Statement of reasons—expiry review determination: Stainless steel sinks (SSS 2022 ER)

Decision

Ottawa, May 12, 2023

On April 27, 2023 pursuant to paragraph 76.03(7)(a) of the Special Import Measures Act, the Canada Border Services Agency determined that the rescission of the Canadian International Trade Tribunal’s order made on February 8, 2018, in Expiry Review No. RR-2017-001:

• is likely to result in the continuation or resumption of dumping of the goods from China; and
• is likely to result in the continuation or resumption of subsidizing of the goods from China

Executive summary

[1] On November 28, 2022, the Canadian International Trade Tribunal (CITT), pursuant to subsection 76.03(1) of the Special Import Measures Act (SIMA), initiated an expiry review of its order made on February 8, 2018, in Expiry Review No. RR-2017-001, concerning the dumping and subsidizing of certain stainless steel sinks (“stainless steel sinks”) originating in or exported from the People’s Republic of China (China).

[2] As a result of the CITT’s notice of expiry review, on November 29, 2022, the Canada Border Services Agency (CBSA) initiated an expiry review investigation to determine, pursuant to paragraph 76.03(7)(a) of SIMA, whether the rescission of the order is likely to result in the continuation or resumption of dumping and/or subsidizing of the subject goods from China.

[3] The CBSA received a response to its Canadian Producer Expiry Review Questionnaire (ERQ) from Franke Kindred Canada Limited^{Footnote 1} (Franke) and Novanni Stainless Inc.^{Footnote 2} (Novanni), producers of stainless steel sinks in Canada. The submissions made by Franke and Novanni also included information supporting the position that the continued or resumed dumping and subsidizing of stainless steel sinks from China is likely if the CITT’s order is rescinded.

[4] The CBSA received responses to the Importer ERQ from Canac-Marquis Grenier Ltée (“Canac-Marquis”)^{Footnote 3}, Deccor Living Innovations Inc. (“Deccor”)^{Footnote 4}, Tec Vanlife Ltd. (“TecVan”)^{Footnote 5}, Stone Gallery Ltd. (“Stone”)^{Footnote 6} and Superprem Industries Ltd. (“Superprem”)^{Footnote 7}. Canac-Marquis, Deccor and Superprem expressed an opinion on the likelihood of continued or resumed dumping and/or subsidizing of subject goods. The other importers did not express an opinion on the likelihood of continued or resumed dumping and/or subsidizing of subject goods.

[5] The CBSA received a response to its Exporter ERQ from IKEA Supply AG (IKEA)^{Footnote 8}, a global wholesaler and exporter of subject goods. IKEA did not express an opinion on the likelihood of continued or resumed dumping and/or subsidizing of subject goods.

[6] The CBSA did not receive a response to the Foreign Government ERQ from the Government of China (GOC).

[7] No parties provided case briefs or reply submissions.

[8] Analysis of information on the administrative record indicates a likelihood of continued or resumed dumping into Canada of stainless steel sinks from China should the CITT’s order be rescinded. This analysis relied upon the following factors:

• Competition from hand-fabricated sinks
• Commodity nature of stainless steel sinks
• Chinese producers have excess production capacity
• Chinese producers are export-oriented
• Chinese producers have propensity to dump
• Weak market conditions and demand for stainless steel sinks in China; and
• Continued dumping of stainless steel sinks from China while the order was in effect

[9] In addition, analysis of information on the administrative record indicates a likelihood of continued or resumed subsidizing of stainless steel sinks from China should the CITT’s order be rescinded. This analysis relied upon the following factors:

• Continued availability of subsidy programs for stainless steel sink producers in China
• Imposition of countervailing measures on stainless steel sinks from China by authorities in other countries
• Imposition of anti-dumping and countervailing measures on Chinese stainless steel sheet and strip
• Continued subsidizing of stainless steel sinks from China while the order was in effect; and
• The volume of subsidized goods exported to Canada is large

[10] For the forgoing reasons, the CBSA, having considered the relevant information on the record, determined on April 27, 2023, pursuant to paragraph 76.03(7)(a) of SIMA, that the rescission of the order in respect of stainless steel sinks:

• is likely to result in the continuation or resumption of dumping of the goods from China; and
• is likely to result in the continuation or resumption of subsidizing of the goods from China

Background

[11] On October 27, 2011, following a complaint filed by Franke and Novanni, the CBSA initiated investigations, pursuant to subsection 31(1) of SIMA, into whether stainless steel sinks from China had been dumped and/or subsidized.

[12] On April 24, 2012, the CBSA made final determinations of dumping and subsidizing, pursuant to paragraph 41(1)(a) of SIMA, in respect of stainless steel sinks from China.^{Footnote 9}

[13] On May 24, 2012, the CITT found, pursuant to subsection 43(1) of SIMA, that injury had been caused by the dumping and subsidizing of stainless steel sinks from China. The CITT’s Statement of Reasons for the finding on stainless steel sinks was issued on June 8, 2012.^{Footnote 10}

[14] On April 1, 2014, the CBSA concluded a re-investigation to update the normal values, export prices and amounts of subsidy of stainless steel sinks from China.^{Footnote 11}

[15] On July 7, 2016, the CBSA concluded a re-investigation to update the normal values, export prices and amounts of subsidy of stainless steel sinks from China.^{Footnote 12}

[16] On February 8, 2018, the CITT issued an order continuing the finding pursuant to paragraph 76.03(12)(b) of SIMA.^{Footnote 13}

[17] On November 28, 2022, the CITT, pursuant to subsection 76.03(1) of SIMA, initiated an expiry review of its order made on February 8, 2018, in Expiry Review No. RR-2017-001.

[18] On November 29, 2022, the CBSA initiated an expiry review investigation to determine whether the rescission of the order is likely to result in the continuation or resumption of dumping and/or subsidizing of the stainless steel sinks from China.

Product definition

[19] The goods subject to this expiry review investigation are defined as:

Additional product information

[22] For purposes of the definition of the subject goods, volume is calculated as the product of the length, width and depth of the bowl, regardless of the taper and radius of the bowl, where length and width are measured from front to back and left to right of the bowl rim, and where depth is measured from the bowl rim to the bottom of the sink at the point closest to the drain.

[23] For purposes of the definition of the subject goods, “sinks fabricated by hand” refers to the process by which sinkware is formed by hand. The sink stock is notched and folded, and sides are then welded and hand-polished to form a box-like shape. Hand-fabricated sinks may also be referred to as handcrafted or handmade sinks.

[24] The subject goods may be supplied with seals, strainer or strainer sets, mounting clips, fasteners, sound-deadening pads, cut-out templates, and additional accessories such as rinsing baskets and bottom grids.

[25] Stainless steel sinks are commonly used in residential and non-residential installations including in kitchens, bathrooms, utility and laundry rooms. They are available in a variety of shapes and configurations. Stainless steel sinks may have single or multiple bowls, and may be undermount, top mount, or designed as work tops.

[26] The image below illustrates how bowl measurements are used to calculate volume.

Text version: How we measure sinks

Individual bowl dimensions

• “Length x width x depth”
• “L” (Length)
• “W” (Width)
• “D” (Depth)

Classification of imports

[27] The subject goods are normally imported into Canada under the following tariff classification numbers:

• 7324.10.00.10
• 7324.10.00.90

[28] This listing of tariff classification numbers is for convenience of reference only. The tariff classification numbers provided may include goods that are not subject goods and subject goods may be imported into Canada under tariff classification numbers other than those provided. Refer to the product definition for authoritative details regarding the subject goods.

Period of review

[29] The period of review (POR) for the CBSA’s expiry review investigation is from January 1, 2019 to September 30, 2022.

Canadian industry

[30] The Canadian industry for stainless steel sinks is currently comprised of Franke Kindred Canada Limited (Midland, ON) and Novanni Stainless Inc. (Coldwater, ON).

Franke Kindred Canada Limited

[31] Franke is part of the Kitchen Systems Division of Franke Holdings AG in Midland, ON. Franke’s roots date back to 1946 when Kitchen Installations Inc. (KIL) began operations as a small metal products manufacturing facility in Toronto. In 1960, KIL moved its operations to the current location in Midland, Ontario and in 1962, KIL changed its name to Kindred Industries Limited. In November 1998, Kindred Industries Limited was acquired by Franke Holdings AG.^{Footnote 14}

Novanni Stainless Inc.

[32] Novanni is a privately held company with manufacturing facilities in Coldwater, Ontario. Novanni's roots date back to 1955 when Wessan Plumbing Manufacturing (Wessan) began manufacturing stainless steel sinks in Brampton, Ontario. Wessan's manufacturing facility was relocated to Coldwater, Ontario in 1965. In 1999, Wessan was acquired by Elkay Manufacturing Company, a privately held plumbing products manufacturer in the United States (US) and operated as Elkay Canada Ltd. On March 20, 2008, Elkay Canada Ltd. was acquired by Novanni.^{Footnote 15}

Canadian market

[33] The CBSA cannot release specific quantitative data regarding the value and volume of Canadian production of stainless steel sinks sold for domestic consumption as it would lead to the disclosure of confidential information of Franke and Novanni, the only two Canadian producers of stainless steel sinks. Therefore, only the imports of stainless steel sinks during the POR are presented below in Table 1.

[34] Based on information on the administrative record, the total apparent Canadian market, in terms of value and volume, increased overall from 2019 to 2021.

[35] Based on information on the administrative record, the Canadian producers’ share of the apparent Canadian market, in terms of value and volume, decreased during the POR. The market share of imports, in terms of volume, from China decreased during the POR. In terms of value, the market share of imports from China increased. The market share of imports from other countries, in terms of value and volume, showed an overall increase during the POR.

[36] As a result, the information demonstrates that during the POR imports from China and other countries have increasingly captured a greater share of the total apparent Canadian market in detriment to the Canadian producers.

Enforcement data

[37] In the enforcement of the CITT’s order during the POR, as detailed in Table 2 below, the total amount of anti-dumping and countervailing duties assessed on subject imports from China were approximately $7.3 million. As a percentage of the total value for duty, the total anti-dumping and countervailing duties assessed during the POR were equal to 18.5%.

Parties to the proceedings

[38] On November 29, 2022, the CBSA sent notices concerning the initiation of the expiry review investigation and ERQs were sent to the known Canadian producers, importers and exporters of subject goods. The GOC was also sent a Foreign Government ERQ relating to the subsidizing of the subject goods.

[39] The ERQs requested information relevant to the CBSA’s consideration of the expiry review factors, as listed in subsection 37.2(1) of the Special Import Measures Regulations (SIMR).

[40] The two Canadian producers, Franke and Novanni, participated in the expiry review investigation and provided a response to the Canadian Producer ERQ.

[41] One distributor/vendor, IKEA, responded to the Exporter ERQ.

[42] Five Canadian importers: Canac-Marquis, Deccor, TecVan, Stone and Superprem responded to the Importer ERQ.

[43] The GOC did not provided a response to the CBSA’s Foreign Government ERQ.

[44] No parties provided a case brief or reply submission.

Information considered by the CBSA

[45] The information considered by the CBSA for purposes of this expiry review investigation is contained in the administrative record. The administrative record includes the information on the CBSA’s exhibit listing, which is comprised of the CBSA exhibits and information submitted by interested parties, including information which the interested parties feel is relevant to the decision as to whether dumping and subsidizing are likely to continue or resume absent the CITT order. This information may consist of expert analysts’ reports, excerpts from trade magazines and newspapers, orders and findings issued by authorities of Canada or of a country other than Canada, documents from international trade organizations such as the World Trade Organization (WTO) and responses to the ERQs submitted by the Canadian producer, exporters, importers and governments.

[46] For purposes of an expiry review investigation, the CBSA sets a date after which no new information submitted by interested parties will be placed on the administrative record or considered as part of the CBSA’s investigation. This is referred to as the “closing of the record date” and is set to allow participants time to prepare their case briefs and reply submissions based on the information that is on the administrative record as of the closing of the record date. For this investigation, the administrative record closed on January 18, 2023.

Position of the parties: Dumping

Consideration and analysis: Dumping

[88] In making a determination under paragraph 76.03(7)(a) of SIMA whether the rescission of the order is likely to result in the continuation or resumption of dumping of the goods, the CBSA may consider the factors identified in subsection 37.2(1) of the SIMR, as well as any other factors relevant under the circumstances.

[89] Guided by these aforementioned factors, the CBSA conducted its review based on the documentation submitted by the various participants and its own research, all of which can be found on the administrative record. The following list represents a summary of the CBSA’s analysis conducted in this expiry review investigation with respect to dumping:

• Competition from hand-fabricated sinks
• Commodity nature of stainless steel sinks
• Chinese producers have excess production capacity
• Chinese producers are export-oriented
• Chinese producers have a propensity to dump
• Weak market conditions and demand for stainless steel sinks in China; and
• Continued dumping of stainless steel sinks from China while the order was in effect

[90] The CBSA notes that proceedings to update normal values and export prices have not been conducted since the CITT’s issuance of the order to continue the finding on February 8, 2018. Further, as the CBSA did not receive ERQ responses from any Chinese producers/exporters of stainless steel sinks, the CBSA relied on information available at the time of the conclusion of the last expiry review investigation on stainless steel sinks on September 1, 2017 and information from its own research in assessing the likelihood of continued or resumed dumping should the CITT’s order be rescinded.

Competition from hand-fabricated sinks

[91] A growing trend of product substitution for mid-range stainless steel sinks in the Canadian market has occurred in recent years and is expected to continue. This trend was acknowledged by the complainants during the time of the last expiry review investigation and reaffirmed by the complainants during the current expiry review investigation. This trend is also corroborated by the representations of Deccor, an importer and retailer of stainless steel sinks, hand-fabricated sinks and plumbing accessories in the current expiry review investigation. Evidence provided by Franke indicates that between 2019 and 2021, importations of hand-fabricated sinks increased from 481,000 units to 700,000 units or 45.5%.

[92] The trend is driven by the significant reduction in the already lower prices of hand-fabricated sinks supplied by Chinese exporters. As observed by Novanni, the retail prices of some hand-fabricated sinks have reduced to one-fifth of their retail prices since the last expiry review investigation and even sold at retail prices that are lower than the Canadian domestically produced stainless steel sinks.

[93] The CBSA finds that the shift from stainless steel sinks to hand-fabricated sinks has not only resulted in increased competition but is also likely to reduce the size of the Canadian market for stainless steel sinks. The CBSA also finds that given the continued trend towards hand-fabricated sinks in the Canadian market, Chinese producers of stainless steel sinks may be forced to compete more aggressively in order to maintain market share and prevent lost sales. As such, should the CITT rescind the order, competition from hand-fabricated sinks may increase the likelihood of continued or resumed dumping of stainless steel sinks.

Commodity nature of stainless steel sinks

[94] According to the complainants, the majority of the stainless steel sinks sold in Canada, which are in the lower end of the market, are considered to be commodity products. As such price is the determining factor in the purchasing decision of customers. The complainants argued that competition within all different distribution channels is intense and that importers seek the lowest prices, including the procurement of dumped goods, in order to undercut each other’s prices and gain a competitive advantage.

[95] Table 3 below is a summary of average unit prices of the importations of stainless sinks from China and other countries based on CBSA customs import data and enforcement statistics.

[96] As can be observed in Table 3, while the average price per unit of stainless steel sinks from China remained flat between 2019 and 2021, with a slight increase in 2022, the average price per unit of stainless steel sinks from other countries decreased during the same period. The reduction in the average unit prices of stainless steel sinks imported from other countries corresponds to an increase in the market share of stainless steels sinks from other countries during the same period.

[97] As discussed under the Canadian market section, during the POR, the share of imports from China, in terms of volume, decreased between 2019 and 2021. During the same period, the share of imports from other countries, in terms of volume increased.

[98] Given the price sensitive nature of the subject goods, the CBSA finds that the shift in import volume into Canada from China to imports from other countries can be reasonably attributed to the competition from lower-priced imports in Canada from these other countries.

[99] Due to the commodity nature of stainless steel sinks, in order to regain lost market share, stainless steel sinks from China would need to compete with the lower prices of imports from other countries. As such, should the CITT rescind the order, the commodity nature of stainless steel sinks may increase the likelihood of continued or resumed dumping of stainless steel sinks.

Chinese producers have excess production capacity

[100] According to the complainants, the total production capacity of Chinese producers/exporters is large compared to the size of the apparent Canadian market and that excess production capacity in stainless steel sinks exists in China. Given the production capacity of Chinese producers of stainless steel sinks, the complainants argued that the producers seek sales in export markets in order to maintain their capacity utilization.

[101] Table 4 below provides a summary of total production capacity available for four cooperative exporters, Dongyuan Kitchenware, Yingao Kitchen, New Star Hi-Tech and Komodo Kitchen. Due to the lack of response from these four exporters in the current expiry review investigation, information available at the time of the conclusion of the last expiry review investigation on stainless steel sinks is reported as follows:

[102] Collectively, the annual production capacity of the four cooperative exporters in 2016 was 4.3 million units. The data suggests that Chinese producers have historically increased production capacity over time. However, even under the assumption that there have been no additional investments in production capacity since 2016, the production capacity of these four Chinese exporters alone represent approximately seven times the total size of the current apparent Canadian market for stainless steel sinks.

[103] The CBSA’s estimate of total production capacity is conservative due to the limited number of cooperative exporters. In the US International Trade Commission’s (USITC) determinations on August 14, 2018,^{Footnote 60} the USITC noted that Chinese producers reported a total production capacity of 9,260,00 units as of 2017.

[104] While the CBSA acknowledges that the COVID-19 pandemic may have lead to temporary factory shutdowns and temporary labour shortages and that Chinese producers may be experiencing cost and inflationary pressures as argued by Canac-Marquis and Superprem, the CBSA is of the position that Chinese producers will be motivated to produce and export to the global market as China’s economy continues to recover fully over the long run.

[105] Further, analysis of the CBSA’s enforcement statistics pertaining to imports of stainless steel sinks from China in Table 2 shows that while Chinese imports decreased from 163,571 units in 2019 to 157,602 units in 2020, growth in the volume of imports has rebounded to 198,762 units in 2021 and already 148,919 units in only the first three quarters of 2022.

[106] Available evidence to the CBSA also indicates that cooperative Chinese exporters have operated with excess production capacity in the past. Table 5 below provides a summary of the capacity utilization rates available for Dongyuan Kitchenware, Yingao Kitchen, New Star Hi-Tech and Komodo Kitchen. Due to the lack of response from these four exporters in the current expiry review investigation, information available at the time of the conclusion of the last expiry review investigation on stainless steel sinks is reported as follows:

[107] Based on information in Table 5, the cooperative exporters have operated at a weighted average capacity utilization rate between 54.2% and 68.5%. In terms of the number of units of sinks, the excess capacity represents 1.4 million to 2.0 million.

[108] Under the assumption that cooperative exporters are currently experiencing the highest production capacity utilization rate as reported in Table 5 and the total production capacity of 2016 as reported in Table 5, the volume of excess capacity represents over two times the current size of the Canadian apparent market for stainless steel sinks.

[109] Based on the available evidence, the CBSA finds that production capacity of stainless steel sinks is extremely large and that excess production capacity exists in China. As such, should the CITT rescind the order, Canada represents an attractive market for stainless steel sink producers in China to eliminate excess production capacity which may increase the likelihood of continued or resumed dumping of stainless steel sinks.

Chinese producers are export-oriented

[110] The complainants claimed that stainless steel sink producers in China are export-oriented and that imports of stainless steel sinks to Canada remained stable during the POR.

[111] Table 6 below provides a summary of sales reported by four cooperative exporters, Dongyuan Kitchenware, Yingao Kitchen, New Star Hi-Tech and Komodo Kitchen in their domestic and export markets. Due to the lack of response from these four exporters in the current expiry review investigation, information available at the time of the conclusion of the last expiry review investigation on stainless steel sinks is reported as follows:

[112] In terms of value, total domestic sales as a percentage of total sales to all markets represent 4.8% in 2011, 5.2% in 2013 and 27.2% in 2016. Due to lack of responses from the cooperative exporters, there does not appear to be any information that suggests that there have been changes in the trading patterns of the Chinese producers. The CBSA finds that the share of domestic sales in comparison to total sales indicate that Chinese producers are export-oriented and are dependent on export markets for sales.

[113] Further, based on the CBSA’s enforcement statistics pertaining to imports of stainless steel sinks from China in Table 2, Chinese imports increased by 21.5% from 163,571 units in 2019 to 198,762 units 2021 with a slight decrease in 2020. This decrease can be attributed to the effects of the COVID-19 pandemic. So far, 148,919 units have been imported into Canada in only the first three quarters of 2022.

[114] The CBSA finds that the rate of increase and the increased volume of exports to Canada of stainless steel sinks during the period the order was in effect indicates a continued interest in the Canadian market on behalf of the Chinese exporters. Should the CITT rescind the order, increasing imports of stainless steel sinks into Canada from export-oriented producers in China may increase the likelihood of continued or resumed dumping of stainless steel sinks.

Chinese producers have a propensity to dump

[115] The complainants argued that Chinese producers of stainless steel sinks have propensity to dump into foreign markets.

[116] On February 26, 2013, the USDOC made a final determination of dumping in respect of drawn stainless steel sinks from China. According to the investigation results, exporters of drawn stainless steel sinks from China received weighted-average dumping margins ranging from 27.1% to 76.5%.^{Footnote 63} It is important to note that Dongyuan Kitchenware, Yingao Kitchen and New Star Hi-Tech were among twenty-five exporters that cooperated in the USDOC investigation.

[117] On August 14, 2018, the USDOC and USITC made determinations that revocation of the countervailing and antidumping duty orders on drawn stainless steel sinks from China would likely lead to the continuation or recurrence of material injury to an industry in the US within a reasonably foreseeable time.^{Footnote 64}

[118] On March 26, 2015, the Australian Anti-dumping Commission (ADC) made a final determination of dumping on certain deep drawn stainless steel sinks from China. According to the investigation results, certain deep drawn steel sinks from China were dumped with margins ranging from 5.0% to 49.5%.^{Footnote 65} It is important to note that New Star Hi-Tech and Komodo Kitchen were among eleven exporters that cooperated in the ADC investigation.

[119] On February 28, 2020, the ADC made determinations that the expiration of the measures would lead, or would be likely to lead, to a continuation of, or a recurrence of, dumping and subsidisation and the material injury that the measures are intended to prevent.^{Footnote 66}

[120] On April 22, 2015, the Mexican Ministry of Economy made a final determination of dumping on stainless steel sinks from China. On June 7, 2021, the Mexican authorities concluded its sunset review and maintained the anti-dumping measures against stainless steel sinks from China.^{Footnote 67}

[121] The CBSA finds that the imposition of anti-dumping measures on stainless steel sinks from China by the US, Australian and Mexican authorities demonstrates that Chinese exporters have a propensity to dump. Should the CITT rescind the order, as a result of their propensity to dump, Chinese exporters would divert stainless steel sinks from the US, Australia and Mexico to the Canadian market which may increase the likelihood of continued or resumed dumping of stainless steel sinks.

Weak market conditions and demand for stainless steel sinks in China

[122] For stainless steel sinks producers, construction starts are important indicators of stainless steel sinks sales trends. Future demand for stainless steel sinks is considered to be weak in the Chinese market. Several reports indicate that economic growth in China is slowing.

[123] In August 2022, Goldman Sachs cut its forecast for China’s GDP growth in 2022 to 3.0% from 3.3%, after taking into account weaker-than-expected economic data and energy constraints in previous months. This marks the third cut by the bank since May 2022.^{Footnote 68}

[124] Export Development Canada (EDC) indicated that the outlook for China’s economy calls for historically weak growth of 3% in 2022 and 4.9% in 2023. According to the EDC, China is one of the few countries where monetary policy is likely to be eased rather than tightened. The economic impacts of the country’s zero-COVID-19 policies are not expected to improve in 2023. At the same time, ongoing debt accumulation and overcapacity in the property sector will require policy support to stem wider economic impacts.^{Footnote 69}

[125] In its July 2022 World Economic Outlook Report, the International Monetary Fund’s (IMF) growth outlook for China is marked down from 8.1% in 2021 to 3.3% and 4.6% in 2022 and 2023, respectively. The IMF also mentions large-scale disorderly corporate debt defaults and restructuring, for instance in China’s property sector, that could lead to market volatility.^{Footnote 70}

[126] New estimates from S&P Global Ratings forecasts China’s property sales to plunge in 2022 by 30%, more than they did during the 2008 financial crisis.^{Footnote 71}

[127] According to data published on March 16, 2023 by the National Bureau of Statistics of China, China’s real estate climate index stood at 94.67 as of February 2023 up from a low of 94.36 at the end of December 2022. The real estate climate remains weak, as readings below 100 indicate a slowdown in the Chinese real estate industry while readings above 100 indicate economic growth.^{Footnote 72}

[128] Against this weak outlook, the CBSA finds that Chinese producers may become increasingly export oriented as they face diminishing demand in their domestic market. As well, given the softening of the construction sector in China, there is a likelihood that Chinese exporters will have to look to other export markets like Canada to replace lost sales to customers within China. As such, should the CITT rescind its order, weak market conditions and demand for stainless steel sinks in China may increase the likelihood of continued or resumed dumping of stainless steel sinks.

Continued dumping of stainless steel sinks from China while the order was in effect

[129] As reported in Table 2, during the POR, a total of $7.3 million of anti-dumping and countervailing duties (SIMA duties) were assessed on a total of 668,854 units (VFD $39,662,221) of stainless steel sinks from China imported into Canada. Based on the underlying data, of this total, $241,872 of SIMA duties were assessed on subject goods from cooperative exporters, representing 3.3% of all SIMA duties assessed during the POR. The majority of SIMA duties were assessed on goods from non-cooperative exporters.

[130] The enforcement data also shows that as a percentage of the total value for duty, the total combined SIMA duties assessed during the POR were equal to 18.5%, which is not insignificant.

[131] The CBSA finds that Chinese exporters, including cooperative exporters with established normal values, have continued to export subject goods to Canada at dumped prices while the order was in effect. The CBSA also finds that should the CITT rescind the order, the continued dumping of stainless steel sinks from China while the order was in effect may increase the likelihood of continued or resumed dumping of stainless steel sinks.

Position of the parties: Subsidizing

Consideration and analysis: Subsidizing

[135] In making a determination under paragraph 76.03(7)(a) of SIMA whether the rescission of the order is likely to result in the continuation or resumption of subsidizing of the goods, the CBSA may consider the factors identified in subsection 37.2(1) of the SIMR, as well as any other factors relevant under the circumstances.

[136] Guided by the aforementioned regulations and having examined the information on the administrative record, the following is a list of the factors considered in the analysis with respect to the likelihood of continued or resumed subsidizing:

• Continued availability of subsidy programs for stainless steel sink producers in China
• Imposition of countervailing measures on stainless steel sinks from China by authorities in other countries
• The imposition of anti-dumping and countervailing measures on Chinese stainless steel sheet and strip
• Continued subsidizing of stainless steel sinks from China while the order was in effect; and
• The volume of subsidized goods exported to Canada is large

[137] The CBSA notes that proceedings to update amounts of subsidy have not been conducted since the CITT’s issuance of the order to continue the finding on February 8, 2018. Further, as the CBSA did not receive ERQ responses from any Chinese producers/exporters of stainless steel sinks or the GOC in this expiry review investigation, the CBSA relied on information available at the time of the conclusion of the last expiry review investigation on stainless steel sinks on September 1, 2017 and information from its own research in assessing the likelihood of continued or resumed subsidization should the CITT’s order be rescinded.

The continued availability of subsidy programs for stainless steel sink producers in China

[138] At the final determination of the original subsidy investigation in 2011, the CBSA found 15 subsidy programs that benefited the cooperative exporters of stainless steel sinks. The weighted average amount of subsidy, expressed as a percentage of the export price was 38.8%.^{Footnote 73}

[139] In the 2013 re-investigation, the CBSA found 7 subsidy programs that benefited the cooperative exporters of stainless steel sinks. The CBSA determined that the three cooperative exporters received amounts of subsidy between 4.53 CNY per unit and 6.58 CNY per unit.^{Footnote 74}

[140] In the 2016, re-investigation, the CBSA found 11 subsidy programs that benefited the cooperative exporters of stainless steel sinks. The CBSA determined that the four cooperative exporters received amounts of subsidy between 0.001 CNY per unit and 2.27 CNY per unit.^{Footnote 75}

[141] In addition to stainless steel sinks, the CBSA found that Chinese producers in the plumbing sector including copper tube and copper pipe fittings also received subsidies from the GOC. In the 2015 re-investigation of copper tube from China, as no responses were received from Chinese exporters, the CBSA determined amounts of subsidy for all exporters from China in accordance with a ministerial specification and was equal to 25,239 CNY per metric tonne.^{Footnote 76} In the 2019 re-investigation of copper pipe fittings from China, the CBSA determined that two cooperative exporters received amounts of subsidy between 0.18 CNY per kilogram and 2.28 CNY per kilogram.^{Footnote 77}

[142] In addition to the plumbing sector, the CBSA also found that Chinese producers in other consumer goods sectors including upholstered domestic seating and mattresses received subsidies from the GOC. In the 2020 investigation of upholstered domestic seating from China, the CBSA found 15 subsidy programs that benefited the cooperative exporters. The weighted average amount of subsidy, expressed as a percentage of the export price was 12.7%.^{Footnote 78} In the 2022 investigation of mattresses from China, the CBSA found 23 subsidy programs that benefited the cooperative exporters. The weighted average amount of subsidy, expressed as a percentage of the export price was 24.1%.^{Footnote 79}

[143] On August 27, 2021, the GOC submitted its most recent notification to the World Trade Organization (WTO) in which the GOC reported programs granted during the period from 2019 to 2020.^{Footnote 80} The POR for this expiry review investigation encompasses the period covered in the GOC’s notification. In its notification, the GOC identifies subsidies available at the central and sub-central levels of government which take the form of cash grants, land-use rights, discounted inputs, preferential loans and directed credit, special tax rebates, and VAT and tariff exemptions.

[144] Based on a review of the document, the CBSA identified 11 programs which may potentially confer benefits to stainless steel sink producers in China as listed below:

• Preferential tax treatment of additional calculation and deduction of research and development expenses
• Preferential tax policies for enterprises transferring technology
• General-benefit tax exemption for micro and small enterprises
• Exemption of employment security fund as for people with disabilities
• Exemption of government-managed fund
• Preferential VAT policies for enterprises that employ people with disabilities
• Preferential income tax policies for enterprises that employ people with disabilities
• Preferential tax treatment for import of equipment
• Special fund for foreign economic and trade development
• Award and subsidy for reducing the fees for the financing guarantee businesses of small and micro enterprises; and
• Preferential tax treatment on financing

[145] Based on the above, the CBSA finds that since the final determination of the original investigation and throughout the period the order was in effect, the GOC has continued to make subsidy programs available to producers/exporters of goods in the plumbing sector and consumer goods sector, including stainless steel sinks. The CBSA finds that should the CITT rescind the order, the continued availability of subsidy programs for stainless steel sink producers in China may increase the likelihood of continued or resumed subsidizing of stainless steel sinks.

Imposition of countervailing measures on stainless steel sinks from China by authorities in other countries

[146] While Mexican authorities have only imposed anti-dumping duties on importation of stainless steel sinks from China, authorities in the US and Australia have also imposed countervailing measures on importation of stainless steel sinks from China.

[147] On February 26, 2013, the USDOC made a final determination of subsidizing in respect of drawn stainless steel sinks from China. Countervailable subsidy rates determined for Chinese exporters of drawn stainless steel sinks ranged from 4.8% to 12.26%.^{Footnote 81} As noted in the analysis of the likelihood of continued or resumed dumping, Dongyuan Kitchenware, Yingao Kitchen and New Star Hi-Tech were among twenty-five exporters that cooperated in the USDOC investigation.

[148] On August 14, 2018, the USITC made determinations that revocation of the countervailing and antidumping duty orders on drawn stainless steel sinks from China would likely to lead to continuation or recurrence of material injury to an industry in the US within a reasonably foreseeable time.^{Footnote 82}

[149] On March 26, 2015, the ADC made a final determination of subsidizing on certain deep drawn stainless steel sinks from China. Subsidy margins established for exporters of drawn stainless steel sinks from China ranged from 3.3% to 6.4%.^{Footnote 83} It is important to note that New Star and Komodo were among eleven exporters that cooperated in the ADC investigation.

[150] On February 28, 2020, the ADC made determinations that the expiration of the measures would lead, or would be likely to lead, to a continuation of, or a recurrence of, dumping and subsidisation and the material injury that the measures are intended to prevent.^{Footnote 84}

[151] The CBSA finds that the imposition of countervailing measures on stainless steel sinks from China by the US and Australian authorities demonstrate that the GOC makes available subsidy programs that confer benefits to producers of stainless steel sinks in China. The CBSA finds that should the CITT rescind the order, the imposition of countervailing measures on stainless steel sinks from China by authorities in other countries may increase the likelihood of continued or resumed subsidizing of stainless steel sinks.

The imposition of anti-dumping and countervailing measures on Chinese stainless steel sheet and strip

[152] On February 8, 2017, the USDOC made a final determination of subsidy on stainless sheet and strip from China. Countervailable subsidy rates established for exporters ranged from 45.6% to 190.7%.^{Footnote 85}

[153] Recently on November 4, 2022, the USDOC and USITC made determinations that the revocation of the anti-dumping duty and countervailing duty orders on stainless steel sheet and strip from China would be likely to lead to the continuation or recurrence of dumping, countervailable subsidies, and material injury to an industry in the US.^{Footnote 86}

[154] As stainless steel sheet/strip is the main raw material input in the production of subject goods, potentially all or part of the subsidy could be attributable to the stainless steel sinks in the form of indirect pass-through subsidies. As determined in the CBSA’s original investigation and subsequent re-investigations of stainless steel sinks, the GOC through state-owned and/or state controlled enterprises of suppliers/manufacturers have provided raw material inputs to producers of stainless steel sinks at less than adequate remuneration. In those proceedings, the CBSA determined that a financial subsidy existed and that the subsidy has benefitted the producers/exporters of stainless steel sinks.

[155] Based on the evidence above, the CBSA finds that should the CITT rescind the order, the imposition of anti-dumping and countervailing measures on Chinese stainless steel sheet and strip may increase the likelihood of continued or resumed subsidizing of stainless steel sinks.

Continued subsidizing of stainless steel sinks from China while the order was in effect

[156] As reported in Table 2, a total of $7.3 million of SIMA duties were collected on subject goods imported during the POR.^{Footnote 87} The enforcement data also shows that as a percentage of the total value for duty, the total combined SIMA duties assessed during the POR were equal to 18.5%, which is not insignificant.

[157] While the payment of countervailing duties cannot be avoided, the data in Table 2 suggests that importers in Canada have taken countervailing duties into consideration as part of their purchasing decision of stainless steel sinks. During the time the order was in effect, it appears that importers have continued to purchase large volumes of stainless steel sinks from both cooperative and non-cooperative Chinese exporters at subsidized prices. The CBSA finds that should the CITT rescind the order, the continued subsidizing of stainless steel sinks from China while the order was in effect may increase the likelihood of continued or resumed subsidizing of stainless steel sinks.

The volume of subsidized goods exported to Canada is large

[158] As reported in Table 2, during the POR, a total of 668,854 units (VFD $39,662,221) of stainless steel sinks from China were imported into Canada. Chinese imports increased by 21.5% from 163,571 units in 2019 to 198,762 units in 2021 with a slight decrease in 2020. This decrease can be attributed to the effects of the COVID-19 pandemic. So far, 148,919 units have been imported into Canada in only the first three quarters of 2022.

[159] The CBSA finds the rate of increase to be significant and the total volume of subsidized goods imported into Canada during the POR was substantial given the size of the apparent Canadian market. The CBSA also finds that should the CITT rescind the order, the rate of increase and volume of subsidized goods exported to Canada may increase the likelihood of continued or resumed subsidizing of the stainless steel sinks.

Conclusion

[161] For the purpose of making a determination in this expiry review investigation, the CBSA conducted its analysis within the scope of the factors found under subsection 37.2(1) of the SIMR and considering any other factors relevant in the circumstances. Based on the foregoing analysis of pertinent factors and consideration of information on the record, on April 27, 2023, the CBSA made a determination pursuant to paragraph 76.03(7)(a) of SIMA that the rescission of the order made by the CITT on February 8, 2018, in Inquiry No. RR-2017-001 in respect of certain stainless steel sinks originating in or exported from China:

• is likely to result in the continuation or resumption of dumping of the goods from China; and
• is likely to result in the continuation or resumption of subsidizing of the goods from China

Future action

[162] The CITT has now initiated its expiry review to determine whether the continued or resumed dumping and subsidizing are likely to result in injury. The CITT’s Expiry Review schedule indicates that it will make its decision by October 4, 2023.

[163] If the CITT determines that the rescission of the order with respect to the goods is likely to result in injury, the order will be continued in respect of those goods, with or without amendment. If this is the case, the CBSA will continue to levy anti-dumping and/or countervailing duties on dumped and/or subsidized importations of the subject goods.

[164] If the CITT determines that the rescission of the order with respect to the goods is not likely to result in injury, the order will be rescinded in respect of those goods. Anti-dumping and/or countervailing duties would then no longer be levied on importations of the subject goods, and any anti-dumping and/or countervailing duties paid in respect of goods that were released after the date that the order was scheduled to expire will be returned to the importer.

Contact us

[165] For further information, please contact the officers listed below:

• Telephone:
• Nalong Manivong: 343-549-0429
• Alex Wu: 343-573-2930

Email: simaregistry-depotlmsi@cbsa-asfc.gc.ca