The U.S. Department of Commerce broke its own rules when it imposed a tariff on Canadian wheat in 2003, says an appeals panel of the North American Free Trade Agreement.
The panel ordered the department to redo its calculations, which resulted in the imposition of a 5.29 percent countervailing duty.
The decision was hailed as a major victory by Canadian Wheat Board and federal government officials in the ongoing wheat trade war with the U.S.
“This is a clear win for the CWB,” said CWB chair Ken Ritter. “The NAFTA panel agreed with our arguments that these duties were not right.”
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But it remains to be seen whether the ruling will result in any significant reduction in the countervailing duty, which is designed to offset Canadian government programs that the commerce department says constitute export subsidies.
The NAFTA panel did not say the programs are not subsidies; it did say that the department of commerce violated U.S. law in the method it used to calculate the duty.
The department has up to 90 days to come up with new findings consistent with the NAFTA panel’s findings, but could theoretically come back with the same numbers, a move that would almost certainly trigger another appeal by Canada.
(The total U.S. duty on Canadian wheat is 14.15 percent, made up of the 5.29 percent countervail plus an 8.86 percent anti-dumping tariff.)
The five-member panel upheld an appeal launched under the North American Free Trade Agreement by the CWB and the governments of Canada, Alberta and Saskatchewan against the department of commerce’s August 2003 ruling.
The panel found that the DOC violated U.S. law when it lumped together three separate Canadian government programs that provide financial guarantees to the CWB.
The three programs Ñ guarantees of CWB borrowings, export credit and initial payment guarantees Ñ were rolled into what the department called a single “comprehensive financial risk coverage” plan.
The Canadian appellants successfully argued that violated U.S. trade law, adding the program on which the duty is based does not even exist.
In its 94-page report, the five-member NAFTA panel agreed, ruling that the DOC’s analysis “is not in accordance with law and cannot be sustained.”
CWB officials say rolling the three programs into one resulted in a higher number than would be the case if they were looked at individually.
“When they put them all together they are able to bring in things that they can’t when they consider them separately,” said board spokesperson Maureen Fitzhenry. “We think they’ll be struggling to make each add up to one percent.”
The DOC ruled that the three programs taken together constituted a subsidy of 4.94 percent.
The rest of the 5.29 percent duty is made up of a 0.35 percent subsidy arising from the provision of government-owned grain hopper cars to the railways. The NAFTA panel upheld that portion of the duty.
Jim Peterson, marketing specialist with the North Dakota Wheat Commission, which launched the original trade complaint to the DOC in September 2002, said his group is disappointed with the decision but doesn’t think it’s that big a blow to the U.S. side.
“The more important thing to us is they did not say these subsidies are not countervailable. It’s just the route to getting to the final duty,” he said.
The final number could be slightly lower if each program is considered separately, he said, but the total duty, including the 8.86 percent anti-dumping tariff, will still be prohibitive and keep Canadian wheat from crossing the border.
“We see this as a minor bump in the road and not a major change in direction,” said Peterson.
