Resolving a steely question – Minister required to take another look at China steel subsidies

The High Court has required the Minister of Commerce and Consumer Affairs to take another look at Chinese steel imports, following successful judicial review proceedings by New Zealand Steel in one of the first major cases under New Zealand’s trade remedies legislation.

In New Zealand Steel Limited v Minister of Commerce and Consumer Affairs [2018] NZHC 2454, the High Court has quashed a decision by the Minister declining to impose duties on galvanised steel coil from China.  The decision had made New Zealand an outlier amongst other countries that had imposed duties after finding that these were appropriate to counter subsidised Chinese steel imports. 

Justice Mallon found that advice the Minister received from the Ministry of Business, Innovation and Employment contained material errors, both as to the test that should be applied, and how other countries’ findings had been characterised.  MBIE is now required to reconsider NZ Steel’s original application in light of the court’s decision. 

In this Brief Counsel, we summarise the judgment and look at the implications for New Zealand’s trade remedies regime.  

Chapman Tripp acted for NZ Steel in the proceedings.

NZ Steel’s application

In late 2016, before Donald Trump made steel tariffs news again, NZ Steel asked the Minister to investigate the subsidisation of galvanised steel coil in China.  It sought the imposition of duties under New Zealand’s trade remedies regime, to counteract the effect of alleged Chinese subsidisation on the domestic steel industry.  

Trade remedies are a part of the WTO framework to maintain fair trading across borders.  The framework allows countries to impose duties on goods at the border to counteract unfair trade practices.  This includes where a foreign manufacturer is receiving certain types of government support (subsidies) in their home country, giving them an unfair advantage and causing injury to the domestic industry.   

New Zealand implements the WTO trade remedies framework through the Trade (Anti-dumping and Countervailing Duties) Act 1988.[1] 

Over the past decade, several WTO member states, including Australia, Canada, the US and the EU, have imposed countervailing duties on Chinese steel products.  However, following its investigation, MBIE concluded that Chinese steel products were only being subsidised to de minimis levels (i.e. subsidisation was at a level less than 2%), and consequently could not be the cause of any injury to New Zealand’s steel industry.  On that basis, the Minister declined to impose countervailing duties. 

NZ Steel sought a judicial review of the Minister’s decision on the basis MBIE’s report, on which she relied, contained material errors of law and fact. 

It argued that the Minister’s decision was unlawful because:

  • MBIE had applied the wrong test of what constituted a 'public body' (a key question in determining whether a manufacturer is receiving the type of subsidy that can attract trade remedies); and
  • the Minister had not been properly informed about the conclusions reached by overseas investigations.

The Court's decision

Justice Mallon agreed with NZ Steel and granted the application for review.  The Court found that “the advice to the Minister on which her decision was made contained material errors which meant the Minister’s decision was unlawful”.  In particular “the advice to the Minister on whether an entity was a ‘public body’ relied, in particular, on an Australian authority which had misinterpreted an aspect of that test”.  She also found that in explaining the overseas investigations to the Minister, MBIE’s advice that “these investigations had used adverse inference reasoning and that this made their findings unreliable” was incorrect. 

The Minister’s decision was accordingly set aside, and MBIE must now reconsider NZ Steel’s application in light of the Court’s findings.

Chapman Tripp comment

The decision is one of the first major decisions under New Zealand's trade remedies regime, and provides important guidance on the treatment of evidence in investigations under the Act, and the international context within which the regime operates.  The decision comes hot on the heels of another successful judicial review under the Act, which found a breach of due process relating to an application made by Heinz Wattie's.[2]   

The decision also continues a move in judicial review towards a “culture of justification", looking beyond a public decision-maker's authority to act to whether the decision itself has been adequately justified.  Here, because the Minister relied on MBIE advice that was flawed, the justification for the decision failed this test.  

Thank you to Marcel Lister for preparing this Brief Counsel.  For more information please contact the authors listed.

Footnotes
[1] At the time of the investigation this was known as the Dumping and Countervailing Duties Act 1988.

[2] Heinz Wattie's Ltd v Ministry of Business, Innovation and Employment [2018] NZHC 2309.

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Related topics: Litigation & dispute resolution; Public law; International trade & investment

 

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