have been dumped into Canada, causing injury or retardation or threatening to cause injury to the domestic industry, as determined by a CITT order. Conversely, anti-dumping duties cannot be imposed on products, such as the Refined Sugar, that have no connection to either (i) dumped goods or (ii) the associated finding of injury to the domestic industry. To that end, Sucro Can submitted that the Refined Sugar both originated in and was “exported from” Brazil and therefore has no connection to the finding of dumping or the related injury, which supported the Order.

Sucro Can further submitted that the Refined Sugar was only temporarily stored in a U.S. FTZ. To that end, the Refined Sugar never entered U.S. commerce, nor did it undergo further processing or any change in ownership while being stored in the FTZ. This was corroborated by expert testimony, which the CITT accepted in rendering its decision.

CBSA

The CBSA’s first argument was that sugar, refined from sugar cane or sugar beets, in granulated, liquid or powdered form, should be subject to anti-dumping duties if it is exported from the United States to Canada, regardless of its origin. Although this general statement is technically correct, the CBSA still had to convince the CITT that the Refined Sugar was actually “exported from” the United States.

To do so, the CBSA relied on the definition of “country of export” as set forth in subsection 2(1) of SIMA, which refers to goods “being directly shipped” to Canada. Per the CBSA, since the Refined Sugar was shipped directly to Canada from the U.S., the “country of export” was the U.S., regardless of the Refined Sugar’s origin. According to the CBSA, the storage in and the multiple shipments out of the FTZ break the continuous and uninterrupted journey rule required under SIMA. The CBSA further contended that the Refined Sugar was not merely transshipped or passing through the U.S. in transit.

Finally, the CBSA relied on subsection 30(1) of SIMA and section 25 of the Special Import Measures Regulations (“SIMR”) to argue that goods should be considered to be shipped directly to Canada if conveyed in a “through bill of lading” to a Canadian consignee, without entering trade or consumption in an intermediate country. In the case at hand, the CBSA was of then view that the Refined Sugar was never earmarked for Canada, emphasizing that the bill of lading indicated Buffalo, New York, as the final destination. Per the CBSA, after its arrival in Buffalo, the Refined Sugar entered the U.S. and the subsequent shipments from the FTZ to Canada were separate transactions.

CITT Analysis

The main issue revolved around whether the Refined Sugar was “exported from” the U.S., which would trigger the imposition of anti-dumping duties under SIMA.

While, as argued by the CBSA, SIMA does define the phrase “country of export”", the CITT found, following a textual and purposive analysis of the legislation, that such definition was irrelevant in the case at hand, as it only applies to “dumped goods”. Without proof that the Refined Sugar was sold to Canada at dumped prices, the definition of “country of export” could simply not apply to the facts at hand.

Considering the above, the CITT conducted an analysis of applicable jurisprudence to establish the ordinary sense of the word “export”. Specifically, the CITT found that, although this term is highly context-specific, as it pertains to Canadian anti-dumping measures and safeguards, “export” refers to the act of sending goods from one country to another. The term “export” also implies that the goods in question were part of the commerce of the country from which they were exported, generally involving some level of production, sale, transformation, or manufacturing. Therefore, per the CITT, for the Refined Sugar to have been “exported from” the U.S. to Canada, it must have initially been present “in” the U.S. (i.e., it must have been part of U.S. commerce).

Per the CITT, expert evidence presented by Sucro Can demonstrated that, according to U.S. law, the Refined Sugar stored in the FTZ never formally entered U.S. commerce. Moreover, the Refined Sugar also never underwent any manufacturing, production or transformation while stored within the FTZ. Since the CBSA did not submit any contradictory evidence, the CITT found that although the Refined Sugar was physically located in the U.S., by operation of applicable law it was deemed not to have entered the United States.

As such, the CITT ruled that since the Refined Sugar was never part of U.S. commerce nor a product of the U.S. sugar industry, it was found not to have been “exported from” the United States. Accordingly, the Refined Sugar both “originated in” and was “exported from” Brazil. The imposition of anti-dumping duties designed, in the case at hand, to protect the Canadian sugar industry against dumped American sugar was therefore found to be inappropriate.

Key Takeaway

The notion of “export” established by the CITT, as it pertains to Canadian anti-dumping and countervailing measures, implies that goods should not only be physically sent from one country to another but such goods should also become part of the commerce of the country from which they are exported. This, according to the CITT, generally involves some level of production, sale, transformation, or manufacturing in that country. Goods stored in an American FTZ generally do not enter U.S. commerce (and cannot be transformed or altered) and should therefore not be considered as being “exported from” the United States. if such goods are later shipped to Canada (typically through an in-bond shipment process).

Accordingly, goods that are transshipped or passing through a specific country should not be viewed as being “exported from” that country if they never became part of the commerce of such country (in accordance with applicable domestic laws) for the purpose of imposing SIMA duties based on a CITT order.

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