ARCHIVED - Statement of Reasons

This page has been archived.

OTTAWA, May 1, 2003

4258-103
4258-11
AD/1179
AD/1211

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

CERTAIN STAINLESS STEEL ROUND BAR ORIGINATING IN OR EXPORTED FROM THE FEDERAL REPUBLIC OF GERMANY, FRANCE, INDIA, ITALY, JAPAN, SPAIN, SWEDEN, CHINESE TAIPEI (FORMERLY DESIGNATED AS TAIWAN) AND THE UNITED KINGDOM

AND

CERTAIN STAINLESS STEEL ROUND BAR ORIGINATING IN OR EXPORTED FROM THE REPUBLIC OF KOREA

DECISION

On April 16, 2003, pursuant to subsection 76.03(7) of the Special Import Measures Act, the Commissioner of Customs and Revenue determined that the expiry of the finding made by the Canadian International Trade Tribunal on September 4, 1998, in Inquiry No. NQ-98-001, concerning certain stainless steel round bar originating in or exported from the Federal Republic of Germany, France, India, Italy, Japan, Spain, Sweden, Chinese Taipei (formerly designated as Taiwan) and the United Kingdom; and the expiry of the finding made by the Canadian International Trade Tribunal on June 18, 1999, in Inquiry No. NQ-98-003, concerning certain stainless steel round bar originating in or exported from the Republic of Korea is likely to result in the continuation or resumption of dumping of the goods.

This statement of reasons is also available in French. Please refer to the "Information" section.
Cet énoncé des motifs est également disponible en français. Veuillez consulter la section " Renseignements ".

TABLE OF CONTENTS

^SUMMARY

^BACKGROUND

^{PROCEDURAL ISSUES}

^{PRODUCT INFORMATION}

^{CANADIAN INDUSTRY/MARKET}

^PARTICIPANTS

^{CONSIDERATION AND ANALYSIS}

• ^{INCIDENCE OF DUMPING WHILE THE FINDINGS WERE IN PLACE}
• ^{PERFORMANCE AND LIKELY FUTURE PERFORMANCE OF EXPORTERS}
• ^{POTENTIAL TO PRODUCE SUBJECT GOODS IN FACILITIES USED FOR OTHER GOODS}
• ^{ANTI-DUMPING MEASURES BY AUTHORITIES OF COUNTRIES OTHER THAN CANADA}
• ^{OTHER TRADE MEASURES TAKEN BY AUTHORITIES OF COUNTRIES OTHER THAN CANADA}
• ^{CHANGES IN MARKET CONDITIONS}
• ^{COUNTERVAILING MEASURES TAKEN BY CANADA}

^{CONSIDERATION OF VALBRUNA'S SUBMISSION}

^{SUMMARY BY COUNTRY}

^CONCLUSION

^{FUTURE ACTION}

^INFORMATION

SUMMARY

On December 17, 2002, the Canadian International Trade Tribunal (Tribunal), pursuant to subsection 76.03(3) of the Special Import Measures Act (SIMA), initiated an expiry review of its finding made on September 4, 1998, in Inquiry No. NQ-98-001 (the "1998 Finding"), concerning certain stainless steel round bar originating in or exported from the Federal Republic of Germany (Germany), France, India, Italy, Japan, Spain, Sweden, Chinese Taipei (formerly designated as Taiwan) and the United Kingdom. The Tribunal also initiated an expiry review of its finding made on June 18,1999, in Inquiry No. NQ-98-003 (the "1999 Finding"), concerning certain stainless steel round bar originating in or exported from the Republic of Korea (Korea). The purpose of this expiry review is to determine whether the Tribunal's 1998 and 1999 Findings (collectively referred to as "the Findings"), scheduled to expire on September 3, 2003 and June 16, 2004 respectively, are to be continued or rescinded.

As a result of the Tribunal's decision to initiate a review of the Findings, the Commissioner of Customs and Revenue (Commissioner) initiated an investigation on December 18, 2002, to determine whether the expiry of the Findings is likely to result in the continuation or resumption of dumping of the goods.

On the basis of the information available, the Commissioner determined, pursuant to subsection 76.03(7) of SIMA, on April 16, 2003, that the expiry of the Findings is likely to result in the continuation or resumption of dumping of the goods.

On April 17, 2003, the Tribunal initiated an inquiry to determine whether the expiry of the Findings in respect of the goods is likely to result in injury or retardation to the domestic industry. If the Tribunal determines that the expiry of the Findings is likely to result in injury or retardation, the Findings will be continued, with or without amendment. If the Tribunal determines that the expiry of the Findings is unlikely to result in injury or retardation, the Findings will be rescinded.

BACKGROUND

The anti-dumping investigation of certain stainless steel round bar originating in or exported from Germany, France, Italy, Japan, Spain, Sweden, Chinese Taipei and the United Kingdom was initiated on December 23, 1997, in response to a complaint filed by Atlas Specialty Steels, a Division of Sammi Atlas Inc. of Welland, Ontario (now Atlas Specialty Steels, a Division of Slater Stainless Corporation, wholly owned by Slater Steel Inc.) (Atlas).

On March 6, 1998, a second anti-dumping investigation respecting the alleged injurious dumping into Canada of the same product originating in or exported from India was initiated in response to a separate complaint from Atlas. The investigations were joined and a preliminary determination of dumping with respect to the subject goods from the nine countries was made on May 7, 1998, followed by a final determination of dumping on August 5, 1998. The Tribunal issued its 1998 Finding of injury in respect of the goods on September 4, 1998.

Subsequently, Atlas filed a dumping complaint with respect to the same product originating in or exported from Korea. An anti-dumping investigation with respect to stainless steel round bar against Korea was initiated on December 3, 1998, followed by a preliminary determination of dumping on February 19, 1999 and a final determination of dumping on May 19, 1999. The Tribunal issued its 1999 Finding of injury in respect of the goods on June 18, 1999.

On October 28, 2002, the Tribunal issued a notice of expiry of the Findings indicating that the above-mentioned Findings were scheduled to expire on September 3, 2003 and June 16, 2004, respectively. The notice of expiry invited opinions from interested persons or governments requesting or opposing the initiation of an expiry review. On December 17, 2002, the Tribunal initiated a review of the Findings as it was of the opinion that such a review was warranted and provided notice to the Commissioner.

On December 18, 2002, the Commissioner initiated an investigation to determine whether the expiry of the Findings is likely to result in the continuation or resumption of dumping of the goods. In accordance with the Anti-dumping and Countervailing Directorate's guidelines on the conduct of expiry reviews¹, interested parties (see Participants section) were requested to provide any information they considered relevant to the Commissioner's investigation.

The period of review (PoR) for this expiry review investigation was January 1, 1999 to September 30, 2002

PROCEDURAL ISSUES

Amendment to Product Definition for the 1998 Finding

On March 5, 2003, the Tribunal, under the provisions of paragraph 76.01(5)(b) of SIMA, issued an order amending the 1998 Finding concerning certain stainless steel round bar to exclude a certain product. The excluded product, Staballoy AG17 (trade name), or equivalent, non?metallic drilling components (Collars), is a unique stainless steel specialty product. Only the Canadian producer and an exporter, Corus Metals, Division of Corus CIC Inc., United Kingdom (Corus), participated in the Tribunal's Interim Review No. RD-2002-004. Corus did not participate in the expiry review process and none of the parties participating in the expiry review investigation made any reference to this product or the Tribunal's order in their submissions.

The Canada Customs and Revenue Agency (CCRA) revised its product definition in respect of the 1998 Finding to reflect the Tribunal's order. The Commissioner has rendered the expiry review determination for the 1998 Finding on the basis of the amended product definition. However, based on its review of the amended product definition and recognizing the minimal, if any, impact on the expiry review investigation in progress, the CCRA concluded that it was not necessary to contact all the parties involved in the expiry review proceeding regarding this amendment. This minor technical amendment would not have affected the Commissioner's decisions regarding the likelihood of continued or resumed dumping of the goods from any of the Countries named in the expiry review investigation.

Change to the Commissioner's Expiry Review Schedule

On February 19, 2003, the CCRA issued revised enforcement statistics² and amended the expiry review schedule to provide time for interested persons to make revisions to their case briefs where reference had been made to the original enforcement statistics. The enforcement statistics were revised to eliminate the double counting of the goods subject to both anti-dumping and countervailing duties. All parties that had expressed an interest in the Commissioner's expiry review investigation were contacted in writing regarding this amendment and change in schedule. In addition, the revised expiry review schedule was posted on the CCRA website. The amended schedule was felt to be the most expeditious and reasonable manner to resolve the issue. No parties expressed any concerns regarding the amended schedule during the course of the Commissioner's expiry review investigation.

The case briefs were originally due on February 17, 2003. That due date was changed to February 27, 2003. In addition, the due date for the reply submissions was changed from March 3, 2003 to March 10, 2003. No change was made to the scheduled date of the Commissioner's determinations of April 16, 2003.

PRODUCT INFORMATION

Definition

The goods subject to the expiry review investigation for the Findings are defined as:

Stainless steel round bar of sizes 25 mm diameter up to 570 mm diameter inclusive, originating in or exported from the Federal Republic of Germany, France, India, Italy, Japan, Spain, Sweden, Chinese Taipei (formerly designated as Taiwan), the United Kingdom and Korea (collectively referred to as the "Named Countries"), excluding stainless steel round bar made to specifications:

• ASN-A3380 and ASN-A3294;
• 410QDT (oil quenched), that is, grade 410 quenched and double tempered with an oil quenching medium.

Further, for the purposes of the 1998 Finding, the following product is also excluded:

• Staballoy AG17 (trade name), or equivalent, non-magnetic drilling components (Collars); nominal chemical composition: C 0.03 / Si 0.30 / Mn 20.00 / Cr 17.00 / N2 0.50 /Mo 0.05; mechanical and magnetic properties to API 7 over the full length; material to be tested from 1 inch below outer surface or mid-wall (whichever is the smaller value); 120 ksi minimum tensile strength; 110 ksi minimum yield; elongation 18 per cent; tensile test to BS EN 10002 Part 1 or ASTM A370; Brinell hardness to 277 minimum; Charpy impact values to minimum 60 ft. lbs.; impact tests to BS EN 10045 Part I or ASTM E23. All material to be certified free from magnetic hot spots and measured over the full length (longitudinal). Maximum deflection +/- 0.50 UT/100 mm, grain size 2-3, and Magnetic Permeability below 1.005; intergranular/transgranular (chloride-induced) stress corrosion cracking tested to ASTM A262; practice E.

Product Description

The subject goods include stainless steel round bar in cut lengths, with various diameters, and with a variety of surface finishes.

Stainless steel round bar may be hot-rolled or forged only; hot-rolled or forged and annealed; hot?rolled or forged and annealed and descaled or bar turned, rough turned or lathe turned; cold drawn whether smooth turned/rough ground, centreless ground or centreless ground and polished; hot-rolled and bar turned and smooth turned/rough ground or centreless ground or centreless ground and polished.

Stainless steels are corrosion resistant and/or heat resistant steels which contain, by weight, a maximum carbon content of 1.2 per cent and a minimum chromium content of 10.5 per cent. There are many individual chemical analyses or grades for stainless steels. These analyses typically include other alloying elements besides chromium (such as nickel and molybdenum, among others) and are tailored to meet the mechanical and/or physical properties of particular end-use applications. The most popular analyses of stainless steel bar are AISI (American Iron & Steel Institute) types 303, 304, 304L, 316, 316L, 410, 416, 420, 430F, and the 630 or 17Cr?4Ni precipitation hardening grade. These analyses account for over 85 per cent of the total Canadian consumption of stainless steel bar.

Use of Subject Goods

Stainless steel round bar is used in a variety of production and maintenance applications that require resistance to corrosion and heat. Consequently, stainless steel round bar finds application in a variety of industries.

These industries include pulp and paper, power generation, petro-chemical, oil and gas, automotive and transportation. Round bars are used for a variety of applications including valve bodies, various mixer shafts and pump shaft applications. Due to the corrosive and high heat environments in which stainless steel is employed, substitute or alternate goods are not available.

As indicated above, stainless steel is classified and sold by AISI chemical analysis numerical designations. Once these analyses are met, the resulting product is fungible and the most important factor in purchasing decisions is price. The imported goods from the Named Countries are fully substitutable for Atlas' stainless steel round bar.

Classification of Imports

The Harmonized System (H.S.) provides eight classification numbers under which the subject stainless steel round bar may be classified:

7222.11.00.11	7222.20.90.11
7222.11.00.21	7222.20.90.21
7222.20.10.11	7222.30.00.11
7222.20.10.21	7222.30.00.21

CANADIAN INDUSTRY/MARKET

The Canadian industry is comprised solely of Atlas, located in Welland, Ontario, a division of Slater Stainless Corporation, which is wholly owned by Slater Steel Inc. (Slater). Slater also owns Slater Steels Corp. (a Delaware corporation) that includes Fort Wayne Specialty Alloys Division (Fort Wayne), in Fort Wayne, Indiana, United States of America (United States). Slater's Stainless Bar Division is comprised of the Atlas and the Fort Wayne Divisions.

Information on the total size of the Canadian market cannot be divulged because it could reveal Atlas' confidential sales data. The table below summarizes the volume of imports of stainless steel round bar from the Named Countries and the non-Named Countries during the PoR.

IMPORTS	1999 MT	2000 MT	2001 MT	2002 (9 Months) MT
Named Countries and % of Imports	231 (13%)	949 (29%)	1,157 (31%)	1,565 (41%)
Non Named Countries and % of Imports	1,548 (13%)	2,365 (71%)	2,574 (69%)	2,284 (59%)
Total Imports	1,779 (100%)	3,314 (100%)	3,731 (100%)	3,849 (100%)

MT = Metric tonne (1000 kg)

Source: CCRA Market Statistics - Apparent Canadian Domestic Market for Stainless Steel Round Bar (Exhibit 87).

PARTICIPANTS

At the start of the expiry review, the Tribunal distributed a notice of the initiation of the expiry review and an expiry review schedule to 165 persons including the Canadian producer, exporters, traders and importers. At the same time, any person or government having an interest in the Commissioner's investigation was invited to provide a submission to the Commissioner containing information that they deemed relevant.

Expiry Review Questionnaires (ERQs) requesting information necessary to evaluate the factors relevant to this expiry review investigation were sent to the persons identified above. These persons were also invited to submit case briefs arguing that dumping is likely or unlikely to continue or resume absent the Findings. In addition, they could submit reply submissions providing their comments in respect of the case briefs submitted by other parties.

Atlas, the sole Canadian producer of stainless steel round bar, fully participated in this expiry review. Atlas responded to the ERQ and submitted a case brief and a reply submission arguing that dumping is likely to continue or resume absent the Findings.

Six exporters participated in the expiry review. Acciaierie Valbruna spa (Valbruna), Cogne Acciai Speciali srl (Cogne), and Italfond spa (Italfond) of Italy, and Viraj Impoexpo Ltd (Viraj) and Ferro Alloys Corporation (FACOR) of India, responded to the ERQ. In addition, Fort Wayne, Atlas' associated entity, responded as a US exporter.

Valbruna also submitted a case brief and reply submission arguing that dumping of subject goods from Italy is not likely to continue or resume absent the Findings.

Responses to the ERQs were also received from five Canadian importers, namely, Ryerson Tull Canada Inc., of Brampton, Ontario, ThyssenKrupp VDM Canada of Markham, Ontario, Valbruna Canada, of Milton, Ontario, Unalloy - IWRC, a Division of Samuel Manu-tech Inc. of Brampton, Ontario and A.M. Castle & Co. of Selkirk, Manitoba.

Participants are divided into two broad categories: "parties to the proceeding" and "interested persons". Both groups are allowed to file any information that they feel is pertinent and may file case arguments and reply submissions. The main difference between the two groups is that counsel for "interested persons" may not be given access to confidential or protected information, while counsel for "parties to the proceeding" may be given access provided all the relevant conditions of SIMA are met.

A person is regarded as a "party to the proceeding" if the person has a direct interest in the outcome of the proceeding and actively participates in the proceeding. In an expiry review proceeding, only exporters, importers and Canadian producers may be considered parties to the proceeding.

In this expiry review, all of the identified companies named above were considered parties to the proceeding, as they have a direct interest in the outcome of the proceeding and participated in the proceeding.

CONSIDERATION AND ANALYSIS

Subsection 76.03(7) of SIMA requires the Commissioner to determine whether the expiry of a finding or order in respect of goods of a country or countries is likely to result in the continuation or resumption of dumping of the goods. Pursuant to subsection 37.2(1) of the Special Import Measures Regulations (SIMR), the Commissioner, in making the determination, may consider any factor specifically identified in paragraphs (a) to (i), as well as any other factors relevant in the circumstances.

The following factors were found to be of particular relevance to this expiry review:

• Incidence of dumping while the Findings were in place;
• Performance and likely future performance of exporters;
• World-wide overcapacity of stainless steel bar production;
• Demand for stainless steel bar and capacity utilization of foreign producers;
• Potential for the foreign producers to produce stainless steel bar in facilities currently used to manufacture other goods;
• Anti-dumping measures taken by authorities of countries other than Canada;
• Other trade measures taken by authorities of countries other than Canada;
• Countervailing measures taken by Canada.

The following is an analysis of each factor considered by the Commissioner. The analysis was based on the information contained in the administrative record, which was available to counsel for all parties to the proceeding as well as the Commissioner.

INCIDENCE OF DUMPING WHILE THE FINDINGS WERE IN PLACE

The statistics for total imports of subject stainless steel round bar from the Named Countries during the PoR are summarized as follows:

Imports and Enforcement Data - All Named Countries *

Year	Value (C$)	Quantity Imported (MT)	Quantity Dumped (MT)	SIMA Duty Paid (C$)	% of Goods Dumped
1999	$553,577	231	89	$92,317	38%
2000	$2,176,768	949	83	$242,228	9%
2001	$3,303,147	1158	159	$463,603	14%
2002	$4,525,962	1,565	84	$202,707	5%

* Based on Statistics Canada data and CCRA enforcement statistics. Information on the individual countries cannot be shown, as it would disclose confidential information.

The above data indicates that subject goods from the Named Countries were dumped and anti-dumping duties were paid on these imports during the entire PoR. In addition, the overall import volume of the subject goods from the Named Countries has increased during the same period.

In its submission³, Atlas argued that the ongoing participation in the Canadian market of subject imports from the Named Countries indicated that this presence will continue and that if such imports have been dumped while the Findings have been in place, there is no credible basis to suggest that such dumped imports would cease absent the Findings. Atlas submitted that dumping in higher volumes is the likely outcome in view of the entry into the Canadian market of very low priced imports from non-Named Countries (non-subject countries) with which subject imports from the Named Countries must now compete.

CCRA's Position

The information on the administrative record shows that the Named Countries have continued to sell significant quantities of subject goods to Canada during the PoR and that the CCRA has continued to collect anti-dumping duties on the dumped imports. The continuation of dumping while the Findings have been in place is an indicator that the absence of the Findings in respect of the subject goods from the Named Countries is likely to result in the continuation or resumption of dumping of the goods.

PERFORMANCE AND LIKELY FUTURE PERFORMANCE OF EXPORTERS

The CCRA reviewed the performance and likely future performance of the exporters with reference to production/capacity utilization, exports/market share and prices.

Production/Capacity Utilization

In its 1998 and 1999 Findings⁴, the Tribunal concluded that exports represent a significant proportion of production of stainless steel in the Named Countries and that producers in most countries actively seek out export markets to achieve optimum capacity utilization. Since the Findings have been in place, global production capacity has increased substantially and any increase in underutilization of production capacity would enhance competition for export markets.

Information on the record from various sources indicates a global overcapacity in the stainless steel industry.⁵ For example, a substantial increase in capacity for the stainless steel sector is expected in the United States while the consumption of stainless bar in its domestic market has declined.

In addition, the decision made by the People's Republic of China (China) to significantly add to its capacity for stainless steel products will likely mean a corresponding decline in the requirement for imported products, mainly from Japan, Korea and Chinese Taipei, that supplied 80 per cent of China's demand. With the vast Chinese stainless steel market becoming increasingly out of reach for both the Named and non-Named Countries, all producers would be expected to aggressively seek out alternative export markets such as Canada.

In Europe, stainless steel production exceeds consumption and this situation is expected to continue for the next several years. An increase in actual and planned capacity together with weak demand and flat prices in Europe will likely intensify the search for export markets to improve capacity utilization. Exporters in Named Countries in Europe and India have significant excess capacity with most of the production destined for the export market.

CCRA's Position

The planned and in-progress capacity expansions in the global stainless steel industry will only exacerbate the present high level of overcapacity in the sector. Together with stagnant or weak demand and resultant flat or declining prices, producers are under increased pressure to sell into export markets to maximize capacity utilization. With subject goods produced to international specifications, price is the deciding factor in making a sale. The CCRA is of the view that exporters are likely to resort to selling the goods at dumped prices to optimize capacity utilization.

Exports/Market Share

As previously indicated, information on the size of the Canadian market cannot be disclosed owing to confidentiality considerations. However, imports from the Named Countries continued to increase their share of the total imports during the PoR, accounting for 13% in 1999, 29% in 2000, 31% in 2001 and 41% of the total imports into Canada in the first nine months in 2002. Imports from certain non-Named Countries, namely China, Slovenia, the United Arab Emirates, Portugal, Latvia and Russia, have also increased their presence in the Canadian market.

Producers of stainless steel round bar, including those from the Named Countries, are all predominantly export oriented, with their export sales well in excess of their respective domestic consumption and sales.

With China progressing to a position where it will supply most, if not all, of its own domestic needs of stainless steel, exporters from Named Countries like Chinese Taipei that previously sold to this market are expected to step up efforts to replace these lost exports by increasing their market share in other export markets, including Canada.

CCRA's Position

The global stainless steel bar market is heavily export-oriented. The flat or reduced demand, attributable to the global economic slowdown, together with significant levels of overcapacity, has resulted in very aggressive pricing on the part of producers. The CCRA is therefore of the view that absent the Findings, exporters from the Named Countries would strive to maintain and increase their market share in the face of low priced imports from non-Named Countries.

Prices

The global stainless steel market is characterized by price pressures. A combination of overcapacity and weakened demand are responsible for the flat prices of the subject goods. The presence of imports from non-Named Countries hoping to obtain a share of the Canadian market creates additional pressure on prices.

The most recent development regarding the Canadian and global markets is the presence of low-priced imports from non-Named Countries. These countries have been able to capture a significant portion of the Canadian market with very aggressive pricing.

Import permits⁶ from the Department of Foreign Affairs and International Trade (DFAIT), for October 2002, showed that the sales volumes of the subject goods for foreign producers from both Named and non-Named Countries were 23% higher than for October 2001. In addition, by October 2002, prices had dropped on average $465 per metric tonne from the first nine months of 2002 for all stainless steel bar, including both Named and non-Named Countries. The average prices for non-United States stainless steel bar was $2,893 per metric tonne for the first nine months of 2002.

Concerning the pricing practices of steel exporters, the CCRA stated in its expiry review determination for steel plate:

The need for exporters to keep the plants operating at optimum levels is critical to their viability and overall existence. As demand for steel products in their domestic markets levels or drops off, producers will be forced to increase sales in foreign markets. Driven by the need to seek out new sales in order to maximize production capacity, exporters will target any country with an open market, including Canada. As price is the key factor for this commodity product, the success of the exporters will be dependent on their ability to compete with, or more precisely, undercut the producers currently supplying these other markets.⁷

These conditions also apply to exporters of stainless steel round bar.

CCRA's Position

Foreign producers, from both the Named Countries and non-Named Countries who wish to sell into Canada must do so at price levels that are increasingly set by exporters from countries that are not subject to the Findings i.e. the non-Named Countries. Indeed, the current price levels for the subject goods from the non-Named Countries is approximately 30% lower than the prices for goods from the Named countries before the Findings took effect in 1998 and 1999.

With the continued participation of the Named Countries in the Canadian market and the aggressive pricing of exporters from the non-Named Countries, it is likely that exporters from the Named Countries will have to sell at dumped prices in order to maintain market share, in the absence of the Findings.

POTENTIAL TO PRODUCE SUBJECT GOODS IN FACILITIES USED FOR OTHER GOODS

Information on the administrative record including the exporter submissions and Atlas' case brief indicates that most producers have the ability to produce both subject stainless steel round bar and other non-subject small diameter round bar (under 25mm in diameter) and related stainless steel long products, such as angles, shapes and sections at the same facilities.

Atlas also cited the significant increase of 240%, or 1,469 metric tonnes, in imports of stainless steel angles, shapes and sections from India, Italy and Spain, between 1997 and 2002⁸. Their share of the total imports of these goods rose from 23% to 55%, for the same period. During that same period, the prices from these three countries declined by 25%, and in 2002 was 35% lower than the prices of imports from all the other countries. Atlas noted that these developments occurred after the imposition of the 1998 Finding and submitted that, in the absence of the Findings, these countries would revert to exporting the subject goods for which there is a much larger market in Canada.

With respect to imports of small diameter stainless steel round bar from India and Italy, which are not subject to the Findings, Atlas noted a similar pattern. Between 1997 and 2002, such imports have increased by well over 1000% and their share of the total imports grew from under 7% to over 64%. During that same period, the prices of imports from these two countries has declined by 18% and in 2002, is 28% lower than prices of imports from all other countries. Atlas stated that imports from India and Italy have grown at the expense of the volumes from the other Named Countries as they are apparently priced at dumped levels.

Atlas submitted that during the PoR, the Canadian imports of small diameter stainless steel round bar has grown and contends that the switch to the small diameter bar is coincident with the imposition of the 1998 Finding. Atlas also contends that the pricing practices for the smaller size bar provides compelling evidence that exports of the subject goods would also be at dumped prices. There is no domestic production to compete with these imports and such imports from India and Italy have apparently undercut the market. Atlas again submitted that such sales are motivated by an export imperative designed to utilize production capacity.

CCRA's Position

The CCRA notes the potential to produce subject goods in the facilities now used to produce non-subject goods and is of the view that, in the absence of the Findings, the exporters in the Named Countries would likely attempt to increase sales of stainless steel round bar in Canada, likely at the predatory price levels that they have set for the non-subject goods.

ANTI-DUMPING MEASURES BY AUTHORITIES OF COUNTRIES OTHER THAN CANADA

Measures taken by the United States

The United States has taken measures against some of the same Named Countries that are involved in this expiry review⁹.

Italy - All three Italian companies that responded to the ERQ were subject to either anti-dumping or countervailing measures taken by the United States in 2001. The dumping margins ranged from 2.5% to 33%. Cogne is the only Italian company that exports goods to the United States which are subject to countervailing measures with applicable duties of 13% and 22%.

India - In 2002, the United States concluded an investigation and levied anti-dumping duties against Indian manufacturers of stainless steel round bar.

Other Countries - On May 4, 2000, the United States in its sunset review of the finding relating to goods from Brazil, India, Japan, and Spain concluded that the revocation of the finding would likely lead to the continuation or recurrence of dumping at the levels recorded in the original finding¹⁰. The dumping margin at that time ranged from 3.9% to 62.9%. Therefore, the finding was extended for a further period of 5 years. In addition, another United States finding on stainless steel bar was made in early 2002 with respect to anti-dumping measures against France, Germany, Italy, Korea and the United Kingdom and countervailing measures against Italy¹¹.

Measures taken by the European Communities

During the PoR, the European Communities initiated both anti-dumping and countervailing investigations against stainless steel round bar from India. However, these proceedings did not result in any duties being levied.¹²

CCRA's Position

Anti-dumping measures taken by the authorities of countries other than Canada, in respect of the goods of the same description or in respect of similar goods, are indicative of past dumping practices of the Named Countries with respect to stainless steel round bar. When considered in conjunction with other factors, the facts lend support to the view that in the absence of the Findings, there is likelihood of resumed or continued dumping.

OTHER TRADE MEASURES TAKEN BY AUTHORITIES OF COUNTRIES OTHER THAN CANADA

United States Section 201 Safeguard Measures Against Certain Steel Products

On March 5, 2002, Section 201 Safeguard Measures were implemented in the United States¹³ as a direct response to the crisis in the North American and global steel industry, including the stainless steel industry. The Safeguard Measures resulted in increased tariff protection on most steel products for three years.

Pursuant to the Section 201 Safeguard Measures, import tariffs on stainless steel bars and rods were for a three-year period, beginning in 2002 at 15%, declining to 12% in 2003 and dropping to 9% in 2004. The Safeguard Measures covered numerous countries, except for countries which benefited from exclusions.

Manufacturers located in India were exempted from the imposition of the Section 201 Safeguard Measures, as India was identified as a developing country whose imports represented less than 3% of imports into the United States market. Recently, domestic manufacturers have petitioned the United States government to remove India from the tariff exclusion list due to the surge in imports from India, following the imposition of the Section 201 Safeguard Measures.¹⁴

At the present time, information is not available as to whether imports from India will be subject to Section 201 Safeguard Measures. However, should India be included in the Section 201 Safeguard Measures, there is a risk that stainless steel round bar from India will be diverted from the United States market into the Canadian market.

Exporters tend to view North America as an integrated market and if access to the United States market is impeded, the Canadian market can and does serve as a natural substitute market for the offshore mills looking for export sales of stainless steel bar. Atlas cited the decline in imports of stainless steel bar into the United States, particularly from the Named Countries as a result of the Section 201 Safeguard Measures.¹⁵

CCRA's Position

The CCRA notes that some diversion of exports into Canada may have already occurred based on the 2001 and 2002 DFAIT import permits, which show a dramatic increase in permits for stainless steel round bar in sizes 25 mm and greater from all countries, other than the United States.

In addition, the CCRA's own enforcement data, obtained from the Facility for Information Retrieval and Management (FIRM), also shows a significant increase in the actual volume of imports of the subject goods for the first nine months of 2002, when compared to the same period in 2001, indicating the probable diversion of exports into Canada.

CHANGES IN MARKET CONDITIONS

Domestic Conditions

The demand for stainless steel long products has been relatively stable since January 1999 with no significant changes in consumption during the PoR.

Atlas remains the only domestic producer of the subject goods. On November 13, 2002, Atlas announced the closure of one of its two rolling mills, scheduled for the first half of 2003. Also, since 1999, there has been a consolidation of small Canadian distributors into larger North American distribution companies.

Subsequent to the Findings, the Tribunal issued a third finding in October 2000, against stainless steel round bar injuriously dumped from Brazil and injuriously subsidized from Brazil and India. Since then, other non-traditional exporting countries have emerged. Canadian importers/traders are known to repeatedly switch sources for goods following a finding on subject goods in the steel sector. Importers are active in importing from the Named Countries and the non-traditional exporting countries with their low-priced stainless steel round bar. The importers have a low profit margin and seek out the lowest priced goods in order to make a sale. Indeed, the Tribunal has confirmed in its Findings that "[...] purchasers have a marked tendency to switch from one supplier to another on the basis of price alone".¹⁶

International Conditions

Various sources of information are contained in the administrative record with respect to the international conditions for the stainless steel industry.

Metal Bulletin Research has forecasted that any recovery would be slow and would not be enough to offset global overcapacity.¹⁷ For example, China consumes a significant proportion of the global stainless steel bar production. In 1999, 80% of Chinese demand was satisfied by imports, principally from Chinese Taipei, Korea and Japan. This is expected to fall to 50% in 2003, and will continue to fall further as Chinese production facilities are built.

The most significant aspect of the industry is the continuing increase in global capacity. Between 2001 and 2004, one million metric tonnes per year of additional melting capacity are forecasted to come on stream. It is estimated that global stainless steel long product capacity would increase by approximately 170,000 metric tonnes in 2003 alone.¹⁸

CCRA's Position

International supply and demand has, and will continue to have a significant impact on the overall Canadian market. While overall global demand appears to have been steady, further capacity increases have exacerbated an existing oversupply problem. This global oversupply will likely result in continued dumping into Canada by the Named Countries as the producers attempt to maintain or increase market share and thereby maximize capacity utilization. In addition, as producers from other non-Named Countries continue to increase capacity and enter the international market, increased competition for sales will cause the prices to drop even further, making continued dumping even more likely.

COUNTERVAILING MEASURES TAKEN BY CANADA

On March 31, 2000, the Commissioner initiated an investigation respecting the dumping of certain stainless steel round bar originating in or exported from Brazil and the subsidizing of certain stainless steel round bar originating in or exported from Brazil and India. This was the third case initiated in respect of the subject goods since December 1997.

In their complaint, Atlas noted that although India was covered by the 1998 Finding, low priced imports from India had not abated and Atlas contended that this was attributable to subsidies.

On September 27, 2000, the CCRA made a final determination of dumping with respect to certain stainless steel round bar originating in or exported from Brazil and a final determination of subsidizing with respect to the same goods originating in or exported from Brazil and India.

On October 27, 2000, the Tribunal issued its finding that the dumping in Canada of the subject goods, originating in or exported from Brazil, and the subsidizing of the aforementioned goods, originating in or exported from Brazil and India, had caused material injury. This finding is not scheduled to expire until five years from the date that it is issued.

In its finding, the Tribunal noted that there was no doubt that, as imports from the Named Countries, other than India, were priced out of the market by the Findings, they were rapidly replaced by imports from Brazil and an increase in imports from India. The Tribunal concluded that Atlas's decline in sales volumes and its loss of market share in 1999 were mainly attributable to the large increase in imports of stainless steel round bar from India and Brazil.¹⁹

Since the date of this finding, imports of subject goods from India have been subject to countervailing duties. The ongoing subsidization of the subject goods, by the Government of India, is intended to provide a competitive advantage to goods originating in or exported from India. Since price is the key factor for this commodity product, the ongoing subsidization of the subject goods will allow exporters to undercut the export prices from other countries.

CCRA's Position

In its review of other factors, the CCRA has noted the aggressive conduct of the Indian exporters in the Canadian market. Notwithstanding that the Tribunal's finding with respect to subsidization is not the subject of this review, the CCRA is of the view that, absent the Tribunal's 1998 Finding against India, exporters from India would likely continue to maintain or increase their market share.

CONSIDERATION OF VALBRUNA'S SUBMISSION

Valbruna provided a case brief and reply submission arguing that in the absence of the 1998 Finding, there is no likelihood of continuation or resumption of dumping from Valbruna. In their reply submission, Valbruna requested that the CCRA find that there is no propensity to dump by Valbruna and that the injury determination against Valbruna be terminated.

The Commissioner will normally make the determination regarding the likelihood of resumed or continued dumping or subsidizing on the basis of each country named in the finding or order under review. However, where the situation warrants, the Commissioner may make a determination in respect of certain goods or exporters.²⁰

Based on the information contained in the administrative record in relation to Valbruna, the Commissioner is not persuaded that a separate determination regarding the likelihood of resumed or continued dumping for Valbruna is warranted. Accordingly, the Commissioner will make the determination regarding the likelihood of resumed or continued dumping on the basis of each country named in the Finding.

SUMMARY BY COUNTRY

A brief summary of the expiry review factors as they apply to each country follows. It is clear that exporters from each of the Named Countries will likely resume or continue dumping the subject stainless steel round bar into Canada in the absence of the Findings.

1. Germany

None of the exporters from Germany cooperated in the CCRA's last normal value re-investigation. These companies have also not participated in this expiry review investigation.

Based on the expiry review factors identified above, the resumption or continuation of dumping of the subject goods from Germany is likely since the exporters have continued to dump the subject goods into Canada during the PoR. Further, German producers are dependent on export sales to maintain capacity utilization. German production capacity is significantly increasing, which will increase pressure on the producers to seek out export markets. German stainless steel bar is also subject to measures taken by the authorities of the United States, i.e. anti-dumping measures and the imposition of Section 201 Safeguard Measures, which is likely to cause the diversion of dumped goods into Canada.

2. France

None of the exporters from France cooperated in the CCRA's last normal value re-investigation. These companies have also not participated in this expiry review investigation.

Based on the expiry review factors identified above, the resumption or continuation of dumping of the subject goods from France is likely since the exporters have continued to dump the subject goods into Canada during the PoR. Further, French domestic consumption is declining and pricing has remained flat. Therefore, producers are dependent on export sales to maintain capacity utilization. French stainless steel bar is also subject to measures taken by the authorities of the United States, i.e. anti-dumping measures and the imposition of Section 201 Safeguard Measures, which is likely to cause the diversion of dumped goods into Canada.

3. India

In the CCRA's last normal value re-investigation, four exporters from India cooperated. Two of these companies have participated in this expiry review investigation.

Based on the expiry review factors identified above, the resumption or continuation of dumping of the subject goods from India is likely since there has been some dumping of the subject goods into Canada during the PoR. Producers from India are dependent on export sales to maintain capacity utilization while production capacity is enhanced. This overcapacity will mean additional pressure on the producers to seek out export markets since domestic consumption is a very small proportion of overall production. Information on the administrative record shows that exporters from India have an aggressive approach to pricing. In addition, producers in India have the ability to manufacture the subject stainless steel round bar in facilities that are used to produce other stainless steel products. It should be noted that certain stainless steel round bar from India is also subject to Canadian countervailing duties. Indian stainless steel bar is also subject to anti-dumping measures taken by the authorities of the United States, which is likely to cause the diversion of dumped goods into Canada. Finally, United States producers of stainless steel have recently requested that the United States Government remove India from the Section 201 Safeguard Measures exclusion list. If India's exclusion is revoked, there is the risk of diversion of subject goods into Canada.

4. Italy

In the CCRA's last normal value re-investigation, four exporters from Italy cooperated. Three of these companies have participated in this expiry review investigation.

Based on the expiry review factors identified above, the resumption or continuation of dumping of the subject goods from Italy is likely since the exporters have continued to dump the subject goods into Canada during the PoR. Further, the producers in Italy are dependent on export sales to maintain capacity utilization due to flat domestic demand and pricing of stainless steel round bar. Additional production capacity means extra pressure on the producers to seek out export markets. The companies in Italy also have the ability to produce the subject stainless steel round bar in facilities that are used to produce other stainless steel products. Italian stainless steel bar is also subject to measures taken by the authorities of the United States, i.e. anti-dumping measures and the imposition of Section 201 Safeguard Measures, which is likely to cause the diversion of dumped goods into Canada.

5. Japan

None of the exporters from Japan cooperated in the CCRA's last normal value re-investigation. These companies have also not participated in this expiry review investigation.

Based on the expiry review factors identified above, the resumption or continuation of dumping of the subject goods from Japan is likely since the exporters have continued to dump the subject goods into Canada during the PoR. Further, Japanese producers are dependent on export sales to maintain capacity utilization, especially when domestic demand is weak and domestic prices are flat. Japan is facing additional competition in the Asian market, mainly from Chinese producers, and this will increase pressure on the producers to seek out other export markets. Japanese stainless steel bar is also subject to measures taken by the authorities of the United States, i.e. anti-dumping measures and the imposition of Section 201 Safeguard Measures, which is likely to cause the diversion of dumped goods into Canada.

6. Spain

None of the exporters from Spain cooperated in the CCRA's last normal value re-investigation. These companies have also not participated in this expiry review investigation.

Based on the expiry review factors identified above, the resumption or continuation of dumping of the subject goods from Spain is likely since the exporters have continued to dump the subject goods into Canada during the PoR. Further, Spanish producers are dependent on export sales to maintain capacity utilization, especially when European demand is weak and prices are flat. Spanish stainless steel bar is also subject to measures taken by the authorities of the United States, i.e. anti-dumping measures and the imposition of Section 201 Safeguard Measures, which is likely to cause the diversion of dumped goods into Canada.

7. Sweden

None of the exporters from Sweden cooperated in the CCRA's last normal value re-investigation. These companies have also not participated in this expiry review investigation.

Based on the expiry review factors identified above, the resumption or continuation of dumping of the subject goods from Sweden is likely since the exporters have continued to dump the subject goods into Canada during the PoR. Further, Swedish producers are dependent on export sales to maintain capacity utilization, especially when European demand is weak and prices are flat. Swedish stainless steel bar is also subject to Section 201 Safeguard Measures taken by the authorities of the United States, which is likely to cause the diversion of dumped goods into Canada.

8. Chinese Taipei

None of the exporters from Chinese Taipei cooperated in the CCRA's last normal value re-investigation. These companies have also not participated in this expiry review investigation.

Based on the expiry review factors identified above, the resumption or continuation of dumping of the subject goods from Chinese Taipei is likely since the exporters have continued to dump the subject goods into Canada during the PoR. Further, Chinese Taipei producers are dependent on export sales to maintain capacity utilization especially when domestic demand and pricing is weak. Chinese Taipei is facing additional competition in the Asian market, mainly from Chinese producers, and this will increase the pressure on the producers to seek out other export markets and price aggressively. Stainless steel bar from Chinese Taipei is also subject to Section 201 Safeguard Measures taken by the authorities of the United States which is likely to cause the diversion of dumped goods into Canada.

9. United Kingdom (UK)

None of the exporters from the UK cooperated in the CCRA's last normal value re-investigation. These companies have also not participated in this expiry review investigation.

Based on the expiry review factors identified above, the resumption or continuation of dumping of the subject goods from the UK is likely since the exporters have continued to dump the subject goods into Canada during the PoR. Further, the UK producers are dependent on export sales to maintain capacity utilization especially when European demand is weak and prices are flat. Stainless steel bar from the UK is also subject to measures taken by the authorities of the United States, i.e. anti-dumping measures and the imposition of Section 201 Safeguard Measures, which is likely to cause the diversion of dumped goods into Canada.

10. Korea

None of the exporters from Korea cooperated in the CCRA's last normal value re-investigation. These companies have also not participated in this expiry review investigation.

Based on the expiry review factors identified above, the resumption or continuation of dumping of the subject goods from Korea is likely since the exporters have continued to dump the subject goods into Canada during the PoR. Further, the Korean producers are dependent on export sales to maintain capacity utilization especially when domestic demand is weak. Korea is facing additional competition in the Asian market, mainly from Chinese producers, and this will increase the pressure on the producers to seek out other export markets. Korean stainless steel bar is also subject to measures taken by the authorities of the United States, i.e. anti-dumping duties and the imposition of Section 201 Safeguard Measures, which is likely to cause the diversion of dumped goods into Canada.

CONCLUSION

Worldwide production of stainless steel is concentrated in relatively few countries. Accordingly, the majority of stainless steel producers focus on the export market, where much of their production is sold. In many, if not most instances, stainless steel sales to the domestic market account for a small portion of overall sales. In some cases, especially among the Named Countries, there are producers that sell exclusively to the export market.

The stainless steel industry as a whole has grown by 5.2% per year for the past 20 years, a growth rate significantly higher than for general steel products. Anticipating similar growth rates for the future, many producers have added or are in the process of adding production capacity. Typically the amount of capacity added is significant as producers attempt to accommodate long-term demand. The industry growth rate has also spurred the entry of new countries into the market. In addition, China is now emerging as one of the largest producers in the world. The effect of adding new production facilities will add to the industry's present global overcapacity situation. The industry suggests that commodity producers should operate consistently at higher than 90% of capacity. Most mills do not achieve this level of production, especially those with recently added capacity.

Adding to the problem of overcapacity is the fact that demand for stainless steel products is currently flat, reflecting the prevailing economic conditions existing in most of the world. The outpacing of supply over demand has also resulted in prices that, for the most part, have not risen in the past year, and in some cases are actually lower than one year ago. As all steel products produced to international grade standards are identical, price becomes the determining factor in making a sale.

It is apparent that significant global overcapacity exists, that prices are weak, and that many producers are selling to export markets at prices lower than domestic prices and, in many cases, below full costs. Owing to the current Findings, prices to Canadian importers from exporters from the Named Countries are higher than prices to other countries where no finding exists.

In conclusion, the analysis of the individual factors, by country, demonstrates that it is likely that exporters from the Named Countries will continue or resume their past practices of dumping of the subject goods into Canada absent the Findings.

FUTURE ACTION

On April 17, 2003, the Tribunal commenced its inquiry to determine whether the expiry of the Findings is likely to result in injury or retardation.

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

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

INFORMATION

For further information, please contact one of the officers identified below:

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

Iqbal Motani : (613) 952-7547
Bob Becker : (613) 954-7246
FAX: (613) 941-2612

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

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

Denis Lefebvre
Assistant Commissioner
Customs Branch

Ottawa, May 1, 2003

1 CCRA Guidelines on the Conduct of Expiry Review Investigations under the Special Import Measures Act, July 2001.

2 CCRA Enforcement Statistics, 1999, 2000, 2001, 2002 (Jan. 1 to Sept. 30), protected & non-confidential

(Exhibits 101 & 102).

3 Atlas' Non-Confidential Case Brief, Revised February 21, 2003 (Exhibit 106).

4 Tribunal's Findings and Statement of Reasons for the 1998 and 1999 Findings. (Exhibits 2 and 4).

5 Metal Bulletin's International Stainless Steel Conference, September 2002, "An Analysis of Stainless Steel Output & Trade Data" (Exhibit 65) and Metal Bulletin Research Stainless Steel Monthly, December 2002, included in Atlas' response to the producer ERQ, Attachment A23 (g) (Exhibit 50).

6 Department of Foreign Affairs and International Trade (DFAIT), Export and Import Controls Bureau (EPD) are responsible for administering the Export and Import Permits Act (EIPA), designed to monitor exports and imports.

7 Atlas Case Brief, non-confidential, extract from the CCRA's Statement of Reasons, Expiry Review Determination concerning certain hot-rolled carbon steel plate and high strength low alloy plate (carbon steel plate) originating in or exported from Mexico, or originating in or exported from the People's Republic of China (China), the Republic of South Africa (South Africa) and the Russian Federation (Russia), June 26, 2002 (Exhibit 106).

8 Atlas' Case Brief, Revised February 21, 2003 (Exhibit 106).

9 "Summary of Specialty Steel AD&CVD Orders and Section 201 Relief In Effect as of October 28, 2002", Laurence J. Lasoff (Exhibit 25).

10 United States Department of Commerce Notice of Final Results of Sunset Review on Stainless Steel Round Bar (Exhibit 67).

11 "Summary of Specialty Steel AD&CVD Orders and Section 201 Relief in Effect as of October 28, 2002", Laurence J. Lasoff (Exhibit 25). Section 201, Trade Act of 1974 (Global Safeguard Investigations), Import Relief for Domestic Industries, United States of America (Proclamation #7529, Fed. Reg. 10553).

12 FACOR response to the exporter ERQ, question A12 (Exhibit 60).

13 United States International Trade Administration, "U.S. Imports of Section 201 - Covered: Stainless Steel Bar From All Countries" (Exhibit 91).

14 Metal Bulletin, August 8, 2002, "US stainless mills want new action against India" (Exhibit 63).

15 Atlas' Case Brief (Exhibit 106).

16 Tribunal's Finding and Statement of Reasons concerning certain stainless steel round bar originating in or exported from Brazil and India", October 27, 2000 (Exhibit 6).

17 Atlas response to the producer ERQ, Attachment A23 (g), Metal Bulletin Research Stainless Steel Monthly, December 2002 (Exhibit 50).

18 Atlas response to the producer ERQ, Attachment A23 (b), "SSINA January 10, 2003, Specialty Steel Industry of North America" (Exhibit 50).

19 Tribunal's Finding and Statement of Reasons concerning certain stainless steel round bar originating in or exported from Brazil and India, October 27, 2000 (Exhibit 6).

20 CCRA Guidelines on the Conduct of Expiry Review Investigations under the Special Import Measures Act, July 2001.