After five years of fighting an import duty, Thunder Bay's GRK Fasteners will have to wait until early January for a ruling from a Canadian trade tribunal.
But the co-owner and president of the Thunder Bay manufacturer isn't optimistic the Canadian International Trade Tribunal (CITT) will grant the company a product exemption that will keep the company and 40 jobs in place in northwestern Ontario.
“I have zero faith in the system,” said company president Mirco Walther after attending four days of hearings in Ottawa in mid-November. “I would be shocked if the right thing would happen and we got an exemption because the whole system is terrible skewed.”
GRK Fastener was accused by their competitors in 2004 of dumping product into the Canadian market. Dumping is the practice of selling product in a foreign country for less than the cost of making it.
The Canadian complainants said they have their own product lines that are “comparable” or “substitutable” to GRK's and they could potentially be hurt in the marketplace.
GRK's suppliers are in Taiwan. Its distribution warehouse is in Thunder Bay, but as an original equipment manufacturer, the comapny argued its Canadian-patented products are far more expensive than what's available domestically and all its research and development is done in Ontario.
However, it led to the federal government slapping an eight per cent customs tariff on their products, that was later hiked to 170 per cent.
By applying for a product exemption, GRK is seeking relief from the duties that, Walther estimates, has cost them $400,000 over the last five years and more than $500,000 in legal fees defending themselves. The CITT is expected to deliver a decision Jan.6, one day before the expiration of the duty.
The tribunal can either renew the duty for another five years, scrap it, or grant the company a product exemption.
Over four days of testimony, Walther and their lawyer argued GRK's high-quality patented fasteners are the most expensive product on the market and it's not hurting the industry. Other Canadian producers simply don't have the tooling, capacity or know-how to duplicate it, said Walther.
While Walther said they have submitted thousands of pages of evidence and product samples to the tribunal, the complainants have submitted nothing.
“We clearly won every legal argument when it came to closing arguments. No one contested the evidence submitted,” said Walther. “We have mountains of independent, third-party evidence certifying what we're saying and unfortunately it looks like it's not going to be enough.”
“Let's see what happens,” said Cyndee Todgham Cherniak, a Bay Street trade lawyer with Lang Michener LLP, who has handled the GRK case since 2006.
“He's discouraged as with anyone who goes through litigation. It's a tough process for anyone to go through when you have business interests at stake.”
Granting a product exemption is nothing new, she said. There's enough case law to support it.
Todgham Cerniak said the real issue is not the trade tribunal, but the vigorous fight being put up by the Canada Border Services Agency (CBSA). GRK also filed a judicial review application that CBSA improperly increased their duty rates to 170 per cent and made a number of errors in so doing.
“The CBSA is taking every step to make this as expensive as possible for GRK to cite the decision they've made,” said Todgham Cerniak.
Walther is concerned about a technicality raised by opposing counsel that GRK described its product line by its brand names, instead of generic descriptions.
“We're saying how can we do that for a product that is unique and patented? If we dumb it down to be totally generic, they could argue it's the same as our competitors.”
Todgham Cherniak views that was argument as more of a knit-picking tactic, rather than anything based on merit. She couldn't say if it would prove to important or not to the tribunal.
“I generally have faith that the tribunal tries to get the right answer.”
In final arguments, she said patented products and producers that sell at high rates should be considered for an exclusion.
“The unfortunate reality is we've got an inventor with unique products who have been approved for patent under Canadian law that is employing Canadians in a northern community and those efforts being put in jeopardy as result of this case.”
She refused to speculate how the tribunal would rule. Walther said the likely scenario is the CITT will keep things are they are.
“It's unfortunate, but if that's what is going to be the case at which point we'll do what we have to do.”
If the duty is upheld, Walther said it likely means an exit from Thunder Bay, a city the family arrived in from Germany in the late 1980s. They established the company in 1990.
Walther said they have standing offers from U.S. companies wanting to integrate GRK's product line into their own. That would mean the loss of 40 jobs in the city.
Though their products are patented in Canada and internationally, only a small fraction of fastener sales are domestic. Most are primarily shipped to the U.S. and Europe. Canadian sales are low.
The prospect of losing jobs was enough to prompt Thunder Bay-Atikokan MPP Bill Mauro to raise the issue in the Ontario Legislature Nov. 25. He appealed to provincial trade minister Sandra Pupatello to take up the matter with the feds.
Pupatello said she spoke with federal international trade minister Stockwell Day to review the GRK case and explain how the company can be charged with dumping “when in fact this price point is four times that of other competitors in Canada.
“This is a very interesting story. We want to see some federal action.”
Todgham Cherniuak said the CITT is an independent judicial body that is free of any political interference. There is the possibility of a remission order where the federal finance minister can grant a request to give back the money from their duties paid. However, it's rarely granted in an anti-dumping case.
