LLP 2021 ER: Large line pipe
Statement of Reasons: Expiry review determination

Products excluded from the CITT's finding

[19] The CITT excluded the following products from its finding:

• ASME SA 672 or ASME SA 691 electric-fusion welded steel pipe as certified under the ASME “Boiler and Pressure Vessel Code” rules (and stenciled with at least one of the aforementioned standards), of a length not to exceed 15 feet (4.572 m), for use other than in a CSA Z-662 pipeline application and imported with authorized inspection certificates and applicable ASME Partial Data Reports
• line pipe, regardless of grade, outside diameter and wall thickness, single stenciled as “DNV-OS-F101” for exclusive use in offshore applications and marked “For Offshore Applications Only”
• submerged arc longitudinal welded line pipe, regardless of grade, outside diameter and wall thickness, in lengths of 60 feet (18.288 m) with no girth welds for exclusive use in slurry or tailings piping systems in oil sands projects and marked “For Use as Slurry/Tailings Pipe Only”; for greater certainty, use in a pipeline meeting CSA Z-662 or as pressure piping meeting CSA B51 Code is not permitted under this exclusion and
• submerged arc longitudinal welded line pipe, regardless of outside diameter, wall thickness and length, for exclusive use in high-temperature steam distribution pipelines and marked “For Steam Distribution Only”, certified to meet the requirements of CSA Z662-15 Clause 14 and/or Annex I and certified to have proven fatigue/creep test properties as provided in sections I.2.3.2 and I.3.2.1 of CSA Z662-15 as established by means of a creep test of no less than 10,000 hours carried out in accordance with ASTM E139

[20] On April 16, 2021, the CITT amended its finding to exclude the following additional goods:

• Longitudinally submerged arc welded line pipe with a double submerged arc weld, stenciled with grade API 2B whether or not stenciled to any other grade, regardless of outside diameter, with wall thicknesses greater than 1” for exclusive use in production of debarker rotors and marked “For Use in Production of Debarker Rotor Only”

Additional product information^{Footnote 15}

[21] Large line pipe is used in the oil and gas sector primarily in pipelines for the transmission of oil and natural gas products over long distances, but also in a variety of mining applications, including as slurry pipe in oil sands operations.

[22] The Canadian market for large line pipe is governed by applicable line pipe specifications including Canadian Standards Association (CSA) specification Z245.1 for line pipe used in pipeline applications. Oil and gas transmission pipelines must, in turn, for example, conform to CSA Z662 (Oil and Gas Pipeline Systems). That said, international trade in line pipe is governed primarily by API specification 5L. For example, CSA Z245.1 Grade 448 pipe is considered to be equivalent to API 5L Grade X65. The API 5L X grade numbers define the minimum yield strength required of the grade in kilopounds per square inch. This equivalency applies to other specifications, including International Organization for Standardization (ISO), which means that a particular line pipe may be certified and stenciled as complying with multiple standards if all the requirements of each standard/grade are met (leading to dual-, triple-, and further multiple-stenciled line pipe). Indeed, it is common practice to certify multiple grades of pipe on a Mill Test Report. It is also common practice to substitute grades other than that initially requested by a customer with an equivalent grade. Mill Test Reports are provided to show that the properties of the supplied pipe meet the requirements of the actual grade ordered.

[23] The complainant manufactures or is capable of manufacturing line pipe to API 5L specifications in grades up to and including X100 and to all equivalent grades under CSA Z245.1, and in all outside diameter sizes covered by the product definition.

[24] The product definition covers all large line pipe meeting or supplied to meet the above specifications and grades, as well as equivalent specifications and grades, regardless of whether the line pipe has been multiple-stenciled to indicate that it meets or is supplied to meet additional end-use specifications. For purposes of greater clarity, all large line pipe stenciled or otherwise marked as meeting or supplied to meet API 5L (or equivalent specifications) for use as oil and gas pipelines are included in the product definition regardless of whether the pipe is marked as meeting any other end-uses or is supplied to meet any other end-uses. Line pipe that is manufactured and tested to meet higher API specifications (or equivalent CSA and ISO specifications) automatically conforms to lower specifications and may therefore have multiple stencils identifying additional end uses, such as American Society for Testing and Materials (“ASTM”), and equivalent specifications for end use as standard pipe (for low-pressure conveyance of steam, water, natural gas, air and other liquids in plumbing and heating applications), piling pipe, and other such end uses.

[25] Large line pipe has notable product characteristics that distinguish it from other pipe products. These include being more resistant to highly corrosive (“sour”) environments, which is accomplished by a secondary refining process in the production of the steel to increase the purity of the steel, thereby making it more resistant to corrosion from sour gas. The grain size of the steel plate used as an input into the production of large line pipe is also more refined, which affects the low-temperature toughness of the steel. Large line pipe also typically is sold in API grades of X70 or greater, which speaks to higher strengths of steel. Finally, large line pipe is characterized by higher deformability and higher pressure-crushing properties.

Canadian production and capacity utilization

[38] Similar to the trend of the total apparent Canadian market, the Canadian producer’s domestic sales from domestic production increased each year from 2018 to 2020, followed by a rapid decline in 2021.^{Footnote 20}

[39] Evraz reported a stable annual large line pipe production capacity from 2018 to 2021. During the period, the producer’s capacity utilization rate increased from 2018 to 2020 but decreased in 2021.^{Footnote 21}

Imports

[40] Total import volumes soared 188% between 2018 and 2019 but decreased in 2020 and 2021, falling back near the previous 2018 level.

[41] Since the dumping period of investigation (POI) of the original investigation (July 2014 to December 2015), subject imports have declined significantly. During the original investigation, imports of large line pipe from China and Japan represented 34.3% and 43.6% of total imports respectively and the combined subject imports accounted for 77.9% of the total imports.^{Footnote 22} In contrast, during the POR, subject imports represented only 12.4% of total large line pipe imports and an even smaller proportion of the total apparent market, thereby demonstrating that the sources of imports for large line pipe have shifted since the original investigation.

[42] The market share of subject imports remained stable in 2018 and 2019, but the subject import volume gradually reduced in 2020 and 2021.

[43] Imports from other countries increased between 2018 and 2019 but decreased in the following two year period of 2020 and 2021. In terms of market share, imports from other countries remained stable in 2018 and 2019, decreased in 2020 and increased in 2021.

Parties contending that continued or resumed dumping from China and Japan is likely

[54] The Canadian producer Evraz made representations as part of its submissions to the CITT in LE-2021-002, in its ERQ responses, in its case brief and in its reply submission supporting its position that the dumping of large line pipe from China and Japan is likely to continue or resume should the CITT’s finding expire.

[55] The main arguments made by the Canadian producer can be summarized as follows:

• Declines in Global Demand for Large Line Pipe
• The Global Excess Steel Capacity Crisis Continues
• The Proliferation of Trade Measures Imposed across Jurisdictions
• Import Data Demonstrate Subject Imports Cannot Compete at Non-Dumped Prices
• Producers in China and Japan Are Export Oriented and Maintain Significant Presence in Canada
• Producers in China and Japan Have Significant Excess Production Capacity
• Absent Protection, Subject Producers Will Have to Compete with Non-Subject Imports Making Dumping Even More Likely
• Canada Will Be a Prime Target for Subject Goods in the Absence of SIMA Duties

Declines in Global Demand for Large Line Pipe

[56] Evraz describes that international market conditions for large line pipe have deteriorated significantly since the CITT’s finding. The combined effect of the slowdown in global demand for line pipe and the restrictions to contain the COVID-19 pandemic have led to pipeline delays and cancellations, leading to the lowest number of completed pipeline kilometres in 25 years and restricting the available export markets for Japanese and Chinese large line pipe.^{Footnote 24}

[57] Evraz submits that in addition to pipeline delays and cancellations caused by the COVID-19 pandemic and the oil price crisis, the demand for large line pipe in major export markets such as the United States and the Middle East also remains below pre-pandemic levels, thereby further restricting the availability of export destinations for Chinese and Japanese large line pipe.^{Footnote 25}

[58] Evraz argues that producers in China and Japan will be even more likely to target an attractive market like Canada over the next 12-24 months, in light of the deteriorating market conditions in the post-pandemic era.^{Footnote 26}

The Global Excess Steel Capacity Crisis Continues

[59] Evraz notes that global steel overcapacity has deteriorated since the time of the CITT’s finding evidenced by publications and reports from the Organisation for Economic Co-operation and Development (OECD).^{Footnote 27}

[60] It is submitted that China, as the world’s number one steel-producing country, accounting for 57% of the global steel production in 2020, is the biggest driver behind the global steel excess capacity. Evraz discusses that China continues to suffer from massive overcapacity in steel production despite of the lockdowns and temporary stoppages in production due to pandemic containment measures in 2020.^{Footnote 28}

[61] Evraz submits that Japan has the world’s third largest steel industry, which is heavily reliant on exports. In 2020, Japan exported 29.8 million MT of steel, representing more than one-third of total steel production in Japan.^{Footnote 29}

The Proliferation of Trade Measures Imposed across Jurisdictions

[62] Evraz points out that the propensity to dump large line pipe by China and Japan is evidenced by the trade measures imposed on large line pipe and similar goods in jurisdictions around the world, as well as by the safeguard measures and other steel tariffs imposed by major line pipe consuming markets.^{Footnote 30}

[63] Evraz lists the anti-dumping and countervailing measures imposed by other trade remedy authorities against large line pipe from Japan and China and claims that the existence of these trade measures increases the likelihood of continued diversion of subject goods to Canada.^{Footnote 31}

[64] Evraz reports that the producers’ ability to export subject goods globally is further restricted due to the proliferation of trade measures imposed against large line pipe in the world’s largest markets. For example, the United States imposed Section 232 and Section 301 tariffs on Chinese steel goods including line pipes during the POR. On September 26, 2019, the European Union imposed definitive safeguard measures in the form of a 25% tariff on line pipe (among other steel products) from around the world, including from China and Japan, further limiting the markets in which Chinese and Japanese line pipe can be sold.^{Footnote 32}

Import Data Demonstrate Subject Imports Cannot Compete at Non-Dumped Prices

[65] It is submitted that there was a dramatic reduction in the volumes of subject goods competing in Canada since March 2016. Evraz notes that in the original inquiry, the CITT reported a total of 139,496 MT of subject goods imported in 2015. In contrast, the following year in 2016, only 562 MT entered Canada. Although subject import volumes increased in subsequent years, reaching a peak of 43,000 MT in 2019, the volume of subject imports never returned to 2015 levels.^{Footnote 33}

[66] After analyzing country specific imports and duty collections based on the enforcement data released by the CBSA, Evraz finds that the CITT’s finding has had the effect of dramatically reducing the volume of subject imports from China to nearly zero over the POR, with the highest volume of imports amounting to only 53 MT in 2018.^{Footnote 34}

[67] Evraz concludes that the near elimination of Chinese subject goods from the Canadian market subsequent to the imposition of SIMA duties demonstrates the complete inability for non-dumped and non-subsidized Chinese subject goods to compete in the Canadian market and underlines the fact that if the finding were allowed to expire, Chinese large line pipe exporters would resort to dumped and subsidized pricing to recapture its market share.^{Footnote 35}

[68] With respect to Japanese large line pipe, Evraz argues that Japanese exporters have demonstrated an ongoing track record of dumping into Canada since the imposition of SIMA duties ranging from 33% to 39% of the value for duty of these subject goods.^{Footnote 36}

[69] Evraz notes that no SIMA duties were assessed in the first half of 2021 but contends that this is not indicative of a change in Japanese behaviour rather than a reflection of the fact that the Japanese normal values issued in 2016 were significantly outdated in this period due to the sharp rise in the cost of steel raw materials in 2020 and 2021.^{Footnote 37}

Producers in China and Japan Are Export Oriented and Maintain Significant Presence in Canada

[70] Evraz reports that Chinese large line pipe producers are strongly export oriented and continue to operate sales offices in Canada. It further discusses why Chinese producers such as BaoSteel, Panyu Chu Kong Pipe, China National Petroleum Corporation (CNPC) and Sinopec International Petroleum Exploration and Production Corporation (Sinopec) will be turning to export markets with pre-established networks like Canada to increase their sales in the absence of SIMA duties.^{Footnote 38}

[71] With respect to Japanese large line pipe, Evraz states that nearly all major steel producers in Japan have an overt and stated export orientation with a keen interest in and strong connections to the Canadian market. It discusses how exporters Sumitomo Corporation, Metal One and Marubeni maintain their Canadian presence through their respective subsidiary importers Sumitomo Canada, Cantak and Marubeni Canada. Evraz presents that Japanese producers continue to have sufficient excess capacity capable of overwhelming the Canadian market. It is reported that JFE Steel acquired Canadian company Cogent to advance its supply chain management and that Nippon Steel has formed a joint venture with ArcelorMittal in order to become an “insider” in North America.^{Footnote 39}

Producers in China and Japan Have Significant Excess Production Capacity

[72] Evraz indicates that there are 142 Chinese manufacturers capable of producing API 5L line pipe and conservatively estimates a minimum aggregated Chinese annual production capacity based on a small subset of Chinese producers, which publicly report their capacity and line pipe production capabilities. Evraz claims that even a small fraction of this excess capacity would completely overwhelm the Canadian market if allowed to enter at dumped and subsidized pricing.^{Footnote 40}

[73] Evraz submits that Japanese producers also have massive excess capacity that is clearly intended to serve export markets. The production capacity of just three Japanese large line pipe producers: JFE Steel, Nippon Steel, and Osaka Tokushu Kokan Mfg. Co., Ltd. (OTK) exceeds 1.5 million MT. It is argued that the incredible size of this large line pipe capacity is stark when compared to Japan’s current and future demand.^{Footnote 41}

Absent Protection, Subject Producers Will Have to Compete with Non-Subject Imports Making Dumping Even More Likely

[74] Evraz states that prior to the imposition of SIMA duties in 2016, subject producers in both China and Japan regularly competed with the domestic industry for mainline opportunities in the Canadian market. Japanese producers have only been relegated to the “niche” suppliers that they are today as a result of the imposition of SIMA duties.^{Footnote 42}

[75] A comparison of the average import pricing of Japanese large line pipe to average Canadian import prices between 2018 to 2020 shows that Japanese producers have the demonstrated ability to compete at and below the existing low prices from third country imports. In the first half year of 2021, non-subject imports have replaced subject imports as the new low-price leaders in the Canadian market. Evraz argues that Chinese and Japanese large line pipe producers will be forced to beat the low-priced leaders of non-subject goods in the market to regain market share.^{Footnote 43}

Canada Will Be a Prime Target for Subject Goods in the Absence of SIMA Duties

[76] According to Evraz, Canada remains an attractive market relative to global opportunities based on the fact that Canada ranks third worldwide for number of installed pipeline kilometers and seventh globally for planned and announced pipeline length additions expected between 2021 and 2025. Evraz anticipates that five new requests for proposal will be awarded in the next 24 months, worth up to 748,000 MT of large line pipe.^{Footnote 44}

[77] Evraz reiterates that both Chinese and Japanese producers have established sales networks in Canada and have continued to dump subject goods into Canada over the POR. It is submitted that Statistics Canada, IHS Markit, and Japanese Customs data under the tariff classification codes of 7305.11 and 7305.19 all show that Canada remained among the top export destinations for large line pipe from China and Japan throughout the last five years.^{Footnote 45}

Parties contending that continued or resumed dumping from China and Japan is unlikely

[78] The following parties contend that continued or resumed dumping from Japan is unlikely:

• Importers Marubeni Canada and Cantak
• Canadian end user TCPL
• Japanese exporter Metal One

[79] Marubeni Canada made representations as part of its submission to the ERQ response, TCPL submitted its case brief and reply submission and Metal One filed jointly with Cantak their ERQ response, case brief and reply submission supporting their position that the dumping of large line pipe from Japan is unlikely to continue or resume should the CITT’s finding expire.

[80] TCPL is the only party claiming the position that the expiry of the CITT’s finding is unlikely to result in the continuation or resumption of dumping and subsidizing of the subject goods from China; however TCPL did not provide specific arguments and evidence in relation to the Chinese goods.

[81] The main arguments made by the opposing parties can be summarized as follows:

• The onus is on Evraz to submit positive evidence demonstrating the likelihood concerning resumption of dumping and/or subsidization
• There is insufficient evidence to satisfy the necessary evidentiary standard that producers of the subject goods from China and Japan will engage in dumping
• The CBSA enforcement data fails to identify anti-dumping duties offset by remissions on Japanese goods
• Producers’ capacity in Japan to produce subject goods has declined

The Onus is on Evraz to Submit Positive Evidence

[82] TCPL raises the issue that the onus is placed squarely on Evraz to demonstrate that the expiry of the finding is likely to result in the continuation or resumption of dumping and/or subsidizing of the subject goods. References were made to the CITT’s decisions on Mattress Innerspring Units and Waterproof Rubber Footwear and the decision on US—Oil Country Tubular Goods Sunset Reviews by the WTO Appellate Body.^{Footnote 46}

[83] Similarly, Metal One and Cantak submit that the determination of the expiry must be based on an objective examination of positive evidence and not simply on allegation, conjecture or mere speculation. It is argued that the vast majority of the evidence submitted by Evraz to support its assertion that there is a likelihood of resumed injurious dumping does not meet this standard.^{Footnote 47}

Insufficient Evidence to Satisfy the Necessary Evidentiary Standard

[84] TCPL emphasizes that there is an absence of positive evidence that there will be a resumption of dumping given the very different circumstances that exist now compared to 2016 when CITT made it’s finding. These new circumstances, which did not exist when the finding was made, include:^{Footnote 48}

• One of the two Japanese producers entirely shut down its facilities for the production of subject goods, thereby substantially reducing capacity and the amount of available exports that could be shipped to Canada
• The overall level of exports to Canada has been declining since the finding, and the exports that have continued have been for very specific demands of Canadian users both as to technical specifications and delivery deadlines
• Inability of Evraz to produce the large majority of the subject goods that are exported from Japan for use in low temperature applications and of greater thickness than produced by Evraz
• The number of remission applications approved by the Department of Finance for products imported from Japan based on the inability of Evraz to produce certain types of subject goods
• Limited demand in Canada for the subject goods in the foreseeable future thereby reducing exports of the subject goods from the Japanese mill and
• Inability of Evraz to produce and compete in the Canadian market due to its financially distressed condition caused by the worldwide downturn in demand for the subject goods and limited number of projects in Canada for building pipelines

The Enforcement Data Fails to Identify the Anti-dumping Duties Offset by Remissions on Japanese Goods

[85] Metal One and Cantak contend that technically, the only dumping which has occurred has been with respect to products where remission has been granted pursuant to consent by Evraz^{Footnote 49} and the remissions have addressed imports of subject goods which should have been excluded from the initial finding.^{Footnote 50}

[86] According to Metal One and Cantak, there is abundant evidence that JFE has been focusing on products which Evraz cannot make, does not make or can only produce with difficulty.^{Footnote 51} It is submitted that JFE, Metal One and Cantak have no incentive to re-enter the market for more standardized large line pipe which is dominated by lower-priced producers.^{Footnote 52}

Producers’ Capacity in Japan to Produce Subject Goods has Declined

[87] Metal One and Cantak state that producers’ capacity in Japan to produce subject goods has declined with the decision of the largest producer, Nippon Steel Corporation, to cease production.^{Footnote 53} They submit that the reduced capacity in Japan which will be dedicated to the range of traditional markets will leave less capacity to export to Canada.^{Footnote 54}

[88] Metal One and Cantak believe that JFE’s capacity will struggle to keep up to global customer demands and will likely result in less competitive pricing as mill capacity should remain busy. It is submitted that Japan’s supply focus for Canada remains on specialty steel products and small run pipe orders that would be rejected by the domestic supplier.^{Footnote 55}

Common factors of likelihood of continued or resumed dumping—China and Japan

Global Steel Overcapacity

[92] As noted in the CBSA’s recent OCTG expiry review investigation, steel production is capital-intensive in nature, incurring high fixed costs. As such, in order to maintain high capacity utilization rates to recover fixed expenses, producers may look to export markets to help maintain utilization rates when demand in the home market cannot absorb production.^{Footnote 56} The CBSA continues to find there to be a risk that producers in the steel industry will sell excess production in foreign markets at depressed prices, rather than reduce their production, in situations where there is overcapacity.

[93] According to the OECD, global crude steelmaking capacity increased to over 2,453 million MT in 2020. While global steel making capacity decreased from 2015 to 2018, information available suggests that capacity increases in 2020 would mark the second consecutive year of increases, taking into consideration new capacity additions and closures. The OECD states that the gap between global production and capacity narrowed between 2016 and 2019 due to strong increases in production and modest decreases in steelmaking capacity. The gap widened significantly from 569 million MT in 2019 to 625 million MT in 2020.^{Footnote 57}

[94] As steel supply continues to exceed demand, overcapacity is likely to put pressure on prices of various steel products and will further encourage steel producers to pursue export markets.

Global Market Conditions

Declines in Global Demand for Large Line Pipe

[95] According to the OECD, global growth prospects have improved since the height of the COVID-19 crisis, which led to plummeting output in the first half of 2020 as strict containment measures aimed at slowing down the spread of the virus were implemented. While economic prospects have improved recently, the economic outlook remains exceptionally uncertain.^{Footnote 58}

[96] International market conditions for large line pipe have deteriorated significantly during the POR. The combined effect of the slowdown in global demand for line pipe and the restrictions to contain the COVID-19 pandemic have led to pipeline delays and cancellations, leading to the lowest number of completed pipeline kilometres in 25 years^{Footnote 59} and restricting the available export markets for Japanese and Chinese large line pipe.^{Footnote 60}

[97] As the chart^{Footnote 61} illustrates below, the Global Energy Monitor reports that the global pipeline construction activity experienced an overall declining trend in pipeline starts since 1996, reaching their lowest point in 2020. It forecasts that global pipeline construction may never recover to pre-pandemic levels and changes in environmental sentiment may have a lasting impact on future pipeline development.^{Footnote 62}

[98] GlobalData Energy forecasts that the total global pipeline completions between 2021 and 2025 are expected to be approximately 85,711 km^{Footnote 63}, which is only 59% of the 145,000 km^{Footnote 64} of pipeline completions globally that were forecasted for construction between 2014 and 2018 at the time of the CITT’s original inquiry. Similarly, Rystad Energy reports that global upstream oil and gas exploration investment in 2019 stood at around $530 billion, before dropping to $382 billion in 2020, and is expected to grow only marginally to $390 billion in 2021.^{Footnote 65}

[99] Information available on the administrative record demonstrates that some of the major pipeline projects have been delayed or cancelled^{Footnote 66} driven in part by the collapse in oil prices caused by COVID-19 containment measures and the Russia-OPEC oil price war in 2020. Metal One indicates that demand was quite limited during the POR compared to normal circumstances as many large projects had been put on hold.^{Footnote 67} This resulted in a global contraction of demand for large line pipe which has continued into 2021.^{Footnote 68}

Reduced Demand for Large Line Pipe in Major Export Markets

[100] In line with the trends in the overall global demand discussed above, demand for large line pipe in major export markets also remains below pre-pandemic levels, thereby further restricting the availability of export destinations for the subject large line pipe.

[101] According to a report by World Atlas, the United States, the largest market for pipelines in the world, has four times more kilometres of pipeline than the total length of next three largest markets combined, namely; Russia, Canada and China.^{Footnote 69} Thus, a reduction in pipeline demand in the United States further indicates the global slowdown in pipeline construction that would impact producers in China and Japan and force them to compete for the fewer sales opportunities available.

[102] The International Energy Agency’s Oil 2020 report indicates that the pace of expansion of oil production in the United States is slowing as independent producers cut spending and scale back drilling activity in response to pressure from investors.^{Footnote 70} The American Metal Market reports that the demand for large diameter line pipe, which has been resilient given the long lead times inherent in pipeline projects, was affected in 2020 and into 2021 with fewer new projects being announced.^{Footnote 71}

[103] The Middle East also suffered its sharpest economic contraction ever in 2020 due to low oil prices and reduced demand.^{Footnote 72} According to the International Monetary Fund’s most recent forecast, after contracting by 2.8% in 2020, the Middle Eastern economy is projected to recover only moderately by 4.1% in each of 2021 and 2022.^{Footnote 73}

[104] Several pipeline projects in the Middle East region have been postponed due to the pandemic, which will inevitably have a significant impact in global line pipe demand as the Middle East market accounts for 48% of proven global oil reserves and 38% of proven natural gas reserves, and therefore constitutes a significant market for large line pipe.^{Footnote 74} Information on the record indicates that in May 2020, the construction of the Iraq-Jordan pipeline was postponed indefinitely until after the pandemic.^{Footnote 75} In August 2020, energy company BP announced a 40% cut in its oil and gas output by 2030 from 2019 levels, and Shell similarly reported a 40% planned cut to its oil and gas exploration and development budget.^{Footnote 76}

[105] These negative changes in the largest markets such as the United States and the Middle East exemplify the worldwide condition of decreased demand for large line pipe, which have led to overcapacity of large line pipe and increased pressure on the price of the subject goods. This could potentially lead to resumed dumping of large line pipe should the CITT’s finding expire.

Attractiveness of Canadian Market

[106] Despite the challenges faced in the global large line pipe market discussed above, Canada remains an attractive market to large line pipe producers in other countries. During the POR, imports from countries other than China and Japan represented approximately half of the total market although the volume of the subject goods dropped significantly.^{Footnote 77}

[107] Demand for large line pipe in Canada increased from 2018 to 2020 during the POR with the exception of the first half year in 2021.^{Footnote 78} Despite the collapse in oil prices and the negative impacts to the Canadian oil and gas industry, Canada remains an attractive market for large line pipe. According to World Atlas, Canada ranks third worldwide for number of installed pipeline kilometers and seventh globally for planned and announced pipeline length additions expected between 2021 and 2025.^{Footnote 79}

[108] With respect to drilling activity, information on the administrative record indicates that Canadian drilling activity began improving following the low in June 2020, while worldwide oil and natural rig counts continued to decrease. ^{Footnote 80} Furthermore, information on the record suggests the world market for large line pipe improved in 2021. Metal One reports that the large line pipe market has been improving and prices have been rising rapidly in 2021 as some projects, which were put on hold, are beginning to move forward, and procurement activities are getting active.^{Footnote 81}

[109] Although the Canadian market for large line pipe faced difficult conditions during the POR, forecasts with respect to large line pipe demand and pricing point to a potential recovery in the industry, thereby supporting the attractiveness of the Canadian market. In light of the appeal of the Canadian market, the substantial excess capacity in global and domestic markets and the fact that producers generally compete on the basis of price, there is an ongoing risk that large line pipe would be sold to Canadian customers at dumped prices.

Trade Measures in Canada and in Other Jurisdictions

[110] China has a history of dumping steel pipe products into the Canadian market. This is evidenced by the number of anti-dumping findings in place with respect to steel pipe products originating in or exported from China. In addition to subject large line pipe, the CBSA has anti-dumping measures in force on carbon and alloy steel line pipe, oil country tubular goods, sucker rods, carbon steel welded pipe, seamless casing, steel piling pipe, and pup joints.^{Footnote 82}

[111] The United States is China’s largest trading partner and Japan’s second-largest trading partner for all products.^{Footnote 83} It is also is the largest market for large line pipe in the world given its vast pipeline network. The United States has imposed anti-dumping and countervailing duties on Chinese large line pipe and steel pipes and anti-dumping duties against large line pipe from Japan. A list of these measures is provided in Table 3 below.

[112] In addition to the measures in force concerning Chinese and Japanese large line pipe and steel pipe, information on the record indicates that there are 11 additional anti-dumping measures against related Chinese steel tubular products, which can be produced on the same or similar equipment by other investigating authorities.^{Footnote 85}

[113] The numerous measures currently in place in Canada and other jurisdictions demonstrate the Chinese and Japanese exporters’ propensity to dump large line pipe and other related steel tubular products. The existence of these trade measures increases the likelihood of continued diversion of subject goods to Canada.

[114] The subject producers’ ability to export globally is further restricted due to other trade measures, such as tariffs and safeguards imposed against Chinese and Japanese steel products including large line pipe in the world’s largest markets.

[115] On March 23, 2018, pursuant to Section 232 of the Trade Expansion Act of 1962, the United States imposed 25% tariffs on imports of steel products including large line pipe, from virtually every country in the world, including China and Japan.^{Footnote 86} In addition, on August 20, 2019, pursuant to Section 301 of the Trade Act of 1974, the United States imposed a further (compounding) 15% tariff on Chinese steel goods including large line pipe effective September 1, 2019, which was reduced to 7.5% as of February 14, 2020.^{Footnote 87}

[116] In other words, in addition to the anti-dumping and countervailing duties imposed on Chinese large line pipe discussed in Table 2, Chinese large line pipe exporters face a further 32.5% of combined Section 232 and Section 301 tariffs on sales into the United States. Chinese large line pipe is effectively barred from entry to the United States, the world’s largest importer of circular welded pipe products^{Footnote 88}, decreasing the outlets for Chinese production of large line pipe and increasing the likelihood of diversion of these goods to other countries including Canada. Although Japanese line pipe does not face the additional compounding Section 301 tariff, the combination of Section 232 tariffs and antidumping duties discussed above renders the U.S. market similarly difficult to access for Japanese exporters, resulting in an analogous likelihood of diversion.

[117] The presence of these trade measures further limits the markets that Chinese and Japanese large line pipe can access, thereby increasing the risk of diversion of subject goods to Canada. While the anti-dumping and countervailing measures currently in place in Canada have significantly limited subject imports of large line pipe during the POR, the removal of these measures is likely to result in an increase of shipments to Canada at dumped prices.

Likelihood of continued or resumed dumping—China specific

Steel Capacity in China

Production and Capacity

[118] Overcapacity in the Chinese steel industry has been a well-recognized problem over a number of years, including throughout the POR. Although China has the largest steel production capacity accounting for 47.2% of the world capacity, steelmaking capacity in China increased in 2019 and 2020 following a period of decreasing capacity. The steelmaking capacity in China reached 1,157.1 million MT in 2020 with an overall increase of 2.9% from 2018 to 2020.^{Footnote 89}

[119] In addition to having the largest steelmaking capacity, evidence on the record indicates that China is also the world’s largest steel producing country, representing 57.6% of total global production in 2020.^{Footnote 90} Further, seven of the ten largest steel producing companies globally are headquartered in China. For example, China’s Baowu Iron and Steel Co. (Baowu Steel), a producer of large line pipe and other steel products, is the largest global steel producer.^{Footnote 91} A list of China’s top ten steel producers identifies several companies that produce steel pipe.^{Footnote 92} Although China is already the largest steel producer, crude production data reported by the World Steel Association (WSA) for 2010 to 2020 demonstrates that China’s steel production continued to increase.^{Footnote 93}

[120] Included on the administrative record is information concerning certain plans, policies and actions of the GOC which have the stated aim of reducing production and/or capacity of steel. For example, it was reported that the Ministry of Industry and Information Technology had a draft plan aiming to tighten steel capacity though a capacity swap programme in certain regions. China has stated that it reduced its installed steelmaking capacity by 150 million MT between 2016 and 2018, as part of this plan.^{Footnote 94} The OECD also published a list of plant level closures for 2019, in which six of ten companies were located in China.^{Footnote 95}

[121] Despite China’s repeated commitments to address steel overcapacity, scepticism remains surrounding China’s willingness and ability to meaningfully address steel capacity issues. For example, several sources expressed concern that China’s capacity swap initiative will have the impact of increasing overall capacity, as outdated equipment is replaced with more efficient technology.^{Footnote 96}

[122] It is evident that China’s steel production has a history of exceeding consumption:

[123] In the opinion of the CBSA, the combination of the factors described above will likely result in steel overproduction and continued overcapacity. As steel supply continues to exceed demand, the CBSA is of the opinion that this is likely to put pressure on prices of various steel products and will further encourage steel producers in China to pursue export markets.

Market Conditions in China

[124] In light of declined demand in the global market and the market condition of overcapacity in China in the post-pandemic era, producers in China will be likely to target an attractive market like Canada to secure every possible sale should the CITT’s finding expire.

[125] Although domestic demand in China for large line pipe is expected to increase in the next 24 months, the increase will barely register in terms of consumption of China’s total excess capacity for the production of large line pipe over the same period. Between 2021 and 2025, China is forecasted to expand its domestic pipeline network, installing between 17,000 and 32,800 km of new oil and gas pipelines over the five-year period.^{Footnote 98} Annual domestic demand of large line pipe in China between 2021 and 2025 is estimated at approximately 1.85 million MT.^{Footnote 99}

[126] Information on the record indicates that there are 142 Chinese manufacturers capable of producing API 5L line pipe.^{Footnote 100} Large line pipe production capacity in China is estimated to be 70 million MT, a result obtained by extrapolating on the 20.5 million capacity publicly reported by 40 Chinese line pipe producers.^{Footnote 101}

[127] By only using the highly conservatively estimated annual capacity of 20.5 million MT, it is estimated that Chinese large line pipe producers will have at minimum 18.7 million MT in capacity exceeding domestic demand every year between now and 2025. The annual domestic demand for large line pipe as discussed above is far less than the total capacity of the 40 companies which have capacity information available, let alone the capacity of the whole Chinese large line pipe industry.

[128] Considering the market conditions in China where excessive supply of large line pipe exists, the CBSA finds that it is likely that Chinese producers will continue to seek export markets for their product in the absence of the CITT’s finding.

Dumping of Chinese Large Line Pipe

[129] Dumping occurs when export prices of the subject goods are less than the normal values. The SIMA duties collected throughout the POR are presented in the “Enforcement Data” section of this report. The information discloses that during the POR, there was dumping of the subject goods from both China and Japan into the Canadian market.

[130] As shown below in Table 6, an amount of $150,552 in SIMA duty was assessed on 70MT of Chinese imports of subject goods during the POR. The SIMA duties assessed represent approximately 92.9% of the value for duty, which indicates that the majority of subject goods from China continued to be dumped.

[131] The fact that SIMA duties were assessed on importations of subject good during the POR even though the import volume was extremely low, demonstrates an inability of Chinese exporters to sell at un-dumped prices.

Imports of Chinese Large Line Pipe

[132] The subject imports from China represented 34.3% of total imports during the dumping POI in the original investigation,^{Footnote 102} while large line pipe from China was drastically reduced to only 0.01% of the total imports and also close to 0% of the total Canadian market during the current POR.^{Footnote 103} As Table 6 shows, the CITT’s finding has had the effect of dramatically reducing the volume of subject imports from China to nearly zero over the POR, with the highest volume of imports amounting to only 53 MT in 2018.

[133] This near elimination of Chinese subject goods from the Canadian market is indicative of the effect of the SIMA measures and the inability or unwillingness for most exporters to compete at non-dumped and non-subsidized prices. Furthermore, the assessment of SIMA duties on subject goods during the POR also serves as evidence that large line pipe from China was dumped and/or subsidized during this period.

Export Orientation of Chinese Large Line Pipe Producers and their Presence in Canada

[134] Information on the record confirms that large line pipe producers in China continue to be export orientated and interested in the Canadian market, as evidenced by GOC’s policies and plans, export volumes and marketing and sales strategies.

Policies and Plans in China

[135] Various initiatives of the GOC emphasize the government’s focus on exports generally, and with respect to steel in particular. For example, in its 13th five year plan (2016-2020), the GOC identifies the steel industry specifically as an industry of focus for which China will encourage more equipment, technology, standard and services to go global.^{Footnote 104} The 13th five year plan also aims to upgrade foreign trade by promoting “… a transformation in foreign trade toward better quality exports that command higher prices” while also consolidating and improving traditional export strengths. The GOC states that it will promote diversification in export markets, increasing the proportion of emerging markets while also maintaining the share of traditional markets.^{Footnote 105}

[136] In response to the spread of the COVID-19 pandemic and the impact on national economies, China’s Ministry of Finance announced in March 2020 that tax rebates on over 1,000 export goods would be raised.^{Footnote 106} In the case of exports of alloy steel and steel pipes, including oil and gas steel pipe, this meant a tax rebate increase to 13%.^{Footnote 107} Despite rumours of a rollback on export tax rebates, no such confirmation has been made by the Chinese central government as recent as April 2021.^{Footnote 108} With larger rebates applicable on exports of line pipe, it is more likely that exporters of subject goods will be able to lower their export prices to improve their international competitiveness. The initiatives, plans and policies of the GOC, discussed above, encourage export behaviour and underline the importance of steel, including large line pipe, to the Chinese economy.

Chinese Export Oriented Producers

[137] China exports steel to more than 200 countries and territories and the steel exports represented about 15% of all steel exported globally in 2019, almost double that of the world’s second-largest exporter, Japan.^{Footnote 109}

[138] China has maintained a trade surplus in steel products for the better part of the last decade, with steel exports increasing consistently between 2009 and 2015.^{Footnote 110} While exports of steel from China have trended down since 2016, China remained the world’s largest steel exporter, exporting 47 million MT of steel in 2020 alone.^{Footnote 111} China was also the largest exporter of semi-finished and finished steel products during this period, with pipe and tube products representing 12.6% of total steel exports.^{Footnote 112}

[139] The final determination made by the United States International Trade Commission in January 2019 relating to large line pipe from China indicated that China exported over 1.22 million short tons of large line pipe annually to other countries during the period from 2015 to 2017, with Canada being the largest export destination accounting for 10.1% of all China’s large line pipe exports.^{Footnote 113}

[140] Further to the large export volume of steel products, including large line pipe, information on the record suggests that producers of large line pipe in China have maintained interest in the Canadian market.

[141] Panyu Chu Kong Pipe, a major manufacturer and exporter of longitudinal welded steel pipes in China that submitted limited information during the original investigation, highlights North America as one of its export destinations on its website.^{Footnote 114} Further, Panyu Chu Kong Pipe has an established network in Canada, in particular, having sold large line pipe to various Canadian customers and pipeline projects, including to Canadian Natural Resources, Shell Canada, Suncor and Syncrude.^{Footnote 115}

[142] CNPC, China’s largest oil producer and supplier and a global supplier of line pipe, has been involved in oil and gas exploration projects in Canada since 1992. CNPC’s existing investments include the MacKay River and Dover Oil Sands projects, the LNG Canada Project, the Duvernay Shale Gas Project, the Groundbirch Tight Gas Project, and the Grand Rapids Pipeline.^{Footnote 116} Notably, even during the pandemic, CNPC continued its involvement in oil and gas exploration and pipeline construction projects in Canada, completing one third of the LNG Canada project according to its 2020 Annual Report.^{Footnote 117} With an annual production capacity of 1.3 million MT of HSAW and 150,000 MT of LSAW pipe, CNPC has capacity and connections to enter the Canadian market at increasing volumes should the finding expire.^{Footnote 118}

[143] Similarly, Sinopec, the largest oil and petrochemical products supplier and the second largest oil and gas producer in China, also has existing networks in Canada, including its subsidiary Sinopec Canada. Among oil and gas exploration, Sinopec Canada’s business also includes “construction and installation of petroleum projects and downstream services”.^{Footnote 119} Based on the parent company Sinopec Group’s website, the Group has been involved in several oil and gas discovery missions in Canada and has supplied oil and gas products.^{Footnote 120}

[144] Baosteel, a known producer of large line pipe in China, reported exports of steel products totalling 3.621 million tons in 2019 to more than 70 countries and regions. With respect to 2020 business objectives, plans and priorities, Baosteel states that the overseas market will be “…vigorously expanded to achieve export targets of key products.”^{Footnote 121}

[145] The existence of networks connecting producers in China to distributors and/or customers in Canada increases the likelihood that large line pipe producers would sell large line pipe to Canada if the current finding expired.

[146] Further evidence of the export orientation of Chinese large line pipe producers is found in the imposition of anti-dumping measures concerning large line pipe originating in or exported from China. This is discussed above in the section of Trade Measures in Canada and in Other Jurisdictions.

[147] While exports of subject goods have decreased dramatically since the POI in the original investigations, China remains one of the top five trading partners from which Canada imports pipe and tube products for the period beginning January 2018 and ending September 2020.^{Footnote 122} In light of the continued exports of large line pipe from China during the POR, it is evident that Chinese large line pipe has the potential to re-enter the Canadian market in a significant way.

[148] The evidence on the administrative record demonstrates that producers of large line pipe in China remain focused on export markets. In light of factors discussed above, the CBSA finds that producers in China are likely to rely, or to continue to rely, on export markets.

Determination regarding likelihood of continued or resumed dumping of Chinese goods

[149] Based on the information on the administrative record in respect of: steel overcapacity, market conditions, attractiveness of Canadian market, trade measures, dumping duty collected, import volume and export orientation of Chinese large line pipe producers, the CBSA has determined that the expiry of the finding is likely to result in the continuation or resumption of dumping into Canada of large line pipe originating in or exported from China.

Likelihood of continued or resumed dumping—Japan specific

Steel Capacity in Japan

[150] Japan has the world’s third largest steel industry. As shown in table 7 below, the 2021 World Steel in Figures reports that Japan produced 99.3 and 83.2 million MT of steel in 2019 and 2020, while the country’s steel use stood at 63.2 and 52.6 million MT.^{Footnote 123} Japan exported 29.8 million MT of steel in 2020, which represents more than one-third of its production and nearly all production exceeding home market demand by 30.6 million MT. It is an indication that Japan’s steel industry is heavily reliant on exports.^{Footnote 124}

[151] Although announcing its intention to cease large line pipe production, Nippon Steel remains the large Japanese steel producer and has the ability and capacity to resume its production of large line pipe. Nippon Steel reports that Japan’s direct exports account for about 40% of all steel production in Japan and the decline in domestic demand has been offset by an increase on exports of steel products, thereby maintaining steel production at above 100 million tons.^{Footnote 125} Another major large line pipe producer; JFE Steel, adopted a similar strategy to cope with the overcapacity issue. JFE states in its 2020 annual report that expanding into growing markets overseas is one of the main medium-term business plans.^{Footnote 126}

[152] Based on the information on the record, the CBSA finds that the steel overcapacity exists and will continue to exist in Japan. It is likely that Japanese steel producers continue to focus on overseas markets with demand growth potential in order to maximize their production capacity.

Market Conditions in Japan

[153] Japan has very few existing domestic pipelines with limited future plans for expansion of its modest pipeline system. Currently, the country has just 3,851 km of gas pipelines, and 21 km of oil pipelines. In terms of quantity of gas and oil pipelines, these values rank Japan at 29th and 77th in the world, respectively.^{Footnote 127}

[154] Metal One confirms the situation by stating in its ERQ response that there is virtually no domestic market for large line pipe in Japan and this situation is not expected to change in the foreseeable future.^{Footnote 128}

[155] Information on the record indicates that Japan has 646 km of gas pipelines in development but no planned oil pipeline at the end of 2020.^{Footnote 129} It is estimated that the Japanese domestic market would expect demand for large line pipe of at most 182,172 MT in the foreseeable future.^{Footnote 130}

[156] Three Japanese producers JFE Steel, Nippon Steel, and OTK are known to be able to produce large line pipe. The total production capacity of the three producers is estimated by Evraz to exceed 1.5 million MT.^{Footnote 131} However, Marubeni Canada insists that JFE steel is the only large line pipe producer in Japan with a limited capacity.^{Footnote 132}

[157] The CBSA notices that Nippon Steel announced that the company planned to withdraw from longitudinal submerged arc welded pipe business and close Kimitsu UOE pipe mill at East Nippon Works by the end of March in 2022.^{Footnote 133} However, assuming the estimated future demand of 182,172 MT of large line pipe was to be consumed in a single year, the CBSA still finds that large line pipe capacity, estimated only for JFE Steel by Marubeni Canada, already exceeds the future domestic demand in the whole country.

[158] Based on the discussion above, the CBSA is of the opinion that continued overcapacity is likely to motivate producers/exporters of large line pipe in Japan to pursue export markets like Canada.

Dumping of Japanese Large Line Pipe

[159] Dumping occurs when export prices of the subject goods are less than the normal values. Japanese exports continued to enter the Canadian market at dumped prices since the imposition of dumping duties.

[160] As shown below in Table 8, significant amounts of anti-dumping duties have been assessed on importations of subject goods from Japan with a total of approximately $48.7 million in SIMA duty during the POR.

[161] Metal One and Cantak argue that the only “technical” dumping which has occurred has been with respect to products where remission has been granted pursuant to consent by Evraz. It is submitted that there were essentially no net SIMA duties applied to imports of large line pipe into Canada from Japan.^{Footnote 134}

[162] The CBSA acknowledges that Cantak, Sumitomo Canada and Trans Mountain Pipeline L.P. were granted remissions of SIMA duties paid with respect to imports of large diameter line pipe from Japan in response to the temporarily short supply of large line pipe in the Canadian market for certain specific projects. However, the total amount of SIMA duties to be remitted to the three companies is approximately $8.9 million,^{Footnote 135} which is far less than the total duty of $48.7 million assessed during the POR.

[163] Remission of SIMA duties is typically only used in extraordinary circumstances and it is not used to override the legislated intent of SIMA, which is to remedy the injury caused by dumped goods to domestic producers of competing goods. The CBSA determines whether goods are dumped in accordance with the provisions of SIMA and the SIMR and notes that the concept of “technical dumping” as a result of remission is not provided for in SIMA. This is consistent with the CITT’s statements in the inquiry involving Gypsum Board in which the CITT noted “There is no “good” or “bad”, “passive” or “aggressive” dumping. There is only dumping as it is defined under SIMA and the underlying international agreement”.^{Footnote 136}

[164] The SIMA duties represent approximately 36.1% of the value for duty, which indicates that a large portion of subject goods from Japan continued to be dumped. The fact that anti-dumping duties were assessed on importations of subject good during the POR demonstrates an inability of Japanese exporters to sell at un-dumped prices.

Imports of Japanese Large Line Pipe

[165] Subject imports from Japan represented 43.6% of total imports during the original dumping POI,^{Footnote 137} while large line pipe from Japan was reduced to 12.4% of the total imports and even a smaller portion of the total market during the POR.^{Footnote 138}

[166] This significant reduction in the volume of subject good imported from Japan is indicative of the effect of the SIMA large line pipe measures and the inability or unwillingness for most exporters to maintain sales at normal values. Furthermore, the assessment of SIMA duties on subject goods during the POR also serves as evidence that large line pipe from Japan was dumped during this period.

Export Orientation of Japanese Large Line Pipe Producers/Exporters and their Presence in Canada

[167] Information on the record confirms that large line pipe producers and exporters in Japan continue to be export orientated and interested in the Canadian market, as evidenced by their sales network, business strategies and initiatives.

[168] Nippon Steel confirms in its 2020 annual report that on a value basis, over 40% of total sales came from export sales during the period from 2017 to 2019. It further explains that the decline in domestic demand has been offset by an increase on exports of steel products. The annual report emphasizes that Nippon steel has made alliances with local partners such as ArcelorMittal in North America to develop local bases for downstream production processes by joint ventures.^{Footnote 139}

[169] Similarly, JFE Steel highlights in its 2020 annual report that an overseas business promotion center was established in April 2020 to help maximize profits in existing overseas businesses and pursue initiatives that grasp opportunities for new overseas businesses. Expanding new revenue bases overseas is identified as one of the three future growth strategies. As a result, JFE’s overseas trading networks are being expanded in coordination with JFE Steel’s overseas business development.^{Footnote 140}

[170] Japanese exporters of large line pipe are solidifying their presence in the North American market by expanding their sales offices, subsidiaries, and joint venture partnerships in Canada.

[171] Sumitomo Corporation, an exporter of large line pipe produced by Nippon Steel, continues to maintain its Canadian subsidiary Sumitomo Canada. Sumitomo Canada continues to market sales of line pipe in Canada and intends to extend its business foundations by capitalizing on the Edgen group network, which has a presence in Canada.^{Footnote 141} Most recently, Sumitomo Corporation attempted to obtain normal values for large line pipe in Canada through a normal value review concluded in February 2020.^{Footnote 142}

[172] Metal One, a Japanese trading company and large line pipe exporter to Canada, owns 100% of Cantak. Cantak, acting as the Canadian representative of a number of global mills and suppliers, imports and supplies oil and gas tubular products for the Canadian oil and gas industry.^{Footnote 143}

[173] On April 14, 2021, Russel Metals Inc. announced that it has entered into a partnership agreement with Marubeni-Itochu Tubulars America Inc. to combine their respective Canadian OCTG/line pipe businesses. Currently, Russel Metals Inc. operates its Canadian OCTG/line pipe business through its wholly owned subsidiary Triumph Tubular & Supply Ltd. and Marubeni-Itochu Tubulars America operates its Canadian OCTG/line pipe business through its wholly owned subsidiary Hallmark Tubulars Ltd. The combined business of Triumph and Hallmark will operate under a newly incorporated company, named TriMark Tubulars Ltd.^{Footnote 144} In addition, Marubeni-Itochu Tubulars America wholly owns Marubeni Canada, another subsidiary with a speciality in importing steel tubular goods including large line pipe to the Canadian market.^{Footnote 145}

[174] The weakening domestic demand in Japan combined with the large production capacity and an export-oriented philosophy suggests that large line pipe producers in Japan would continue their efforts to expand foreign markets.

Determination regarding likelihood of continued or resumed dumping of Japanese goods

[175] Based on the information on the administrative record in respect of: steel overcapacity, market conditions, attractiveness of Canadian market, trade measures, dumping duty assessed, import volume and export orientation of Japanese large line pipe producers, the CBSA has determined that the expiry of the finding is likely to result in the continuation or resumption of dumping into Canada of large line pipe originating in or exported from Japan.

Parties contending that continued or resumed subsidizing is likely

[176] The Canadian producer Evraz, having made certain representations as part of its submission to the CITT in LE-2021-002, in its ERQ response, and in its case brief, argued that the subsidizing of large line pipe from China is likely to continue or resume should the CITT’s finding expire.

[177] The main argument made by the Canadian producer can be summarized as follows:

• Chinese producers of subject goods have been and are likely to remain subsidized
• Trade Measures in Canada and in Other Jurisdictions

Chinese producers of subject goods have been and are likely to remain subsidized

[178] Evraz notes that in the original investigation of large line pipe, the CBSA identified 160 potential subsidy programs and, due to lack of information provided on specific programs, has assigned a subsidy rate of 30.3% applicable to all exporters from China. It is argued that Chinese producers of subject goods have been and are likely to remain subsidized.^{Footnote 146}

[179] In support of their arguments, references are made to publically available information which indicates that subsidies were granted to listed steel pipe companies. In reviewing the annual reports of Shandong Molong Petroleum Machinery Company Limited (Shandong Molong), Evraz finds the company received 18,234,769.37 RMB in subsidies and grants in 2018. In the Q1 2019 Report, it reports receiving a further 11,166,723 RMB government grant in the first quarter of 2019 alone. Similarly, in 2020, Baowu Steel, a known producer of large line pipe, reports 256 million RMB in subsidies between January 2020 and September 2020 in its Q3 2020 report. Shengli Oil & Gas Pipe Holdings reports in its 2020 Annual Report having received 9.124 million RMB and 7.541 million RMB of government grants in 2019 and 2020 respectively.^{Footnote 147}

[180] According to Evraz, China’s subsidy programs have been compounded by COVID-19 stimulus. Evraz references a KPMG publication which discusses various GOC initiatives including the launch of 1.2 trillion CNY of repurchase repossessions and other low interest loans as well as an employment based subsidy program.^{Footnote 148}

Trade Measures in Canada and in Other Jurisdictions

[181] Evraz argues that the subsidization of Chinese tubular goods is well established for large line pipe and closely related products. In support of this, Evraz discusses the amounts of subsidy found in the CBSA’s investigations into a number of steel tubular goods from China. In one example, relating to the CBSA’s recent OCTG re-investigation, it is noted that the all others rate for exporters of Chinese OCTG was determined to be 4,070 RMB per tonne. In the CBSA’s investigation of Carbon Steel Welded Pipe, it found that cooperating producers benefitted from nine separate subsidy programs, while non-cooperative producers benefitted from upwards of 31 such programs.^{Footnote 149}

[182] Evraz submits that other jurisdictions have also experienced the injurious subsidizing of Chinese steel tubular products. In this respect, the Canadian producer makes reference to findings made by the United States in 2019, relating to line pipe and other related products.^{Footnote 150}

[183] Based on the information discussed above, Evraz argues that it is likely that the subject goods shipped to Canada would continue to be subsidized.

Parties contending that continued or resumed subsidizing is unlikely

[184] TCPL is the only party claiming the position that the expiry of the CITT’s finding is unlikely to result in the continuation or resumption of subsidizing of the subject goods from China; however TCPL did not provide specific arguments and evidence in relation to the Chinese goods.

Likelihood of continued or resumed subsidizing

[186] As mentioned previously, with the exception of the Canadian large line pipe user TCPL, no other exporters or importers offered an opinion on the likelihood of continued or resumed subsidizing of the subject goods from China. Likewise, the GOC did not provide a response to the ERQ, nor did the GOC provide a case brief or reply submission.

[187] In the absence of participation from Chinese exporters, importers and the GOC, the CBSA relied on other information in assessing the likelihood of continued or resumed subsidization should the CITT’s finding be rescinded. This includes the representations made by the Canadian producer^{Footnote 151} and information on the administrative record concerning subsidizing in China.

[188] Guided by the aforementioned factors and having considered the information on the administrative record, the following list represents a summary of the CBSA’s analysis conducted in this expiry review investigation with respect to subsidization:

• Trade Measures in Canada and in Other Jurisdictions
• Continued Availability of Subsidy Programs

Trade Measures in Canada and in Other Jurisdictions

[189] In the original large line pipe subsidy investigation, the CBSA identified 160 subsidy programs. Information concerning these programs is available in the CBSA’s Statement of Reasons for the original investigation concerning large line pipe.^{Footnote 152}

[190] As noted in the CBSA’s Statement of Reasons of Final Determinations, neither the GOC nor Chinese exporters provided a response to the CBSA’s subsidy RFI, which limited the CBSA’s ability to determine the amount of subsidy in the prescribed manner, pursuant to subsection 30.4(1) of SIMA, as the required information relating to financial contribution, benefit and specificity was not provided. It also limited the CBSA’s ability to determine whether producers, or other suppliers of goods and services are public bodies.

[191] Due to this lack of information, subsidy amounts for all exporters were determined under a ministerial specification, pursuant to subsection 30.4(2) of SIMA on the basis of the facts available. It was found that 100% of the goods exported from China were subsidized during the original investigation. The amount of subsidy for all exporters was determined to be 30.3%, expressed as a percentage of the export price.

[192] Since the CITT’s finding, the CBSA has not conducted any re-investigations to update amounts of subsidy for large line pipe from China.

[193] In addition to the large line pipe finding, the CBSA currently has seven other countervailing measures in place concerning steel tubular products originating in or exported from China: Oil Country Tubular Goods, Seamless Casing, Pup Joints, Sucker Rods, Carbon and Alloy Steel Line Pipe, Carbon Steel Welded Pipe and Piling Pipe.^{Footnote 153} Detailed descriptions and explanations of the programs are contained in the CBSA’s Statement of Reasons issued at the final determination of each investigation.

[194] Furthermore, in recent years the CBSA has conducted expiry reviews with respect to Carbon and Alloy Steel Line Pipe, Seamless Casing, Carbon Steel Welded Pipe and Oil Country Tubular Goods, determining that the expiry of each finding/order was likely to result in the continuation or resumption of subsidizing of the goods exported to Canada.^{Footnote 154}

[195] As shown in the table below, information on the administrative record also indicates that the United States has investigated and found significant subsidization in respect of large line pipe or its closely related goods from China.

[196] The existence of these countervailing measures in place in Canada and in other jurisdictions concerning large line pipe and/or similar steel tubular products from China serves as evidence that Chinese exporters of steel tubular products have received countervailable benefits from the GOC. It is the CBSA’s opinion that the GOC will likely continue to subsidize its domestic large line pipe producers in the future.

Continued Availability of Subsidy Programs

[197] Information on the administrative record indicates that government subsidies continue to be available to steel producers, including large line pipe producers, in China. For example, the GOC announced in March 2020 an increase to the export tax rebate rate on certain goods, including steel pipe.^{Footnote 156} With larger rebates, Chinese steel exporters will have more flexibility to cut their export prices further and thus lift the competitiveness of China-origin steel products internationally.

[198] Publicly available information also confirms that Chinese producers of subject goods received government supports from the GOC. According to its 2020 report, Shandong Molong reports having received subsidy supports as follows:

[199] Similarly, Baowu Steel reports in its Q3 2020 report (the most recently available English version) that 256 million CNY of government subsidy was received between January 2020 and September 2020.^{Footnote 158}

[200] Financial Times reports that China had increased its subsidies to domestically listed companies to a record level in 2018, by 14% year-on-year amounting to CNY 153.8 billion. Notably, the top recipient Sinopec, a state-owned oil company and purchaser of tubular steel goods, received CNY 7.5 billion in subsidies in 2018.^{Footnote 159}

[201] Evidence available also suggests the GOC introduced additional government support in response to the COVID-19 pandemic through tax measures, employment related measures and economic stimulus etc.^{Footnote 160}

[202] In addition, other jurisdictions continue to express concern over subsidization of the steel industry in China. For example, the United States and the European Union reiterated concerns surrounding China’s non-notification of possible subsidy programs for steel producers in a 2019 meeting of the WTO’s Committee on Subsidies and Countervailing Measures.^{Footnote 161} Members of the Global Forum on Steel Excess Capacity (GFSEC), a forum open to members of the G20 and members of the OECD, also recently cited concerns over market-distorting government subsidies and other support measures in China, in its 2020 Ministerial Report.^{Footnote 162} Members of the GFSEC contend that there is lending by Chinese state owned banks to indebted steel companies, equity infusions to non-financially viable steelmaking companies, grants and awards, preferential tax programs, and the preferential provision of steelmaking materials, among other government measures.^{Footnote 163}

[203] On the basis of the above information and analysis, it is the CBSA’s opinion that the GOC places a great deal of importance on its steel industry, including large line pipe, and that there are strong indications that the GOC will likely continue to subsidize its domestic producers of large line pipe in the future.

Determination regarding likelihood of continued or resumed subsidizing

[204] Based on the information on the administrative record in respect of the continued availability of subsidy programs for producers and exporters of large line pipe in China, and the countervailing measures in place relating to Chinese large line pipe in Canada and in other jurisdictions, the CBSA has determined that the expiry of the finding is likely to result in the continuation or resumption of subsidizing of large line pipe originating in or exported from China.