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The Canadian anti-dumping duty in relation to natural products, with particular reference to fruits and… Mallory, Lester Dewitt 1929

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THE CANADIAN ANTI-DUMPING DUTY IN RELATION TO NATURAL PRODUCTS, WITH PARTICULAR REFERENCE TO FRUITS AND VEGETABLES. Submitted as a Thesis In Partial Fulfilment af the Requirement For The Degree of MASTER OF SCIENCE IN AGRICULTURE In the Department of AGRICULTURAL ECONOMICS THE UNIVERSITY OF BRITISH COLUMBIA Vancouver, B. C., May 1929. By LESTER DEWITT MALLORY ! w ACKNOWLEDGMENTS. Grateful acknowledgment is given to Captain L.S. Burrows, Secretary of the Canadian Horticultural Council, Ottawa, for statistics and material supplied. Appreciation is also expressed to Mr. F+ M* Clement, Dean of the Faculty of Agriculture, University of British Columbia, and to Dr. T+H* Soggs, Professor of Economies, University of British Columbia, for friendly help and guidance. L.D. Mallory. INDEX. Page Introduction. ................ ...... 1 Definition of Dumping. ................. 2 The Extent of the Canadian Fruit and Vegetable Industry. The Amount of Imports and Exports, Competing and Non-Competing. .................... 4 History of the Dump Duty. ............. 21 The Application of the Dump Duty in its Various Forms. .................... 30 The Type of Protection Desired by the Fruit and Vegetable Growers and Some Arguments in Support. ........ 36 The Seasonal Tariff. .................. 42 Summary. .4...... .............. ..... 44 Bibliography. .......... ...... ...... 45 0 — INTRODUCTION This thesis has been undertaken with the purpose of attempting in seme measure, to clarify thought and dis-cussion in the matter of the Canadian Anti-Dumping Duty. The Canadian fruit and vegetable industry is one of sueh importance that factors materially affecting its welfare should receive considered attention. The Dump Duty is spch a factor, and at the present time is receiving much thought by our legislative bodies and the fruit and vegetable producers, as it would seem that the present status of the Duty is such that the function of an Anti-Dumping Duty is not being carried out towards natural products. Consideration of the Duty has been confused by the various forms and interpretations given to it in past years, and the material herein contained,it is hoped, will serve to give the history, status and purpose of the Duty. No definite stand has been taken either in supporting or opposing the Duty, but rather the writer has tried to explain and set forth facts which will enable those interested to understand the subject under review. n DEFINITION OF DUMPING. Jacob Viner defines dumping as "price-discrimin-ation between national markets"* This definition is suf-ficiently broad to include all forms of dumping,such as, Reverse Dumping, Exchange Dumping, Spurious Dumping, Con-cealed Dumping, etc., as well as the general view of dumping which might be called Straight Dumping. Mr. E. J. Young, M.P. for Weyburn, Saskatchewan, during the 1928 Session of the Dominion Legislature, gave a definition of dumping which is ordinarily accepted in Canada. l.r. Young said: "Goods are being dumped when they are being sold for export to Canada at a lower price than that at which they are being sold for consumption in the country of origin in the usual and ordinary course." This would be applicable to and agree with the Dumping Duty as contained in the Customs Tariff Act. Act and the Customs Act may be considered under two headings, depending upon the method of valuing imported goods. The and is straight dumping, where a duty was assessed if the price at which goods were sold to Canada was less than the "fair market value of the same article when sold for home consumption in the usual and ordinary course in the country whence exported to Canada". This type of dumping agrees with Dumping as provided against in the Customs Tariff first type was under the Customs Tariff Acts of 1904 and 1907 the definitions above* The second differs from the first in that the method of valuing goods is different. The Customs Act was amended in 1921 by the addition of a Clause which provided that the value for duty on new and unused goods should be the actual cost of production plus a reason-able profit* This provision was repealed in 1922 and later in the same year a new clause was enacted whereby the Minister of Customs and Excise might in the ease of natural products be authorized to value goods for duty purposes. Under this method of valuation "dumping" might not be dumping in the proper usage of the term* In popular usage, dumping has taken on a variety of meanings, viz: when a product is sold for less to Canada than in the country of origin, when it is sold for less than the cost of production, when in times of severe competition the price is forced by foreign supplies below what is considered a fair level. In this discussion, the term "dumping" will be taken to apply to the condition under which the Tariff and Customs provisions of the Statutes of Canada would cause the assess-ment of a special or dumping duty* OF THE CANADIAN FRUIT AND VEGETABLE INDUSTRY. THE OF IMPORTS AND EXPORTS. COMPETING AND NON-COMPETING. In any discussion of a tariff problem in relation to a particular indnstry, the extent of that industry should be known, as well as the amounts of exports and imports of a competing and non-competing nature. The Investment in Fruit and Vegetable Production. Area 1911 1921 Decrease and Acres Acres Increase Orchard 403,596 297,055 (d) 106,543 Vineyard 9,836 7,090 (d) 3,746 Small Fruit 17,495 17,741 (i) 246 430,927 321,884 (d) 99,043 Vegetables 64,092 Greenhouses 234 (9,980,369 sq. ft.) Total 386,210 Capital Invested. Estimating the average value of fruit and vegetable land at $300.00 per acre^ the investment would be: 385^976 ^ 300.00 . $115,792,800.00 and with the value of the equipment estimated at $1500.00 per farm, this would be 84,514 @ §1500.00 - $126,771,000.00. With the value of greenhouses at §1.50 par sq. ft., there is **5 ** an additional 9,960,369 <3 $1.50 = §14,940,553.00. This makes a total investment in land, equipment and greenhouses of $257,504,353.00. This total is sufficiently large to compel attention and to make worth while a discussion on any tariff problem relative to the fruit and vegetable industry. Value of Production (on the farm). 1921 Orchards $ 19,146,681.00 Grapes and Small Fruits 7,807,720.00 Vegetables 26,684,574.00 Greenhouse Products 1,247,954.00 $ 54,886,929.00 Since 1921 the orchard production in British Columbia has steadily increased in Quantity until this past year,when the production was equivalent to that of Ontario and Nova Scotia combined. This has, however, not prod-uced a greater total value, for the total value of orchard fruits in 1926 was #17,391,194.00, being lower than that of 1921. The Lack of Progress in the Fruit and Vegetable Industry. Number of Persons Employed or Residing on Fruit and Vegetable Farms 1911 1921 Average number of inhabitants per farm Total number of inhabitants 5.7 6.18 Decrease Total Farms of 1 to 50 acres 157,445 126,771 30,674 Estimating three-quarters as being fruit and vegetable farms 118,083 95,079 23,004 t^*' 673,073 587,588 85,485 (2.) (1.) During the same period, the number of all occupied farms was increased by 28,761 or 4.22 per cent., indicating that the trend was from fruit and vegetables to some more prosperous branch of farming. (2.) During the same period the rural population Increased by 502,495. Population of Canada Urban Rural 1911 1921 Increase 3,272,947 4,352,122 1,079,175 3,933,696 4,436,361 502,665 **7 ** ecrease in the Number of Orchard Trees and in the " i,*3%en of Small Fraits. Number of Trees 1911 1921 Decrease Apple Trees 16,217,176 12,482,332 3,754,844 Peach Trees 1,895,647 1,196,221 699,426 Pear Trees 967,242 673,902 293,340 Plums and Prunes 1,712,350 1,252,173 460,177 Cherries 1+237,074 886,587 350,487 5,558,274 Small Fruits -Products 1910 1920 Strawberries (qts) 18,686,662 15,658,346 3,028,316 Currants and Gooseberries (qts) 3,830,609 1,983,834 1,846,775 Other Small Fruits (qts) 9,000,208 843,407 8,156,801 The value and importance of the fruit and vegetable industry noticeably declined from 1911 to 1921. Recent be that trends show no opposite tendency, although it may/ rather than continued decline, it is now ;iiore in a stationary state. During the ten year period of 1911 to 1921, the imports of various fruits and vegetables increased 2 per cent, to 300 per cent, over the figures obtaining in 1911. The tendency has been a shifting from fruit and vegetable farms to farms of other types, and an increase in the amount of imports. This nay have been in part due to the working out of the principle of comparative advantage, but is in doubt in large measure due to the severe competition from -8-the and vegetable industry of the Westarn United States, where expansion has been tremendously rapid. During 1921, a substantial measure of protection was afforded the apple growers when 90 cents a barrel was placed as the tariff on apples* Since that time no important tariff measures have bean instituted in support of the fruit and vegetable industry. Should the industry decline still further, it is important to consider such measures as the Dump Duty in order that vested interests will not be too severely injured through glutted markets and price slaughtering from foreign dumping* **9 ** Imports and Exports of Fruits and Vegetables, Competing and Non-Competing. The following tables set forth in detail the imports into Canada of fresh, dried or preserved fruits and vegetables, of kinds produced and not produced in Canada* FRUIT AND VEGETABLE IMPORTS FRESH FRUITS: (a) OF A KIND PRODUCED IN CANADA: ( 1 ) COMMODITY Apples - Bbls. - Lbs. Apricots ) Nectarines) Quinces ) Lbs. Pears ) 1911 Quantity 190,765 29,571,675 8,927,486 Berries - wild - not shown in lbs. ( 2 ) (3) Blackberries ) Gooseberries ) Raspberries ) Lbs. Strawberries ) Cherries - Lbs. Currants - Lbs. Grapes - Lbs. Melons - No. - Lbs. Peaches - Lbs. Plums - Bu. " - Lbs. 3,022,457 519,359 1,960 6,232,286 1,196,668 1,495,860 8,971,460 97,244 5,834,460 1921 Quantity 139,199 21,575,845 2,581,651 866,186 2,647 7,702,350 3,268,321 4,085,276 10,928,262 106,464 6,387,840 1926 Quantity 150,580 33,380,200 11,504,657 22,863,321 3,207,335 501,051 217 12,565,121 3,774,596 4,718,245 14,898,566 190,754 11,445,240 Other Fruit - not shown in lbs. TOTAL POUNDS - 64,576,903 65,634,694 93,579,296 INCREASE - - 1,057,791 27,944,602 (1) - 155 Lbs. per Bbl. (2) - " " Melon. (3) - 60 " " Bu. 1911 Quantity (b) OF A KIND NOT PRODUCED IN CANADA: Bananas, bunches 2,163,574 Cranberries, Bus* 32,351 Other fruits not shown in quantities. 1921 (1) Quantity 2,054,607 43,080 1926 quantity 2,703,432 51,895 ( 1 ) Bus* per Bbl. (a) OF A KIND PRODUCED IN CNADA: COMMODITY Apples Apricots ) Quinces ) Nectarines ) Pears ) Berries - wild Blackberries ) Gooseberries ) Raspberries ) Strawberries ) Cherries Currants Grapes Melons Peaches Plums Other Fruit 1911 Value 655,245 294,182 5,633 343,767 67,949 211 349,597 104,666 299,909 239,899 28,965 1921 Value 729,421 10,240 515,487 168,160 355 846,448 335,144 583,401 404,534 22,933 1926 Value 800,059 664,295 1,065,687 10,161 613,572 81,071 38 826,531 412,600 643,001 495,035 64,977 $2,390,073 330,418 ^5,012,732 $1,940,345 $ 682,314 1921 Value 1926 Value 1911 Value (b) OF A KIND NOT PRODUCED IN CANADA: Bananas 2,054,674 5,257,135 4,277,828 Cranberries 100,081 208,521 205,204 Guavas ) 1,419 10,875 9,607 Mangoes ) Lemons ) 716,031 1,333,185 1,346,696 Limes ) Oranges ) 3,186,252 7,115,667 8,331,042 Grapefruit ) Pineapples 283,846 445,523 520,165 Total Value $6,347,303 $14,369,906 $14,690,542 Increase - § 8,022,603 ^ 320,636 ta) OF A KIND PRODUCED IN CANADA: ' FRESH VEGETABLES: COMMODITY 1911 1921 1926 Quantity quantity Quantity Potatoes, Bu* 387,515 466,069 " Lbs* 23,250,900 27,964,140 26,129,680 Tomatoes, Bu. 112,474 293,760 329,781 " Lbs* 5,623,700 14,688,000 18,489,050 Vegetables, n.o.p., not shown in lbs* TOTAL POUNDS - 38,874,600 42,652,140 42,618,730 INCREASE exclusive of other vegetables 13,777,540 - 33,410 -12-9F A KIND PRODUCED IN CAKADA: COMMODITY 1911 Value $413,443 240,333 999,936 Potatoes Tomatoes Vegetables, n.o.p. TOTAL VALUE INCREASE (b) OF A KIND NOT PRODUCED IN CANADA; Quantity Potatoes, Sweet, Bu. 43,723 INCREASE -Potatoes, Sweet, Value. $51,084 1921 Value 1926 Value $531,492 $481,933 847,920 1,110,587 1,745,011 2,559,744 $3, 124,423 $4, 152, 264 §1, 471,711 $1, 027, 841 Quantity 56,603 12,880 Value. $108,783 Quantity 51,586 5,017 Value. ^114,152 INCREASE - $ 57,699 $ 5+369 -13-FRUITS - DRIED. CANNED OR PRSSERV3D* (A) OF A KIND PRODUCED IN CANADA: 1911 1921 1926 COMMODITY Quantity Quantity Quantity Dried Apples lbs. 140,094 1,102,853 1,174,553 Apricots " - 686,862 989,664 Prunes & Plums " 9,301,561 10,494,520 14,776,062 Peaches " - 1,154,843 1,621,878 Fruits Canned " (1)4,501,874 13,482,596 9,032,563 Jellies, Jams Etc. 3,946,735 1,434,109 2,283,599 Total Pounds 17,890,264 28,355,783 29,878,319 (1) - 85% of total imports^ (B) OF A KIND NOT PRODUCED IN CANADA: Increase - 10,465,519 1,522,536 Currants lbs* 11,000,240 4,934,917 4,389,109 Dates " 3,543,081 4,097,068 11,727,978 Figs * 4,759,673 2,670,145 4,694,301 Raisins " 21,023,665 24,979,194 33,811,732 Fruits Canned " (1) 794,440 5,900,942 9,101,354 Total Pounds 41,121,107 42,582,266 64,224,474 Increase - 1,461,159 21,642,208 (1) - 15% of total imports. **14 ** (A) OF A KIND PRODUCED IN CANADA: Value Value Value Dried Apples 11,260 39,043 35,144 Apricots * 164,497 150,634 Plums & Prunes 459,985 1,459,102 1,109,827 Peaches - 210,351 171,216 Fruits Canned (1) 226,441 1,961,693 884,133 Jellies, Jams etc. 316,793 397,745 332,615 Total Value $1,014,479 $4,232,431 $2,683,569 (1) - 85% of value of total imported, (B) OF A KIND NOT PRODUCED IN CANADA: Increase - $3,217,952 $1,548,862 Currants 551,562 849,893 334,263 Dates 159,647 603,346 792,204 Figs 202,384 337,432 418,504 Raisins 1,139,983 5,482,589 2,325,885 Fruits Canned (1) 39,960 833,754 642,355 Total Value $2,093,526 $8,107,014 $4,512,611 Increase - $6,014,478 $3,594,403 (1) 15% of value of total imported. -15-VEGETABLES - CANNED, DRIED ETC: (A) OF A KIND PRODUCED IN CANADA: COMMODITY 1911 1981 1926 Quantity Quantity quantity Tomatoes and } lbs.7,465,909 8,293,193 13,756,678 other Vegetables) canned. ) Piekles & Sauces *( 1)5,169,180(1)2,998,270 3,951,340 12,635,089 11,291,463 17,707,918 Decrease - 1,343,626 (increase) 6,416,455 (1) 10 lbs. to the gal. Value Value Value Tomatoes and ) other Vegetables) - 421,909 1,124,041 1,235,560 canned. ) Piekles & Sauces - 601,373 500,148 529,805 Total Value #1,023,282 $1,624,189 $1,756,365 Increase - #600,907 $141,176 NOTE Although the trade returns do not itemise the kinds of canned vegetables, pickles and sauces it is pre-sumed that practically, if not all, are of a kind produced in Canada. - 1 6 -TOTAL IMPOSTS: OF A KIND PRODUCED IN CANADA: 1911 1921 Fresh Fruits 2,330,073 4,350,418 Fresh Vegetables 1,653,712 3,124,423 Fruits,,preserved,ete. 1,014,479 4,232,431 Vegetables, Canned, 1,023,283 1,624,189 5,012,732 4,152,264 2,683,559 1,756,365 ^6,081,546 13,311,461 13,604,930 OF A KIND NOT PRODUCED IN CANADZ: Fresh Fruits 6, 347,303 14,369,906 14, 600,542 Fresh Vegetables 51,384 108,783 114,152 Fruit{ 9, Canned, ete. 2, 093,536 8,107,014 4, 512,611 TOTAL IMPORTS §8, 22,585,703 19, 227,305 14, 563,489 35,897.164 832,235 EXPORTS; FRUITS Apples, Bbl. $ Berries, $ Other Fruits, $ Dried, lbs. $ Canned or Preserved,Lbs. $ Cider, Gals. Juices & Syrups n.o.p., Gals. $ Total Fruits, $ VEGETABLES Beets, sugar, Ton Potatoes,Bu. Turnips, Bu. $ Canned, Lbs. $ Pickles, $ Other, $ Dried, Lbs. § Total Vegetables, $ TOTAL EXPORTS: Fruit Vegetables TOTAL, $ **17 ** 1911 533,658 1,756,834 83,921 136,177 2,844,267 184,707 1921 1,358,499 8,299,099 377,230 570,252 2,098,628 382,777 1926 1,388,493 6,250,186 497,472 109,258 4,410,026 458,890 220,157 184,792 87,707 751,520 ?2,544 52,565 7,613,172 658,097 46,566 28,337 381,376 383,260 8,385,500 2,520,553 10,393,422 994,348 682,592 1,477,994 808,611 28,797 243,193 11,502 103,175 5,036,769 9,657,612 1,786,755 460,506 4,779,126 408,203 152,123 219,005 59,747 45,097 270,782 7,083,149 9,327,274 2,449,535 639,316 10,341,023 668,434 834,548 289,245 1,534,228 10,841,366 12,019,599 3,520,553 1,534,228 4,054,781 10,393,432 10,841,366 21,334,788 8,385,500 12,019,599 20,405,099 **18 ** Available statistics are not as complete regarding exports as they are regarding imports* Those detailed above, however, show that there is a considerable export trade in fruits and vegetables, which in recent years has exceeded in amount the imports of a kind produced in Canada* This fact may suggest that there is already a greater supply of produce than can be utilized for hom consumption, and that there is little need of tariff measures of any sort. It must be recognized that in a country so vast as Canada, there must be a certain amoant of importing and exporting of the same commodity if it be a natural product, dua to geographical situation. The expenses of a long rail haul may be more than offset by buying from a nearby point in the United States and allowing the distant point to export by water* An example of this might be an import by the cities of Ontario of apple from eastern New York, while British Columbia could export to Great Britain by steamship through the Panama Canal. Imports of American produce are much less than they might otherwise be, were it not for the determination of the Canadian producer to market as much as possible in his own country. This has been particularly evident in late years in the ease of British Columbia fruit on the prairie provinces. At one time the market was largely held by American produce. British Columbia has gradually increased her hold on this -19-market until she now virtually controls it* A very excellent example is afforded in the marketing of last year's crop (1928). Through the activities of the Interior Committee of Direction which has a certain price fixing function under the Produce Marketing Aet, the amount of apples imparted into the prairie provinces was negligible. This was made possible by the constant arranging of prices by the Committee of Direction, which would successfully sell Canadian fruit against the competition of American shipping houses. Were it not for activities sueh as these and the prompt usage of markets information, there is no doubt but that the amount of imports would be far greater than is the case at present. A further reason for importations is the difference in the time of maturity of the crops in Canada and the United States. With most fruits and vegetables, two seeks would be a fair average of the difference in growing seasons. With some kinds of produce, sueh as strawberries from Georgia, tomatoes from Mexico and cherries and melons from California, the differences are mueh greater. The public appetite for new supplies of any fruit or vegetable is considerable, particularly in the early summer. With foreign supplies available before the Cansdi n crop is ripe, importations take place. As a result of this difference in season, the market is satiated before home gro?<n supplies are completely used up. **20 ** [ Perishables must be processed, as in the canning or freezing of strawberries, while sore lasting products,such as apples, may be exported. The necessity for taking such aetion works a hardship on many producers, sinee they, in a sense, sell the "left overs". This difference in season is in large measure responsible for there being imports and exports of the same commodities. UBC Scanned by UBC Library THE HISTORY OF THE DUMP DUTY* The enactments, amendments and rescinded portions of the Customs Act% the Customs Tariff Act and the Orders in Council relating thereto, of the Anti-Dumping Legislation in Canada, from their first passage to the present time* The following section, while lacking in interest, is written to give properly the order and material of the various Aets, and the status of these Acts. At the present time the "Dump Duty" is largely misunderstood by those who attempt to discuss it, and, regrettable as the fact is, the members of the Dominion House of Parliament seem little better qualified in this respect than the man in the street. In-so-far as possible, with the material which has been available, I have followed a striet chronological order and have given an exact definition of the various Acts, Amend-ments and Orders in Council. In the year 1904, the Anti-Dumping Legislation was first passed in Canada* At that time the leader of the Government was the famous Sir Wilfred Laurier, and the Honorable W* S* Fielding was Minister of Finance. On June 7, 1904, the Minister of Finance in bringing down the proposed changes to the tariff advocated the Dump Duty* On that occasion he said, in part: "As time rolls on, changing conditions arise, and it is the duty of the government and of all men in parliament to observe these changing conditions and adapt their tariff **22 ** legislation to the conditions which may confront us. In the world's trade, many new conditions have grown up, and we are particularly interested in the conditions which have arisen in the great high tariff countries. We cannot meet these by mere academic discussions of the principles of free trade or protection. Mr. Cleveland, on a memorable occasion, used an expression which is very frequently quoted,'It is a condition and not a theory which confronts us.* We recognize that fact in tariff matters as in many other matters, and we say that many new conditions have arisen and are arising of which we are obliged to take notice* In low tariff coun-tries or in free trade countries, Great Britain for example, these disturbing conditions seldom exist. England conducts her business generally upon rational lines. She sells at a profit, and what is known as the system of dumping or slaughtering is hardly known in connection with British trade. But, Sir, in the case of all high tariff countries these objectionable conditions arise. It seams to be the inevit-able result of high tariff policy that monopolies, trusts and combines will flourish. They may possibly exist in low tariff countries, but they flourish under a high tariff policy as they could not possibly flourish under other con-ditions. We find to-day that the high tariff countries have adopted that method of trade which has not come to be known as slaughtering, or perhaps the word more frequently used is dumping; that is to say, that the trust or combine, having obtained command and control of its own market and finding that it will have a surplus of goods, sets out to obtain command of a neighbouring market, and for the purpose of obtaining control of a neighbouring market will put aside all reasonable considerations with regard to the cost or fair price of the goods; the only principle recognized is that the goods must be 30ld and the market obtained." And further on, he said: "l.e propose therefore to Impose a special duty upon dumped goods. That special duty, subject to a limitation which I will mention, will be the difference between the price at which the goods are sold, the sacrifice price, and the fair market value of those goods as established under the customs law of the country. But this is subject to a qualifi-cation, they are subject to a limitation. If an article is sold in the country of production, then that will be the evidence of dumping, and the difference between the fair market value in the country of production and the price at which it is sold—or if hon. gentlemen prefer, dumped—that difference shall constitute the special duty, within the limitations. As regards certain articles upon which our **23 ** duties are low and upon which we grant protection in the form of bounties as well as in the form of duties, as respects certain of these items in the iron schedule chiefly, the limitation shall be 15 per cent ad valorem; that is to say, that special duty shall be the difference between the fair price and the dumping price provided it shall not exceed 15 per cent ad valorem. The additional duty over and above the present duty I call the special duty, and it is so called in our resolutions, Then in case of other articles, the limit is 50 per cent of the present duty. It is a duty over and a above the existing duty, and it is limited by these two con-ditions: In one case, or in a few cases of like character, the limitation is that it shall not exceed 15 per cent, and in the other ease it shall not exceed one-half of the duty." On June 28, 1904, the Honorable . S. Fielding moved in the Bouse of Commons the following: "Resolved, that whenever it shall appear to the satisfaction of the Minister of Customs or of any officer of customs authorized to collect customs duties, that the export price or the actual selling price to the importer in Canada of any imported dutiable article, of a elass or kind made or produced in Canada, is less than the fair market value thereof (as determined according to the basis of value for duty provided in the Customs ^ct in respect of imported goods subject to an ad valorem duty), such article shall, in addition to the duty otherwise established, be subject to a special duty of customs equal to the difference between such fair mar-ket and said selling price; provided, however, that the special customs duty on any article shall not exceed one-half of the customs duty otherwise established in respect of the article, except in regard to the articles mentioned in items 224, 336, 228 and 231 of schedule A. the special duty of customs on which shall not exceed fifteen per cent ad valorem, nor more than the difference between the selling price and the fair market value of the article as aforesaid. "The expression 'export price or 'selling price' herein shall be held to mean and include the exporter's price for the goods, exclusive of all charges thereon after their shipment from the place whence exported directly to Canada. "The foregoing provisions respecting a special duty of customs shall apply to imported round rolled wire rods not over three-eighths of an inch in diameter, notwithstanding that such rods are on the customs free list; provided, however, that the special duty of customs on such wire rods shall not -24 exceed fifteen per cent ad valorem* "If at any time it shall appear to the satisfaction of the Governor in Council, on a report from the Minister of Customs, that the payment of the special duty herein provided for is being evaded by the shipment of goods on consignment without sale prior to such shipment, or otherwise, the Governor in Council may in any case or class of cases autho-rize such action as is deemed necessary to collect on such goods or any of them the same special duty as if the goods had been sold to an importer in Canada prior to their ship-ment to Canada* "If the full amount of any special duty of customs be not paid on goods imported, the customs entry thereof shall be amended and the deficiency paid upon the demand of the collector of customs* "The Minister of Customs may make such regulations as are deemed necessary for carrying out the provisions of the foregoing sections and for the enforcement thereof* "Sueh regulations may also provide for the temp* orary exemption from special duty of any article or class of articles, when it is established to the satisfaction of the Minister of Customs that such articles are not fiade In Canada in substantial quantities and offered for sale to all purchasers en equal terms* "The special duty aforementioned shall not apply to goods of a claas subject to excise duty in Canada*" An amendment was moved by the Minister of Finance _ on August 6, 1904, to insert after "equal terms"% at the end of the last paragraph but one, referring to the regulations whichmay be made in carrying out these provisions, the fol-lowing! "Such regulations may further prov ide for the exemption from the special duty of any article whereon the duty in schedule A* is equal to fifty per cent ad valorem or upwards,, or where the difference between the fair market value of the goods and the selling prica thereof to the importer as aforesaid amounts only to a small percentage of their fair market value." This section of the Customs Tariff Act appears the with almost/identical wording given above in the Statutes of Canada, 1904, Chapter 11, Section 19, Customs Tariff. In the Statutes of 1907, the wording was changed somewhat, although making the same provisions* This then, became the since famous Section 6 of the Customs Tariff Act, the f irst paragraph of which is so often quoted, and is reproduced below, reading as follows: "6. In the case of articles exported to Canada of a class or kind made or produced in Canada., if the export or actual selling price to an importer in Canada is less than the fair market value of the same article when sold for home consumption in the usual and ordinary course in the country whence exported to Canada at the time of its exportation to Canada, there shall, in addition to the duties otherwise established, be levied, collected and paid on such article, on its importation into Canada, a special duty (or dumping duty) equal to the difference between the said selling pries of the article for export and the said fair market value thereof for home consumption; and such special duty (or dumping duty) shall be levied, collected and paid on such article, although it is not otherwise dutiable. "Provided that the said special duty shall not exceed fifteen per cent ad valorem in any case." By itself this clause alone was not effective and further assistance is given in the Customs Act, in certain sections of which a basis is laid down for the appraisal of goods for duty purposes* The dumping duty was originally designed to prevent dumping of manufactured goods and no special provision was made for the appraisal of the various market values of per-ishable goods such as fruits and vegetables.' Discussed at greater length in a later section. **26 ** Strong representation induced the Dominion Govern-ment to amend the Customs Act in June, 1921, as follows: "Add to Clause 7, Section 40, a new subsection (2): "(2) Provided that the value for duty of new or unused goods shall in no case be less than the actual cost of production of similar goods at data of shipment direct to Canada, plus a reasonable profit thereon, and the Minister of Customs and Excise shall be the sole judge of what shall constitute a reasonable profit in the circumstances." This new Clause set forth a definite basis for evaluation which during the fruit and vegetable shipping season of 1921 was effectively used. In 1922, under strong pressure from those who were averse to any tariff assistance, the above Clause was repealed. Again, in 1922, urgent representation on the part of those favoring tariff assistance caused the Government to amend the Customs Act by inserting Clause 47 A (now Clause 43 of the Revised Statutes) which reads as follows: "If at any time it appears to the satisfaction of the Governor in Council on a report from the Minister of Customs and Excise, that natural products of a class or kind produced in Canada are being imported into Canada, either on sale or on consignment, under such conditions as prejudic-ially or injuriously to affect the interests of Canadian producers, the Governor in Council may, in any case or class of cases, authorize the Minister to value such goods for duty, notwithstanding any other provisions of this Act, and the value so determined shall be held to be the fair market value thereof." No action wa3 taken under this Clause until Order in Council No* 1088 was passed on July 15, 1926, which authorized the Minister of Customs and Excise to value fruits and **27 ** vegetables for duty. The fixed values were set by Appraisers' Bulletin No. 3209, issued July 14, 1926; end further Bulletins were issued on July 20, 1926 and September 2, 1926. It is said that the fruit and vegetable trade welcomed the public-ation of these values as it removed any doubt as to whether Dumping Duties would or would not be collected, and had a stabilizing effect upon the market. As the Canadian-grown supply of fruits and vegetables became exhausted, the values fixed were cancelled so that they were only applicable during the time when Canadian products of a like kind were available in substantial quantities. During the season of 1927, Appraisers' Bulletins fixing the fair market values of fruits and vegetables were issued on June 1, June 14 and June 24. In these Bulletins, the period during which each commodity of Canadian production was available in substantial quantities was set out so that the values were effective only during such period. Where products were imported and Special or Dumping Duty assessed, if the importer could prove that Canadian products of a like kind were not available in substantial quantities to his market, the Department of National Revenue favorably consid-ered an application for the refund of sueh Special Duty. Early in the Session of the House of Parliament for 1928, Mr. E* J. Young, Member of Parliament for Leyburn, Saskatchewan, and a leader of the Free Trade group in the **28 ** Heuse, placed on the Order Paper of the House of Commons a resolution, reading as follows: "That in the opinion of this House, Section 43 of the Customs Act, Revised Statutes, 1927, Chapter 42, giving the Governor in Council power to authorise the Minister of Customs and Excise to place a fixed value for Duty on imports of natural products of a class or kind produced in Canada should be repealed." This resolution was later withdrawn but on March 19 and March 30, the Orders in Council which gave the Minister of National Revenue authority to fix values on natural prod-ucts for Duty were cancelled and on March 28, the Department of National Revenue issued a Bulletin cancelling all values fixed by the Minister. Without the Orders in Council authorizing the Minister to make valuations for duty purpose, the Dumping Duty was applied strictly as under Section 6 of the Customs Tariff Act. In the agitation which ensued following the cancel-lation of the Orders in Council referred to above, a good deal of attention was given to the Dumping Duty and the De-partment of Justice ruled that the provisions of the Dumping Clause as contained in the Customs Tariff Act (Section 6) and of the Valuation Clause as contained in the Customs Act (Sect-ion 43) did not permit of the broad interpretation which they had been given—that while the Dumping Clause was still good to provide against dumping in the narrow sense, the Minister had no power under the Valuation Clause to deal with dumping in the broader sense. **29 ** Sinee the time of the cancellation of the Orders in Council as referred to above, and the Ruling brought down by the Department of Justice, the Dumping Duty has bean applied as under Section 6 of the Customs Tariff ^ct. To my knowledge no further Acts, Amendments or Orders in Council have been passed relative to this subject. UBC Scanned by UBC Library **30 ** TRE APi&ICATIQN OF THE ANTI-DUMPING DUTY IN ITS VARIOUS FORMS. Strictly speaking, there has been since 1804, only one Anti-Dumping Duty. In the previous section, it was shown that the Dump Duty proper is Section 6 of the Customs Tariff Aet. Various interpretations have been given to this section by means of valuation clauses in the Customs Act. All these clauses which may, at different times, have given different interpretations, are, however, together with Section 6, referred to as the Dump Duty. The original Dumiing Clause,as enacted in 1904, was designed to apply to manufactured goods. It was made quite clear by the Honorable S. Fielding, when introducing the clause, that what he had in mind was a dumping of manu-factured articles, in respect of which dumping in the narrow sense of the term had occurred and was feared for the future. Sir Wilfred Laurier, speaking before an audience in Toronto in 1907, referred to the Dump Duty and is quoted as having given the same expression as that of Mr. Fielding. Section 6 provides that a special or Dumping Duty shall be assessed when a product is sold for a lesser price in Canada than in the country of origin. With such a provision the protection to such natural products as fruits, vegetables or poultry products is almost of scant value. These products are highly perishable and of necessity are quite rapidly moved through the channels of distribution. Usually by the **31 ** time that dumping has been acted upon, the goods are in the hands of the retailer or consumer* The duty is then paid by some middleman who already has sold the goods, yet may lose on the transaction because of the duty exacted. This destroys the confidence of the dealers and causes them to demand a wide margin for operating. With manufactured products, the sale price in foreign countries may at times be difficult to ascertain and this is especially so with atural products. On such goods no definite priee ranges are set, these often selling for what they will bring. This again makes the operation of the Dump Duty,as under Section 6, difficult to administer. There are many ways in which the duty may be evaded. As an example, there might be sub rosa rebates, that is, to buy at a certain price and the shipper return a portion of the receipts to the buyer. This would, of course, be more advantageous with those items having a specific duty than with those under an ad valorem duty. As the Customs generally assess duties, I believe on invoice values, an invoice can be made containing higher prices than it is the intention of the buyer to pay the seller, on some preconceived arrangement of their own. The chief objection to the original Dumping Duty was that goods were brought in and sold before action could be taken, for the Clause states that they must be sold for a **32 ** lesser price In Canada. Such sales may satisfy a portion or all of the market. The damage as far as the Canadian producer is concerned has then already been done, no matter how much duty may be collected. Having a perishable product, the grower must move it, often at very low prices. The greatest objection has been that the remedy was ap lied after the disease was contracted und that which was wanted was a preventive measure rather taan a curative one. The original clause was the only one from 1904 to 1921. In the latter year, an evaluation clause as quoted in the previous section was added to the Customs Act. This provided that the value for duty purposes was the cost of production plus a reasonable profit. Naturally, this pro-vided ample protection, as it is the same in principle as the scientific tariff. When goods were sold or invoiced for less than their cost of production, they were considered as dumped goods and a special or dumping duty was assessed. This interpretation of the Dump Duty was applied throughout the 1921 shipping season, and it is said, applied effectively. In 1922, the above clause was repealed and a new clause enacted whieh provided that (in the case of natural products) the Minister of Customs and Excise might be author-ized to set fair market values of goods for duty purposes, if if appeared that foreign goods of a class or kind produced in Canada were being imported under conditions a3 to affect **33 ** prejudicially or injuriously the interest of the Canadian producer. As has been before mentioned, no action was taken on this clause until 1986, when the Honorable H. H. Stevens was Minister of Customs. During the period 1922 - 1925 (inclusive} the status of the Dump Duty to the producers of natural products was Section 8 of the Customs Tariff Act. In 1926, the Minister of Customs was authorized to fix values for duty. This condition prevailed throughout the shipping seasons of 1926 and 1927, Appraisers' Bulletins being Issued several times fixing values. The fair market value was not always a market value at all but was what the Minister might consider a fair value in order to give protection to Canadian pr oducers. The value fixed might have no re-lationship whatever to the actual selling price at the time of export in the country of origin. It has been said that the Dumping Duty as applied under this clause was misused and did not really carry out the proper purpose of a Dumping Duty. It is true that there were cases of this, for instance, values were set upon lettuce and,unfortunately, allowed to remain throughout a whole year. On the other hand, it has been stated that the fixing of values and the publishing of bulletins containing these values were welcomed by the trade since any doubt was removed as to whether Dumping Duties would or would not be collected, **54 ** and tended to have a stabilising effect upon the market. There are no statistics which would go to show that prices of fruit in Canada were definitely increased or not by the application of fair market values set by the Minister of Customs. Instances are cited by those pleading for each side of the question; these are difficult to judge. If the fair market values set are really fair, then there is no reason to suppose that the Dumping Duty is being applied In any other way than for its intended purpose. There is, however, a considerable difficulty in maintaining a fair administration under such a clause, and as has been ruled by the Department of Justice, the application of such a clause is illegal, accord-ing to the status of Section 6 of the Customs Tariff Act. During the past year (1928),the Dumping Duty has again been on the same basis as in 1904-21. Protection against dumping, as discussed previously, is, on this basis very inadequate. During the past shipping season, several instances of severe competition were occasioned, which under Section 6, cannot properly be termed dumping, yet is so con-sidered by the Canadian producer. It is interesting to note that during the period of 1904 to the present, there have been but three years in which the operations of the Anti-Dumping Duty have been con-sidered by the Canadian producer as being adequate. These years were 1921 under the "Cost of Production" Clause and **35 ** 1986 and 192? under the "Fair Market Value" Clause* Protests in reference to the lack of effectiveness of the present Dump Duty have been particularly vigorous during the past season, due perhaps, to the fact that one misses greatly the thing one had, but not the thing one did not have, whieh latter was previously the ease. UBC Scanned by UBC Library **39 ** TS.S TYPE OF PROTECTION DESIRED BY THE FRUIT AND VEGETABLE GROWAHS AND SOME ARGUMENTS IN SUPPORT. As has been pointed out, the Anti-Dumping Duty as it at present obtains under Section 6 of the Customs Tariff Act does not provide the protection against dumping which is suitable to the conditions pertaining to natural products, particularly fruits, vegetables and poultry products. The type of protection desired is one that will tend to prevent dumped goods from entering into the markets of Canada, rather than is now the case, of goods entering, paying the duty, and breaking the market. This was partially prevented during 1926 and 1927. As to the type of protection from dumping,the fruit and vegetable growers are agreed on one point—that it should be greater than at present. Some believe that a Dump Duty based upon price discrimination between national markets, if it be so legislatively framed as to be effective quickly, would be sufficient, whether the power rested with Parliament, the Governor General in Council or at the discretion of the Minister of National Revenue. Many feel that valuations based upon the cost of production should be the basis for dump duty protection. This, however, is unsound, as it allows no provision for changes of valuation during periods of low or high prices, the vicissitudes of the business cycle which the farmer must experience. Should the cost of product-ion **37 ** be chosen as a basis, a choice must first be made as to whether the cost is that at home or abroad. The cost of production at home would appear to be unfair as it contravenes the law of comparative advantage, and cuts off from the Can-adian consumer the opportunity of obtaining goods from mora efficient foreign production. If the cost of production abroad is chosen, the purpose of the duty is largely negated, for to cite extreme cases, the Canadian producer cannot hope to compete in cost with such articles as Egyptian onions or Mexican tomatoes. During the past year, discussion of the Dump Duty has brought forward a new term and a new conception of the protective needs. This has been called a "glut" duty, and involves periods of severe price competition rather than the thought of dumping. In heavy crop years prices are lowered by large supplies, not only in Canada but particularly in the United States as well. This was evident in 1928 when the threat of American importations of apples kept the prices at such a level on the prairie provinces that it is estimated the British Columbia grower of apples will receive approxi-mately one-half of his cost of production. Uere prices to be permanently low, it would be to the advantage of the con-sumer to have no protection afforded the Canadian producer under these conditions. Heavy importations under "glut" con-ditions would seriously injure the Canadian producer, forcing **41 ** many out of the industry* Conditions would be reached where fruit might be relatively cheap in one year and very expen-sive the next. In support of the idea of a "glut" or emergency duty, the producers point out that although fruit might be cheap in the heavy crop years of the American producer, and Canada created as a surplus market, when supplies were short the consumer in Canada would go begging for his fruit, .^n ill-ustration of this is afforded in the experience of the past two years. Supplies were plentiful during 1928 and prices low in Canada, due not only to a large home grown supply, but also to the attempt of the western United States to market a portion of their surplus in Canada. The reverse was true in 1927. Crops in that year were smaller and the buying power of the American markets was high. Apples,in particular, sold for a greater amount there than in Canada. Had there been no home grown supplies, the Canadian consumer would have, of necessity, been forced to pay dearly. An even greater implication is made at times, namely, that were there little or no Canadian industry, American shippers would consciously endeavor to extract the extreme price from the Canadian market. So much for the support of a glut duty. In consid-eration of an ordinary Dumping Duty, perhaps slightly more protective than is its status at present, t -ere are a few **39 ** arguments which are eminently fair and one or two others which should receive consideration. In a sense, and particularly is this true of British Columbia, fruit growing is an infant industry. Pro-ducts to the south of us are products of an older culture. This older culture provides a greater age in orchards and the accompanying greater productivity. More time has been afford-ed to eliminate poor producing and undesirable varieties. Experience, an asset of extreme value in the industry, has to a greater extent been gained by the American grower. Marketing and distributing organisation likewise have the benefit of a longer time to acquire knowledge, and a more lengthy period over which to spread their cost of being built up. When the Canadian industry, and in particular, the industry,as it obtains in British Columbia, has had a similar period of time in which to develops, it can confid-ently be expected that cost ^ill be similar. A survey con-ducted in the Wenatehee and Yakima districts of Washington in 1926 shows costs to be not a great deal less than is found to be the ease in a survey conducted over several years in the Qkanagan and Kootemy districts of British Columbia. Because fruits and vegetables are natural products, consideration must be greater than with manufactured goods. An orchard requires ten y*ars of careful attention before it begins to produce. After that time the production can never be determined^ The action of climate, weather, season, hail, frost, etc,, all operate to make crops large or small* An orchard cannot be shut down, as can a factory, without very serious damage being caused. The grower must stay and produce, or lose all* Some consideration must be given to these facts in determining what the nature of an adequate Anti-Dumping Duty should be. One thing that can never be changed, yet, it is declared, should be provided against, is the difference in season due to climatic influences. Maturity in the aouth comes at an earlier date than it does in Canada. In a market with the taste for the new supplies of each fruit, the Amer-ican goods find a ready sale at good prices. Canadian sup-plies sufficient to fill the needs of the market are later available, only to experience the market partly satisfied coues and prices on a downward trend. As the Canadian crop/on in its height, American goods are being sold at low prices to clean up the balance of their supplies. This indeed works a hardship on the home grower. It is said that the best price the Canadian grower secures in his own market is the lowest price which the American shipper receives. This is partially true* Strictly speaking, under a dumping duty nothing can be done to change this situation, largely because the goods in question are natural products* Another proposal to remedy this condition will be discussed in the next section. Those viewing the protective needs of the fruit and v egetable industry with fair mindedness, feel that the protection afforded at present by the Customs Tariff is suf-ficient, but that there is the possibility of serious loss occasioned by abnormal conditions of supply which must be guarded against. This brings in the idea of an emergency duty. Whether in consideration of the discussion above, it is thought that the Duhp Duty should be so modified as to include provisions to provide for these conditions and con-tingencies, is a matter of opinion. It does seem, however, that some thought should be directed towards this particular problem. -42-THg SEASONAL TARIFF. The Seasonal Tariff is a measure which is distinct-ly different from an Anti-Dumping Duty, but because of its application to some of the conditions discussed in the previous section, will be briefly considered here. When the Seasonal Tariff was first discussed in Canada, and an application made to the Tariff Advisory Board by the Canadian Horticultural Council for its adoption, there was not, the writer's knowledge, any similar provisions or legislation in foreign countries. Today it is stated there are twenty-three countries which have Seasonal Tariffs. This type of tariff is one which is applied during a certain period each year, generally when home supplies of goods are most available. In Canada, the fruit and vegetables producers have had an application before the Tariff Board for a seasonal Tariff for five years. They wish to have an in-creased measure of protection afforded to home grown supplies when such supplies are available. When no Canadian supplies are available, it is no advantage to have protection. The application made would increase present duties to some extent as in the proposed item below: Tariff Item 95 -- Strawberries, Loganberries & Raspberries British Inter- General Preference mediate At Present Blackberries, gooseberries, raspberries, strawberries, cherries ana currants, n.a.p.: the weight of the package to be included in the weight for duty par pound 2^ **43 ** Sritiah Inter- General Preference mediate Proposed Strawberries, loganberries, and raspberries per pound; the weight of the package to be included in the weight for duty. Imported from 1st June to 31st July 3^ This illustrates the type of duty contemplated. One distinet accomplishment would be to remedy in large measure the disadvantage of the Canadian producer be-cause of his later season. While his supplies ware available, a higher duty would protect the home market, but would allow importations at other times. This section is merely to put forward the idea of a Seasonal Tariff and to show how it might apply to some con-ditions at present prevailing. Some of the work demanded at this time, but not fulfilled by an Anti-Dumping Duty might be accomplished under a well designed and properly administ-ered Seasonal Tariff. **44 ** SUMMARY. 1, A definition of "Dumping" is given. 3* The extent of the Canadian fruit and vegetable industry, and the amounts of imports and exports, competing and non-competing, is shown* 3. The history of the Canadian Anti-Dumping Duty is reviewed. 4. The application of the Anti-Dumping Duty in its various forms is discussed. 5. The type of protection desired by the fruit and vegetable growers,and some arguments in support, are given. 6* The Seasonal Tariff is briefly discussed, to show its possible relationship to the ,nti-Dumplng Duty. -45 BIBLIOGRAPHY. British Columbia Fruit Growers* Association: Correspondence, Files and Reports* Canadian Horticultural Council: Circulars, Statements and Memoranda issued during 1928* Dominion Bureau of Statistics: Canada Year Book, 1912, 193a-23, 1927-28. Dominion of Canada: Debates, Bouse of Commons, 1904 - 1928. Dominion of Canada: Statutes of Canada, 1904, 1907, 1921, 1922* Johnson, Neil W*: An Economic Study of Orcharding in Yakima and '.'anatchee Valleys, Washington, U.3*A* University of British Columbia: Files,of the Tree Fruits Survey, Department of Horticulture. Viner, Jacob: Dumping: A Problem in Internation/Trade. -al 0 


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