UWM 2018 ER
Certain Unitized Wall Modules
Statement of Reasons

[1] On August 27, 2018, the Canadian International Trade Tribunal (CITT), pursuant to subsection 76.03(3) of the Special Import Measures Act (SIMA), initiated an expiry review of its finding made on November 12, 2013, in Inquiry No. NQ-2013-002, concerning the dumping and subsidizing of certain unitized wall modules (UWM) originating in or exported from the People’s Republic of China (China).

[2] As a result of the CITT’s notice of expiry review, the Canada Border Services Agency (CBSA), on August 28, 2018, initiated an investigation to determine, pursuant to paragraph 76.03(7)(a) of SIMA, whether the expiry of the finding is likely to result in the continuation or resumption of dumping and/or subsidizing of the goods.

[3] The CBSA received 12 responses to its Canadian Producer Expiry Review Questionnaire (ERQ), from BVGlazing Systems Ltd., Ferguson Neudorf Glass Inc., Flynn Group of Companies (Flynn Canada Ltd. And Northern Facades Ltd.), Contract Glaziers Corp., Inland Glass & Aluminum Ltd. / Aluminum Curtainwall Systems Inc., Integro Building Systems, Oldcastle Building Envelope Canada Inc. (as of December 31, 2018, the company’s name changed to Antamex Industries ULC), Quest Window Systems Inc., Sotawall Limited, Starline Windows Ltd., State Window Corporation and Toro Aluminum/ Toro Glasswall Inc. These companies may also collectively be referred to as “the Canadian producers” in this Statement of Reasons. The submissions made by the Canadian producers included information supporting their position that continued or resumed dumping and subsidizing of certain UWM from China is likely if the CITT’s finding is rescinded.

[4] The CBSA received a response to the Exporter ERQ from Shenyang Yuanda Aluminium Industry Engineering Co. Ltd. (Shenyang Yuanda). The submission made by Shenyang Yuanda did not explicitly express an opinion with respect to the likelihood of continued or resumed dumping and/or subsidizing of certain UWM from China if the CITT’s finding is rescinded.

[5] In addition to responding to the ERQ, the Canadian producers submitted supplementary information prior to the closing of the record. The CBSA also received a joint case brief on behalf of the Canadian producers. The case brief submitted by the Canadian producers included arguments supporting their position that continued or resumed dumping and subsidizing of certain UWM from China is likely if the CITT’s finding is rescinded. Shenyang Yuanda submitted a reply submission to the case brief of the Canadian producers, where it contested some of the allegations made by the Canadian producers.

[6] No importers in Canada responded to the ERQ nor did they provide a case brief or reply submission.

[7] The CBSA did not receive a response to the ERQ from the Government of China (GOC) nor did the GOC provide a case brief or reply submission.

[8] Analysis of information on the administrative record in respect of the weakening UWM market conditions and the excess production capacity in China; the increasing export orientation of Chinese producers, the attractiveness of the Canadian market and its increased competition from domestic and foreign sources, along with the propensity of Chinese exporters to undercut Canadian prices, indicates a likelihood of continued or resumed dumping into Canada of certain UWM originating in or exported from China should the CITT’s finding be rescinded.

[9] In addition, analysis of information on the administrative record in respect of the continued availability of subsidy programs for UWM exporters in China, the subsidizing of primary aluminum in China and other government intervention in the primary aluminum industry and the countervailing measures against Chinese aluminum products in Canada and in other jurisdictions, indicates a likelihood of continued or resumed subsidizing of certain UWM from China should the CITT’s finding be rescinded.

[10] For the foregoing reasons, the CBSA, having considered the information on the record, made a determination under paragraph 76.03(7)(a) of SIMA that:

1. the expiry of the finding in respect of the dumping of certain UWM originating in or exported from China is likely to result in the continuation or resumption of dumping of the goods into Canada; and
2. the expiry of the finding in respect of the subsidizing of certain UWM originating in or exported from China is likely to result in the continuation or resumption of subsidizing of the goods exported to Canada.

[11] On March 4, 2013, following a complaint filed by Allan Window Technologies (now BVGlazing Systems), Ferguson Neudorf Glass Inc., Flynn Canada Ltd., Inland Glass & Aluminum Ltd./Aluminum Curtainwall Systems Inc., Oldcastle Building Envelope (now Antamex Industries ULC), Sota Glazing Inc., Starline Architectural Windows Ltd., State Windows Corporation, Toro Aluminum/Toro Glasswall Inc. and Windsor Glass Company (1992) Ltd. (now Contract Glaziers Inc.), (hereafter ‘the Complainants’), the CBSA initiated investigations pursuant to subsection 31(1) of SIMA, respecting the dumping and subsidizing of certain UWM originating in or exported from China.

[12] On October 10, 2013, pursuant to subsection 41(1) of SIMA, the CBSA made final determinations respecting the dumping and subsidizing of UWM originating in or exported from China.

[13] On November 12, 2013, pursuant to subsection 43(1) of SIMA, the CITT found that the dumping and subsidizing of UWM originating in or exported from China threatened to cause injury to the domestic industry in Canada.

[14] On May 26, 2014, the CBSA concluded a re-investigation to update the normal values and export prices of certain UWM from China.

[15] On May 8, 2018, pursuant to subsection 76.03(3) of SIMA, the CITT issued a notice concerning the expiry of its finding, which was scheduled to occur on November 11, 2018. Based on the information filed during the expiry process, the CITT decided that a review of the finding was warranted.

[16] On August 27, 2018, the CITT initiated an expiry review of its finding pursuant to subsection 76.03(3) of SIMA.

[17] On August 28, 2018, the CBSA commenced an expiry review investigation to determine whether the expiry of the finding is likely to result in continued or resumed dumping and/or subsidizing of the subject goods.

[18] The goods subject to the finding under review are defined as:

[34] The subject goods are usually classified under the following tariff classification numbers:

1. 7610.10.00.20
2. 7610.90.90.90

[35] The subject goods may also be imported under the following tariff classification numbers:

1. 7008.00.00.00
2. 7308.30.00.21
3. 7610.10.00.10
4. 7610.90.90.30

[36] 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.

[37] The period of review (POR) for the CBSA’s expiry review investigation is January 1, 2015, to June 30, 2018.

[38] The Canadian industry for UWM is comprised of 26 known companies, as listed below. Of these companies, 10 were complainants (one of the “other producers” is now related to a complainant) and another 9^{Footnote 3} supported the complaint.

[39] At the time of the original investigations, the CBSA and the CITT were satisfied that the complainants accounted for a major proportion of known domestic production of like goods and that the complainants and the supporting producers collectively represented a large majority of the total domestic production of like goods.^{Footnote 4}

[40] As mentioned, responses to the Canadian Producers ERQ were received from the following 12 producers:

Antamex Industries ULC (formerly Oldcastle Building Envelope Canada Inc.)

[41] Antamex Industries ULC (Antamex), formerly Oldcastle Building Envelope Canada Inc., of Concord, Ontario, is a custom high-performance unitized façade solutions provider for high-end, complex building applications. Antamex offers highly engineered and customized products for its customer base located in markets across the United States (U.S.) and Canada.

BVGlazing Systems Ltd.

[42] BVGlazing Systems Ltd. (BVG) is the amalgamation of The Allen Windows Group of Companies, Global Architectural Metals and LSC Railings. Window wall and curtain wall production facilities are located in Concord, Ontario and Niagara Falls, Ontario, with regional offices in British Columbia and Cornwall, New York. The company has been producing UWM since 1980 and sells to customers across Canada and in select markets in the United States.^{Footnote 5}

Contract Glaziers Corp.

[43] Established in 1971, Contract Glaziers Corp. (CGC), of Windsor, Ontario, designs and manufactures high performance commercial glass products for institutional and commercial customers in North America. CGC specializes in the development, design, engineering and installation of high performance unitized curtain wall. UWM are also produced by its subsidiary Ennova Facades Inc., in Windsor, Ontario.^{Footnote 6}

Ferguson Neudorf Glass Inc.

[44] Ferguson Neudorf Glass Inc. (Ferguson) is a self-performing contract glazing company, incorporated in 1986. Ferguson designs, engineers, manufactures and installs curtain wall modules throughout North America. Ferguson produces UWM in Beamsville, Ontario and in Stevensville, Ontario.^{Footnote 7}

Flynn Group of Companies (Flynn Canada Ltd and Northern Facades Ltd.)

[45] Flynn Canada Ltd. (Flynn), of Mississauga, Ontario, is a privately-owned company that originated as a Winnipeg based roofing company, incorporated in 1978. Growth and expansion through various acquisitions has led the company to become a total building envelope contractor. UWM production, marketing and installation was added to the company’s offerings in 2006. Flynn produces UWM at its production facilities in Mississauga and in Surrey, BC. Production by Flynn includes production of its subsidiary Northern Facades Ltd.^{Footnote 8}

Inland Glass & Aluminum Ltd. / Aluminum Curtainwall Systems Inc.

[46] Inland Glass & Aluminum Ltd. (IGA), of Kamloops, BC, produces custom architectural aluminum unitized curtain wall products since its incorporation on January 21, 1974. The firm operates within both Canada and the United States. IGA’s products generally comprise of custom unitized curtain wall modules but the company offers a larger range of other products, including: aluminum stick system (site glazed), skylights, sunshades, storefronts/entrances and windows.^{Footnote 9}

Integro Building Systems

[47] Integro Building Systems (IBS) was incorporated in Ontario on February 17, 2015. UWM are designed and fabricated in house for supply and (at times) installation on commercial, institutional and mixed use towers throughout North America. The company opened its first manufacturing facility in Boynton Beach, Florida in March 2015. This was a turn-key facility needed to meet delivery schedules for the first major project located in San Francisco, California. A Canadian facility was next set up in Langley, BC to serve as an assembly and glazing plant to this and other projects on the West Coast. A Canadian manufacturing facility was opened in late 2016 in Maple, Ontario. The Maple facility more than doubled the company’s manufacturing capacity.^{Footnote 10}

Quest Window Systems Inc.

[48] Quest Window Systems Inc. (Quest), a producer based in Mississauga, Ontario, has manufactured window wall since 2000. The company was founded as a window and glass products manufacturer catering to multi-residential high-rise condominium developers and constructors in Canada and the U.S.. In 2017, Quest was purchased by Exchange Income Corporation, of Winnipeg, Manitoba.^{Footnote 11}

Sotawall Limited

[49] Sotawall Limited (Sotawall), of Brampton, Ontario, was incorporated as Sota Glazing Inc. in 1991 from a corporate buyout. Sotawall has two UWM production facilities in Brampton, Ontario and a third in Mississauga, Ontario. The company also has drafting/engineering and sales offices in Winnipeg, Manitoba; Edmonton, Alberta; and St. Catharines, Ontario. Sotawall is a subsidiary of Apogee Enterprises of Minneapolis, MN, U.S.^{Footnote 12}

Starline Windows Ltd.

[50] Starline Windows Ltd. (Starline) (formerly Starline Architectural Windows Ltd.), of Surrey, BC, was incorporated in 2001 in British Columbia. From its inception, Starline has manufactured UWM’s for the high-rise market in Western Canada and the Western United States. Its facility includes approximately 46,500 square metres of production area with automated inventory, painting, rolling, cutting and machining.^{Footnote 13}

State Window Corporation

[51] State Window Corporation (State Window), of Vaughan, Ontario, was incorporated on July 15, 2002. It is 100% Canadian and is privately held. The company began producing unitized window wall in 2006. One of the company’s affiliated entities also provides installation of unitized curtain wall systems. The company mainly supplies to and installs for domestic clients, but has also supplied U.S. based clients in the past. The company does not import its UWM. The company also shares facilities with a related entity from which it receives custom fabrication services in relation to the manufacturing of its window wall modules as well as another related entity that manufactures aluminum railings.^{Footnote 14}

Toro Aluminum / Toro Glasswall Inc.

[52] Toro Aluminum / Toro Glasswall Inc. (Toro) is a UWM producer located in Concord, Ontario. Established in 1979, Toro Aluminum has become the window wall and door supplier for high-rise condominiums, office buildings and hotels across Canada, the United States and Mexico. Established in 2008, Toro Glasswall has become the curtain wall supplier for high-rise condominiums, office buildings and hotels across Canada and the United States.^{Footnote 15}

[53] The apparent Canadian market for UWM over the POR, which includes Canadian production, is indicated in Table 1 and Table 2 below. In light of the limited number of parties involved, the CBSA cannot release specific quantitative data respecting imports of subject goods in 2015 and 2016 as it would lead to the disclosure of confidential information. As a result, the CBSA is also unable to disclose specific data for the total apparent market for those years.

*The CBSA is unable to provide the total apparent Canadian market figures in terms volume because some of the information is not available in a consistent unit of measurement (i.e. Customs data mixes area vs weight vs number of units, etc.).

** The consensus among the responding Canadian producers is that the “Coalition of Canadian UWM producers” (i.e. Antamex, BVG, CGC, Ferguson, Flynn, IGA, IBS, Quest, Sotawall, Starline, State Window, and Toro) collectively held the vast majority (the average estimate being 76 %) of the total Canadian production of UWM for the Canadian market between January 1, 2015 and June 30, 2018. The CBSA therefore determined Canadian producers’ sales data on the basis of the data provided by these respondents, plus 31.6% (i.e. 1/76%) of that amount as an estimate of the other producers’ sales volume.

* The consensus among the responding Canadian producers is that the “Coalition of Canadian UWM producers” (i.e. Antamex, BVG, CGC, Ferguson, Flynn, IGA, IBS, Quest, Sotawall, Starline, State Window, and Toro) collectively held the vast majority (the average estimate being 76 %) of the total Canadian production of UWM for the Canadian market between January 1, 2015 and June 30, 2018. The CBSA therefore determined Canadian producers’ sales data on the basis of the data provided by these respondents, plus 31.6% (i.e. 1/76%) of that amount as an estimate of the other producers’ production volume.

[54] In terms of trend, the total market increased steadily throughout the POR, including an additional increase of 19.7% in the first half of 2018, compared to the same period in the previous year.

[55] While the CBSA is unable to provide the total apparent Canadian market figures in terms of volume because some of the information is not available in a consistent unit of measurement (i.e. Customs data mixes area, weight, number of units, etc.), if it is assumed that the same market shares applies to the volumes as to the values, it can be estimated that the total Canadian market was approximately 1,175,000 square metres (m²) in 2017.

Canadian Sales from Canadian Production

[56] Based on the apparent Canadian market figures in Table 1 above, the domestic sales value of UWM produced in Canada increased by 8.9% between 2015 and 2017, with most of the increase occurring in 2016. The increase in sales value accelerated in 2018, with sales during the first half of 2018 being 21.7% higher than during the same period in 2017.

[57] Despite the increase in value between 2015 and 2017, the actual volume decreased by 2.1% during that time. In 2018, however, the volume increased proportionally to the increase in value, with an increase of 21.8% during the first half of 2018 compared to the same period in 2017.

[58] The increase in value despite a decrease in the volume between 2015 and 2017 could be attributable to a number of factors. On the one hand, this may reflect a higher profit margin by Canadian producers. Based on the available financial reports of a sample of nine Canadian producers,^{Footnote 18} the weighted average profit margin increased slightly between 2015 and 2017. On this matter, one producer did report “…slight increase in system pricing for modules over the past three to four years in opportunities – over and above standard inflation.”^{Footnote 19} On the other hand, the increase in sales value despite a decrease in the sales volume may also be partially explained by the reported building code changes and consumer preferences that have demanded improved performance, resulting in an increase in cost and value.^{Footnote 20} In other words, the quality of the goods have improved in the past few years, likely resulting in a higher value per square metre.

[59] During the POR, the Canadian producers held on to the vast majority of the Canadian market.

Imports – China

[60] As a result of the limited number of parties involved in the exportation/importation of the subject goods, the CBSA cannot release specific quantitative data respecting imports of subject goods as it would lead to the disclosure of confidential information. As can be seen in Table 1 above, during the POR, subject goods were only present in the Canadian market in 2015 and 2016.

Imports – Other Countries

[61] As shown in Table 1 above, while Chinese imports disappeared from the Canadian market after 2016, importers of UWM found new sources of imports. As such, imports from countries other than China increased from about $9 million in 2015 to just over $23 million in 2017, an increase of 153% over these years. During that time, their share of the total market increased. Imports seem to be lower in 2018, with a decrease of 29% during the first half of 2018 compared to the same period in 2017. Overall, total imports increased between 2015 and 2017.

Market Projections

Demand:

[62] As a general consensus, Canadian producers foresee healthy market demand in Canada in the foreseeable future. Most producers expect steady growth in market demand while others expect the market to remain stable in the foreseeable future.^{Footnote 21}

Supply:

[63] On the supply side, the CBSA expects increased competition in the Canadian market in the foreseeable future. There were several reports in Canadian producers’ ERQ responses of new foreign entrants in the Canadian or North American market, from Asia (other than China) and also from Europe. Further, on the basis of the CBSA’s compilation of the producers’ data,^{Footnote 22} the domestic industry has been on an expansion during the POR. Overall domestic production capacity increased by 26% between 2015 and 2017, along with an additional increase of 16% in the first half of 2018. Production also increased, although at a slightly lower pace of 20% between 2015 and 2017, and an additional 16% in the first half of 2018. The capacity utilization rate has been decreasing during that time, from 59% in 2015 to 56% in 2017 to 50% in the first half of 2018.

[64] Overall, the expected demand growth and the increased competition may keep the demand and supply balance stable for the foreseeable future.

[65] As a result of the limited number of parties involved in the exportation/importation of subject goods during the POR, the CBSA cannot release the specific amounts of anti-dumping duty and countervailing duty assessed in 2015 and 2016 as this would lead to the disclosure of confidential information. The majority of the duties assessed in 2015 and 2016 consisted of countervailing duty. The total amount of anti-dumping duty assessed during 2015 and 2016 is considered to be minimal. There were no imports of subject goods during the remainder of the POR.

[66] On August 28, 2018, the CBSA sent a notice concerning the initiation of the expiry review investigation and ERQs to known Canadian producers, importers and exporters. The GOC was also sent an ERQ relating to subsidy.

[67] The ERQs requested information needed to consider the expiry review factors, as found in subsection 37.2(1) of the Special Import Measures Regulations (SIMR), relevant to this expiry review investigation.

[68] Twelve Canadian producers: Antamex, BVG, CGC, Ferguson, Flynn, IGA, IBS, Quest, Sotawall, Starline, State Window, and Toro, participated in the expiry review investigation and provided ERQ responses. Additional documents were also filed on behalf of these Canadian producers prior to the closing of the record.

[69] One exporter, Shenyang Yuanda also participated in the expiry review investigation and provided an ERQ response.

[70] A case brief was received from counsel on behalf of the Canadian producers. A reply submission was filed on behalf of Shenyang Yuanda.

[71] No importers in Canada responded to the ERQ nor did they provide a case brief or reply submission.

[72] The CBSA did not receive a response to the ERQ from the GOC nor did the GOC provide a case brief or reply submission.

[101] In making a determination under paragraph 76.03(7)(a) of SIMA whether the expiry of the finding 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.

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

• Weakening Market Conditions in China
• Excess Production Capacity / Oversupply in China
• Chinese Producers are Increasingly Export-focused
• Attractiveness of the Canadian Market to Chinese Producers
• Increased Competition in the Canadian Market from Domestic and New Foreign Sources
• Propensity of Chinese Exporters to Undercut Canadian Prices

[103] As previously mentioned, the CBSA received ERQ responses from 12 Canadian producers and from one exporter. In addition to responding to the ERQ, the Canadian producers submitted supplementary information prior to the closing of the record as well as a case brief, and Shenyang Yuanda, an exporter, provided a reply submission.

[104] The CBSA relied on the information submitted by these parties, as well as other information on the administrative record for purposes of this expiry review investigation.

[105] Specific supply and demand data for the Chinese UWM market is limited. Nevertheless, evidence on the record suggests that demand in the Chinese curtain wall market expanded significantly in the recent past, resulting in an increase in production by the Chinese industry. However, the Chinese curtain wall industry is currently operating in a weakening construction market with evidence of an oversupply condition.

[106] China’s rapid economic growth and the fast pace of urbanization has spurred strong growth in fixed assets and construction investments. This in turn has led to rapid growth in the Chinese curtain wall industry, particularly for UWM. Similarly, limited land-use rights in China pushed developers to build taller buildings, which increased demand for UWM.^{Footnote 67}

[107] Evidence on the record suggests a total output of approximately 267 billion RMB for curtain wall production at the time of the finding, in 2013.^{Footnote 68} The total output increased to 320 billion RMB in 2014, 340 billion RMB in 2015, and 370 billion RMB in 2016.^{Footnote 69} This represents an increase of 38.6% between 2013 and 2016. In terms of volume, domestic production output was approximately 156.4 million m² in 2016,^{Footnote 70} up from approximately 115 million m² in 2013.^{Footnote 71} This represents a 36 % increase between 2013 and 2016.

[108] The Chinese curtain wall industry is known to be very fragmented and highly competitive. According to the CITT, at the time of the finding, there were allegedly as many as 200 producers of UWM in China.^{Footnote 72} One Chinese producer, referring to statistics from the China Building Decorating Association, noted that in 2016, there was a total of 260 companies with Class A Curtain Wall Designing Qualification, 210 companies which possess Level I Curtain Wall Contracting Qualification, and 947 companies holding Level I Building Decoration Contracting Qualifications.^{Footnote 73}

[109] Sales of UWM depend heavily on the performance of the construction and real estate industries. During the POR, China experienced a slowdown of its real estate investments. This slowdown appears to be in part the result of specific policies of the GOC aimed at deflating the housing bubble and tightening its credit policies. The GOC’s measures were seemingly successful at curbing demand for real estate, reducing buyers’ leverage and weakening the willingness of developers to further invest in 2018.^{Footnote 74}

[110] The slowdown in the real estate market and its negative impact on the Chinese UWM market was flagged by Yuanda China Holdings Limited (CNYD) in its 2015, 2016 and 2017 Annual Reports.^{Footnote 75} CNYD, one of the major UWM producers in China and a major global player, is the parent company of Shenyang Yuanda, who participated in this expiry review investigation and exported subject goods to Canada at the time of the original investigation. CNYD’s revenue from its domestic market decreased by 22.9% in 2015, by 25.2% in 2016 and again by 28.3% in 2017.^{Footnote 76} The company attributed the drop in its domestic market sales to the slowdown in the real estate market and the effects of government measures. Domestic sales in the foreseeable future are not expected to recover, as suggested by a 32.1% drop in newly-awarded domestic projects in 2017.^{Footnote 77} Projects awarded in any given year are what generate workload and revenue for the subsequent one to two years. In their 2017 Annual Reports, both CNYD^{Footnote 78} and Far East Global,^{Footnote 79} another major Chinese producer and global player, mentioned the need to be selective in choosing curtain wall projects in China and focus on major projects owned by customers with good reputations. Such a statement suggests great concern with respect to the sustainability of ongoing real estate investments in the current environment if it relates to concerns that ongoing projects may not proceed or be completed. This is also consistent with the information provided by the Canadian producers which indicated that Chinese developers were highly leveraged and faced heightened liquidity risks.

[111] In each of its 2015, 2016 and 2017 Annual Reports, CNYD indicated that the Chinese market was characterized by excess supply of curtain wall products on the mainland, the fragmentation of the industry and the presence of fierce competition.^{Footnote 80} Far East Global also described the domestic market as fragmented, disordered and oversupplied.^{Footnote 81}

[112] CNYD has an annual production capacity for curtain wall of as much as 10 million^{Footnote 82} to 12 million^{Footnote 83} m². This is 10 to 12 times the size of the entire estimated Canadian market. Although a portion of that capacity is used for the production of non-subject goods, such as stick systems, the capacity to produce UWM remains substantial.

[113] As suggested by the Canadian producers, if Chinese producers were operating at 70% of their capacity in 2016, the total Chinese production of 156.4 million m² in 2016^{Footnote 84} would suggest a total capacity of over 223.4 million m², or about 67 million m² in overcapacity. If Chinese producers were operating at 50% capacity utilization, the excess capacity increases to 156.4 million m², based on 2016 data. If total capacity actually increased since 2016, a likely scenario, the excess capacity may be even greater. This excess capacity is quite substantial compared to the Canadian market, estimated at just over 1.1 million m² in 2017.

[114] Evidence suggests that Chinese UWM producers are increasingly turning to export markets to make up for their decreases in domestic sales, put their excess production capacity to use and seek some stability.

[115] For example, CNYD’s export sales as a percentage of total sales increased from 21.2% in 2014, prior to the POR, to 29% in 2015, 37.7% in 2016, and 42.5% in 2017.^{Footnote 85} The trend is believed to be continuing in 2018. In fact, the export markets represented over 62% of new projects total value in 2017, which is indicative of its workload in 2018 and parts of 2019.^{Footnote 86}

[116] Shenyang Yuanda claims that re-entering the Canadian market would be difficult even without SIMA duties in place.^{Footnote 87} The confidential evidence on the record, however, does not suggest that the company would have a difficult time re-entering the market if the finding was no longer in place.

[117] Other Chinese UWM producers are also increasingly export focused. The Canadian producers compiled information on 20 Chinese producers that export UWM products, and hold substantial production capacity.^{Footnote 88} One such company, Beijing Jangho Curtainwall Company Ltd., which previously exported to Canada and was a cooperating party in the original investigation, is currently advertising its presence in the international market, with over 20 branches. While all of its manufacturing is done in China, the company still has a Canadian subsidiary, Jangho Curtain Wall Canada Co., Ltd, who filed a submission with the CITT in their proceedings.^{Footnote 89} Similarly, in its 2017 Annual Report, Far East Global discussed the expansion of its production and manufacturing base in Mainland China in order to fulfil growing demand for projects in their export markets.^{Footnote 90} The company, which, according to the Canadian producers, has a production capacity of about 850,000 m², specifically notes its past successes in the Canadian market on the “About Us” section of its corporate website.

[118] Meanwhile, the Canadian market is expected to remain stable and healthy, and attract higher prices than the Chinese market. As mentioned in the Canadian Market section above, Canadian producers foresee healthy market demand in Canada in the foreseeable future, with most producers expecting steady growth in market demand while others expect the market to remain stable.^{Footnote 91} Shenyang Yuanda alleged that the price per square metre in the Canadian market more than doubled over the last five years, and that the range of prices for curtain walls is substantially higher than it was five years ago.^{Footnote 92} Shenyang Yuanda expects strong demand for residential condominium and for commercial buildings.

[119] As noted earlier, on the supply side, the CBSA expects increased competition in the Canadian market in the foreseeable future. There were several reports in Canadian producers’ ERQ responses of new foreign entrants in the Canadian or North American market, from Asia (other than China) and also from Europe. Further, on the basis of the CBSA’s compilation of the producers’ data,^{Footnote 93} the domestic industry has been on an expansion during the POR. Overall, the expected demand growth and the increased competition may keep the demand and supply balance stable for the foreseeable future.

[120] In the original UWM inquiry, the CITT acknowledged that while UWM are not commodities, price is nonetheless of considerable importance. As stated by the CITT, “[l]ate delivery poses a significant risk to general contractors as purchasers of UWMs, having regards to the financial penalties that they may incur, should the project fall behind schedule, and the potential damage to the general contractor’s reputation.”^{Footnote 94} Nevertheless, although the domestic industry has a significant advantage in delivery time,^{Footnote 95} many purchasers seemed willing to assume this risk (i.e. of importing from abroad) if a price quotation is low enough.^{Footnote 96} On this matter, the Canadian producers argued that developers would only consider offshore UWM if they are priced lower than those produced in Canada as a result of the risk associated with having production far away.^{Footnote 97} The CITT estimated that the lower risk associated with sourcing domestically allowed like goods to command a risk mitigation premium over the price of the subject goods.^{Footnote 98} The CITT also noted the significance of the price undercutting of subject goods, which ranged, at the time, between 38% and 49% for unitized curtain wall modules and between 16% and 28% for unitized window wall modules.^{Footnote 99}

[121] The CBSA acknowledges that in light of the higher prices in the Canadian market, the Chinese producers can undercut Canadian suppliers without necessarily dumping, provided that the price is sufficiently high to cover the cost of production of the goods, the administrative, selling and all other costs, and a reasonable amount for profit. Some projects were in fact sold at un-dumped prices at the beginning of the POR^{Footnote 100} or prior to that period.^{Footnote 101}

[122] Nevertheless, the CBSA believes that the risk involved with supplying UWM from China remains the same as it was at the time of the original investigation, and that for this reason, a Chinese supplier is likely to be selected to supply UWM only if the price is sufficiently low to justify the added risk. Information on the record suggests that Chinese exporters would not only have to undercut Canadian producers but possibly also new foreign entrants in the Canadian market. During the period of investigation for the original dumping investigation, a time when market conditions in China for UWM were much stronger than they are today, the CBSA determined margins of dumping of 15.7% and 49.3% for the two cooperating exporters. Considering the weakening market conditions in China and the increasing oversupply in that market, the CBSA expects that Chinese producers are likely to undercut the prices of Canadian producers and other bidders in the Canadian market by significant margins in order to re-enter the market, re-gain market share, and fill some of their excess capacity. The CBSA believes that Chinese UWM producers are likely to export UWM to Canada at prices that are insufficient to recover their full cost plus a reasonable amount for profit, and hence at a dumped price. Evidence on the record also suggests that the extent of the excess capacity in China is such that a significant volume of dumped UWM could be expected to be exported to Canada if the finding is rescinded.

Positive Effect of Finding

[123] Based on the information on the administrative record demonstrating; the weakening UWM market conditions and the excess production capacity in China; the increasing export orientation of Chinese producers, the attractiveness of the Canadian market and increased competition from domestic and foreign sources, along with the propensity of Chinese exporters to undercut Canadian prices, the CBSA determined that the expiry of the finding is likely to result in the continuation or resumption of dumping into Canada of certain UWM originating in or exported from China.

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

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

• the continued availability of subsidy programs for UWM exporters in China;
• the subsidizing of primary aluminum in China and other government intervention; and
• the countervailing measures against Chinese aluminum products in Canada and in other jurisdictions.

The continued availability of subsidy programs for UWM exporters in China

[134] At the time of the initiation of the original subsidy investigation in 2013, the CBSA had identified 180 subsidy programs to be investigated. Further to that investigation, the CBSA found that 33 of the identified programs had conferred benefits to at least one of the two cooperative exporters; Guangzhou Jangho Curtain Wall System Engineering Co. Ltd. (Guangzhou Jangho) and associated companies, and Shenyang Yuanda.^{Footnote 110}

[135] At that time, the CBSA found that 100% of the goods exported from China were subsidized. The weighted average amount of subsidy, expressed as a percentage of the export price, was equal to 25.8%. The amounts of subsidy found for the cooperative exporters were equal to 3.8% and 5.3% of the export price, or 32.01 to 64.83 Renminbi (RMB) per m². For all other exporters, the amount of subsidy was determined under Ministerial Specification pursuant to subsection 30.4(2) of SIMA. The amount of subsidy found for non-cooperative exporters was equal to 41.6%, expressed as a percentage of the export price, or 458.31 RMB per m².^{Footnote 111}

[136] The 33 programs which were found by the CBSA to be conferring benefits to the cooperating exporters included several direct subsidy programs, such as grants, preferential loans, and preferential tax programs and also a subsidy passed-through from the purchase of aluminum extrusion.

[137] Despite the limited information with respect to current subsidy programs specifically applicable to UWM producers and exporters, in part due to the non-participation by the GOC in this expiry review investigation, information on the record provides evidence of the continued availability of subsidy programs for UWM exporters in China.

[138] There is evidence on the record that Program 166: Corporate Income Tax Reduction for New High-Technology Enterprises, a subsidy program that was found to benefit both cooperating exporters at the time of the investigation^{Footnote 112} is still benefiting UWM producers. Under this program, some companies enjoy a preferential corporate tax rate of 15% relating to a preferential policy for high-tech enterprise. Considering the corporate tax rate of 25% in China, this represent a reduction of 40% of the company’s income tax.

[139] In addition, information on the record confirms that Shenyang Yuanda has been receiving government subsidies during the POR.^{Footnote 113} The subsidies reported were as high as 0.5% of total revenue in 2016. While Shenyang Yuanda argued, in its reply submissions, that this amount is de minimis, the CBSA stresses that this amount is believed to represent only grants. Given that there were also other types of subsidy programs that were applicable to Shenyang Yuanda at the time of the original investigation, the total amount reported in Shenyang Yuanda’s financial statements may represent only a portion of the total amount of subsidy received during the POR. For instance, exporters may have received benefits from the preferential tax subsidies discussed above, other types of tax benefits such as certain tariff and VAT refunds or exemptions (e.g. Program 19, Program 174, Program 176, which were found to have benefitted the cooperating exporters in the investigation), and preferential loans (e.g. Program 28 respecting preferential loans from the EXIM Bank). Additionally, it does not include the value of any subsidy passed-through from the purchase of aluminum extrusions, as further discussed below. The financial statements also do not provide information as to the nature of the grants, including whether they consist of export subsidies, in which case they would be allocated over export revenues only. In addition, the amount of grants indicated in the financial statements does not include any subsidies received by other entities within Shenyang Yuanda’s corporate structure, which could be allocable to UWM.

[140] Among the subsidy programs found by the CBSA to have conferred benefits to UWM exporters in the original investigation were upstream subsidies received by aluminum extruders and passed-through to exporters of UWM through the purchase of aluminum extrusions. Aluminum extrusions are one of the principle inputs of UWM and one of its principle cost components.

[141] There is currently a finding in place with respect to the subsidizing of aluminum extrusions from China. In that case, 56 potential subsidy programs were investigated and 15 of those programs were determined to have conferred benefits to the cooperative exporters.^{Footnote 114} The information received from the cooperative exporters in that case indicates that they received benefits under one or more of the following programs:

• Preferential Tax Policies for Enterprises with Foreign Investment Established in the Coastal Economic Open Areas and in Economic and Technological Development Zones
• Research & Development (R&D) Assistance Grant
• Superstar Enterprise Grant
• Matching Funds for International Market Development for SMEs
• One-time Awards to Enterprises Whose Products Qualify for "Well-Known Trademarks of China" or "Famous Brands of China"
• Export Brand Development Fund
• Preferential Tax Policies for Foreign Invested Enterprises – Reduced Tax Rate for Productive FIEs Scheduled to Operate for a Period not less than 10 Years
• Preferential Tax Policies for Foreign-Invested Export Enterprises
• Local Income Tax Exemption and/or Reduction
• Exemption of Tariff and Import VAT for Imported Technologies and Equipment
• Patent Award of Guangdong Province
• Training Program for Rural Surplus Labor Force Transfer Employment
• Reduction in Land Use Fees
• Provincial Scientific Development Plan Fund
• Primary Aluminum Provided by Government at Less than Fair Market Value

[142] Countervailing measures with respect to Aluminum Extrusions are also applicable in Australia and in the United States.

[143] In August 2016, in a sunset review of its countervailing finding on Aluminum Extrusions from China originally made on April 4, 2011, the United States Department of Commerce (US DOC) found that the revocation of its countervailing duty finding on aluminum extrusions would likely lead to a continuation or recurrence of a countervailable subsidy at substantial rates.^{Footnote 115} It is noted that aluminum extrusions that form part of UWM are included within the scope of the American measures on Aluminum Extrusions. In 2017, the U.S. International Trade Commission continued the countervailing findings on those goods.^{Footnote 116} In December 2017, the US DOC, further to an administrative review of the order, determined that the mandatory respondents received countervailable subsidies during the period of review.^{Footnote 117}

[144] In a review of its measures applying to Aluminum Extrusions concluded in October 2017, the Australian authorities found that cooperating exporters benefited from subsidies that had been granted under a total of 32 programs.^{Footnote 118} The subsidy margins varied between 0% and 4.5% of the export price for cooperating exporters.^{Footnote 119}

[145] Further, the Canadian, Australian and American authorities have all determined that the subsidies to the aluminum extrusion producers/exporters included benefits from the provision of primary aluminum at less than adequate remuneration, as discussed below.

Subsidizing of Primary Aluminum in China and Other Government Intervention

[146] The record contains evidence that the Chinese government continues to provide financial benefits to primary aluminum producers. For example, a report submitted to the U.S.-China Economic and Security Review Commission estimated benefits of US$444 million to Aluminum Corporation of China Limited (Chalco), a Chinese SOE and China’s largest primary aluminum producer, in the form of grants, preferential tax rates, preferential loans and preferential electricity prices by the government.^{Footnote 120} This amount was equivalent to a subsidy rate of 4.7% of revenues according to the report.^{Footnote 121} As was the case at the time of the UWM investigation, subsidies may be passed through to aluminum extrusion producers and ultimately, in full or in part, to UWM producers.

[147] In addition to directly subsidizing its aluminum industry, a report by the European Commission (EC) listed a number of instruments used by the GOC to control and influence its domestic aluminum industry.^{Footnote 122} Although the EC report does not conclude whether such measures consist of subsidies, such as income or price support, the report does provide insight as to the GOC’s intervention in the market by applying a number of different instruments. Such instruments include restrictive export-related measures on bauxite, a key input in aluminum production, with the effect of increasing domestic supply and lowering its cost. The GOC also implemented VAT policies that discourage the export of primary aluminum and its inputs, with the aim of encouraging exports of higher added value aluminum products, including aluminum extrusions and UWM. The result, as per the report, is a “depression of prices of primary aluminum in the Chinese domestic market, and thereby providing a significant cost advantage for Chinese producers of processed aluminum products”.^{Footnote 123} Similarly, the GOC also implemented an export tax of 15% on unwrought aluminum and aluminum scrap, again shifting exports towards high added value products.^{Footnote 124}

[148] The EC report also identified specific subsidies, in particular, the subsidizing of electricity, as yet another measure taken by the GOC to support its aluminum producers.^{Footnote 125} Such measures are significant considering that electricity accounts for as much as a third of primary aluminum production costs.^{Footnote 126}

[149] These measures demonstrate the importance that the GOC has placed on its aluminum industry and in particular, the higher value-added downstream products, including aluminum extrusions and UWM. As demonstrated, the GOC is supporting these industries and providing the producers of aluminum products an advantage in the export markets. Several of these measures consist of countervailable subsidies. Such advantage extends to producers of UWM and are likely to continue to exist in the foreseeable future.

The countervailing Measures Against Chinese Aluminum Products in Canada and in Other Jurisdictions

[150] The existence of countervailing measures in place in Canada, Australia, the European Union (EU) and in the US concerning aluminum products from China reinforces the argument that Chinese exporters/producers of UWM products receive countervailable benefits from the GOC and the GOC has placed a great deal of importance on its aluminum industry and subsidized it accordingly.

[151] The CBSA currently has a countervailing measure in place against aluminum extrusions and photovoltaic modules and laminates from China.^{Footnote 127} Information on the administrative record indicates that Australia, the EU and the US also have countervailing measures against aluminum products from China. The products that are subject to the Australian countervailing measures include: Aluminum Extrusions, Aluminum road wheels, and Aluminum Zinc Coated Steel.^{Footnote 128} The European Union also has countervailing measures against crystalline silicon photovoltaic modules and key components.^{Footnote 129} The products that are subject to the US countervailing measures include: Aluminum Extrusions (including the aluminum extrusions that form part of UWM), certain aluminum foil, crystalline silicon photovoltaic cells, and certain crystalline silicone photovoltaic products.^{Footnote 130}

[152] On the basis of the above, there are strong indications that the GOC will likely continue to subsidize its domestic UWM producers in the future, both directly and indirectly by subsidizing aluminum extrusion producers and/or the primary aluminum producers.

Determination Regarding Likelihood of Continued or Resumed Subsidizing

[153] Based on information on the record in respect of the continued availability of subsidy programs for UWM exporters in China, the subsidizing of primary aluminum in China and other government intervention, and the countervailing measures against Chinese aluminum products in Canada and in other jurisdictions, the CBSA determined that the expiry of the finding is likely to result in the continuation or resumption of subsidizing of certain UWM originating in or exported from China.

[154] 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. Based on the foregoing consideration of pertinent factors and an analysis of the information on the record, on January 24, 2019, the CBSA made a determination pursuant to paragraph 76.03(7)(a) of SIMA that the expiry of the CITT’s finding made on November 12, 2013, in Inquiry No. NQ-2013-002:

1. in respect of certain unitized wall modules originating in or exported from China is likely to result in the continuation or resumption of dumping of the goods; and
2. in respect of certain unitized wall modules originating in or exported from China is likely to result in the continuation or resumption of subsidizing of the goods.

[155] On January 25, 2019, the CITT commenced its inquiry to determine whether the expiry of the finding with respect to the dumping and subsidizing of certain UWM from China is likely to result in injury. The CITT’s Expiry Review schedule indicates that it will make its decision by July 3, 2019.

[156] If the CITT determines that the expiry of the finding with respect to the goods is likely to result in injury, the CITT will make an order continuing the finding 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.

[157] If the CITT determines that the expiry of the finding with respect to the goods is not likely to result in injury, the CITT will make an order rescinding the finding 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 finding was scheduled to expire will be returned to the importer.

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