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Untertaking - Cigarette Tubes

OTTAWA, April 12, 1999

4235-260
AD/1190

STATEMENT OF REASONS

Concerning acceptance of an undertaking and suspension of the dumping investigation, pursuant to subsection 49(1) and section 50 of the Special Import Measures Act, regarding certain FILTER TIPPED CIGARETTE TUBES, ORIGINATING IN OR EXPORTED FROM FRANCE

DECISION

Pursuant to subsection 49(1) and section 50 of the Special Import Measures Act, the Deputy Minister of National Revenue has today accepted an undertaking and suspended the investigation respecting the alleged injurious dumping into Canada of certain filter tipped cigarette tubes, originating in or exported from France.

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

STATEMENT OF REASONS

SUMMARY

On October 19, 1998, the Deputy Minister of National Revenue initiated an investigation respecting the alleged injurious dumping of certain filter tipped cigarette tubes, originating in or exported from France and the Federal Republic of Germany.

The investigation was initiated in response to a complaint filed by CTC Tube Company of Canada Inc. of Montréal-Nord, Québec.

On January 18, 1999, the Deputy Minister terminated the proceedings with respect to the subject goods originating in or exported from the Federal Republic of Germany in accordance with paragraph 35(1)(c) of the Special Import Measures Act (SIMA).

On the same date, the Deputy Minister made a preliminary determination of dumping, in accordance with paragraph 38(1) of SIMA and determined that there was evidence that disclosed a reasonable indication that the dumping had caused injury.

On this date, the Deputy Minister has accepted an undertaking from the exporter Alpaci Sarl of France, and the vendor Gizeh Raucherbedart GmbH & Co. KG of the Federal Republic of Germany, and has suspended the investigation.

The undertaking accepted by the Deputy Minister covers substantially all of the dumped goods and provides that the prices of the imported goods will increase to a level sufficient to eliminate the injury caused to the complainant by the dumping. The undertaking was accepted pursuant to subsection 49(1) of the SIMA and the investigation was suspended in accordance with section 50 of SIMA.

INTERESTED PARTIES

Complainant

CTC Tube Company of Canada Inc.
10220 Armand Lavergne
Montréal-Nord (Québec)
H1H 3N5

Exporter

Alpaci Sarl
Zone Industrielle Imbsheim
67330 Bouxwiller
France

Vendor

Gizeh Raucherbedart GmbH & Co. KG
Breiter Weg 40
D-51690 Bergneustadt
The Federal Republic of Germany

Importer

T&R Tubes Canada Ltd.
632, rue Guy
St-Amable (Québec)
J0L 1N0

PRODUCT DEFINITION

The subject goods are defined as:

“Filter tipped cigarette tubes, excluding those which bear the trademark or brand name of a finished or ready-made cigarette, originating in or exported from France.”

Product Information

The subject goods can be described as filter tipped cigarette tubes. Cigarette tubes are used by consumers to make finished cigarettes by inserting fine cut tobacco into the tubes, usually with the aid of a small machine or injector. The industry standard in Canada for regular length filter tipped cigarette tubes is 74 mm, while the standard for king size filter tipped cigarette tubes is 84 mm.

The dumped imports are usually sold in boxes of 200 tubes under the brand name “Patriarch” or in boxes of 100 tubes under the brand name “Silver Tip”. The boxes are generally packaged for wholesale distribution in cases containing 10,000 tubes in configurations of 50 boxes of 200 tubes or 100 boxes of 100 tubes. A trial shipment of “Patriarch 250” containing 250 tubes per box was also imported during the period of investigation.

The filter consists of a plug of crimped acetate tow and a filter wrap made from paper with a minimum basis of 25 grams per square metre (gsm). The paper tube portion is generally made from paper with a minimum basis of 23.8 gsm. The cigarette paper may be treated with a chemical such as citrate or phosphate to facilitate either a fast or slow burn rate. The cigarette tubes generally appear white in colour, although the portion covering the filter may be made from paper which is either white or tan hue (solid or speckled).

The complaint filed by CTC Tube relates only to the distinct class of goods produced and sold by CTC Tube, i.e., house brand or private label cigarette tubes. Accordingly, this investigation does not include cigarette tubes which carry the trademarks or brand names of finished or ready-made cigarettes sold in Canada.

CLASSIFICATION OF IMPORTS

Filter tipped cigarette tubes are properly classified in Schedule I of the Customs Tariff under classification number 4813.10.00.00 of the Harmonized System. Under the Most Favoured Nation Tariff treatment, imports from France are subject to a 5.5 per cent rate of regular customs duty.

CANADIAN INDUSTRY

CTC Tube represents the majority of Canadian production of the goods. A second Canadian producer, Dynasty Tobacco Inc., was also identified.

CANADIAN MARKET

Detailed information on the size of the Canadian market and the shares held by the participants cannot be divulged because it could reveal information that is confidential to the parties involved.

For the purpose of estimating the apparent Canadian market, the Department aggregated the value of sales from domestic production with the value of imports from France and from one exporter located in the United States of America. That exporter is Clinton Tube Company Inc. of Plattsburg, New York, which is related to the complainant, CTC Tube. All shipments from Clinton Tube Company Inc. of Plattsburg, New York, were imported by CTC Tube. The estimated value of imports was compiled from information available through the Customs Commercial System database and import documents. The Department estimated the Canadian market for the subject goods at approximately $7 million per year.

RESULTS OF THE INVESTIGATION

After the case was initiated, the Department conducted an investigation to determine whether subject goods shipped from France and the Federal Republic of Germany were dumped. The exporter and the importer were requested to provide sales and cost information necessary to determine the normal values and export prices of the subject goods. The period investigated was from July 1, 1997, to June 30, 1998.

Responses to the Department’s request for information were received from both the exporter and the importer. Departmental officers visited the exporter’s premises in order to verify that the information provided was complete and correct.

As the investigation progressed, it was determined that Gizeh Raucherbedart GmbH & Co. KG (Gizeh) of Germany was the vendor of the goods and Alpaci Sarl (Alpaci) of France was the producer. It was also determined that all shipments to Canada were exported directly from Alpaci’s plant in Bouxwiller, France, and that neither Alpaci nor Gizeh have facilities to produce filter tipped cigarette tubes in the Federal Republic of Germany. As a result, the Deputy Minister terminated that part of the investigation related to the Federal Republic of Germany.

At the conclusion of the preliminary phase of the investigation, margins of dumping were determined for 99.3 per cent of the goods exported to Canada from France. In this regard, filter tipped cigarette tubes imported as test samples were not included in the margin of dumping calculations.

Normal Values

Normal values were estimated under section 15 of SIMA using Alpaci’s domestic sales of like goods to unrelated customers at the nearest trade level to that of the importer. In this respect, sales to the three largest regional distributors in France were considered most comparable to the sales made to T&R Tubes, the national distributor for Canada. Various adjustments were made under the SIMA Regulations, as set out below.

Regulation 5(a): Qualitative Differences

As regional distributors in France did not purchase certain brands of cigarette tubes that were exported to Canada, sales of domestic goods which closely resemble the exported goods were used. Generally, the price and cost differential between the like goods and the goods exported to Canada was attributable primarily to variations in packaging and labeling. An adjustment was made to the selling price of the like goods to reflect this difference.

Regulation 6: Cash Discounts and Deferred Rebates

The exporter offered both cash discounts and deferred rebates to regional distributors in France. The Department made an adjustment to the selling price of the like goods for both programs as they were generally granted on sales of like goods in the domestic market and the importer in Canada would have qualified for these deductions had it been located in the country of export.

Regulation 7: Delivery Costs

Generally, cigarette tubes were sold to regional distributors on a delivered basis. Consequently, freight costs included in the selling price were deducted when estimating normal values.

Regulation 9: Trade Level Adjustment

As normal values were based on sales to purchasers at a trade level subsequent to that of the importer, a national distributor, a trade level adjustment was required. Selling prices were reduced by an amount that reflects selling expenses incurred on sales in France which were not incurred on sales to the importer in Canada.

Regulation 10: Internal Duties and Taxes

Included in domestic selling prices was an EcoEmballage tax imposed on packing material. An adjustment was made to normal values to account for the amount of tax included in domestic sales but not incurred on sales to Canada.

Export Price

Section 24 of SIMA states that the export price of the goods is an amount equal to the lesser of the exporter's selling price, or the importer’s purchase price, after all of the various deductions set out in subsection 24(a) have been made. In this case, the importer’s purchase prices were used to determine the export prices.

Margin of Dumping

For the purpose of the preliminary determination, 99.3 per cent of the goods exported to Canada during the period of investigation were reviewed and all were found to be dumped. The margins of dumping ranged from 21.3 per cent to 37.7 per cent with a weighted average margin of 25.1 per cent of the normal value.

UNDERTAKING DISCUSSIONS

An undertaking is an offer made voluntarily by an exporter to increase its selling prices to purchasers in the country of importation so that the dumping or its injurious effect is eliminated. The undertaking is a written commitment to adhere to specific conditions in exporting subject goods to Canada.

Pursuant to subsection 49(1) of SIMA, the Deputy Minister of National Revenue may accept an undertaking if he believes that the dumping or the injury to the Canadian producer will be eliminated. The Deputy Minister may only accept such an undertaking after a preliminary determination has been made, where observance of the undertaking will not cause the export price to Canada to increase by more than the estimated margin of dumping and where the undertaking is practicable to administer. When an undertaking is accepted, further action in the investigation is suspended.

After the preliminary determination of the margin of dumping was made, counsel for the exporter and the vendor indicated that they were interested in pursuing the possibility of concluding these proceedings by way of undertaking. Similarly, the Canadian complainant indicated that it too was prepared to resolve this case by undertaking if acceptable agreements could be reached.

The Department received an undertaking offer from the exporter and the vendor on March 25, 1999. The undertaking will ensure that selling prices to the major importer in Canada will be increased sufficiently to eliminate the injury caused by dumping. The importer of the goods supports the acceptance of an undertaking.

DECISION

Based on the information obtained during the investigation, the Department is satisfied that the undertaking will account for all or substantially all of the dumped goods and will eliminate the injury caused by dumping. Accordingly, the Deputy Minister has accepted the undertaking and has suspended further action in the investigation.

FUTURE ACTION

The Department will monitor imports into Canada of the subject goods to verify that such sales are made in accordance with the terms of the undertaking. The Department will request information from time to time from the complainant and from the exporter, vendor and importers to ensure the effective enforcement of the undertaking.

The legislation provides that the Deputy Minister will terminate the undertaking if, within 30 days after the date of the notice of the acceptance of the undertaking, a written request to terminate the undertaking is received from the complainant, the importer or the exporter of the goods. Should this occur, the investigation will resume forthwith.

The undertaking may also be terminated, the investigation resumed and a final determination of dumping made, if any of the following events occur:

(a) an exporter refuses to revise or amend the undertaking when required or requested to do so by the Department;

(b) the undertaking is violated or circumvented;

(c) new information is made available which, if such information had been available to the Deputy Minister at the time of the acceptance of the undertaking, would have led the Deputy Minister not to accept the undertaking;

(d) circumstances change to the point where the undertaking would not have been acceptable if the changed circumstances had prevailed at the time of acceptance.

In such a case, provisional duty becomes applicable from the date of the preliminary determination to the date the undertaking was accepted; provisional duty also becomes payable starting on either the date of the violation or the ninetieth day before notice of termination of the undertaking was given, whichever date is later, and ending on the day of the finding by the Canadian International Trade Tribunal.

The undertaking will remain in effect for a five-year period. The Deputy Minister will review the undertaking before the expiry of the five years in order to determine whether it continues to serve its intended purpose. If this is the case, the undertaking may be renewed for a further period of up to five years. Undertakings that are not renewed expire at the end of their term and all proceedings under SIMA are terminated.

PUBLICATION

Notice of the acceptance of the undertaking by the Deputy Minister and the subsequent suspension of the investigation is being published in the Canada Gazette pursuant to paragraph 50(a) of SIMA.

INFORMATION

This Statement of Reasons has been provided to persons directly interested in these proceedings. A free copy may be obtained by contacting the departmental officers listed below.

This document is also available through the Directorate’s World Wide Web site at: /sima-lmsi/

For further information, please contact

Jan Smith at (613) 954-7409, or
Michel Desmarais at (613) 954-7188, or
telefax (613) 954-2510.

These officers can be reached at the following address:

Revenue Canada
Anti-dumping and Countervailing Directorate
19th Floor, Sir Richard Scott Building
191 Laurier Avenue West
Ottawa, Ontario
K1A 0L5

R. Tait
Director General
Anti-dumping and Countervailing Directorate