Infasco Division of Ifastgroupe and Company LP v. Canada (Canadian International Trade Tribunal)

Infasco Division of Ifastgroupe and Company LP v. Canada (Canadian International Trade Tribunal) Court (s) Database Federal Court of Appeal Decisions Date 2006-03-31 Neutral citation 2006 FCA 130 File numbers A-47-05 Notes Digest Decision Content Date: 20060331 Docket: A-47-05 Citation: 2006 FCA 130 CORAM: SHARLOW J.A. PELLETIER J.A. MALONE J.A. BETWEEN: INFASCO DIVISION OF IFASTGROUPE AND COMPANY LP Applicant and THE CANADIAN INTERNATIONAL TRADE TRIBUNAL, LELAND INDUSTRIES INC., ARROW FASTERNERS LTD., WESTLAND STEEL PRODUCTS LTD., CANADIAN FASTENERS IMPORTERS COALITION, SHANHAI BEN YUAN METAL PRODUCTS CO., LTD., STAR STAINLESS SCREW CO., TONG HWEI ENTERPRISE CO., LTD., BOMBARDIER RECREATIONAL PRODUCTS INC., ITW CONSTRUCTION PRODUCTS, CANADIAN TIRE CORPORATION, LIMITED, FLEETWOOD CANADA LTD., THE GOVERNMENT OF THE PEOPLE'S REPUBLIC OF CHINA, GOVERNMENT OF TAIWAN, VELAN INC., DIRECT FASTENERS, FULLER METRIC PARTS LTD., ENDRIES INTERNATIONAL OF CANADA INC., NATIONAL SOCKET SCREW MFG. LTD., VISQUÉ, INC. Respondents Heard at Toronto, Ontario, on February 21, 2006. Judgment delivered at Ottawa, Ontario, on March 31, 2006. REASONS FOR JUDGMENT BY: SHARLOW J.A. CONCURRED IN BY: PELLETIER J.A. DISSENTING REASONS BY: MALONE J.A. Date: 20060331 Docket: A-47-05 Citation: 2006 FCA 130 CORAM: SHARLOW J.A. PELLETIER J.A. MALONE J.A. BETWEEN: INFASCO DIVISION OF IFASTGROUPE AND COMPANY LP Applicant and THE CANADIAN INTERNATIONAL TRADE TRIBUNAL, LELAND INDUSTRIES INC., ARROW FASTERNERS LTD., WESTLAND STEEL PRODUCTS LTD., CANADIAN FASTENERS IMPORTERS COALITION, SHANHAI BEN YUAN METAL PRODUCTS CO., LTD., STAR STAINLESS SCREW CO., TONG HWEI ENTERPRISE CO., LTD., BOMBARDIER RECREATIONAL PRODUCTS INC., ITW CONSTRUCTION PRODUCTS, CANADIAN TIRE CORPORATION, LIMITED, FLEETWOOD CANADA LTD., THE GOVERNMENT OF THE PEOPLE'S REPUBLIC OF CHINA, GOVERNMENT OF TAIWAN, VELAN INC., DIRECT FASTENERS, FULLER METRIC PARTS LTD., ENDRIES INTERNATIONAL OF CANADA INC., NATIONAL SOCKET SCREW MFG. LTD., VISQUÉ, INC. Respondents REASONS FOR JUDGMENT SHARLOW J.A. [1] Infasco Division of Ifastgroupe and Company LP. (Infasco) has applied for judicial review of a decision of the Canadian International Trade Tribunal (the CITT) reported as "Dumping and Subsidizing - Findings and Reasons - Inquiry No. NQ-2004-005 -- Certain Fasteners", in so far as that decision relates to carbon steel nuts and bolts. The findings were issued on January 7, 2005. The reasons were issued on January 21, 2005. [2] The proceeding related to the dumping and subsidization of certain steel fasteners, namely carbon steel screws, carbon steel nuts and bolts, stainless steel screws, and stainless steel nuts and bolts, originating in or exported from China and Chinese Taipei. The period under review was January 21, 2001 to June 30, 2004. [3] The CITT concluded among other things that the dumping and subsidization of carbon steel nuts and bolts had not caused injury and did not threaten to cause injury to the domestic industry (see the CITT's reasons, paragraphs 187 and 230) . Infasco is seeking judicial review of that determination on the basis that the CITT erred in law by formulating and applying the wrong test for causation under subsection 42(1) of the Special Import Measures Act, R.S.C. 1985, c.47 (SIMA). The applicant invokes paragraph 18.1(4)(c) of the Federal Courts Act, R.S.C., 1985, c. F.7, which reads as follows: 18.1. (4) The Federal Court may grant relief under [subsection 18(3)] if it is satisfied that the federal board, commission or other tribunal [...] (c) erred in law in making a decision or an order, whether or not the error appears on the face of the record [...]. 18.1 (4) Les mesures prévues au [paragraphe 18(3)] sont prises si la Cour fédérale est convaincue que l'office fédéral, selon le cas : c) a rendu une décision ou une ordonnance entachée d'une erreur de droit, que celle-ci soit manifeste ou non au vu du dossier [...]. [4] The parties do not agree on the applicable standard of review. No issue of statutory interpretation arises in this case. There is no dispute as to the legal principles the CITT should have applied. The only question is whether the CITT applied the correct legal test of causation, a question that can be answered only by reviewing and analysing the CITT's reasons. In my view, if an examination of the CITT's reasons demonstrate that the CITT failed to apply the correct legal test, it will have erred in law and its decision should not stand. [5] Subsection 42(1) provides in relevant part as follows (emphasis added): 42. (1) The Tribunal, forthwith after receipt by the Secretary pursuant to subsection 38(3) of a notice of a preliminary determination, shall make inquiry with respect to such of the following matters as is appropriate in the circumstances: (a) in the case of any goods to which the preliminary determination applies, as to whether the dumping or subsidizing of the goods (i) has caused injury or retardation or is threatening to cause injury, or (ii) would have caused injury or retardation except for the fact that provisional duty was imposed in respect of the goods; 42. (1) Dès réception par le secrétaire de l'avis de décision provisoire prévu au paragraphe 38(3), le Tribunal fait enquête sur celles parmi les questions suivantes qui sont indiquées dans les circonstances, à savoir : a) si le dumping des marchandises en cause ou leur subventionnement : (i) soit a causé un dommage ou un retard ou menace de causer un dommage, (ii) soit aurait causé un dommage ou un retard sans l'application de droits provisoires aux marchandises; [6] "Injury" is defined in section 2 of SIMA to mean "material injury to a domestic market". [7] In determining whether the dumping or subsidization of goods has caused the requisite degree of injury to the domestic market, the CITT must have regard to the factors listed in subsection 37.1(1) of the Special Import Measures Regulations, SOR/84-927, (SIMR), which reads as follows: 37.1(1) For the purposes of determining whether the dumping or subsidizing of any goods has caused injury or retardation, the following factors are prescribed: (a) the volume of the dumped or subsidized goods and, in particular, whether there has been a significant increase in the volume of imports of the dumped or subsidized goods, either in absolute terms or relative to the production or consumption of like goods; (b) the effect of the dumped or subsidized goods on the price of like goods and, in particular, whether the dumped or subsidized goods have significantly (i) undercut the price of like goods, (ii) depressed the price of like goods, or (iii) suppressed the price of like goods by preventing the price increases for those like goods that would otherwise likely have occurred; (c) the resulting impact of the dumped or subsidized goods on the state of the domestic industry and, in particular, all relevant economic factors and indices that have a bearing on the state of the domestic industry, including (i) any actual or potential decline in output, sales, market share, profits, productivity, return on investments or the utilization of industrial capacity, (ii) any actual or potential negative effects on cash flow, inventories, employment, wages, growth or the ability to raise capital, (ii.1) the magnitude of the margin of dumping or amount of subsidy in respect of the dumped or subsidized goods, and (iii) in the case of agricultural goods, including any goods that are agricultural goods or commodities by virtue of an Act of Parliament or of the legislature of a province, that are subsidized, any increased burden on a government support programme; and (d) any other factors that are relevant in the circumstances. 37.1(1) Les facteurs pris en compte pour décider si le dumping ou le subventionnement de marchandises cause un dommage ou un retard sont les suivants : a) le volume des marchandises sous-évaluées ou subventionnées et, plus précisément, s'il y a eu une augmentation marquée du volume des importations des marchandises sous-évaluées ou subventionnées, soit en quantité absolue, soit par rapport à la production ou à la consommation de marchandises similaires; b) l'effet des marchandises sous-évaluées ou subventionnées sur le prix des marchandises similaires et, plus particulièrement, si les marchandises sous-évaluées ou subventionnées ont, de façon marquée, mené : (i) soit à la sous-cotation du prix des marchandises similaires, (ii) soit à la baisse du prix des marchandises similaires, (iii) soit à la compression du prix des marchandises similaires en empêchant les augmentations de prix qui par ailleurs se seraient vraisemblablement produites pour ces marchandises; c) l'incidence des marchandises sous-évaluées ou subventionnées sur la situation de la branche de production nationale et, plus précisément, tous les facteurs et indices économiques pertinents influant sur cette situation, y compris : (i) tout déclin réel ou potentiel dans la production, les ventes, la part de marché, les bénéfices, la productivité, le rendement sur capital investi ou l'utilisation de la capacité de la branche de production, (ii) toute incidence négative réelle ou potentielle sur les liquidités, les stocks, les emplois, les salaires, la croissance ou la capacité de financement, (ii.1) l'importance de la marge de dumping des marchandises ou du montant de subvention octroyé pour celles-ci, (iii) dans le cas des produits agricoles qui sont subventionnés, y compris tout produit qui est un produit ou une marchandise agricole aux termes d'une loi fédérale ou provinciale, toute augmentation du fardeau subi par un programme de soutien gouvernemental; d) tout autre facteur pertinent, compte tenu des circonstances. [8] It is common ground that dumping or subsidization may be found to be a cause of material injury even if there are, at the same time, other relevant contributing factors. It was noted in Sacilor Acieries v. Anti-Dumping Tribunal (1985), 60 N.R. 371 (F.C.A.) that there are often numerous factors contributing to material injury to the domestic market. In that case Hugessen J.A. wrote: [...] If the presence of foreign goods in the domestic market at dumped prices results in domestic producers being obliged either to lose sales or to sell their own product at a loss, then it is open to the Tribunal to make a finding that the dumping has caused injury. Of course, there may be other factors which may have contributed to the injury. As a matter of common sense, it seems to me that there almost always will be. Such matters as efficiency, quality, cost control, marketing ability, accuracy in forecasting, good luck and a host of others come to mind. It is the function of a specialized tribunal such as this one to weigh and balance those factors and to decide the importance to be given to each. [9] The CITT's reasons in this case contain no statement of the legal test for the causation of material injury. The reasons do not quote or refer to subsection 42(1) of SIMA, the statutory definition of "injury", or the comments of Hugessen J.A., quoted above, from Sacilor Acieries. However, a failure to recite the law cannot by itself establish that the CITT applied the wrong test. [10] The applicant refers to a number of instances in the reasons where the CITT says that dumping and subsidization is not the cause of the injury to the domestic market. The suggestion is that if the CITT had in mind the correct test, it would have said that dumping and subsidization is not a cause of injury. [11] The CITT's reasons are lengthy (230 paragraphs), because there were many products, parties and issues to be considered. The issues under appeal are the subject of paragraphs 150 to 187. Those paragraphs are quoted below (footnotes have been omitted). I have indicated by underlining the words that, in the applicant's submission, establish that the CITT applied the wrong legal test (see paragraphs 162, 166, and 177): -- Volume of Dumped and Subsidized Goods [150] The Tribunal notes that, with the exception of the first six months of 2004, imports from the subject countries accounted for less than 50 percent of the total volume of imports of carbon steel nuts and bolts, with the United States being the single largest source of imports. [151] The volume of imports from the subject countries varied considerably between 2001 and 2003, rising by 13 percent in 2002 and then falling back by 18 percent in 2003. Overall, between 2001 and 2003, the volume of carbon steel nuts and bolts from the subject countries declined by 7 percent or by 1.5 million kg. Imports from non-subject countries also fell, but only by some 1.0 million kg, as imports from the United States declined by 1.6 million kg, while those from other non-subject countries increased by 600,000 kg. [152] In 2002, domestic production of carbon steel nuts and bolts increased substantially, rising by 17 percent, which growth was all taken up by Infasco, the domestic producer. In the following year, however, production volumes contracted, so that, between 2001 and 2003, production was essentially stable. [153] The domestic market for carbon steel nuts and bolts, after declining by 20 percent in 2002, returned in 2003 to its 2001 level, thus showing no net growth between 2001 and 2003. Sales from domestic production largely tracked total market activity between 2001 and 2003, falling in 2002 and rebounding in 2003. Over the three years, the respective market shares of the domestic industry, the subject countries and non-subject countries showed little change. Total sales from domestic production declined slightly between 2001 and 2003, while sales from the subject countries increased correspondingly. The Tribunal also notes the loss in sales between 2001 and 2003 of 100 million units from the United States, which appear to have been taken up mostly by other non-subject countries. [154] In the first six months of 2004, sales of imports from the subject countries showed a strong upward trend, increasing by nearly 40 percent. Although the domestic industry's sales also increased, they lagged behind the increases experienced by both the subject and non-subject countries. Sales from all non-subject countries rose by 8 percent. As a result, the share of the market held by the domestic industry fell by two percentage points compared to the same period in 2003. On the other hand, the share of the market held by the subject countries increased to nearly 60 percent, which was the highest level seen during the period of inquiry. [155] In light of the foregoing analysis, the Tribunal considers that there was very little net displacement of domestic production between 2001 and 2003, as the domestic market for carbon steel nuts and bolts essentially remained stable, with little growth and little movement in market shares. The situation was different however in the first six months of 2004, as the subject countries were able to capture the majority of the growth in the market. Although the domestic industry and non-subject countries also increased their sales, this increase was at a significantly lower rate. However, the Tribunal notes that there was no displacement of either domestic production volumes or sales from domestic production. In fact, there was growth in both instances. -- Effects of Dumped and Subsidized Goods on Prices [156] Turning next to the effects of the subject carbon steel nuts and bolts on prices of like carbon steel nuts and bolts, the Tribunal first notes that unit import costs for the subject carbon steel nuts and bolts fell by 5 percent between 2001 and 2003, while unit import costs for goods from non-subject countries displayed the opposite trend, increasing by 11 percent. [157] A comparison of unit import costs shows that, throughout the period of inquiry, those for the United States were generally at least 75 percent greater than those for either the subject countries or other non-subject countries, which were very similar in value. In the Tribunal's view, this suggests that the product mix of carbon steel nuts and bolts imported from the United Statesdiffers from that imported from either the subject countries or other non-subject countries. [158] In examining selling prices in the market, the Tribunal notes that the domestic industry's selling prices for its carbon steel nuts and bolts fell continuously from 2001 to 2003, declining by some 7 percent. On the other hand, selling prices for imports from the subject countries rose by an almost equal amount over the same period. Selling prices of imports from the subject countries, along with selling prices from the United States, peaked in 2002 before slumping in 2003, though to levels that were greater than in 2001. [159] In view of testimony from both Infasco witnesses and other witnesses that Infasco, the largest Canadian manufacturer, is the price leader in the market, the Tribunal was unable to reconcile the decline in the domestic industry's selling prices for its carbon steel nuts and bolts with the increase in selling prices for imports from the subject countries. [160] In the first six months of 2004, the domestic industry was able to reverse the trend of the previous three years and increase its selling prices by 17 percent. In this regard, witnesses from Infasco indicated that the company increased its prices several times in 2004 and that these were the first increases since some time prior to 2000. At the same time, selling prices of imports from the subject countries and non-subject countries rose, respectively, by 15 percent and by 5 percent. [161] The Tribunal notes the significant gap that existed throughout the period of inquiry between the selling prices of the domestic industry for its carbon steel nuts and bolts and the selling prices for imports from the subject countries, with the former being approximately two and a half times as high. In fact, the domestic industry's selling prices were by far the highest in the market. The selling prices of imports from the United States were for the most part well below those of the domestic industry throughout the period of inquiry, although they were higher than those for either the subject countries or other non-subject countries. The Tribunal has already made reference to the possibility that there is a difference in product mix between the United States and other import sources, including the subject countries. These trends suggest that there could also be a significant difference in product mix between domestic sales and subject country imports. The Tribunal will address the issue of product mix below. [162] In sum, the Tribunal does not consider that the prices of the subject carbon steel nuts and bolts were the cause of the declines in the prices of domestic carbon steel nuts and bolts between 2001 and 2003. -- Impact on the Domestic Industry [163] Before considering what impact the dumped and subsidized carbon steel nuts and bolts had on the domestic industry, the Tribunal will first assess how the industry fared during the period of inquiry. [164] The domestic industry's financial performance improved in 2002, as the gross margin rose by four percentage points from 2001. The following year, however, performance deteriorated significantly and the gross margin fell by several percentage points. In the Tribunal's view, the decline in gross margin experienced by the domestic industry in 2003, and entirely the result of Infasco's poor financial performance, is material. In the first six months of 2004, the domestic industry recovered to a substantial degree, and the gross margin attained its highest level of the period of inquiry. [165] As to other measures of performance with regard to carbon steel nuts and bolts, the Tribunal notes the declines in capacity utilization between 2001 and 2003 at Infasco, the only producer in the domestic industry whose output consists solely of carbon steel nuts and bolts. Similarly, employment levels at this producer declined between 2001 and 2003, before partially recovering in the first six months of 2004. [166] Finally, the Tribunal notes that, in support of their case, the two producers constituting the domestic industry submitted allegations of injury at specific accounts. The Tribunal has examined the evidence pertaining to these allegations and does not find it to be persuasive. Examination of the injury allegations submitted by Infasco revealed that these allegations generally did not relate specifically to 2003, the period in which, in the Tribunal's view, most of the injury took place. The allegations filed by Leland include two instances of lost sales of bolts at the same account and to the same competitor, only one of which occurred in 2003. The witness from Paulin testified that this sale was lost for non-price reasons. [167] In sum, the domestic industry, because of Infasco, experienced poor results with regard to several performance measures in 2003. However, in light of its above conclusions with respect to the volumes and price effects of the subject carbon steel nuts and bolts, the Tribunal concludes that the injury sustained by the domestic industry during the period of inquiry cannot be attributed to the imports from the subject countries. -- Factors Other Than Dumping [168] In examining the non-dumping factors that could be responsible for the injury sustained by the domestic industry, the Tribunal focused on Infasco, by reason of its dominance and poor financial performance in 2003. [169] The witnesses from Infasco described the company's situation in the period leading up to the CCAA proceedings in September 2003: "We lost sales. Cash flow was reduced. We had to do something to improve our liquidity. We were forced to reduce our inventories, and to do that we had to reduce production. The consequences were layoffs and shortages of material. We had cash problems. We had problems meeting payments to our suppliers. We still had the notes to pay." [170] The Infasco witnesses went on to argue that imports from the subject countries had played a "major role" in causing the financial crisis in 2003. The Tribunal is not persuaded by this argument. [171] First, the Tribunal notes the significant economic downturn underway by 2002 in both Canada and the United States, the destination for three quarters of Infasco's production. Evidence on the record suggests that the downturn was especially severe in those sectors of the economy that use large quantities of nuts and bolts. It appears to the Tribunal that Infasco ended 2002 with surplus inventory because of the slowdown in both of its main markets, namely, Canada and the United States. [172] In 2003, when Infasco cut back on production to try to liquidate inventories, its unit costs would naturally have increased, as there was a smaller volume of production over which to absorb costs, which, in turn, would have had a negative impact on its gross margin. The Tribunal is not convinced that Infasco's inability to recover its higher costs by sufficiently raising prices in 2003 was brought about by the dumping and subsidizing. In this regard, the Tribunal again refers to the fact that Infasco designated itself as the price leader in the market. Further, the Tribunal notes that Leland, the other domestic producer included by the Tribunal in the domestic industry that is claiming injury with respect to carbon steel nuts and bolts, did not experience comparable financial difficulties in 2003. This reinforces the Tribunal's view that Infasco's worsening results in 2003, which culminated in the CCAA proceedings in September 2003, were the result of its own particular circumstances, and those of the broader Ifastgroupe, and were not reflective of the market pressures faced by the domestic industry as a whole. [173] With regard to the CCAA proceedings, the Tribunal notes that the Third Report of the Monitor, October 9, 2003, ascribes the decline in the performance and liquidity of the various Ivaco entities to several factors "including, but not limited to" currency, U.S. anti-dumping duties on exports of wire rod, increases in scrap metal prices and energy costs, increased labour costs and substantial pension costs. There is no mention of the negative impact of imports of carbon steel nuts and bolts from the subject countries on Infasco. Given that witnesses from the company characterized Infasco as the "cash cow" for the Ivaco group, the Tribunal questions the importance of the alleged impact of these imports, since the Monitor failed to mention it as a factor. [174] Infasco's situation was no doubt exacerbated by the appreciation of the Canadian dollar in 2003, which would have made its exports to the United States less competitive. In the Tribunal's view, unlike the case of carbon steel screws, the impact of exchange rates did play an important part in the injury sustained by the carbon steel nut and bolt industry, whose main player, Infasco, is highly dependent on export sales. [175] Another factor that leads the Tribunal not to attribute the domestic industry's injury to the dumping and subsidizing is the apparent difference in product mix between domestic production, at least for Infasco, and imports from the subject countries. A witness from Infasco submitted that the subject countries are the predominant suppliers of Grade 2 bolts, the least expensive bolts, but supply very few Grade 8 bolts, the most expensive bolts, and a key product area for Infasco. Accordingly, the Tribunal wonders why Infasco, as the price leader and largest producer in the market, was not able to increase its prices sufficiently in 2003 to maintain its gross margins. [176] There is no evidence on the record indicating that VMI services, mad cow disease or shortage of skilled labour played any significant role in Infasco's downturn in 2003. [177] Based on the foregoing, the Tribunal is not persuaded that the injury sustained by the domestic industry can be attributed to the dumping and subsidizing of carbon steel nuts and bolts from the subject countries. -- Threat of Injury [178] Having found that dumping and subsidizing have not caused injury, the Tribunal must consider whether the dumping and subsidizing of carbon steel nuts and bolts from the subject countries are threatening to cause injury. The Tribunal is guided in its consideration by subsection 37.1(2) of the Regulations, which prescribes factors to take into account for the purposes of determining whether the dumping and subsidizing of goods is threatening to cause injury. Further, the Tribunal notes that subsection 2(1.5) of SIMA requires that the circumstances in which dumping and subsidizing of goods would cause injury must be clearly foreseen and imminent. [179] Based on the current state of the domestic industry and the market, the Tribunal is not convinced that the dumping and subsidizing of the subject carbon steel nuts and bolts are threatening to cause injury. [180] The Tribunal notes that, in the first six months of 2004, the value of the domestic industry's sales of its carbon steel nuts and bolts increased by more than 20 percent over the same period in 2003. Further, the Tribunal notes that, during this period, the industry's gross margin was 15 percentage points higher than at any other time during the period of inquiry. Infasco, as the dominant industry producer, participated in the upturn in performance. Moreover, the Tribunal notes that, as of December 2004, Infasco is no longer under CCAA protection. [181] As to the increase in the volume of imports from the subject countries in the first six months of 2004, the Tribunal does not take this as evidence that supports a threat of injury because prices for the subject carbon steel nuts and bolts were also rising during that period. In this regard, there is nothing on the horizon to indicate that Infasco will forfeit its position as the price leader in the market and that prices for imports from the subject countries will begin to exert a disproportionate downward pull on domestic prices. [182] As to the other threat factors, the Tribunal acknowledges that the capacity of the fastener industry in Chinese Taipei and China, including that for carbon steel nuts and bolts, is enormous compared to the capacity of the domestic industry. Foreign producers' responses to the Tribunal's questionnaire indicated an increase in fastener production and capacity during the period of inquiry. However, the Tribunal finds no evidence on the record to indicate that the subject countries are likely in the near future to change their raditional patterns of exporting to target Canada for increased sales of carbon steel nuts and bolts. [183] Finally, with respect to anti-dumping measures imposed by other jurisdictions, the Tribunal notes an outstanding finding in South Africa on "nuts of iron and steel" from Chinese Taipei. The Tribunal does not view this single finding as compelling evidence to support a finding that Chinese Taipei threatens to cause injury to the domestic industry. Although there are measures against various carbon steel products from China and Chinese Taipei in other jurisdictions, the Tribunal considers the products in question to be sufficiently dissimilar to carbon steel nuts and bolts as to preclude drawing any inferences about the likelihood of the subject countries to injuriously dump the carbon steel nuts and bolts, and in the case of China, to injuriously subsidize them. -- Alloy Steel [184] The Tribunal notes that Infasco argued that, despite the fact that the CBSA had distinguished between carbon steel and alloy steel nuts and bolts, nuts and bolts made of alloy steel should be found to be like goods, as they were affected by imports of the subject goods. It was further argued that the Tribunal should assess injury on this basis. [185] The Tribunal notes that the question as to whether fasteners made of alloy steel are part of the subject goods is a matter to be dealt with by the CBSA. For the purpose of determining what are like goods in conducting its injury analysis, the Tribunal notes that, based on the responses to its requests for information, Infasco included alloy steel nuts and bolts as part of its domestic production volumes. [186] Based on the evidence on the record, nuts and bolts made of alloy steel, including Grade 8 products, are more expensive than carbon steel nuts and bolts, including Grade 2 and Grade 5 products. Accordingly, if the Tribunal had conducted its injury analysis without the nuts and bolts made from alloy steel, the domestic industry's average selling prices possibly would have been lower, depending on which products were sold in the domestic market and which were exported. However, the Tribunal is not persuaded that the change would be significant enough to alter its assessment of the pricing trends in the domestic market over the period of inquiry. The Tribunal would still be of the view that the dumping and subsidizing have not caused injury and are not threatening to cause injury to the domestic industry, as there still would be a significant gap between the domestic industry's selling prices and those of the subject countries. -- Conclusion [187] The Tribunal is therefore of the view that the dumping and subsidizing of carbon steel nuts and bolts from the subject countries have not caused and are not threatening to cause injury to the domestic industry. [12] The respondent has provided the following summary of some of the key factual findings made by the CITT in relation to carbon steel nuts and bolts: 1) Imports from China and Chinese Taipei accounted for less than 40% of the total volume of all imports, with the United States being the single largest source of imports; 2) Imports from China and Chinese Taipei decreased by 18% in 2003; 3) Imports from China and Chinese Taipei declined by 7% or by 1.5 million kg between 2001 and 2003; 4) Imports from the United States declined by 1.6 million kg between 2001 and 2003; 5) Imports from countries other than China and Chinese Taipei and the United States increased by 600,000 kg between 2001 and 2003; 6) In 2002, domestic production increased substantially, rising by 17%; 7) Between 2001 and 2003, domestic production was stable; 8) In 2003, the domestic market returned to its 2001 levels after a decline in 2001; 9) Over the years 2001-2003, the respect market shares of the domestic industry, China and Chinese Taipei, and other countries showed little change; 10) Selling prices for imports from China and Chinese Taipei rose during the period 2001 to 2003; 11) In the first six months of 2004, the domestic industry increased its selling prices several times, cumulatively by 17%; 12) In the first six months of 2004, the selling prices of imports from China and Chinese Taipei rose by 15% and from non-subject countries by only 5%; 13) In the first six months of 2004, the domestic industry recovered to a substantial degree and the gross margin attained its highest level in the period of inquiry; 14) The applicant exported 75% of its carbon steel nuts and bolts to the United States and by 2002, the economic downturn that was well underway in both Canada and the United States severely impacted those sectors of the economy that used large quantities of that product; 15) The applicant had surplus inventory at the end of 2002 because of the economic downturn in Canada and the United States throughout 2002; 16) The applicant reduced inventory levels to improve liquidity; 17) The applicant cut back production to try to liquidate inventories; 18) When the applicant cut back production, its costs increased; 19) The higher unit costs had a negative impact on gross margins; 20) The applicant's situation was exacerbated by the appreciation of the Canadian dollar in 2003, which resulted in its exports to the United States being less competitive; 21) In the first six months of 2004, the value of the domestic industry's sales increased by more than 20% over the same period in 2004; 22) In the first six months of 2004, the industry's gross margin was 15% higher than any other time during the period of inquiry; 23) The applicant was under the protection of the Companies Creditors Arrangements Act until December 2004; 24) In the first six months of 2004, prices of carbon steel nuts and bolts from Chinaand Chinese Taipei increased, cumulatively by 17%. [13] It may be that the words in paragraphs 162, 166 and 177 of the CITT's statements, read in isolation from their context, could give the impression that the CITT did not have the correct legal principles in mind when it was analyzing the evidence that was relevant to the question of causation. However, that impression is not sustained once the reasons are read in their entirety against the evidentiary record. [14] In my view, a fair reading of the CITT's reasons, in their total context, indicates that they assessed the impact of various economic factors, apart from the dumping and subsidization, in order to determine whether the dumping and subsidization on its own was sufficient to cause material injury, and concluded that it was not. I am not persuaded that the passages cited by the applicant support its argument that the CITT applied the wrong legal test. [15] I would dismiss this application for judicial review with costs. "K. Sharlow" J.A. "I agree J.D. Denis Pelletier J.A." Dissenting (Malone J.A.): [16] I have had the privilege of reading the majority reasons for judgment which my colleague, Sharlow J.A., has circulated in this appeal. As I am unable to agree with her proposed disposition of the appeal I respectfully dissent for the following reasons. [17] In its findings and reasons relating to Carbon steel nuts and bolts, the CITT considered the volume of dumped and subsidized goods, the effects of dumped and subsidized goods on prices, their impact on the domestic industry, as well as factors other than dumping (CITT Reasons paragraphs 150-177). It separately considered whether the dumping and subsidization of carbon steel nuts and bolts from China and Taipei threatened to cause injury (CITT Reasons paragraphs 178-186). Subsection 42(1) is not mentioned in this analysis. [18] This Court may grant relief on an application for judicial review if it is satisfied that the CITT refused to exercise its jurisdiction or otherwise erred in law in making a decision or order (see paragraphs 18.1(4)(a) and (c) of the Federal Courts Act, R.S.C., 1985, c. F.7). While there are numerous Supreme Court of Canada decisions dealing with the standard of review under section 18.1, the main principles dealing specifically with the CITT are articulated by Major J. in Canada (Deputy Minister of National Revenue) v. Mattel Canada Inc. [2001] 2 S.C.R. 100. [19] In Mattel, the Court applied the pragmatic and functional approach to determine the appropriate standard of review for a CITT decision. After considering all the factors, Major J. at paragraph 27, concluded that 'different standards of review will apply to different legal questions depending on the nature of the question to be determined and the relative expertise of the CITT in those particular matters'. To establish where a given decision falls on that spectrum, Major J. in Mattel, says that the essential question is whether the legal issue to be addressed was intended by Parliament to be left to the exclusive decision of the CITT. The standard of review for legal questions may fall somewhere between correctness and patent unreasonableness, depending on how close the question at hand is to the expertise of the CITT. [20] In the present application, the applicant's key argument is that the CITT's findings and reasons do not address subsection 42(1) of SIMA and their reasons suggest that the CITT applied the wrong legal test of causation. This is also said to be a failure of the CITT to demonstrate that it exercised its jurisdiction under that subsection. In my analysis, this is an allegation of an error of law that must be reviewed on a standard of correctness (see Rothstein J.A., as he then was, in Novell Canada Ltd. v. Canada (Minister of Public Works and Government Services), [2000] F.C.J. No. 951 at paragraphs 3, 10 and 15). [21] Both the plain meaning of the words found in subsection 42(1) and earlier decisions of the CITT and North American Free Trade Binational Panels have confirmed that in order for dumping or subsidization to have caused injury under SIMA, the dumping or subsidization must be found to be a cause of material injury (see for example In the Matter of Synthetic Baler Twine...CDA-94-1904-02, Decision of the Panel, 10 April 1995 at 25-26; see also Machine Tufts Carpeting...April 21, 1992, NQ-91-006 at 21). It is noteworthy that subsection 42(1) mandates that the CITT must make inquiries with respect to such matters as is appropriate in the circumstances; in this case, whether dumping or subsidization has caused material injury to the domestic market. [22] In some inquiries, factors other than dumping or subsidization may combine to account for harm to a domestic industry. In those instances, a determination that the other factors contribute to that harm does not preclude the possibility that dumping or subsidization may also be a contributing cause of injury. In such circumstances, the CITT must decide whether dumping or subsidization was a cause of material injury that contributed to the overall injury of the domestic industry. [23] In the present application, the CITT does not state clearly in its findings and reasons that dumping or subsidization was not a cause of material injury. Its language in finding that the dumping and subsidization of Carbon steel nuts and bolts had not caused injury to the domestic market suggests that the CITT considered only whether the dumping and subsidization was the cause or a very significant cause of material injury. The following examples illustrate the problem: In sum, the Tribunal does not consider that the prices of the subject carbon steel nuts and bolts were the cause of the declines in the prices of domestic carbon steel nuts and bolts between 2001-2003. (emphasis added) (CITT Reasons, paragraph 162) However, in light of its above conclusions with respect to the volumes and price effects of the subject carbon steel nuts and bolts, the Tribunal concludes that the injury sustained by the domestic industry during the period of inquiry cannot be attributed to the imports from the subject countries. (emphasis added) (CITT Reasons, paragraph 167) Based on the foregoing, the Tribunal is not persuaded that the injury sustained by the domestic industry can be attributed to the dumping and the subsidizing of carbon steel nuts and bolts from the subject countries. (emphasis added) (CITT Reasons, paragraph 177) [24] I acknowledge that the CITT is an expert tribunal; however its reasons must be adequate for the parties to fully understand the nature and scope of the decision. [25] In my analysis, the present reasons fail to conduct the mandatory analysis required by subsection 42(1), and fail to state clearly that the CITT had determined that dumping or subsidization was not a cause of material injury. In this case, the record encompasses thirty thousand exhibits and some sixty-eight volumes of evidence gathered over a seven day period involving nineteen participants and some twenty-nine witnesses. It is therefore of little comfort to say that the two hundred and thirty paragraph CITT decision when read in context against the evidentiary record is suffice. The parties deserve better and SIMA so directs. [26] In addressing the requirement for written reasons, L'Heureux-Dubé J. in Baker v. Canada(Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817) stated that where the decision has important significance to the individual there is greater necessity for comprehensible reasons. In this case, the decision has substantial commercial significance to Infasco and Leland, making it imperative that adequate reasons are provided. In addition, clear reasons provide guidance to other commercial interests who are subject to the CITT's jurisdiction in other cases. [27] As in the Novell decision (supra at paragraph 20), these reasons are ambiguous. Accordingly, it is not possible to conclude that the CITT exercised its jurisdiction, i.e. that the CITT applied the correct legal test as required by subsection 42(1) of SIMA and the SIMR when it considered whether the dumping or subsidization of Carbon steel nuts and bolts from China and Taipei has caused injury or is threatening to cause injury to domestic industry. In my analysis, this is an error of law in accordance with paragraph 18.1(4)(a) of the Federal Courts Act (supra at paragraph 18). [28] I would allow this application for judicial review with costs to both Infasco and Leland. I would set aside the findings of the CITT in Inquiry No. NQ-2004-005 with respect to carbon steel nuts and bolts, and refer the matter back to the CITT with directions that it apply the test for causation in subsection 42(1) and reconsider the evidence in the existing record in the application of that test. "B. Malone" J.A. FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-47-05 STYLE OF CAUSE: INFASCO DIVISION OF IFASTGROUPE & COMPANY LP and THE CANADIAN INTERNATIONAL TRADE TRIBUNAL et al PLACE OF HEARING: Toronto, Ontario DATE OF HEARING: February 21, 2006 REASONS FOR JUDGMENT BY: Sharlow J.A. CONCURRED IN BY: Pelletier J.A. DISSENTING BY: Malone J.A. DATED: March 31, 2006 APPEARANCES: Mr. Milos Barutciski / Mr. James D. Bunting FOR THE APPLICANT Mr. Lawrence L. Herman Ms. Cynthia Amsterdam / Mr. Matthew Diskin FOR THE RESPONDENT - LELAND INDUSTRIES INC. FOR THE RESPONDENT - CANADIAN FASTENERS IMPORTERS COALITION SOLICITORS OF RECORD: Davies Ward Philips & Vineberg LLP Toronto, Ontario FOR THE APPLICANT Herman & Company Toronto, Ontario Heenan Blaikie LLP Toronto, Ontario FOR THE RESPONDENT -LELAND INDUSTRIES INC. FOR THE RESPONDENT - CANADIAN FASTENERS IMPORTERS COALITION