ARCHIVED - Statement of Reasons

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OTTAWA, March 23, 2001

4366-3
AD/922/774

Concerning a determination under subsection 76.03(7) of the Special Import Measures Act regarding

CERTAIN CARBON STEEL WELDED PIPE ORIGINATING IN OR EXPORTED FROM ARGENTINA, BRAZIL, CHINESE TAIPEI, INDIA, ROMANIA, THAILAND AND VENEZUELA

DECISION

On March 9, 2001, pursuant to subsection 76.03(7) of the Special Import Measures Act, the Commissioner of Customs and Revenue determined that the expiry of the order of the Canadian International Trade Tribunal with respect to the above-mentioned goods is likely to result in the continuation or resumption of dumping of the goods.

This Statement of Reasons is also available in French.
Cet énoncé des motifs est également disponible en français.

STATEMENT OF REASONS

SUMMARY

On November 10, 2000, the Canadian International Trade Tribunal (Tribunal) initiated an expiry review, in accordance with subsection 76.03(3) of the Special Import Measures Act, of its order made on July 25, 1996, in Review No. RR-95-002, continuing without amendment, its finding made on July 26, 1991, in Inquiry No. NQ-90-005, concerning carbon steel welded pipe originating in or exported from Argentina, India, Romania, Taiwan, Thailand and Venezuela, in the nominal size range 12.7 mm to 406.4 mm (1/2 in. to 16 in.) inclusive, in various forms and finishes, meeting one or more of the following specifications: ASTM A53, ASTM A120, ASTM A795, ASTM A252, ASTM A589 or AWWA C200-80, or equivalent specifications, including water well casing, piling pipe, sprinkler pipe and fencing pipe; and its finding made on January 23, 1992, in Inquiry No. NQ-91-003, concerning carbon steel welded pipe originating in or exported from Brazil, produced to ASTM standards A53 or A120 in sizes from 13.7 mm (0.54 in.) to 406.4 mm (16.00 in.) outside diameter, with plain or finished ends and with black, regular mill coat or galvanized surface finishes. The purpose of the expiry review is to determine whether the order should be continued or rescinded.

Note: Taiwan is now referred to as Chinese Taipei. The CCRA has referred to Taiwan as Chinese Taipei throughout this document except in references to the official Tribunal product definition or in references to United States anti-dumping findings against Taiwan.

The Commissioner of Customs and Revenue (Commissioner) has 120 days after the initiation of an expiry review by the Tribunal to determine whether there is a likelihood of continued or resumed dumping if the order expires. On November 11, 2000, the Canada Customs and Revenue Agency (CCRA) initiated its investigation and, on the basis of the information available, the Commissioner determined on March 9, 2001, that the expiry of the order is likely to result in the continuation or resumption of dumping.

The Tribunal will now consider whether the expiry of the order is likely to result in injury or retardation to domestic industry. If the Tribunal determines that the expiry of the order is likely to result in injury or retardation, the order will be continued, with or without amendment. If the Tribunal determines that the expiry of the order is unlikely to result in injury or retardation, the order will be rescinded.

BACKGROUND

On July 26, 1991, the Tribunal found that the dumping of carbon steel welded pipe originating in Argentina, India, Romania, Chinese Taipei, Thailand and Venezuela, had caused, was causing and was likely to cause material injury to the production in Canada of like goods. On January 23, 1992, the Tribunal found that the dumping of carbon steel welded pipe originating in Brazil had caused, was causing and was likely to cause material injury to Canadian production of like goods and that the dumping of carbon steel welded pipe originating in Luxembourg, Poland, Turkey and Yugoslavia, had caused, but was not causing and was not likely to cause material injury to Canadian production of like goods. On July 25, 1996, the Tribunal continued without amendment its material injury finding made with respect to carbon steel welded pipe imported from Argentina, Brazil, India, Romania, Chinese Taipei, Thailand and Venezuela.

Injury findings expire five years from the date of the last order or finding unless an expiry review has been initiated. On September 22, 2000, the Tribunal issued a notice of expiry indicating that the above-mentioned finding was scheduled to expire. The notice of expiry invited opinions from persons or governments requesting or opposing the initiation of an expiry review. On November 10, 2000, the Tribunal initiated a review of the above-mentioned order as it was of the opinion that such a review was warranted and provided notice to the Commissioner. On November 11, 2000, the Commissioner initiated an investigation to determine whether the expiry of the order is likely to result in the continuation or resumption of dumping of the goods.

In order to determine whether the expiry of the order is likely to result in the continuation or resumption of dumping, the Canadian producers as well as the exporters and importers of the subject goods were sent questionnaires and were requested to provide relevant information. The questionnaires requested information respecting the period of review January 1, 1997, to September 30, 2000. The parties mentioned above were also given an opportunity to make representations during the investigation. The investigation was conducted in accordance with the Anti-dumping and Countervailing Directorate's administrative guidelines on the conduct of expiry review investigations pursuant to the Special Import Measures Act (SIMA).

PRODUCT DEFINITION

The goods subject to this expiry review are defined as:

Carbon steel welded pipe originating in or exported from Argentina, India, Romania, Taiwan, Thailand and Venezuela, in the nominal size range 12.7 mm to 406.4 mm (1/2 in. to 16 in.) inclusive, in various forms and finishes, meeting one or more of the following specifications: ASTM A53, ASTM A120, ASTM A252, ASTM A589, ASTM A795, or AWWA C200-80, or equivalent specifications, including water well casing, piling pipe, sprinkler pipe and fencing pipe; and carbon steel welded pipe originating in or exported from Brazil, produced to ASTM standards A53 or A120 in sizes from 13.7 mm to 406.4 mm (0.54 in. to 16.00 in.) outside diameter, with plain or finished ends and with black, regular mill coat or galvanized surface finishes.

PRODUCT INFORMATION

Carbon steel welded pipe is also identified as standard pipe. The American Iron and Steel Institute classifies steel pipe into the following groups according to its end uses: standard pipe, pressure pipe, line pipe, structural pipe, mechanical pipe and oil country tubular goods (OCTG). Standard pipe is generally intended for the low-pressure conveyance of steam, water, natural gas, air and other liquids and gases in plumbing and heating applications and is produced to the American Society for Testing and Materials (ASTM) specifications that prescribe chemical and mechanical properties.

Most standard pipe is used for plumbing and heating applications and is produced to meet the ASTM A53 specification in standard black and galvanized finishes. The major nominal sizes include 1 in., 2 in., 3 in., 4 in., 6 in. and 8 in. The ASTM A53 specification is considered to be of the highest quality and is suitable for welding, coiling, bending and flanging. Other uses for standard pipe include piling pipe (ASTM A252), water well casing (ASTM A589 or AWWA [American Water Works Association] C200-80) and sprinkler pipe (ASTM A795).

PRODUCTION PROCESS

Carbon steel welded pipe is generally produced in mills using either the continuous weld (CW) or the electric resistance weld (ERW) process. Manufacture using either process begins with strips of steel sheet that have been slit from coils of flat steel. The CW process can be used to manufacture pipe up to 4.5 in. in diameter. The ERW process can be used to produce pipe up to 24.0 in. in diameter. CW pipe and ERW pipe are interchangeable, although certain users prefer ERW to CW pipe.

Standard pipe can also be produced using a combination of both the ERW process and a hot stretch reduction mill. Pipe shells are first produced using the ERW process. These shells are heated in a furnace and passed through a stretch reduction mill that reduces the outside diameter of the pipe and can be used to thicken, maintain or reduce the thickness of the pipe walls.

After the basic pipe is formed using either the CW or the ERW process, it is cut to length, straightened and tested, and the pipe ends are processed, i.e. cropped, faced and reamed. The surface of the pipe will be finished, if required, with such finishes as lacquer or zinc (galvanizing). Other operations include stenciling and bundling of the pipe.

CLASSIFICATION OF IMPORTS

For 1997, imports of carbon steel welded pipe were classified under the following Harmonized System classification numbers:

7306.30.00.14

7306.30.00.29

7306.30.00.19

7306.30.00.34

7306.30.00.24

Since January 1, 1998, imports of carbon steel welded pipe are classified under the following Harmonized System classification numbers:

7306.30.10.14

7306.30.90.14

7306.30.90.29

7306.30.10.24

7306.30.90.19

7306.30.90.34

7306.30.10.34

7306.30.90.24

7306.30.90.39

INTERESTED PARTIES

Canadian Industry:

During the period of review, the Canadian industry consisted of three producers, Stelpipe Ltd., a subsidiary of Stelco Inc., Hamilton, Ontario (Stelpipe), Ispat Sidbec Inc., Contrecoeur, Québec (Ispat) and IPSCO Inc., Regina, Saskatchewan, (IPSCO), who account for most of the production of standard pipe. Camrose Pipe Company Ltd., Calgary, Alberta (Camrose) and Prudential Steel Ltd., Calgary, Alberta (Prudential) also produced standard pipe during the period of review although these two would not be classified as direct producers of carbon steel welded pipe. Any carbon steel welded pipe in their inventory at any given point in time is a result of material being downgraded from its intended application of oil and gas well casing or line pipe because it does not meet the required specifications. All of the above companies provided a response to the CCRA's questionnaire. Complete mailing addresses for these companies can be found in Appendix 1.

Stelpipe Ltd.

Stelco was established in 1910. The pipe making facilities were purchased and became part of the corporation in 1962. In 1984 the pipe and tube making facilities comprising Page-Hersey Works, Welland Tube Works and Camrose Pipe were grouped together and managed as Stelpipe. In 1992, 60% ownership of the Camrose Pipe facility was sold to Oregon Steel Mills with Stelco retaining a minority share. In October 1994, Stelpipe and Welland Pipe became separate legal entities in the Stelco group of businesses. Stelpipe currently produces subject goods at Welland, Ontario. Stelpipe and its predecessors have produced carbon steel pipe since 1962.

Ispat

Ispat, formerly Sidbec-Dosco Inc., was incorporated in 1928. The company became a subsidiary of Ispat International N.V. of the Netherlands in 1994. Ispat produces continuous welded carbon steel pipe at its facility in Montreal, Quebec. The pipe unit has been operating in Montreal since 1960, although manufacturing started in Montreal in 1911. Currently, the range of products manufactured at the pipe plant is between ½" and 4" inclusive.

Ispat Sidbec Inc. also owns 40% of Delta Tube, which produces pipe at its facility in Montreal using the ERW process. The range of electric resistant welded pipe sold by Ispat is between 2" and 6" inclusive.

IPSCO Inc.

IPSCO Inc. (IPSCO) was incorporated in 1956 and commenced operations with a pipe mill in Regina in 1957. Since that time, the company has expanded its manufacturing capabilities with the construction and acquisition of facilities in Canada and the United States. IPSCO produces standard pipe from 2" to 16" in outside diameter using the ERW process.

In addition to the subject goods, IPSCO produces other products including carbon and alloy hot rolled sheet and plate, hollow structural sections (HSS), line pipe, and OCTG casing and tubing.

Exporters/Foreign Producers:

The CCRA requested information from 43 potential exporters of the subject carbon steel welded pipe. The number of exporters contacted, by country, was as follows: Argentina (4), Brazil (8), India (11), Romania (4), Chinese Taipei (4), Thailand (8) and Venezuela (4). Five exporters (one from each of Venezuela, Brazil and Thailand, and two from Romania) provided information to the CCRA in response to the questionnaires. The names and addresses of the five responding exporters are listed in Appendix 2.

Importers:

The CCRA requested information from 41 potential importers of the subject goods. Four importers provided information to the CCRA in response to the questionnaire. However, one importer did not provide a non-confidential version of its submission and the information could therefore not be accepted. The names and addresses of the three importers who provided both a confidential and non-confidential version of its submission are listed in Appendix 3.

POSITION OF THE PARTIES

Four parties in the expiry review investigation submitted arguments in writing to the Commissioner regarding the likelihood of continued or resumed dumping if the order is permitted to expire. The arguments were based on information that was before the Commissioner on the date the record closed.

Parties Submitting that Continued or Resumed Dumping is Likely

Case briefs were provided by counsel for the three main domestic producers of the subject goods, submitting that continued or resumed dumping is likely. The three main domestic producers are comprised of the following companies: Stelpipe/Stelco, IPSCO and Ispat Sidbec Inc. ("the Canadian Industry").

Canadian industry presented a number of arguments in their case briefs as to why the expiry of this order is likely to lead to the continuation or resumption of dumping of the subject goods. Their principal arguments are discussed under the following headings.

a) Subject Country Capacity:

Canadian industry estimates of total annual capacity for subject countries range from 1,648,000 metric tonnes to 7,436,000 metric tonnes.

Canadian industry submits that the subject countries have huge production capacity and low capacity utilization. This situation, coupled with decreasing global demand, places pressure on the subject countries to find markets for subject goods. The desire to maintain or increase capacity utilization generates global oversupply, increasing the likelihood that the subject countries will resume or continue dumping into Canada.

Canadian industry notes that many of the individual mills in the named countries are also major producers of subject goods with substantial export capacity. The Canadian industry named 12 mills and stated that the aggregate capacity of these selected producers alone is many times the size of the Canadian market, estimated by the Canadian industry to be less than 200,000 metric tonnes annually.

Canadian industry also notes that in finding likelihood of renewed dumping in the last review of this order (RR-95-002), the Tribunal took into account the large capacity of these countries.

b) Decline in Subject Country Construction Demand:

The generally accepted uses for standard pipe include the low-pressure conveyance of water, steam, natural gas, air and other liquids and gases in plumbing and heating systems, air conditioning units, and automatic sprinkler systems. Industry submitted that the demand for the product depends on the health of the construction sector. The subject countries' producers are currently suffering from declining domestic construction activity. The Canadian industry provided examples of the declining construction sector for all of the named countries except Venezuela.

c) Previous Tribunal Decisions:

Canadian industry states that many of the points made by the Tribunal in the last review of this order and in renewing the order against carbon steel welded pipe (hereafter referred to as CSWP) from South Korea regarding "likelihood" of dumping are still relevant today. Specifically, the factors considered were the following:

• the commodity nature of the goods,
• the importance of pricing,
• the practices and activities of importers in switching sources,
• the global steel over-capacity and the downturn in other foreign markets, such as Asia, leading to a push to export to North America, and,
• the impact of United States trade cases, including the United States safeguard action on line pipe.

Canadian industry states that nothing material on record shows circumstances to have changed in the present case.

d) Global and North American Steel Crisis:

The Canadian industry's responses to the Expiry Review Questionnaire underscores the depressed state of the Canadian steel business and the impact that imports are having. The Canadian industry's 1999 annual reports and supplementary filings confirm the negative effect of dumped and low-priced imports on steel shipment volumes and prices.

Canadian industry's concerns over the flood of imports and the threat of dumping are underscored in press releases by both the Canadian Steel Producers Association (CSPA) and by the American Iron and Steel Institute and in abundant material filed with the various industry questionnaires. The CSPA reported that import penetration in Canada was at a record high of 45.5% for the first six months of 2000.

The Preston Pipe and Tube Report for the last quarter of 2000 confirms the successive declines in both North American CSWP shipments and prices and states "the market outlook for all of our commodities, except OCTG and Line Pipe is tenuous at best"¹. In the Standard Pipe Market Analysis section, reference is made to the "inventory overload because of exceptionally high imports of standard pipe"². It is also apparent that the standard pipe supply has increased while demand has not. An August 2000 Preston Pipe Report shows that imports control 40% of the standard pipe market in the United States and that the average import price has dropped $20 per ton which is less severe than in Canada.

Canadian industry provided excerpts from publications relating to the steel industry, which reported the effects of global oversupply and downward pressure on North American steel prices. Other excerpts provided by Canadian industry confirmed the current problems of oversupply facing North American producers.³

e) Subject Country Participation in the Canadian Market:

Canadian industry submitted that even in the absence of significant market penetration, the Tribunal renewed the order in its previous review because of the dangers faced by the Canadian producers in light of past activity of these exporters. Canadian industry states that the same factors remain relevant today.

f) Pricing Issues:

The pricing of carbon steel welded pipe from "Emerging Countries" (China/Hong Kong, the Philippines and Peru) with which domestic producers have had to compete, has established existing Canadian market pricing.

According to data provided by Canadian industry, these "Emerging Countries" more than doubled the volume of subject goods exported by them to Canada from 1998 (5,062 NT) to 1999 (11,237 NT). The rate of increase accelerated in 1999 and imports continued to increase in the first three quarters of 2000 (14,255 NT). They captured increasing market shares from 2.9% in 1998 to 5.3% in the first nine months 1999, 5.8% in full year 1999, and almost 10.0% in the first nine months 2000, by selling at prices that are below the weighted average selling prices of Canadian producers.⁴

Canadian industry submits that if the order at issue is rescinded, it is reasonable to assume that with the Canadian importers' established connections to the exporting mills in the subject countries, they will look again to the subject countries as sources of product. If the normal value regime now in place covering them is removed, Canadian importers will seek out prices to compete with the pricing presently available from "Emerging Countries". In addition, Canadian industry submitted that any such competitive pricing by the subject countries would have to be at dumped pricing even if their costs of production are significantly lower than Canadian industry's costs. Canadian industry submitted that the cost structure of integrated mills producing CSWP does not differ markedly, whether offshore or domestic. Since Canadian industry has been losing money on sales of subject goods, it follows that exporters from the named countries would also lose money on Canadian sales of subject goods that are priced at the same level as CSWP from the so called emerging countries.

Import penetration illustrates the fact that the subject goods are easily moved across borders and can readily enter into the local commerce. The nature of these goods, the distribution channels and the ability of exporters/importers to dump below Canadian producer's prices demonstrate the threat of renewed dumping in the event that the present order lapses. Subject goods are a commodity product and price differences of only 2% or 3% are important enough to lead to renewed dumping.

g) United States Anti-Dumping Orders:

Canadian industry submitted that each of the named countries is currently subject to trade actions in the United States on carbon steel welded pipe. The United States International Trade Commission (USITC) recently renewed anti-dumping (AD) orders on CSWP from Brazil, India, Taiwan and Thailand. As well, Canadian industry noted that the USITC recently found material injury and applied AD duties in respect of CSWP from Romania. Venezuela is subject to United States anti-dumping duties on circular welded non-alloy pipes and tubes, although C.A. Conduven (hereafter referred to as Conduven), a major Venezuelan producer, has been exempted. Argentina is subject to a United States countervailing duty order on CSWP and tubes.

Canadian industry noted that all of the seven countries in this case are affected by anti-dumping orders in the United States covering subject pipe or goods that are within the same category as subject pipe, even if described slightly differently. Equally significant, many of the individual exporting mills that were named in the present review have also been named in these United States cases.

h) Other United States Trade Actions:

The United States currently has an array of outstanding anti-dumping and countervailing duty findings against one or more of the subject countries in cases involving other carbon steel products. Canadian industry cited several examples of these findings.

Furthermore, the United States government has implemented a global safeguard action on imports of carbon steel line pipe, a closely related good. The Tribunal stated in the South Korean CSWP review that this safeguard action has a bearing on the likelihood of renewed dumping of standard pipe into Canada. The goods are made on the same equipment and due to the fact that the United States market is closed to line pipe, there is a real possibility that offshore production will be shifted to standard pipe and that these goods will then be seeking export markets.

i) Trade Actions in Other Jurisdictions:

In the European Union (EU), seamless pipe and tube from Romania and pipefittings from Thailand are subject to anti-dumping orders. In Australia, galvanized steel pipe from Thailand is subject to an anti-dumping order. Actions in these jurisdictions reinforce the case for propensity and likelihood of renewed dumping.

As well, the subject countries have definitive measures in place among themselves; e.g., Argentina against Chinese Taipei, India against Romania and Brazil against Romania with respect to other carbon steel products.

j) Canadian Anti-Dumping Findings Re: Subject Country Similar Steel Goods:

In addition to the order against the subject goods, there are existing Canadian anti-dumping orders concerning steel products from Argentina, Romania, Chinese Taipei, Thailand, Brazil and India.

Case Brief Submitting that the Continuation or Resumption of Dumping is Unlikely

Conduven, a major Venezuelan producer, was the only exporter from the named countries that provided a case brief arguing that continued or resumed dumping is unlikely. Conduven presented several arguments in its case brief as to why the expiry of this order is unlikely to result in the export and hence dumping of the subject goods from Venezuela to Canada in the foreseeable future.

Conduven stated that the assertions made by the domestic industry with respect to the likely dumping of subject goods into Canada by Conduven and hence Venezuela are unsupported by evidence and, in some cases, clearly inaccurate.

Conduven submitted that a common and recurring theme by Canadian industry is the noticeably absent or, alternatively, ambiguous references with respect to the applicability of specific evidence in relation to exports from Venezuela. In all three domestic submissions, Venezuela is seemingly intentionally and inappropriately associated with evidence that is presented as being applicable to the other six named countries.

Conduven indicated that the domestic industry provided the CCRA with several examples of the subject countries dumping or subsidizing CSWP or similar goods into the United States, the EU and Australia. Conduven submitted that there are no orders or findings in effect with respect to subject goods exported from Venezuela with the exception of the United States global safeguard action on imports of carbon steel line pipe. Furthermore, the United States has recently revoked its anti-dumping measures with respect to subject goods exported from Venezuela. The United States revocation follows a similar revocation of anti-dumping measures by the EU with respect to subject goods exported from Venezuela in 1995. Both of these markets represent larger potential export markets for shipments of subject goods from Venezuela than the Canadian market and lends further support for the conclusion that exports of subject goods to Canada is unlikely. Conduven noted that it is important to point out that the existence of those previous orders was a key consideration during the last expiry review for the subject goods in 1996.

Canadian industry also submitted that the subject countries have a huge production capacity and low capacity utilization, e.g., production capacity for Venezuela has been estimated at 1,025,000 tonnes. Conduven stated that this is theoretical capacity and does not reflect the practical production capacity. According to Conduven, it has progressively focused its production of subject goods in recent years towards its domestic market (the housing and construction industry) and has dedicated the bulk of its manufacturing activities towards an increased emphasis on the production and export of its non-subject goods in order to take advantage, in particular, of increased opportunities in the growing oil and gas sectors. In terms of capacity utilization, Conduven submitted that it has a high rate of utilization and does not foresee any increases in capacity utilization.

In terms of inventories, a consistent pattern of declines in the inventory of subject goods from 1997 to 2000 is reflective of industry trends to initiate production in response to specific orders, long-term contractual arrangements and just-in-time delivery requirements. Conduven has reduced inventories from 1998 to 2000.

With regard to likely future performance, Conduven expects that its production of subject goods will be increasingly dedicated to its domestic market and that overall, apart from markets that are geographically close in proximity to Venezuela, the subject goods will not be the focus of exports in the reasonably foreseeable future. Conduven submitted that the Venezuelan economy is growing and demand is increasing for both subject and non-subject goods due to an increase in the construction sector with a planned $1.5 billion government expenditure in domestic housing projects and market opportunities in the natural gas industry.

Conduven states that the potential for product shifting towards greater production of subject goods is remote given present market conditions. Further, the nature of Conduven's contractual arrangements and commitments for non-subject goods is such that product shifting is not likely. As well, Conduven has no economic interest in shifting production toward the manufacture of goods that represent lower economic returns.

Canadian industry have asserted that there is no likelihood that Venezuela will refrain from again dumping exports of subject goods to Canada at high margins set out in previous Tribunal orders. Conduven submits that the relevant standard for making the determination is not whether an exporter is likely to refrain from dumping but rather must be based on a positive finding that the exporter is likely to resume dumping. Conduven states that the high margins cited as evidence were calculated for the period 1988-91, and were based on normal values and export price in relation to market conditions that were in effect at that time. The relevance of this data in the present review is, at best, questionable and, if considered relevant at all, must be given very little evidentiary weight.

In discussing the current state of the world steel market, Canadian industry states that the market outlook for all commodities except OCTG and Line Pipe is tenuous at best. Conduven submits that evidence on the record indicates that Venezuela has shifted its strategic focus to the production of OCTG and Line Pipe, the very market cited by Canadian industry as being the only viable market. Conduven states that the report cited by Canadian industry addresses primarily a United States problem due to imports from China, Turkey and Korea.

Canadian industry also assert in their case briefs that emerging dumping countries have significantly increased the volume of subject goods exported and have captured an increasing share of the Canadian market. As well, Canadian industry contends that the dumping practices of Korea and the basis for continuing an order with respect to Korea, is evidence of a similar dumping practice on the part of named countries in this review, including Venezuela. Conduven submits that the existence of new sources of supply to the Canadian market and the practices of those countries, including Korea, is not relevant to the issue of whether Conduven is likely to export subject goods to Canada under the present conditions.

Rebuttal by Canadian Industry of Case Brief Submitting that the Continuation or Resumption of Dumping is Unlikely

Canadian industry notes that Conduven is only one of several Venezuelan mills and its submissions cannot be taken as proof of an absence of likelihood of renewed dumping by the other Venezuelan producers.

Canadian industry notes that the fact that Conduven has not exported subject goods to Canada in the recent period is not determinative of an absence of likelihood or renewed dumping, contrary to Conduven's submissions. Canadian industry submits that Conduven's absence from the Canadian market since the date of the finding demonstrates that Conduven is unable to sell subject goods in Canada at normal values. Canadian industry notes further that there are numerous cases where the Tribunal has rejected this as a defense to a likelihood finding. In the previous review for this order, there were virtually no imports from subject countries leading up to this review. That fact did not prevent the Tribunal from finding that there was a likelihood of renewed dumping from Conduven and others.

Canadian industry also notes that Conduven places heavy reliance on the fact the United States International Trade Commission (USITC) issued a negative injury decision respecting Venezuela in the 2000 United States sunset review in Circular Welded Pipe. However, the USITC determination concerned the matter of future injury, not the likelihood of renewed dumping. On the matter of likely renewed dumping, the United States Commerce Department had made a positive finding and estimated that dumping from Venezuela was likely to recur at a margin of 52.51% for Conduven and all other Venezuelan producers. Canadian industry submits that it is the determination that is relevant in the present case and that Conduven is attempting to blur the distinction between the likelihood and the injury issue.

With regards to capacity, production and sales issues, Canadian industry states that Conduven makes a great deal of its alleged concentration on the domestic market both for subject and non-subject goods. Canadian industry submits that Conduven argues that it has little interest or incentive to export to Canada; however, in making these decisions, Conduven glosses over the capacity issue, one of the main factors that the Tribunal has found to be indicative of the likelihood of a return to dumping by foreign producers in the last review and in numerous other cases.

The Canadian industry has provided estimates of total production capacity for subject goods from Venezuela. Canadian industry states that while Conduven claims that these estimates are theoretical and not reflective of Venezuelan practical production capacity, Conduven offers no figures to counter this estimate. Canadian industry submits that the true measure of production capacity is theoretical capacity. The equipment used to produce carbon steel welded pipe can also be used to produce similar goods and the product mix can easily be adjusted depending on available market opportunities. Canadian industry states that this point is illustrated by Conduven's statement that it has allocated increased production capacity to OCTG products.

Canadian industry notes that Conduven also argues that Venezuelan production capacity is "made up of small local mills"⁵. However, Canadian industry submit that the evidence on the record shows that the three largest Venezuelan mills have a combined production capacity of over 900,000 MT and cannot be characterized as "small local mills". The Venezuelan mills have capacity to produce subject goods that is over four times greater than the size of the total Canadian market for subject goods. In any event, to the extent that this considerable capacity originates in "small local mills" without export orientation, such mills' production for the Venezuelan market displaces Conduven production, which must find markets elsewhere.

The Canadian industry's estimate of 1.0 million tonnes annual capacity in Venezuela is consistent with the evidence before the USITC, which in turn was taken from credible sources. This huge capacity is in contrast to the size of the total Canadian market, estimated by the industry to be around 200,000 tonnes annually.

Canadian industry submits that Conduven makes a number of assertions about its production and export efforts being directed to non-subject goods "in order to take advantage, in particular, of increased opportunities in the growing oil and gas sectors". It also makes claims about certain "long term contractual arrangements" it has entered into for subject goods. It refers back to its Expiry Review Questionnaire in support of these arguments. Conduven goes on to make additional assertions about its future export performance and refers to increased demand in Venezuela "as a result of government initiatives in the construction sector and pursuit of market opportunities in the natural gas industry".

Canadian industry submits that none of these foregoing claims about increased market demand in Venezuela or elsewhere for subject and non-subject goods are backed up in the record. There is nothing submitted with Conduven's questionnaire response to support allegations about the strength of the domestic CSWP market in Venezuela, the regional markets or Conduven's domestic or export performance in this respect.

Canadian industry note that Conduven makes a series of assertions in its response to the CCRA's Expiry Review Questionnaire and in its case brief regarding subject goods financial performance and refers to certain confidential appendices filed with its questionnaire response. Canadian industry states that this material appears contradictory in that Conduven first says that it cannot produce subject goods income statements, as required by the CCRA, because it does not segregate data by product or "carry separate accounting records" by product⁶. It has therefore not been able to supply the required income and/or profit and loss statements.

Conduven then has filed confidential appendices to support claims regarding product-specific performance, including production and sales of subject goods versus non-subject goods, inventory levels, exports and cost of sales. Canadian industry submits that the probative weight and value of these appendices is highly questionable, since Conduven has told the CCRA that it does not segregate its financial data on a product basis and is unable to prepare or provide subject goods income statements.

CONSIDERATION AND ANALYSIS

Subsection 76.03(7) of the Act requires the Commissioner to determine if the expiry of an order or finding is likely to lead to a continuation or resumption of dumping. In making this determination, the Commissioner may consider the specific factors listed in section 37.2 of the Special Import Measures Regulations and any other factors that are relevant in the circumstances. The following section contains the consideration and analysis of the principal factors upon which the Commissioner of Customs and Revenue determined whether the expiry of the order in respect of certain carbon steel welded pipe from Argentina, Brazil, Chinese Taipei, India, Romania, Thailand and Venezuela is likely to result in the continuation or resumption of dumping. The analysis is based on information provided by Canadian producers, exporters and importers as well as other information gathered by the CCRA.

The following is a summary of the major factors in this review.

Production Capacity:

Canadian industry provided estimates of the production capacity for each of the named countries. The CCRA received exporter submissions from only five companies - Persico Pizzamiglio S.A. (Persico) in Brazil, IASI Tepro (Tepro) S.A. and Metalexportimport (MEI) from Romania, SSP Trading (1982) Co. Ltd. (SSP Trading) from Thailand and Conduven from Venezuela.

The data presented in each of these submissions was used to adjust, by substituting estimated production capacity by actual production capacity, the estimates of production capacity for the named countries. The CCRA's estimate of production capacity for all named countries is 6,096,000 metric tonnes. The CCRA is unable to list production capacity by individual country due to the confidentiality of the information. However, it should be noted that the estimated production capacity figure includes both subject and non-subject goods. The CCRA recognizes that not all of this production capacity would, or could, be used to produce subject goods. Exporters have commitments to meet in both their domestic and export markets and they simply cannot abandon these customers if they hope to remain a long-term viable entity. However, the evidence on the record illustrates that any of the subject countries likely has sufficient production capacity to supply all or a major portion of the Canadian market, which is estimated at 235,000 metric tonnes in 2000.

Both Canadian industry and Conduven have discussed the total estimated production capacity for Venezuela. Canadian industry has provided estimates of the annual production capacity of Venezuela. These estimates were based on a report produced by the Preston Pipe Report entitled "Pipe and Tube Mills of the World (1997)". Conduven disputes the annual production capacity submitted by Canadian industry stating that this represents theoretical capacity rather than practical capacity. It is important to note that Conduven offered no estimate of its own on the annual production capacity of Venezuela. In the absence of any other information, the CCRA used the evidence on the record to estimate the annual production capacity for Venezuela. This estimate shows that Venezuela has substantial production capacity.

Capacity utilization is the relationship of actual production over plant capacity. A less than full capacity utilization rate means there is excess capacity available that could potentially be used for additional production of the subject goods. There is no information available regarding capacity utilization rates for other than the producers that responded to the Expiry Review Questionnaire.

The capacity utilization rates that could be determined based on the exporter information received show that there is significant capacity available in Brazil, Romania and Thailand. Based on the information received from producers in these countries, it is likely that other producers in these countries have excess production capacity available to produce the subject goods.

For Venezuela, Conduven's overall capacity utilization rate over the first nine months of 2000 was relatively high. However, it should be noted that there are four other potential exporters in Venezuela listed in the Preston Pipe and Tube report for which the CCRA has no information. It is reasonable to assume that these companies may also have excess capacity that could be used to supply the Canadian market should the order against Venezuela be allowed to expire.

Exporters were asked to provide data relevant to all other goods that were produced on the machinery and equipment used in the production of CSWP. Only one exporter, Conduven, reported any significant volume of production of other goods on the same equipment as the subject goods. The combined data for Conduven showed that their potential capacity and actual production volume for other goods was significant. Conduven explained that while it may theoretically be possible to switch some of its production capacity from other products to subject pipe and vice versa, in practice there are certain limitations in doing so, a major one being its commitment to produce OCTG and Line Pipe under long term contracts of 2 to 3 years in duration. It should be noted that Conduven supplied no copies of these long-term contracts.

Furthermore, demand in the OCTG market is driven by the price of oil and natural gas. Past experience shows that prices for oil and gas fluctuate which, in turn, affect the number of wells drilled and total demand for this pipe. If demand drops, then the possibility exists that Conduven may consider switching production to CSWP or any other tubular product.

It should also be noted that all producers of welded pipe, whether it be oil and gas well casing, line pipe, drill pipe or other carbon steel welded pipe, have the ability to switch production from one type of pipe to another should the need arise. Indeed, if the price for CSWP suddenly increased dramatically, producers would likely reschedule their mills, as soon as possible, to produce more CSWP.

Domestic Selling Prices and Unit Costs

Domestic average unit selling prices and unit costs during the period of review (January 1, 1997 to September 30, 2000) for the goods were calculated from the co-operating exporters' responses. This element is important because it allows the Commissioner to compare profitable selling prices in an exporter's domestic market with import prices in Canada. Unfortunately, little information was provided and extrapolation of the information available to other exporters in the named countries would not be appropriate.

However, for Venezuela, a comparison of the average unit domestic selling price with the average unit cost for each period indicates that Conduven was operating at a profit with respect to its sales of subject pipe throughout the period of review.

As mentioned previously, Canadian industry submitted that Conduven makes a series of assertions regarding its financial performance relating to subject goods and refers to certain confidential appendices filed with its questionnaire response, i.e., Conduven cannot produce income statements for the subject goods as it does not segregate data by product but has filed confidential appendices to support claims regarding product-specific performance, including production and sales of subject goods versus non-subject goods, inventory levels, exports and cost of sales. Canadian industry submits that the value of these appendices is highly questionable. The CCRA agrees with the position of Canadian industry that the information appears contradictory. However, in the CCRA's view, Conduven could provide this information without maintaining separate accounting records, although it would be a difficult and arduous task. As a consequence, the CCRA has not rejected the information supplied by Conduven in its submission but has recognized the concerns expressed by Canadian industry in conducting this analysis.

Domestic Markets

Persico (Brazil) and SSP Trading (Thailand) did not provide any information that would allow the CCRA to determine their share of their domestic market. Tepro (Romania) indicated that it has a 100% share of the Romanian market for CSWP similar to the subject goods; however, Tepro provided no information to substantiate its claim. Metalexportimport (Romania) responded that as there was no published sales data available, it could not estimate its percentage share of the Romanian market for CSWP, which casts some doubt on the validity of Tepro's claim to be the sole vendor in Romania.

Conduven estimated that it had a major share of the Venezuelan market for CSWP although there were no official or private publications on the Venezuelan pipe and tube market available that would support their estimate. Conduven's estimate is based on its own experience and knowledge of the market and its competitors. In reviewing the record, the CCRA could find no evidence to support or dispute Conduven's claim that they have a major share of the CSWP market in Venezuela. Based on the evidence on the record, the CCRA is satisfied that Conduven is a major player in the Venezuelan CSWP market.

In their case briefs, Canadian industry stated that demand for carbon steel welded pipe depends on the health of the construction sector as the generally accepted uses for standard pipe include the low-pressure conveyance of water, steam, natural gas, air and other liquids and gases in plumbing and heating systems, air conditioning units, and automatic sprinkler systems. Canadian industry submitted that the subject countries producers are currently suffering from declining domestic construction activity and, provided evidence of construction activity decline in all countries except Venezuela. There is no evidence on the record to dispute Canadian industry's claim that the construction sectors in these countries or the economies in the named countries in general are declining.

Conduven stated that the Venezuelan economy is growing and demand is increasing for both subject and non-subject goods due to an increase in the construction sector with a planned $1.5 billion government expenditure in domestic housing projects. Evidence on the record indicates that the Venezuelan government is planning this expenditure.⁷ However, it should be noted that the article is dated February 2000 and states that the government "planned" this expenditure for housing. There is no evidence on the record that the government has actually spent these funds on a housing program or that the Venezuelan construction industry and economy in general is improving. If this planned program had accomplished what it was intended to do, then the CCRA would have expected that evidence would have been available for the record.

Export Markets

Persico (Brazil) and SSP Trading (Thailand) reported no export sales during the period of review. Tepro (Romania), Metalexportimport (Romania) and Conduven (Venezuela) exported CSWP to several countries during the period of review. None of the responding exporters have a presence in the Canadian market. In fact, during the period of review (January 1, 1997 to September 30, 2000), exports from the subject countries to Canada were highest in 1998 when they captured an estimated 0.5% of the total apparent market for CSWP in Canada. There have been minimal exports of subject goods to Canada in the last two years.

Other Findings

In their case briefs to the CCRA, Canadian industry listed several findings by other authorities that were currently in place against similar goods from the subject countries. The United States is the most relevant authority because of its proximity to the Canadian market. If a subject country is excluded from the United States market, then it is likely that they would market carbon steel welded pipe in Canada. Conversely, if a subject country is not excluded then it would be logical for that country to market carbon steel welded pipe in the United States due to the size of the market.

The status of relevant United States trade cases is as follows:

• AD duty against OCTG from Argentina;
• Countervailing duty against welded carbon steel pipe and tubes from Argentina;
• AD duty against standard and structural welded pipe (under 16") from Brazil;
• Countervailing duty against standard welded pipe from India;
• AD duty against standard and structural welded pipe (3/8" - 16" OD) from India;
• AD duty against standard and structural welded pipe (under 16") from Taiwan;
• AD duty against standard and structural welded pipe (3/8" - 4 ½" OD) from Taiwan;
• AD duty against standard and structural welded pipe (3/8" - 16" OD) from Thailand;
• Countervailing duty against welded carbon steel pipe and tubes from Venezuela.

It should be noted that the countervailing duty for Venezuela is 0.78%,⁸ which, for all intents and purposes, is irrelevant in preventing Venezuelan exporters from shipping to the United States. In other words, there are no findings currently in place in the United States that would cause Venezuelan CSWP to be diverted to Canada.

It should also be noted that there are no United States findings against Romanian CSWP. There is a finding against seamless standard, line and pressure pipe which could be considered a like good. In their case briefs, Canadian industry provided a list of findings against similar goods imposed by the European Union as well as other countries. Two of the subject countries (India and Brazil) have imposed anti-dumping measures against similar products (seamless tube and line pipe) from Romania.

Canadian industry also noted that there are several other anti-dumping proceedings currently in place in Canada against carbon steel products from the subject countries. The CCRA currently has in place the following findings on steel products:

• Stainless Steel Welded Pipe from Chinese Taipei (will expire on September 11, 2001);
• Hot-Rolled Carbon Steel Plate from Brazil, India and Thailand;
• Stainless Steel Round Bar from India, Chinese Taipei and Brazil;
• Corrosion-Resistant Steel Sheet from Brazil;
• Hot-Rolled Carbon and Alloy Steel Sheet from Romania;

While these goods are not CSWP, it does indicate that exporters in some of the named countries demonstrated a tendency to dump steel in the Canadian market.

In early 2000, the United States imposed a three-year tariff-rate quota under Section 201 of the Trade Act of 1974, on imports of line pipe, which is applicable to all countries with the exception of its NAFTA partners, Canada and Mexico. Section 201 deals with import quotas and this order allows countries to increase their quota by 10% per year. While such a measure is not an anti-dumping measure and in no way implies that the goods in question were sold below normal values, it is relevant to this case because line pipe is produced on the same equipment as subject carbon steel welded pipe. With the United States market virtually closed to foreign producers of line pipe, exporters from the named countries could switch production to the subject goods and sell to Canada if this order is rescinded.

Canada currently has an anti-dumping order in place against carbon steel welded pipe from Korea which was renewed by the Tribunal in June 2000. In their case briefs, Canadian industry point out that many of the likelihood factors considered by the Tribunal in the Korean review are relevant in these carbon steel welded pipe cases. Canadian industry submits that nothing material on record shows circumstances to have changed in the present case. However, Conduven states that the evidence applicable to Korea is not applicable to Venezuela. While the evidence may be applicable to Korea and not specifically to Venezuela, in the CCRA's view, it still applies to the current order under review. Many of the factors listed in that review apply, to varying degrees, to the subject countries in these reviews.

Absence of Exports to Canada

For all intents and purposes, exporters from the named countries have not exported subject goods to Canada nor applied to the CCRA for normal values that would allow them to participate in the Canadian market at undumped prices. This absence of imports indicates that exporters either could not participate in the Canadian market at undumped prices or they chose not to participate because of other reasons, i.e., strong domestic demand, export markets closer to their home market or access to the United States market. It should be noted that there are two companies that have had normal values since 1994 and neither company has attempted to establish a presence in the Canadian market. This indicates that they may not be able to compete in the Canadian market at prices equal to the normal value.

Pricing of CSWP

CSWP is a commodity product and once basic ASTM and related specifications are met, the products are interchangeable. This means that CSWP from Canada is basically the same as CSWP from Peru, China, Argentina or any other country that manufactures CSWP. It should be noted that despite its commodity nature, purchasers may give some preference to domestically produced pipe over imported pipe for what they consider the more favourable conditions of supply, i.e., delivery time, product availability, security of supply and terms of sale. This preference can translate into a price premium for domestic supply. However, once the price spread between domestic production and imports exceeds that premium (2-3%), purchasers will generally turn to buying imported pipe.⁹

Sales of CSWP are driven by price and purchasers will attempt to seek out the cheapest source of supply. Import statistics confirm that imports from other countries have grown significantly during the period of review. The following table shows that imports have increased by an estimated 250% (Volume) and 182% (Value) since 1998.

	1998	1999	Q1-Q3, 2000	Estimated 2000
Volume (MT)	13,109	29,825	34,391	45,855
Value (CDN $)	$9,607,268	$16,643,798	$20,301,681	$27,068,908
$/MT	$733	$558	$590	$590

Source: CCRA's Internal Information Systems.

CCRA notes that the information supplied by Conduven in their submission reveals domestic market selling prices that are higher than the selling prices offered in Canada by the other countries in 2000, i.e., on average $590 per metric tonne. In order for Conduven to sell in the Canadian market, Conduven would have to dump their CSWP in order to compete with the prices offered by the other countries.

In its 1995 review, the Tribunal noted that many of the firms that imported standard pipe from the countries named in the proceedings are still active in the market today, importing standard pipe from other low-priced sources. This is also true for the current proceeding as evidence on the record¹⁰ shows that a number of these importers identified in the CCRA's original investigation¹¹ are still active in the Canadian market today. If these findings were removed, it is likely that these same importers would seek out sources of supply in the named countries. As noted above, exporters in the named countries would have to compete with the prices offered by exporters from "Other Countries." The CCRA agrees with Canadian industry in that these prices would almost certainly be at less than cost, given the comparability of cost structures between Canadian and offshore producers.¹²

Pricing in Foreign Markets:

The CCRA compared the exporters' average selling price to their foreign markets with the exporters' average selling price in their domestic markets. The comparison was based on the information provided by the exporters in their response to the Expiry Review Questionnaire and was conducted for the period of review. All selling prices were adjusted by removing average freight costs in order to arrive at an ex-factory selling price. The CCRA recognizes that the product mix and trade levels may vary between domestic and export markets, which would have an impact on price levels between the two markets.

For Tepro (Romania), the CCRA compared Tepro's average domestic selling price and its average selling prices to its two largest markets for CSWP. The comparison reveals that Tepro's selling price for CSWP was significantly lower in their export markets than in their domestic market. For Conduven (Venezuela), the CCRA compared Conduven's average domestic selling price and its average selling prices to all of its export markets. Based on the information on the record, the comparison reveals that Conduven was also selling at below domestic market prices in all export markets.

The above comparisons support that both Tepro and Conduven exhibit a tendency to sell the subject goods in their export markets at below domestic market prices. It is possible that they would also sell CSWP in Canada at below domestic market prices should the current order against Romania and Venezuela be allowed to expire.

Conclusion

In summary, the Commissioner has determined that the expiry of the order with respect to the named countries is likely to result in the continuation or resumption of dumping for the following reasons:

1. exporters in the named countries have both the production capacity and the excess capacity to supply the entire Canadian market;
2. there have been virtually no exports of subject goods to Canada during the period of review indicating an inability to compete in Canada at undumped prices;
3. there is a potential diversion of subject goods to Canada from the United States if the finding is rescinded as the United States has a current anti-dumping order in place against carbon welded pipe from several of the named countries;
4. exporters from the named countries would likely have to dump in order to compete with low priced exports from "emerging countries; and,
5. evidence suggests that two of the named countries may be dumping in their current export markets and they may dump subject goods in Canada should the order be allowed to expire.

FUTURE ACTION

The Tribunal will now consider whether the expiry of the order is likely to result in injury or retardation to the domestic industry.

If the Tribunal determines that the expiry of the order is likely to result in injury or retardation, the order will be continued, with or without amendment. If this is the case, the CCRA will continue to levy anti-dumping duties on importations of subject goods where appropriate.

If the Tribunal determines that the expiry of the order is unlikely to result in injury or retardation, the order will be rescinded. Anti-dumping duties would no longer be levied on importations of the goods in question from the date the order is rescinded.

INFORMATION

This Statement of Reasons has been provided to persons directly interested in these proceedings. A free copy may be obtained upon request or from the CCRA's Web site at the address below. For further information, please contact Mr. John MacKay or Mr. Louis Nadon as follows:

Mail
Canada Customs and Revenue Agency
Anti-dumping and Countervailing Directorate
100 Metcalfe Street, 11^th Floor
Ottawa, Ontario
Canada
K1A 0L8

Telephone
John MacKay: (613) 954-7395
Louis Nadon: (613) 954-7381

Telefax
(613) 941-2612

e-mail
john.mackay@ccra-adrc.gc.ca
louis.nadon@ccra-adrc.gc.ca

Website
www.cbsa-asfc.gc.ca/sima-lmsi/
www.cbsa-asfc.gc.ca/sima-lmsi/

Denis Lefebvre
Assistant Commissioner
Customs Branch

Ottawa, March 23, 2001
File No. 4366-3

APPENDIX 1

PRODUCERS

Camrose Pipe Company Ltd.
1060-700 4^th Avenue south West
Calgary, Alberta
T2P 3J4

IPSCO Inc.
P.O. Box 1670
Armour Road
Regina, Saskatchewan
S4P 3C7

Ispat Sidbec Inc.
4000, Route des Aciéries
Contrecoeur, Québec
J0L 1C0

Prudential Steel Ltd.
18^th Floor
140-4^th Avenue S.W.
P.O. Box 1510
Calgary, Alberta
T2P 2L6

Stelpipe Ltd.
A Subsidiary of Stelco Inc.
100 King Street West
24th Floor, Stelco Tower
Hamilton, Ontario
L8N 3T1

APPENDIX 2

EXPORTERS

C.A. Conduven
Av. Beethoven,
Torre Financiera, Piso 9
Colinas de Bello Monte
Caracas 1060-A
Venezuela

M.F. Persico Pizzamiglio S.A.
Rodovia Presidente Dutra
Guarulhos
Sao Paulo, Brazil

Metalexportimport S.A.
21-25 Mendeleev Street
Bucharest
Romania

SC Tepro S.A.
132 Chisinaului Str.
Iasi, Romania

SSP Trading (1982) Co. Ltd.
258/21 Soi Watchannock
Rama 3 Rd., Bangkorlaem,
Bankok, 10120
Thailand

APPENDIX 3

IMPORTERS

EMCO Limited
(McLennan Sales Division)
9 Simpson Dr.
Saint John, N.B.
E2H 2B5

Protin Import Limited
Suite 254 - 1070 W. Broadway
Vancouver, B.C.
V6H 1E7

Wheatland Tube Company
900 Hadden Avenue
Collingswood
New Jersey
08108