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OTTAWA, June 1, 2005

4214-4
4218-19

STATEMENT OF REASONS

Concerning the making of a final determination with respect to the dumping of
CERTAIN LAMINATE FLOORING ORIGINATING IN OR EXPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA AND FRANCE
and the making of a final determination with respect to the subsidizing of
CERTAIN LAMINATE FLOORING ORIGINATING IN OR EXPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA
and the termination of the investigation with respect to the dumping of
CERTAIN LAMINATE FLOORING ORIGINATING IN OR EXPORTED FROM AUSTRIA, BELGIUM, THE FEDERAL REPUBLIC OF GERMANY AND THE REPUBLIC OF POLAND

DECISION

On May 17, 2005, pursuant to subsection 41(1)(a) of the Special Import Measures Act, the President of the Canada Border Services Agency made a final determination of dumping respecting laminate flooring in thickness ranging from 5.5mm to 13mm (other than laminate hardwood flooring where the hardwood component exceeds 2mm in thickness) originating in or exported from the People's Republic of China and France, and made a final determination of subsidizing of such product originating in or exported from the People's Republic of China. On the same date, pursuant to paragraph 41(1)(b) of SIMA, the President terminated the dumping investigation of such product originating in or exported from Austria, Belgium, the Federal Republic of Germany, and the Republic of Poland.

Cet énoncé des motifs est également disponible en français.

This Statement of Reasons is also available in French.

TABLE OF CONTENTS

Summary of Events

[1] On October 4, 2004, the President of the Canada Border Services Agency (CBSA):

  • initiated a dumping investigation pursuant to subsection 31(1) of the Special Import Measures Act (SIMA) 1, with respect to certain laminate flooring from Austria, Belgium, the People's Republic of China (China), France, the Federal Republic of Germany (Germany), Luxembourg and the Republic of Poland (Poland);
  • initiated a subsidy investigation pursuant to subsection 31(1) of SIMA, with respect to these products from China; and
  • did not initiate a dumping investigation with respect to these products from Spain as the likely volume of dumped goods from Spain was considered negligible.

[2] Upon receiving notice of the initiation of the investigation, the Canadian International Trade Tribunal (Tribunal) started its preliminary injury inquiry. On December 3, 2004, the Tribunal made a preliminary determination that the evidence disclosed a reasonable indication that the dumping and subsidizing of the subject goods have caused injury to the Canadian industry.

[3] On December 17, 2004, pursuant to paragraphs 39(1)(a) and (b) of SIMA, the President made the decision to extend the 90-day period for making a preliminary decision in the investigation to
135 days, due to the complexity and novelty of the issues presented and the number of persons involved in the investigation.

[4] On February 16, 2005, as a result of the CBSA's preliminary investigation and pursuant to subsection 38(1) of SIMA, the President made a preliminary determination of dumping respecting certain laminate flooring originating in or exported from Austria, Belgium, China, France, Germany and Poland, and a preliminary determination of subsidizing of such product originating in or exported from China. On the same date, pursuant to paragraph 35(2)(a) of SIMA, the President terminated the dumping investigation of such product originating in or exported from Luxembourg as the volume of dumped imports from that country was considered negligible. The Statement of Reasons (SOR) issued on March 3, 2005, contains details regarding the basis of the preliminary determination.

[5] For details regarding the basis of the initiation, consult the SOR issued on October 22, 2004, which is available upon request. For details regarding the preliminary determination, consult the SOR issued on March 3, 2005, which is also available upon request. Please contact the SIMA Registry at 613-948-4605 or simaregistry-depotlmsi@cbsa-asfc.gc.ca for more information.

[6] The CBSA continued its investigation and, on the basis of the results, the President was satisfied that certain laminate flooring originating in or exported from China and France had been dumped and that the margins of dumping were not insignificant. Consequently, on May 17, 2005, the President made a final determination of dumping pursuant to paragraph 41(1)(a) of SIMA.

[7] Similarly, the President was satisfied that certain laminate flooring originating in or exported from China had been subsidized and that the amount of subsidy was not insignificant. As a result, on May 17, 2005, the President also made a final determination of subsidizing pursuant to paragraph 41(1)(a) of SIMA.

[8] On the same date, pursuant to paragraph 41(1)(b) of SIMA, the President terminated the investigation regarding the dumping of certain laminate flooring originating in or exported from Austria, Belgium, Germany and Poland.

[9] The Tribunal's inquiry into the question of injury to the Canadian industry is continuing. Provisional duty will continue to be imposed on the subject goods from China and France until the Tribunal renders its decision. The Tribunal will issue its finding by June 16, 2005.

Period of Investigation (POI)

[10] The investigation covered all subject goods released into Canada during the period of July 1, 2003 to June 30, 2004.

Interested Parties

Complainant

[11] The complainant, Uniboard Surfaces Inc. (Uniboard), is the only known Canadian manufacturer of laminate flooring. The complainant's address is:

Uniboard Surfaces Inc.
5555 Ernest Cormier Street
Laval, Quebec
H7C 2S9

Exporters

[12] At the time of the initiation of the investigation, the CBSA had identified 91 known or possible exporters of the subject goods. Information received during the investigation allowed the CBSA to refine the list of potential exporters. As a consequence, there are currently 100 identified exporters of subject goods. A majority of the exporters shipped small quantities.

[13] Given the unusually large number of exporters, the CBSA relied upon paragraph 30.3(1)(a) of SIMA, which provides that margins of dumping may be determined in relation to the largest percentage of goods that can reasonably be investigated if it is determined that it would be impracticable to determine a margin of dumping in relation to all goods because of the number of exporters, producers or importers.

[14] Ten exporters from the named countries accounted for over 70% of the value of all laminate flooring imports into Canada in this period. These exporters also accounted for over 60% of the total exports of subject goods from their own individual country. In view of the large number of exporters, the CBSA used the above criteria and sent a dumping Request for Information (RFI) at the initiation of the investigation to those ten exporters (mandatory respondents).

[15] As well, all other exporters of subject goods were advised that they could ask for an RFI from the CBSA and participate in the dumping investigation. However, these other exporters were also advised that due to the number of mandatory respondents and the time constraints, the CBSA could not guarantee that a voluntary response to the dumping RFI would be taken into consideration for the investigation. During the investigation, the CBSA received six voluntary dumping responses from exporters located in China and one located in the United States of America (United States). All voluntary responses were reviewed for purposes of the final determination.

[16] The CBSA sent a subsidy RFI to the government of China and all known Chinese exporters of subject goods.

Importers

[17] When the investigation was initiated, the CBSA identified and forwarded RFIs to 133 potential importers of the subject goods. Subsequently, 16 importers indicated that they did not import subject goods during the POI. In addition, 3 new importers have been identified since initiation. Consequently, there are currently 120 importers of subject goods.

Product Definition

[18] For the purpose of this phase of the investigation, the subject goods were defined as:

Laminate flooring in thickness ranging from 5.5mm to 13mm (other than laminate hardwood flooring where the hardwood component exceeds 2mm in thickness) originating in or exported from Austria, Belgium, the People's Republic of China, France, the Federal Republic of Germany and the Republic of Poland.

Additional Product Information

Technical Information

[19] Laminate flooring may be defined as a rigid floor covering with a surface layer consisting of one or more thin sheets of a fibrous material printed with the motif and colour that will show on the flooring, generally a wood grain or ceramic tile pattern (usually paper but can be printed on the raw board) and impregnated with aminoplastic resins (usually melamine). These sheets are either pressed as high pressure laminate and compact laminate or bonded on a substrate, which usually consists of high density fibreboard (HDF), or in the case of direct pressure laminate directly pressed on a substrate, usually HDF. The product is normally finished with a backing, primarily used as a balancing material.

[20] In the market, laminate flooring may be described as "laminated wood flooring" or "floating flooring".

Exclusion:

[21] Excluded from the foregoing definition is:

Laminate hardwood flooring where the hardwood component exceeds 2mm in thickness.

Production Process

[22] Details of the production process of laminate flooring were provided in the SOR issued for the initiation of this investigation.

Classification of Imports

[23] Laminate flooring is properly classified in section IX of the Customs Tariff2 under the Harmonized System (HS) Heading 44.11. The classification number is 4411.19.90.90.

Canadian Industry

[24] Uniboard is the sole Canadian manufacturer of laminate flooring, producing for both the domestic and export markets. Founded in 1995 in Ville St. Laurent, Uniboard opened its manufacturing facility in Laval, Quebec, in 2001.

[25] Prior to initiation, the CBSA confirmed that Uniboard met the standing requirements of subsection 31(2) of SIMA. There has been no known change in the structure of the Canadian industry since the initiation of the investigation.

Imports into Canada

[26] Customs import data for the volume of laminate flooring imports, from all of the various sources, was found to be unreliable in this investigation. The unit of measure required for the classification number is kilograms and the data shows other units of measure being used in many instances, such as square and cubic metres. Therefore, Customs import values are deemed to be more reliable and have been used in doing the required analysis of imports, domestic shipments and for estimating the apparent Canadian market.

[27] During the preliminary phase of the investigation, the CBSA further refined its estimates of the value of imports of subject goods into Canada, based on information received from importers and exporters.

[28] The CBSA acknowledges that the tariff number under which laminate flooring is imported includes products that are not subject to the investigation. In addition, information received from exporters indicates that some subject goods have been classified under incorrect tariff numbers.

[29] It is not possible to provide figures for the value or volume of imports by country in this public document without divulging confidential information, as some of the mandatory respondents are the sole exporters from their respective countries.

[30] Furthermore, as Uniboard is the sole manufacturer in Canada, it is not possible to provide figures for total Canadian shipments in this public document without divulging confidential information. Consequently, a total Canadian market table cannot be provided.

Investigation Process

[31] At the time of the initiation of the investigation, RFIs respecting dumping were sent to the
ten mandatory respondents from the seven subject countries. All RFIs included instructions indicating that exporters who were not also manufacturers were to forward the RFIs to the manufacturers of the goods.

[32] Complete responses to the dumping RFIs were received from all mandatory respondents with the exception of one Chinese exporter. This exporter indicated that they did not export subject goods to Canada, which was confirmed during the investigation. Voluntary dumping submissions were also received from six Chinese exporters and/or manufacturers and one exporter located in the United States. All of the dumping submissions were used in making the final determination.

[33] RFIs respecting subsidy were sent to 30 exporters in China as well as to the Government of the People's Republic China (GPRC). Information concerning export prices and import volumes was requested from 133 potential importers.

[34] Subsidy submissions were received from the GPRC and 14 Chinese exporters and/or manufacturers. All but one of the subsidy submissions were used in making the final determination. The submission from China World Best/Shanghai Allsun Wood Industry Co. Ltd. was determined to be incomplete.

[35] Submissions were also received from 32 importers.

[36] The CBSA conducted on-site verification of the information provided by some of the European exporters just prior to the preliminary determination. However, for the most part, the CBSA did not use this information for purposes of making the preliminary determination, given the proximity to the date of the preliminary determination. The information gathered during the verification visits was used for the purpose of making the final determination. The one exception was the information obtained during the verification visit of the Polish exporter, Kronopol Sp. (Kronopol). Kronopol was the first exporter verified and the CBSA was able to take the results of the verification into consideration for purposes of the preliminary determination. On-site verifications of the other mandatory European respondents as well as the two largest Chinese exporters and meetings with the GPRC took place following the preliminary determination.

Dumping Investigation

[37] In conducting its investigation, the CBSA requested that all mandatory respondents provide sales and cost information necessary to determine the normal values and export prices of the subject goods.

[38] Normal values are generally based on the domestic selling prices of the goods in the country of export, pursuant to section 15 of SIMA and related Special Import Measures Regulations (SIM Regulations), or on the total cost of the goods (cost of production, administrative, selling and all other costs) plus an amount for profit, pursuant to paragraph 19(b) of SIMA and related SIM Regulations.

[39] The export price of goods shipped to Canada is generally the lesser of the exporter's selling price or the importer's purchase price, pursuant to section 24 of SIMA.

[40] With respect to each of those exporters whose company-specific information was verified and used for the final determination, margins of dumping were determined by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI, including any individual sales that were made at undumped prices. As such, any individual sales made at undumped prices were reflected in the determination of the overall margin of dumping found for that particular exporter.

[41] In determining the margin of dumping at the exporter level, the CBSA has recently discontinued the practice of determining a margin of dumping in respect of models or types of product under investigation and the setting of any negative margins of dumping found in respect of a model or type equal to zero (commonly referred to as "zeroing").

[42] In respect of an exporter, where the total normal value is greater than the total export price, the difference is the margin of dumping, which is then expressed as a percentage of the total export price. Where the overall difference is negative for an exporter, the margin of dumping is set equal to zero in accordance with subsection 30.2(1) of SIMA.

[43] In determining the weighted average margin of dumping of a country in accordance with section 30.1 of SIMA, the overall margins of dumping found in respect of mandatory respondents and exporters providing voluntary submissions were weighted according to the volume of subject goods exported to Canada during the POI.

[44] Under Article 15 of the World Trade Organization (WTO) Anti-dumping Agreement (Agreement), developed countries are to give regard to the special situation of developing country members when considering the application of anti-dumping measures under the Agreement. Possibilities of constructive remedies provided for, under the Agreement, are to be explored before applying
anti-dumping duty where they would affect the essential interests of developing country members. As China is listed under Part I of the DAC List of Aid Recipients3 maintained by the Organization for Economic Co-operation and Development, the President recognizes China as a developing country for purposes of actions taken pursuant to SIMA. In this particular investigation, this obligation was met by providing the opportunity for exporters to submit price undertakings.

[45] Pursuant to the preliminary determination, the CBSA did not receive any proposals for undertakings from any of the identified exporters.

[46] For exporters of goods originating in China and France who were not mandatory respondents and did provide a voluntary submission, the margin of dumping found for subject goods was determined under subsection 30.3(3) of SIMA, and was 9.7% and 7.0%, respectively. This represents the weighted average margin of dumping found for those mandatory respondents whose information was used for purposes of making the final determination.

[47] For exporters of goods originating in China and Austria who were not mandatory respondents but chose to provide a voluntary response to the dumping RFI, the margin of dumping for these companies was based on their response to the RFI.

[48] Further details regarding the normal values, export prices and margins of dumping of individual exporters are contained in Appendix 1.

Table 1 - Summary of the Results of the Dumping Investigation

Country

Weighted Average
Margin of Dumping*

Austria

0.1% (Insignificant)

Belgium

1.0%(Insignificant)

China

7.8%

France

7.0%

Germany

1.1%(Insignificant)

Poland

0.0%(Insignificant)

* as a percentage of export price

[49] In making a final determination of dumping in relation to goods imported from a country in the investigation, the President must be satisfied that the subject goods have been dumped and that the margin of dumping is not insignificant. Subsection 2(1) of SIMA defines "insignificant" as being less than 2% of the export price of the goods. Table 1 indicates that the margin of dumping is not insignificant for China and France. However, there is no dumping of subject goods imported from Poland and the margins of dumping from Austria, Belgium and Germany are insignificant. As a consequence, the investigation against Austria, Belgium, Germany and Poland is terminated in accordance with paragraph 41(1)(b) of SIMA.

[50] For purposes of the preliminary determination of dumping, the President has responsibility for determining whether the actual or potential volume of dumped goods is negligible. After a preliminary determination of dumping, the Tribunal assumes this responsibility. In accordance with subsection 42(4.1) of SIMA, the Tribunal is required to terminate its injury inquiry in respect of any goods if the Tribunal determines that the volume of dumped goods from a country is negligible.

[51] Details regarding the margins of dumping determined by exporter and country are provided in Appendix 2.

REPRESENTATIONS AND OTHER ISSUES REGARDING DUMPING

[52] Following the preliminary determination of dumping, the CBSA received various written representations from counsel representing exporters and/or manufacturers involved in this investigation. Several of the representations and arguments related to the CBSA's determination of normal values, normal value adjustments, export prices and margins of dumping. Specific company representations/arguments were considered by the CBSA for purposes of the final determination of dumping. These company specific representations were addressed by the CBSA in the ruling letters to the exporters and manufacturers.

[53] Counsel representing the complainant also made several representations concerning the CBSA's conduct in this investigation. These representations are as follows:

Denial of an Effective Right to Participate in the Investigation:

[54] During the course of the investigation, the CBSA received written representations from the complainant's counsel alleging that he was denied an effective right to participate in the investigation. It was argued that information was not disclosed in a timely manner and that certain information such as verification reports and internal working papers were not disclosed when they should have been.

[55] As stated in a letter to the complainant's counsel dated April 15, 2005, the CBSA acknowledged that there had been some instances where there was a delay in placing information on the exhibit listing but as a rule, the CBSA has provided all counsel with all of the information on a timely basis. With regards to verification reports and internal working papers, the CBSA has no plans to disclose this material at this time.

CBSA Policy on Section 20:

[56] Counsel for the complainant provided representations that the CBSA policy on section 20, issued in June 2004, is "wrong in law and in policy and ought to be reversed4." Counsel quotes SIMA, and the Protocol on the Accession of the People's Republic of China to the WTO and states that the onus should be on Chinese exporters to clearly show that market economy conditions prevail in China rather than Canadian producers showing an absence of market conditions in China.

[57] The CBSA addressed this subject in the SOR issued at the preliminary determination of this investigation. The CBSA did not find any information during its verification visits of the two largest Chinese exporters nor was any additional information provided to the CBSA that would suggest that the GPRC was substantially determining domestic prices of laminate flooring.

CBSA's Policy on "Zeroing":

[58] In the SOR issued at the preliminary determination, the CBSA invited interested parties to comment on the CBSA policy of zeroing. Counsel for the complainant provided several arguments and stated that our "decision to abandon the practice of ignoring undumped product is illegal and ought to be reversed.5" Counsel further stated that the CBSA discontinued the use of zeroing midway through the investigation and that the elimination of "zeroing" will have a profound impact on his client. On the other hand, counsel for exporters of subject goods supported the CBSA's position on zeroing saying that it was consistent with SIMA and Canada's obligations as a member of the WTO.

[59] For the preliminary determination of this investigation, the CBSA discontinued its practice of zeroing for purposes of determining a margin of dumping for an exporter. In the past, the CBSA would set any negative margins of dumping for a product model or type to zero when determining the margin of dumping for a particular exporter. The CBSA's current practice in determining a margin of dumping for an exporter is to subtract the total export price from the total normal value of all goods shipped to Canada during the POI, including any individual sales that were made at undumped prices. As such, any individual sales that were made at undumped prices reduced the overall margin of dumping found for that exporter. The CBSA believes our revised practice is consistent with SIMA and with Canada's obligations as a member of the WTO.

Testing of Transfer Prices:

[60] On March 23, 2005, the CBSA received written representations from the complainant's counsel concerning transfer prices by producers within vertically integrated corporate groups. Counsel stated that the CBSA should be guided by the report of the Organization for Economic Cooperation and Development entitled Transfer Pricing Guidelines from Multinational Enterprises and Tax Administration. This report sets out several methods for establishing the acceptability of pricing between related parties.

[61] The CBSA reviewed the above-noted guidelines and found that these guidelines pertain to international transfer prices between multinational companies and do not pertain to domestic transfer prices between related companies. Moreover, these guidelines are primarily aimed at minimizing conflicts between tax administrations and are not binding upon the CBSA.

[62] During their on-site verification, CBSA officers insured that the transfer prices between related parties covered the total cost of the product being transferred, in accordance with SIMA.

Treatment of Exporters Who File Incomplete and Deficient Responses:

[63] Counsel for Uniboard expressed concern regarding the CBSA's treatment of Kronopol, the mandatory Polish respondent, at the preliminary determination phase of this investigation. Specifically, the CBSA did not use Kronopol's information to establish a margin of dumping for the provisional period but rather Kronopol was given the weighted average margin of dumping of all other mandatory European respondents.

[64] Counsel argues that "any exporter who does not cooperate, fails to provide requested information, files false or misleading information or in any other fashion fails to cooperate with the CBSA should have its normal value and/or export price determined on the basis of a ministerial specification based on the best information available.6"

[65] With respect to counsel's arguments, Kronopol cooperated with the CBSA during this investigation and provided a complete response to the RFI. It was during the verification visit immediately prior to the preliminary determination that CBSA officers discovered some anomalies in Kronopol's domestic sales database and costing information. The "anomalies" were due to a computer error and were not, in the opinion of the CBSA, due to the filing of "false or misleading information".

[66] The CBSA could not use Kronopol's information for purposes of the preliminary determination because further analysis of this information was required before a margin of dumping could be determined. As a consequence, Kronopol was given the weighted average margin of dumping of all other mandatory European respondents for purposes of the preliminary determination.

Other Representations made by Counsel for Uniboard:

[67] On April 28, 2005, counsel for Uniboard provided comments to the CBSA regarding the disclosure of the CBSA's "preliminary calculations of the final results of the investigation into the dumping of laminate flooring in Canada". In this representation, counsel for Uniboard provides comments on three additional items that were not discussed above. These items are as follows:

Use of Data Filed By Foreign Producers After the Close of the Record:

[68] Counsel for Uniboard stated that the close of the record was March 18, 2005, but the CBSA appears to have accepted and used information after that date in making the preliminary calculations for the final phase of the investigation. Counsel states that the use of this information has limited their ability to review and comment on the information provided to the CBSA.

[69] The close of the record for this investigation was March 18, 2005. Information received after the close of the record related to case arguments, replies to case arguments, the disclosure of preliminary calculations prior to the completion of the final phase of the investigation, and to additional information provided by parties in response to requests by the CBSA. While preparing the preliminary calculations, the CBSA requested certain clarifications or further explanations from some of the exporters involved in this investigation. These clarifications and/or explanations were disclosed to all counsel.

[70] Information with respect to the preliminary calculations was placed on the CBSA Exhibit Listing and counsel was given four calendar days after notification by CBSA in which to file their comments with respect to the preliminary calculations for a particular exporter. Reply submissions were due four calendar days after CBSA advised counsel that comments on new information had been received.

[71] It should be noted that the "close of the record date" is an administrative date set by the CBSA and the CBSA has the discretion to accept information after the close of the record. Any information accepted after the close of record date was disseminated to all counsel and all counsel were given the opportunity to provide comments. The CBSA needs to establish timeframes for the investigation in order to meet the overall timeframe for issuing the final determination.

Absence of Clear Justification for Normal Value Adjustments:

[72] Counsel for Uniboard stated that the CBSA provided very little explanation regarding the adjustments that were made to normal values. Counsel argued that these adjustments are cumulative and add up to considerable lowering of normal values and that the CBSA must, before finalizing these results, provide full disclosure of all relevant documentation and correspondence indicating the full nature of the adjustment. Counsel further argues that without access to full record information, and the ability to know what is being discussed, the complainant has no way of determining whether such adjustments are in accordance with SIMA and thus providing effective comment on the adjustments.7

[73] The CBSA provided counsel copies of all submissions received from exporters. Normal value adjustments were made or denied on the basis of this information. The normal value adjustments were detailed in the disclosure of the preliminary results. The adjustments were made on the basis of established directorate policy and within the provisions laid out in the SIM Regulations.

Treatment of Related Parties:

[74] Counsel for Uniboard stated that the CBSA has taken an inconsistent and unexplained stance with respect to its treatment of related parties in this investigation. The CBSA has treated Yekalon/Chuzhou/Danyang as a single group but has not applied the same logic to Kronopol and their sales agent in Canada.

[75] Counsel states that Kronopol has a related sales agent in Canada. Counsel argued that all sales in Canada are conducted through this related party and yet the CBSA determines export price under section 24 of SIMA. Counsel states that the relationship between Kronopol and Lamwood (a.k.a. Kronopol Marketing) is that of a related party transaction, which requires calculating the export price in accordance with section 25 of SIMA.

[76] The CBSA could find no evidence that Kronopol and Lamwood are associated and that export price should be determined under section 25 of SIMA. Counsel for Kronopol/Lamwood states that Lamwood has negotiated the exclusive right to distribute Kronopol products in
North America. As part of this arrangement, Lamwood markets Kronopol products in
North America and for that reason it carries on business as Kronopol Marketing, to strengthen
brand recognition and customer perception of Lamwood's association with these products.8

Subsidy Investigation

[77] In accordance with SIMA, a subsidy exists if there is a financial contribution by a government of a country other than Canada that confers a benefit on persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of goods. A subsidy also exists in respect of any form of income or price support within the meaning of Article XVI of the General Agreement on Tariffs and Trade, 1994, being part of Annex 1A to the WTO Agreement on Subsidies and Countervailing Measures (Subsidies Agreement), that confers a benefit.

[78] Pursuant to subsection 2(1.6) of SIMA, a financial contribution exists where:

a) practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities;

b) amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not collected;

c) the government provides goods or services, other than general governmental infrastructure, or purchases goods; or

d) the government permits or directs a non-governmental body to do anything referred to in any of paragraphs (a) to (c) where the right or obligation to do the thing is normally vested in the government and the manner in which the non-governmental body does the thing does not differ in a meaningful way from the manner in which the government would do it.

[79] If a subsidy is found to exist, it may be subject to countervailing measures if it is specific. A subsidy is considered to be specific when it is limited, in law, to a particular enterprise or is a prohibited subsidy. An "enterprise" is defined under SIMA as also including a group of enterprises, an industry and a group of industries. A "prohibited subsidy" includes an export subsidy which is contingent, in whole or in part, on export performance or a subsidy or portion of a subsidy that is contingent, in whole or in part, on the use of goods that are produced or that originate in the country of export.

[80] Notwithstanding that a subsidy is not specific in law, a subsidy may also be considered specific having regard as to whether:

a) there is exclusive use of the subsidy by a limited number of enterprises;

b) there is predominant use of the subsidy by a particular enterprise;

c) disproportionately large amounts of the subsidy are granted to a limited number of enterprises; and

d) the manner in which discretion is exercised by the granting authority indicates that the subsidy is not generally available.

[81] For purposes of a subsidy investigation, the CBSA refers to a subsidy that has been found to be specific as an "actionable subsidy" meaning that it is subject to countervailing measures if the imported goods under investigation have benefited from the subsidy.

[82] Prior to the initiation of the investigation, the complainant submitted allegations that the subject goods from China are eligible for government programs that may constitute actionable subsidies.

[83] In support of its allegations, the complainant provided a number of documents detailing support offered by the GPRC, primarily to exporting enterprises, enterprises operating in special economic zones (SEZs) and wood processing enterprises. Reference was also made to the fact that there is a lack of information available with regard to potential subsidies granted by the GPRC.

[84] In reviewing the information found in the various documents that were provided by the complainant, the CBSA developed the following list of general types of programs that may be provided to manufacturers of laminate flooring in China:

1. Special Economic Zone Incentives;

2. Grants Provided for Export Performance;

3. Preferential Loans;

4. Loan Guarantees by the government of China;

5. Income Tax Credits, Refunds and Exemptions:

  • (a) Reduced Corporate Tax Rate for Export-Oriented Enterprises,
  • (b) Exemption/Reduction of Corporate Income Tax during Designated Start-up Period;

6. Relief from Duties and Taxes on Inputs;

7. Reductions in Land Use Fees; and

8. Provision of Goods and Services by State-owned Enterprises.

[85] Details regarding the general subsidy programs were provided in the SOR issued for the initiation of this investigation.

[86] The CBSA forwarded RFIs relating to the named programs to the producers and exporters of subject goods in China, as well as to the GPRC. Information was requested in order to establish whether there had been financial contributions made by any level of government and, if so, to establish if a benefit had been conferred on persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of the subject goods; and whether any resulting subsidy was specific in nature.

Results of the Subsidy Investigation

[87] Responses to the CBSA's RFIs were received from 15 companies located in China, as well as from the GPRC. In addition to the responses received from the exporters of the subject goods, a number of affiliated and/or intermediary companies involved in the sale of subject goods to Canada also responded. A complete list of the companies can be found in Appendix 3 of the SOR issued for the preliminary determination of this investigation.

[88] Following the review of the information provided prior to the preliminary determination, the CBSA established a list of specific programs identified up until that point which were believed to have existed in China. This list of programs is contained in Appendix 4 of the SOR issued for the preliminary determination of this investigation.

[89] For purposes of this investigation, the "Government of the People's Republic of China" refers to all levels of government, including federal, central, provincial/state, regional municipal, city, township, village, local, legislative, administrative or judicial levels. For this reason, the CBSA instructed the GPRC to forward the relevant sections of its RFIs to the appropriate subordinate levels of government. Benefits provided by state-owned enterprises operating under the direct or indirect control or influence of the GPRC may also have been considered to be provided by the GPRC for purposes of this investigation.

[90] The GPRC provided a response to the RFI that was issued by the CBSA at the initiation of the investigation. Six separate supplemental RFIs were also sent to the GPRC after receiving this initial response. These supplemental RFIs were sent to obtain further information other than that which was provided in the GPRC's initial response, as well as clarifications relating to the information received. In addition, two sets of verification meetings were conducted with the GPRC in February and March 2005, in order to verify the information received in regards to the subsidy programs identified by the CBSA throughout the investigation.

[91] Based on the information obtained from the parties and the results of the verification of this information during the investigation, the CBSA has determined that the following actionable subsidies exist in China and were used by the Chinese exporters of subject goods during the POI:

Preferential Income Tax Programs:

  • Productive Foreign Invested Enterprises (FIEs) Scheduled to Operate for a Period not Less than 10 Years;
  • FIEs in Industries and Sectors Where Foreign Investment is Encouraged by the State;
  • Re-investment of Profits by Foreign Investor;
  • Enterprises Located in Special Economic Zones (SEZs) - Excluding the Pudong Area of Shanghai;
  • FIEs Located in Coastal Economic Open Zones or in the Old Urban Districts of Cities Where the SEZs or the Economic and Technology Development Zones (ETDZs) are Located or in any Other Regions Defined by the State Council;
  • Enterprises Located in the Special Economic Zone of the Pudong Area of Shanghai;
  • Enterprises Located in the Western Region and Other Specified Locations;
  • Enterprises Operating in the Forestry Industry.

Relief from Duties and Taxes on Materials and Equipment:

  • Refund of Value-Added Tax (VAT) for Production of Goods Using Fuel Wood and Other Low-Valued Wood;
  • Exemption on Tariffs and VAT on Imported Equipment.

Grants:

  • Loan Interest Assistance Grant Provided to Enterprises With Loans Relating to Investments in Fast-Growth-High-Yield Plantations;
  • Grants from Development Zone Management Committees Under the Authority of Town Governments;
  • Grants Provided to Companies Newly Established in the Pudong New Area of Shanghai.

[92] For more details regarding the actionable subsidies noted above, please refer to Appendix 3.

[93] As a result of the investigation, the following programs identified at preliminary determination have been determined to not have been used by Chinese exporters of subject goods during the POI:

  • Advanced Technology FIEs Scheduled to Operate for a Period not Less than 10 Years;
  • FIEs Generating Income from Transferring Technologies;
  • FIEs Exporting Greater than 70% of Production;
  • Low Interest Loans to Wood Processing Projects;
  • Extended Loan Payback Periods Which Include Non-Interest Bearing Grace Periods on Investments in Fast-Growth-High-Yield Plantations;

[94] For more details regarding these programs, please see the SOR that was issued at preliminary determination, which is available at the Web site address provided above.

[95] In addition to the programs addressed above, the CBSA also examined the general program areas identified at the initiation of the investigation. Based on the information obtained and verified, the Chinese exporters of subject goods did not receive grants provided for export performance and employing common workers, preferential loans, loan guarantees by the GPRC, reductions in land use fees, or provision of goods and/or services by state-owned enterprises (SOEs). The officers questioned the GPRC on these program areas and verification meetings took place with various government departments as well as state-owned banks and SOEs.

[96] Regarding land-use in general, no programs were found to have been used by any of the Chinese exporters of subject goods. However, it should be noted that Domestic Invested Enterprises (DIEs) located in certain urban areas may be subject to land usage tax; whereas, FIEs located in the same urban areas would not be required to pay such a tax as land usage tax only applies to DIEs. However, DIEs located outside these urban areas, like FIEs, are not subject to the land usage tax. In regards to the actual purchase of the land-use rights, both DIEs and FIEs are responsible for paying the land-use transfer charge as well as the annual land usage charge.

[97] It should be noted that one of the programs listed above, the "Advanced Technology FIEs Scheduled to Operate for a Period not Less than 10 Years", although not used by any of the Chinese exporters of subject goods during the POI, has been applied for by one of the exporters identified. However, while this exporter has applied for and received a certificate recognizing it as an Advanced Technology FIE, it is unable to take advantage of the tax related incentives at this time as it must allow for other programs it is currently using to expire.

[98] Further, the CBSA also determined that FIEs who purchase domestically made machinery, subject to certain limitations, may be eligible to offset any increase in taxable income in comparison to the prior year up to a maximum of 40% of the domestic equipment purchase price. Any amount, up to the 40% of the domestic productive equipment purchase price, which is not used in the current year, may be carried forward up to a maximum of 5 years. However, this program was found not to have been used by any of the Chinese exporters of subject goods. The program is provided for in the Circular on Income Tax Set off by Purchasing Domestic Equipment for Foreign Invested Enterprises and Wholly Foreign Owned Enterprises.

Table 2 - Summary of the Results of the Subsidy Investigation

Country

Volume of Importations

(Square Meters)

Subsidized Goods as a Percentage of Total Subject Goods Imported

Amount of Subsidy as a Percentage of Export Price

China

4,736,364

99.8%

3.0%

[99] In making a final determination of subsidizing under subsection 41(1) of SIMA, the President must be satisfied that the subject goods have been subsidized and that the amount of subsidy on the goods of a country is not insignificant. According to subsection 2(1) of SIMA, an amount of subsidy that is less than 1% of the export price of the goods is considered insignificant.

[100] However, section 41.2 of SIMA directs the President to take into account the provisions of Article 27 of the Subsidies Agreement when conducting subsidy investigations, and these provisions stipulate that any investigation involving a developing country must be terminated as soon as the President determines that the total amount of subsidy for a developing country does not exceed 2% of the export price of the goods.

[101] The CBSA normally makes reference to Part I of the DAC List of Aid Recipients, maintained by the Organization for Economic Co-operation and Development, to determine eligibility for the differential amounts for developing countries in subsidy investigations. As China is a developing country according to this list, the 2% threshold for insignificance would apply. As the table above illustrates, the amount of subsidy found during this investigation is not insignificant.

[102] For purposes of the preliminary determination of subsidizing, the President has responsibility for determining whether the actual or potential volume of subsidized goods is negligible. After a preliminary determination of subsidizing, the Tribunal assumes this responsibility. In accordance with subsection 42(4.1) of SIMA, the Tribunal is required to terminate its inquiry in respect of any goods if the Tribunal determines that the volume of subsidized goods from a country is negligible.

[103] As illustrated by Table 2, the amount of subsidy respecting China is not insignificant. Details regarding the amounts of subsidy determined by exporter are provided in Appendix 4.

REPRESENTATIONS AND OTHER ISSUES REGARDING SUBSIDY

[104] Following the preliminary determination of subsidizing, the CBSA received various written representations from counsel representing exporters and/or manufacturers involved in this investigation. Representations were received from counsel for Uniboard on the CBSA conduct of its subsidy investigation and from counsel for the GPRC on whether or not the programs being investigated were actionable subsidies under SIMA. These representations are discussed below.

China's Fixed Exchange Rate:

[105] The CBSA received representations from the counsel for Uniboard stating that China's maintenance of an artificial exchange rate with the US dollar is a de facto export subsidy and the CBSA should have included this fixed exchange rate program in its subsidy investigation. Counsel provided several similar arguments as those made at initiation as to why this practice is an "actionable" subsidy.

[106] In the SOR issued at the initiation of this investigation, the financial contribution was identified as the provision or the conversion of foreign currency at a fixed rate and this should be considered as the provision of a service provided by the government of China or by bodies entrusted to it. In accordance with SIMA, the provision of a service by a government would constitute a benefit to the extent that the service is provided for less than the fair market value of the service in the territory of the government providing the service.

[107] Furthermore, under paragraph 2(1.6)(c) of SIMA, a financial contribution does not include the provision of goods or services that constitute general governmental infrastructure. The complainant has not addressed the question as to why the maintenance of China's fixed rate exchange system would not constitute "general governmental infrastructure". This would be a necessary precondition for accepting that China's fixed rate exchange system may constitute a financial contribution under this particular provision.

[108] As no new information was provided to the CBSA regarding this issue since it was addressed at initiation, the CBSA maintains that it is not convinced that the value of the conversion service as provided by the government of China, or by bodies entrusted to it, would include the underlying value of the currencies being traded. In other words, it is not the rate of exchange per se that would be considered as conferring a benefit but, rather, the price charged by the government in providing the actual currency conversion service.

[109] In addition, no further information was provided by the complainant demonstrating how the granting of the subsidy is contingent, in whole or in part, on export performance in order to support its argument that China's fixed rate exchange system constitutes a de facto export subsidy within the meaning of Article 3 of the Subsidies Agreement.

[110] Therefore, the CBSA upholds its decision not to investigate China's fixed exchange rate system as a possible actionable subsidy as it does not possess, nor has it received, sufficient information from any source, including the complainant, substantiating this allegation and justifying such an investigation.

Subsidy Investigation Should not be Restricted to Practices Identified by Complainant:

[111] Counsel for Uniboard also stated that the CBSA should not "restrict its investigation of China's subsidy practices specifically identified by the complainant". In particular, counsel requested that the CBSA review China's banking system.

[112] In conducting its subsidy investigation the CBSA did not limit itself to the programs identified by the complainant. In Part E of its RFI, the CBSA asked for information on "Any other Program Not Previously Addressed" (Item F). Any program identified by the respondents was investigated to determine if it was an actionable subsidy. With regards to China's banking system, the CBSA did review China's banking system as part of our overall review of any "Preferential Loans" that may have been received by an exporter. Also, it should be noted that throughout the course of the investigation, the CBSA ensures that it addresses any information submitted which may suggest the existence of other possible actionable subsidies, including programs which may have not been specifically identified by the complainant.

Preferential Income Tax Policies Provided to Foreign Invested Enterprises:

[113] The CBSA also received representations from counsel on behalf of exporters and the GPRC arguing that preferential income tax policies provided to FIEs are not specific as FIEs do not constitute a `particular enterprise' for SIMA purposes. Counsel has stated that Article 2.1 of the Subsidies Agreement defines the word `enterprise' as "a group of enterprises, and industry and a group of industries" and has indicated that paragraph 2(7.2)(a) of SIMA inserts the word `particular' in front of `enterprise' when referring to a subsidy as being specific. Counsel then goes on to argue that paragraph 2(7.2)(a) of SIMA should be interpreted to mean a particular enterprise or a particular industry or a particular group of industries and that FIEs, which include all foreign-invested enterprises, all industries and all groups of industries, should not be considered specific.

[114] In addition, counsel has referred to the WTO panel decision in United States-Final Countervailing Duty Determination With respect to Certain Softwood Lumber from Canada9 arguing that Canada's position, as summarized by the panel, essentially argues that the term industry refers to producers of products and that industry in the sense of Article 2 of the Subsidies Agreement should be interpreted as "enterprises engaged in the manufacture of similar products". Counsel has argued that this position is incongruent with the CBSA's current position regarding the definition of enterprise, as it is applicable to FIEs in the current investigation.

[115] After considering the arguments above and other similar arguments made by counsel regarding the definition and interpretation of enterprise for SIMA purposes and its relation to FIEs and income tax, the CBSA maintains that preferential income tax policies provided to FIEs are specific and constitute an actionable subsidy. As was also addressed in the CBSA's SOR regarding Outdoor Barbeques issued at the final determination, the CBSA holds that the benefits provided in the FIE Tax Laws and Regulations are specific since they are limited, in law, to certain enterprises pursuant to Article 2.1(a) of the Subsidies Agreement. Further, the CBSA holds that the preferential income tax programs favour a "particular enterprise", specifically, FIEs that constitute a "group of enterprises" as identified in Article 2.1 of the Subsidies Agreement.

[116] For a subsidy to be actionable, it must benefit the producers of subject goods. However, the subsidy need not be specific to those producers only - it can be specific to a group that includes producers of the subject goods. In the case at hand, the subsidy provided to all FIEs (a group of enterprises) also benefits producers of subject laminate flooring.

[117] While it appears that the common practice is to refer to industries by the type of products they produce, the same cannot be said about enterprises. An enterprise can properly be defined as "an institutional unit in its capacity as a producer of goods and services"10 or, more simply, a business organization. Therefore, in the case at hand, a group of FIEs is, in fact, a group of enterprises that happen to share a common characteristic - they are all foreign-invested enterprises that meet the relevant eligibility criteria pertaining to the preferential income tax programs. Therefore, the CBSA does not consider that a "group of enterprises" must produce the same products in order to be regarded as a "group of enterprises".

[118] Moreover, the CBSA does not regard program eligibility that is based on the nature of a firm's ownership, in this case foreign-invested, as representing an objective criteria or condition as is envisaged by Footnote 2 of the Subsidies Agreement. The eligibility criteria for the preferential tax programs for FIEs are not neutral in effect, as such programs have the potential of inducing or influencing investment decisions in China based solely on the availability of this preferential tax treatment which favours FIEs over DIEs.

[119] With regards to the WTO panel decision in United States-Final Countervailing Duty Determination With respect to Certain Softwood Lumber from Canada, the CBSA would like to clearly point out that the panel in this particular dispute rejected all of Canada's claims regarding specificity.11 As such, the CBSA does not believe that Canada's arguments before the panel concerning Article 2 of the Subsidies Agreement would be appropriate as a means of interpreting the specificity provisions contained in SIMA.

[120] The CBSA takes note of the fact that a number of the programs involving the preferential income tax policies provided to FIEs determined to have been specific for the purposes of this investigation were identified by the GPRC as being a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.12

Subsidies Based on Geographic Areas:

[121] Another representation received by the CBSA from counsel on behalf of exporters argues that SIMA does not contain any provisions that address subsidies based on geographic area. Counsel believes that Article 2.2 of the Subsidies Agreement is relevant in interpreting SIMA paragraph 2(7.2)(a) as it emphasizes that certain enterprises located in a designated geographical region within the jurisdiction of the granting authority shall be specific. However, it also stipulates that setting or changing the generally applicable tax rates by all levels of government entitled to do so shall not be considered a specific subsidy for the purposes of the Subsidies Agreement. In using the phrase "certain enterprises", counsel argues that the above article is not intended to be used to deem a program as specific when all enterprises located in a designated geographical region are eligible for the program. Further, counsel argues that Article 2.2 should be interpreted that there could be generally available tax rates within designated geographic area which would not constitute a specific subsidy. Based on this argument, counsel considers the tax rate made available to enterprises located in SEZs to be non-specific as counsel considers it to be a generally available tax rate.

[122] Finally, counsel indicated that the CBSA's determination of countervailability regarding this program appeared to contradict the determination made in the CBSA's investigation concerning Outdoor Barbeques. To support this argument, counsel quoted the following statements from the CBSA's SOR regarding Outdoor Barbeques issued at the final determination:

"Verification revealed that, other than the more beneficial tax rate, these companies did not receive any additional benefits from the [GPRC] as a result of it locating in this particular area."

"Based on the information received and verified, the CBSA is able to confirm that there is no evidence of any factories receiving benefits from the [GPRC] for establishing operations in the localities where they did."

[123] Pursuant to subsection 2(7.2) of SIMA, a subsidy is specific where it is limited, in law, to a particular enterprise within the jurisdiction of the authority granting the subsidy. When the CBSA considers specificity in relation to subsidies provided to particular geographic or regional locations, it is determined based on the relationship between the enterprises and the granting authority that has jurisdiction over those enterprises. If the granting authority provides the subsidy to all of the enterprises under its jurisdiction, than the subsidy would be considered to be non-specific. However, if the granting authority does not make the subsidy available to all enterprises under its jurisdiction, than the subsidy is considered to be specific as it is limited to a particular enterprise.

[124] Regarding the issue concerning the ability of governments to set or change generally applicable tax rates, the CBSA considers that, in this case, the "generally applicable" tax rate in China, as set by the central government (GPRC), is 33%. The reduced rate of 15% provided only to enterprises located in SEZs cannot be considered to be "generally applicable". Article 2 of the Subsidies Agreement is concerned with the distortion that is created by a subsidy that is not broadly available. Further, Article 2 of the Subsidies Agreement refers to setting or changing of applicable tax rates by all levels of government entitled to do so. However, in China, the authorities responsible for SEZs and other particular geographic locations do not have the authority to reduce or change the corporate income tax rate, which is set by the central government. As noted above, the generally applicable income tax rate applicable to enterprises throughout China is 33%, but for those located in SEZs, or particular geographic locations, those enterprises and only those enterprises are entitled to a lower tax rate than the rates which generally apply to all other enterprises in China. In this case, the granting authority, which is the GPRC, has provided a lower tax rate to a limited number of enterprises under its jurisdiction, namely those located in SEZs or other particular geographic locations, and the remaining enterprises under the GPRC's jurisdiction are subject to a higher "generally applicable" tax rate. Therefore, as the lower tax rate is not provided to all enterprises under the granting authority's jurisdiction, the CBSA has determined that this subsidy is specific.

[125] In regards to the final determination made by the CBSA regarding Outdoor Barbeques, the statements highlighted by counsel have been misunderstood as they in no way indicate that the CBSA concluded that preferential income tax rates provided to enterprises located in SEZs are not countervailable. To the contrary, the statements clearly point out,

"Verification revealed that, other than a more beneficial tax rate, these companies did not receive any additional benefits from the [GPRC] as a result of it locating in this particular area."13

[126] Further, the reason for concluding that the factories in the Outdoor Barbeques investigation did not receive any benefits due to their location was due to the fact that the factories which were investigated were either unprofitable or not profitable enough for the benefit received from the preferential income tax rate provided to enterprises located in SEZs to be considered significant for the purposes of making a final determination of subsidy under SIMA. However, the CBSA clearly identified this program as being a program that conferred a countervailable benefit to enterprises as can be seen in Appendix III of the CBSA's SOR regarding Outdoor Barbeques issued at the final determination.

[127] The CBSA takes note of the fact that the preferential income tax policies for enterprises located in SEZs, in relation to FIEs only, were identified by the GPRC as being a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.14

Exemption of VAT for Wood Processing Enterprises on Purchase of Fuel Wood:

[128] Counsel for the GPRC also raised an issue regarding the specificity of the program concerning the exemption from VAT for foreign and domestic wood processing enterprises on purchases of fuel wood and other low-valued wood used in the production of other goods. Counsel argues that the program is generally available as any enterprise that uses low value woods as raw material regardless of the nature of the finished good are eligible for this program. As it applies to a broad range of unrelated industries and enterprises it should not be considered specific.

[129] The CBSA is of the opinion that this program is indeed a specific subsidy, in that, it was found to be limited, in law, to a particular enterprise, pursuant to paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Circular of Ministry of Finance and State Administration of Taxation Regarding the VAT Favorable Policy of the Comprehensively Used Product Produced and Processed with the Three Residues and Small Firewood Materials as Raw Materials. The CBSA considers this program to be limited, in this case, to a group of enterprises that produce "comprehensively used products" using fuel wood and other low-valued wood and sell these "comprehensively used products" in the domestic market. Enterprises which do not use low value wood to process goods are not eligible for exemption from VAT on raw materials and enterprises who use the low value wood to produce goods which are subsequently exported also are ineligible to receive an exemption from VAT under this program. While any enterprise can theoretically take advantage of this program by using low value wood, it is unlikely that every enterprise does so or would consider doing so. In fact, only a limited number of enterprises actually use low value wood and do take advantage of this program.

[130] The CBSA takes note of the fact that this preferential VAT policy for enterprises using low value wood was identified by the GPRC as being a specific subsidy in the subsidy notification that was made for purposes of their accession to the WTO.15

Exemption of VAT on Importation of Machinery:

[131] In relation to the exemption of duty and VAT on imported machinery, counsel for the GPRC has submitted that the CBSA's understanding of the program is incorrect. Counsel points out that the following eligibility criteria must be met in order for an enterprise to benefit from this program:

1. the industry, product, or technology must be one that is encouraged by the state;

2. the purchase of the equipment must be within a total investment meeting certain minimum threshold amounts;

3. the imported equipment does not fall within the Directory of Imported Commodities of
Non-Tax Exemption to be used in Domestic Invested Project and the Directory of Imported Commodities of Non-tax Exemption to be used in Foreign Investment Projects.

[132] Based on the above criteria, counsel argues that the program is non-specific in that any enterprise meeting the above criteria is eligible to participate in the program. Counsel also points out that the laminate flooring industry is an encouraged industry for both DIEs and FIEs in an equal manner. Counsel also submits that the while some differences exist between the two relevant
non-tax exempt catalogues, the differences are immaterial and that the equal treatment given to DIEs and FIEs demonstrates that the program is non-specific.

[133] Based on the information obtained throughout the investigation, the CBSA is not of the opinion that the differences between the two relevant non-tax exempt catalogues is immaterial. While the CBSA acknowledges that the laminate flooring industry is encouraged by the state for both DIEs and FIEs, the difference in the catalogues, in this case, has conferred a specific benefit that clearly favoured FIEs involved in this investigation. The information submitted and verified clearly indicates that the Directory of Imported Commodities of Non-Tax Exemption to be used in Domestic Invested Project applies to DIEs only, while the Directory of Imported Commodities of Non-tax Exemption to be used in Foreign Investment Projects solely applies to FIEs. The differences between the non-tax exempt items in the catalogues has resulted, in this case, in FIEs receiving an exemption of duty and VAT on imported equipment which is not listed in the FIE catalogue, but is clearly listed in the catalogue which applies to DIEs. In these situations, had the DIEs involved in this investigation imported the same equipment as that which was imported by the FIEs being investigated, they would have clearly been unable to receive the same exemption as that which was afforded to the FIEs. This is further supported by the eligibility criteria that has been identified above.

[134] Therefore, the CBSA has determined that this program gives rise to a subsidy by means of providing reductions or exemptions of tariffs and VAT for equipment purchased by FIEs, whereas such reductions and exemptions would not be provided to DIEs purchasing the same equipment due to the inconsistency between the directories and treatment of items contained therein.

Decision

[135] On the basis of the results of the investigation, the President is satisfied that certain laminate flooring originating in or exported from China and France has been dumped and that the margins of dumping are not insignificant. Consequently, on May 17, 2005, the President made a final determination of dumping pursuant to paragraph 41(1)(a) of SIMA.

[136] Similarly, the President is satisfied that certain laminate flooring originating in or exported from China has been subsidized and that the amounts of subsidy are not insignificant. As a result,
on May 17, 2005, the President also made a final determination of subsidizing pursuant to
paragraph 41(1)(a) of SIMA.

[137] Finally, the President is satisfied that certain laminate flooring originating in or exported from Austria, Belgium, Germany and Poland has not been dumped or that the dumping of the subject goods is insignificant. As a result, on May 17, 2005, the President caused this portion of the investigation to be terminated pursuant to paragraph 41(1)(b) of SIMA.

Future Action

[138] The provisional period began on February 16, 2005, and will end on the date the Tribunal issues it's finding. The Tribunal is expected to issue its decision by June 16, 2005. Subject goods imported from China and France during the provisional period will continue to be assessed provisional duty as determined at the time of the preliminary determination of dumping.

[139] As of May 17, 2005, provisional duties will no longer be collected on imports of subject goods originating in or exported from Austria, Belgium, Germany and Poland. The provisional amount of dumping duty that has been collected on goods from these four countries will be returned to the importers in accordance with subsection 8(2) of SIMA.

[146] For further details on the application of provisional duty, refer to the SOR issued for the preliminary determination of dumping.

[141] The Tribunal's inquiry concerning the question of injury to the domestic industry is continuing with respect to China and France. The Tribunal will issue its decision by June 16, 2005.

[142] If the Tribunal finds that the dumped and/or subsidized goods have not caused injury and do not threaten to cause injury, all proceedings relating to this investigation will be terminated. In this situation, all provisional duty paid or security posted by importers will be returned.

[143] If the Tribunal finds that the dumped and/or subsidized goods have caused injury, the anti-dumping and/or countervailing duty payable on subject goods released from customs during the provisional period will be finalized, pursuant to section 55 of SIMA. Imports released from customs after the date of the Tribunal's finding will be subject to anti-dumping duty equal to the margin of dumping and/or countervailing duty equal to the amount of subsidy. In that event, the importer in Canada shall pay all such duty. If the importers of such goods do not indicate the required SIMA code or do not correctly describe the goods in the customs documents, an administrative monetary penalty (AMP) could be imposed. The provisions of the Customs Act apply with respect to the payment, collection or refund of any duty collected under SIMA. As a result, failure to pay duty within the prescribed time will result in the application of interest.

[144] Specific normal values and amounts of subsidy for the subject goods have been provided to the co-operating exporters. Should the Tribunal make an injury finding, these normal values and amounts of subsidy will come into effect the day after the date of the injury finding. Exporters who were not provided with specific normal values will have normal values established by advancing the export price by 9.7% for subject goods originating in or exported from China and 7.0% for subject goods originating in or exported from France. These amounts are based on the overall weighted average margins of dumping determined for mandatory respondents in each of those countries during this investigation.

[145] For exporters that did not respond to the CBSA's subsidy RFI, a countervailing duty amount of 3.54 Chinese Renminbi per square meter will be payable on imports of subject goods originating in China.

Retroactive Duty on Massive Importations

[146] Under certain circumstances, anti-dumping and countervailing duties can be imposed retroactively on subject goods imported into Canada. When the Tribunal conducts its inquiry on material injury to the Canadian industry, it may consider if dumped and/or subsidized goods that were imported close to or after the initiation of the investigation constitute massive importations over a relatively short period of time and have caused injury to the Canadian industry. Should the Tribunal issue a finding that there were recent massive importations of dumped and/or subsidized goods that caused injury, imports of subject goods from China and France released by the CBSA in the 90 days preceding the day of the preliminary determination could be subject to anti-dumping and/or countervailing duty.

[147] In respect of importations of subsidized goods that have caused injury, however, this provision is only applicable where the President has determined that the whole or any part of the subsidy on the goods is a prohibited subsidy. In such a case, the amount of countervailing duty applied on a retroactive basis will equal the amount of subsidy on the goods that is a prohibited subsidy. As the President has not determined that any part of the subsidy on the goods is a prohibited subsidy, countervailing duty will not be imposed retroactively on subject goods imported into Canada.

Publication

[148] A notice of this final determination of dumping and subsidizing in respect of China and final determination of dumping in respect of France has been published in the Canada Gazette pursuant to paragraph 41(3)(a) of SIMA. A notice of the termination of the dumping investigation in respect of Austria, Belgium, Germany and Poland has been published in the Canada Gazette pursuant to paragraph 41(4)(a) of SIMA.

Information

[149] This Statement of Reasons has been provided to persons directly interested in these proceedings. It is also posted on the CBSA Web site at the address below. For further information, please contact Richard Killeen, Roger Lyons, Brian Hodgson, Blair Hynes or Matthew Lerette as follows:

Mail:

Canada Border Services Agency
Anti-Dumping and Countervailing Directorate
SIMA Registry and Disclosure Unit
100 Metcalfe Street, 11th Floor
Ottawa, Ontario K1A 0L8
Canada

Telephone:

Richard Killeen (613) 954-7236
Roger Lyons (613) 954-7342
Brian Hodgson (613) 954-7237
Blair Hynes (613) 954-1641
Matthew Lerette (613) 954-7398

Fax:

(613) 948-4844

Email:

simaregistry-depotlmsi@cbsa-asfc.gc.ca

Web Site:

www.cbsa-asfc.gc.ca/sima

Suzanne Parent
Director General
Anti-dumping and Countervailing Directorate

Appendix 1

Normal Values, Export Prices and Margins of Dumping - Details by Exporter

AUSTRIA

Company: Kaindl Flooring GmbH (Kaindl)

Normal Values:

For those models exported to Canada where there were a sufficient number of profitable sales made to non-associated customers in the domestic market, normal values were determined based on the weighted average domestic selling prices to those customers, pursuant to section 15 of SIMA.

In so doing, the CBSA utilized domestic sales made to the four largest non-associated construction supply/mass merchandisers during the POI.

For those models exported to Canada during the POI that did not have sufficient domestic sales, normal values were determined based on the full cost plus an amount for profit, pursuant to paragraph 19(b) of SIMA. The amount for profit was determined pursuant to SIM Regulation 11(1)(b)(i) as the weighted average profit made on acceptable sales of like goods by the exporter.

In determining normal values, the following SIM Regulation adjustments were granted:

Regulation 6 - Cash Discount: A downward adjustment was made to domestic selling prices to account for cash discounts generally granted on domestic sales.

Regulation 7 - Freight: A downward adjustment was made to domestic selling prices to account for freight incurred.

Export Prices:

As the goods were sold to an unrelated importer in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the ex-factory net selling price to Canada.

Margins of Dumping:

The margin of dumping was determined by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI, which includes individual sales of product models or types that were made at undumped prices. It was found that none of the subject goods exported by Kaindl were dumped.

Company: Mohawk Industries (Mohawk)

Mohawk purchases subject laminate flooring from a manufacturer in Austria. Mohawk imports these goods into the United States and then re-exports them to Canada.

Pursuant to subsection 30(2) of SIMA, where goods are shipped indirectly to Canada from the country of origin through one or more countries, the CBSA compares the normal value determined in the country of origin with the normal value determined in the country of export. The higher of the two normal values shall be used for purposes of determining the margin of dumping of the exporter. In this instance, the normal values determined in Austria were based on either comparable domestic sales or on the full cost of the goods plus an amount for profit. The amount for profit was based on the weighted average profit made on acceptable sales of like goods in Austria. This comparison revealed that, in all instances, the normal values determined in the United States were higher than the normal values determined in Austria. As a consequence, for purposes of the final determination, normal values and export prices were determined as outlined below.

Normal Values:

For all models exported to Canada, there were a sufficient number of profitable sales made to non-associated customers in the domestic market. Normal values were determined based on the weighted average domestic selling prices to these customers, pursuant to section 15 of SIMA. In doing so, the CBSA utilized domestic sales from only those warehouses that shipped to Canada during the period of investigation. Specific normal values were calculated for each of those warehouses.

In determining normal values, the following SIM Regulation adjustments were granted:

Regulation 7 - Freight: A downward adjustment was made to domestic selling prices to account for freight costs incurred in the domestic market.

Regulation 10 - Duties: A downward adjustment was made to domestic selling prices to account for the drawback of Customs duties on exports to Canada.

Export Prices:

As the goods were sold to an unrelated importer in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the ex-warehouse net selling price to Canada.

Margins of Dumping:

The margin of dumping was determined by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI, which includes individual sales of product models or types that were made at un-dumped prices. As a result, it was determined that all of the subject goods exported to Canada by Mohawk during the POI were dumped by a weighted average margin of dumping of 8.3%, expressed as a percentage of export price.

BELGIUM:

Company: Unilin Flooring (Unilin)

Unilin had sales to Canada from their Moeskroen Plant and their Wielsbeke Plant during the POI. Normal values were determined for both plants.

Normal Values:

For those models exported to Canada where there were a sufficient number of profitable sales made to non-associated customers in the domestic market, normal values were determined based on the weighted average domestic selling prices to those customers, pursuant to section 15 of SIMA. In doing so, the CBSA utilized domestic sales made to nine domestic wholesalers during the POI.

For two models exported from the Wielsbeke Plant, normal values were determined based on the full cost plus an amount for profit, pursuant to paragraph 19(b) of SIMA because of insufficient or no domestic market sales. The amount for profit was determined pursuant to

SIM Regulation 11(1)(b)(i) as the weighted average profit made on acceptable sales of like goods by the exporter.

In determining normal values, the following SIM Regulation adjustments were granted:

Regulation 3 - Picking Fees: A downward adjustment to domestic selling prices was made to account for picking fees on domestic sales.

Regulation 6 - Cash Discount: A downward adjustment to domestic selling prices was made to account for cash discounts generally granted on domestic sales.

Regulation 7 - Freight: A downward adjustment was made to domestic selling prices to account for freight costs incurred.

Regulation 9 - Trade Level: A downward adjustment was made to domestic selling prices to account for differences in trade level.

Export Prices:

As the goods were sold to unrelated importers in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the ex-factory net selling price to Canada.

Margins of Dumping:

The margin of dumping was determined by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI, which includes individual sales of product models or types that were made at undumped prices. It was found that all of the subject goods exported by Unilin were dumped by a weighted average margin of dumping of 1.0%, expressed as a percentage of export price.

THE PEOPLE'S REPUBLIC OF CHINA:

Company: Asia Dekor Industries (Shenzhen) Co. Ltd. (Asia Dekor)

Normal Values:

For those models exported to Canada for which there were a sufficient number of profitable sales made to non-associated customers in the domestic market, the normal values were determined on the basis of the weighted average domestic selling prices to these customers, pursuant to section 15 of SIMA. In doing so, the CBSA utilized sales of like goods made to non-associated domestic market distributors during the period of investigation.

For those models exported to Canada during the POI that were not sold in the domestic market, normal values were determined pursuant to section 15 of SIMA based on the normal value of the most comparable models, with an upward quality adjustment pursuant to SIM Regulation 5(a) to account for the respective cost difference between the two products.

In determining normal values the following additional SIM Regulation adjustments were granted:

Regulation 7 - Delivery Costs: A downward adjustment was made to domestic selling prices to account for inland freight charges.

Regulation 10 - Taxes: A downward adjustment was made to remove the amount of the VAT included in domestic selling prices.

Export Prices:

As the goods were sold to unrelated importers in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the company's ex-factory selling prices to Canada.

Margins of Dumping:

The estimated margin of dumping was determined by subtracting the total export price from the total normal value of all goods shipped to Canada during the POI, including any individual sales of product models or types that were made at undumped prices. As a result, it was determined that all of the subject goods exported to Canada by Asia Dekor during the POI were dumped by a weighted average margin of dumping of 17.0 %, expressed as a percentage of export price.

Company: Beijing Kronosenhua Flooring Co. Ltd. (Beijing Kronosenhua)

Normal Values:

For those models exported to Canada where there were a sufficient number of profitable sales made to non-associated customers in the domestic market, normal values were determined based on the weighted average domestic selling prices to these customers, pursuant to section 15 of SIMA. In doing so, the CBSA utilized domestic sales made to non-associated original equipment manufacturers (OEMs) during the POI.

For models exported to Canada during the POI that were not sold in the domestic market, normal values were determined pursuant to paragraph 19(b) of SIMA based on the total cost of the goods plus an amount for profit. The amount for profit was determined pursuant to

SIM Regulation 11(1)(b)(i) as the weighted average profit made on acceptable sales of like goods by the exporter.

In determining normal values, the following SIM Regulation adjustment was granted:

Regulation 10 - Taxes: A downward adjustment was made to domestic selling prices to remove the amount of VAT included in the domestic selling prices.

Export Prices:

As the goods were sold to an unrelated importer in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the ex-factory net selling price to Canada.

Margins of Dumping:

The margin of dumping was determined by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI, including any individual sales of product models or types that were made at undumped prices. As a result, it was determined that all of the subject goods exported to Canada by Beijing Kronosenhua during the POI were dumped by a weighted average margin of dumping of 2.5%, expressed as a percentage of export price.

Company: Vohringer Wood Products (Shanghai) Co. Ltd. (Vohringer)

Normal Values:

For all models exported to Canada, there were a sufficient number of profitable sales made to non-associated customers in the domestic market. Normal values were determined on the basis of the weighted average domestic selling prices to these customers, pursuant to section 15 of SIMA. In doing so, the CBSA utilized domestic sales made to customers that purchased in the same length, width and thickness as the customer in Canada during the POI.

In determining normal values, the following adjustments under the SIM Regulations were granted:

Regulation 5(a) - Quality Adjustment: A downward adjustment to domestic selling prices was made to account for material differences in product sold for export and product sold domestically.

Regulation 5(a) - Quality Adjustment: A downward adjustment to domestic selling prices was made to account for the differences between domestic and export packaging.

Regulation 9 - Trade Level: A downward adjustment to domestic selling prices was made to account for differences in trade level.

Regulation 10 - Taxes: A downward adjustment to domestic selling prices was made to remove the amount of VAT paid on inputs.

Export Prices:

As the goods were sold to an unrelated importer in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the ex-factory net selling price to Canada.

Margins of Dumping:

The margin of dumping was determined by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI, including any individual sales of product models or types that were made at undumped prices. As a result, it was determined that all of the subject goods exported to Canada by Vohringer during the POI were dumped by a weighted average margin of dumping of 9.7%, expressed as a percentage of export price.

Company: Yekalon Industry Inc. (Yekalon)

For the purposes of the CBSA's investigation, Yekalon is an exporter that sells product produced by different suppliers. The CBSA considers Yekalon to be related to two suppliers, Chuzhou Chunzhou Wood Industry Co., Ltd. (Chunzhou) and Danyang City Yate Flooring Co., Ltd. (Yate). Normal values were determined on a supplier basis. As the CBSA did not receive submissions from the other suppliers that Yekalon purchases from, it could not be determined if Yekalon would be the exporter of the goods. As a consequence, sales of the subject goods originating from the other factories have not been included in the CBSA's calculations.

Normal Values:

For all models exported to Canada, there were a sufficient number of profitable sales made to non-associated customers in the domestic market. Normal values were determined on the basis of the weighted average domestic selling prices to these customers, pursuant to section 15 of SIMA. In doing so, the CBSA utilized domestic sales made to all customers during the POI. No

SIM Regulation adjustments were made with respect to the two companies.

Export Prices:

Yekalon was determined to be the exporter of record for flooring produced by Chunzhou and Yate. As the goods were sold to an unrelated importer in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the ex-factory net selling price to Canada.

Margins of Dumping:

The margin of dumping was determined by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI that were manufactured at Chunzhou and Yate, including any individual sales of product models or types that were made at undumped prices. It was determined that none of the subject goods exported to Canada by Yekalon were dumped.

FRANCE:

Company: EPI Laminate Flooring (EPI)

Normal Values:

For those models exported to Canada where there were a sufficient number of profitable sales made to non-associated customers in the domestic market, normal values were determined based on the weighted average domestic selling prices to these customers, pursuant to section 15 of SIMA. In doing so, the CBSA utilized domestic sales made during the POI to the same trade level as the importer in Canada.

For models exported to Canada during the period of investigation for which there were insufficient domestic sales, normal values were determined pursuant to paragraph 19(b) of SIMA based on the total cost of the goods plus an amount for profit. The amount for profit was determined pursuant to SIM Regulation 11(1)(b)(i) as the weighted average profit made on acceptable sales of like goods by the exporter.

In determining normal values, the following SIM Regulation adjustments were granted:

Regulation 6 - Differed Rebates: A downward adjustment was made to domestic selling prices to account for generally granted differed rebates.

Regulation 7 - Freight: A downward adjustment was made to domestic selling prices to account for freight costs incurred on domestic sales.

Export Prices:

As the goods were sold to an unrelated importer in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the ex-factory net selling price to Canada.

Margins of Dumping:

The estimated margin of dumping was determined by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI, including any individual sales of product models or types that were made at undumped prices. As a result, it was determined that all of the subject goods exported to Canada by EPI during the POI were dumped by a weighted average margin of dumping of 7.0%, expressed as a percentage of export price.

THE FEDERAL REPUBLIC OF GERMANY:

Company: Classen Group

Normal Values:

Normal values were determined on a factory basis, with specific normal values being calculated for both the Akzenta Paneele + Profile (AP&P) and the Classen Industries (Classen) factories.

For those models exported to Canada where there were a sufficient number of profitable sales made to non-associated customers in the domestic market, normal values were determined based on the weighted average domestic selling prices to these customers, pursuant to section 15 of SIMA. In doing so, the CBSA utilized domestic sales made to non-associated customers that operated at the same trade level and purchased similar quantities as the importer in Canada during the POI.

For those models produced by AP&P and Classen that were either not sold in the domestic market or did not have comparable sales, normal values were determined pursuant to paragraph 19(b) of SIMA based on the full cost plus an amount for profit. The amount for profit was determined pursuant to SIM Regulation 11(1)(b)(i) as the weighted average profit made on acceptable sales of like goods by the exporter.

In determining normal values, the following SIM Regulation adjustments were granted:

Regulation 6 - Cash Discount/Other Discounts: A downward adjustment was made to domestic selling prices to account for the various discounts that were generally granted by both factories.

Regulation 7 - Freight: A downward adjustment was made to domestic selling prices to account for freight costs incurred on domestic sales.

Regulation 9 - Trade Level: A downward adjustment to domestic selling prices was made to account for differences in trade level.

Export Prices:

As the goods were sold to an unrelated importer in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the ex-factory net selling price to Canada.

Margin of Dumping:

The margin of dumping was determined by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI, including any individual sales of product models or types that were made at undumped prices. It was determined that none of the subject goods exported to Canada by the Classen Group were dumped.

Company: Kronoflooring GmbH (Kronoflooring)

Normal Values:

Normal values were determined on a factory basis, with specific normal values being calculated for both the Lampertswalde and Sandebeck facilities. For those models exported to Canada where there were a sufficient number of profitable sales made to non-associated customers in the domestic market, normal values were determined based on the weighted average domestic selling prices to these customers, pursuant to section 15 of SIMA. In doing so, the CBSA utilized domestic sales made to the three largest non-associated customers in the domestic market.

For those models exported to Canada during the POI that did not have sufficient sales in the domestic market, normal values were determined based on the full cost plus an amount for profit, pursuant to paragraph 19(b) of SIMA. The amount for profit was determined pursuant to

SIM Regulation 11(1)(b)(i) as the weighted average profit made on acceptable sales of like goods by the exporter.

In determining normal values, the following SIM Regulation adjustments were granted:

Regulation 6 - Cash Discounts, Other Discounts, Differed Rebates: A downward adjustment was made to domestic selling prices to account for the various discounts that were generally granted.

Regulation 7 - Freight: A downward adjustment to domestic selling prices was made to account for freight costs incurred in the domestic market.

Export Prices:

As the goods were sold to an unrelated importer in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the ex-factory net selling price to Canada.

Margins of Dumping:

The margin of dumping was determined by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI, including any individual sales of product models or types that were made at undumped prices. It was determined that none of the subject goods exported to Canada by Kronoflooring were dumped.

Company: Kronotex Fussboden GmbH & Co. (Kronotex)

Normal Values:

For those models exported to Canada where there were a sufficient number of profitable sales made to non-associated customers in the domestic market, normal values were determined based on the weighted average domestic selling prices to these customers, pursuant to section 15 of SIMA. In doing so, the CBSA utilized domestic sales made to customers who purchased in the same or similar quantities as the importers in Canada during the POI.

For those models exported to Canada during the POI that did not have sufficient sales in the domestic market, normal values were determined based on the full cost plus an amount for profit, pursuant to paragraph 19(b) of SIMA. The amount for profit was determined pursuant to

SIM Regulation 11(1)(b)(i) as the weighted average profit made on acceptable sales of like goods by the exporter.

In determining normal values, the following SIM Regulation adjustments were granted:

Regulation 6 - Cash Discounts, Other Discounts, Differed Rebates: A downward adjustment was made to domestic selling prices to account for discounts that were generally granted.

Regulation 7 - Freight: A downward adjustment was made to domestic selling prices to account for freight costs incurred in the domestic market.

Regulation 9 - Trade Level: A downward adjustment was made to domestic selling prices to account for differences in trade level.

Export Prices:

As the goods were sold to an unrelated importer in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the ex-factory net selling price to Canada.

Margins of Dumping:

The estimated margin of dumping was determined by subtracting the total export price from the total normal value of all goods shipped to Canada during the POI, including any individual sales of product models or types that were made at undumped prices. As a result, it was determined that all of the subject goods exported to Canada by Kronotex during the POI were dumped by a weighted average margin of dumping of 2.6%, expressed as a percentage of export price.

THE REPUBLIC OF POLAND:

Company: Kronopol Sp. (Kronopol)

Normal Values:

For those models exported to Canada where there were a sufficient number of profitable sales made to non-associated customers in the domestic market, normal values were determined based on the weighted average domestic selling prices to these customers, pursuant to section 15 of SIMA. In doing so, the CBSA utilized domestic sales made to the four largest non-associated regional distributors during the POI.

For models exported to Canada during the POI that were not sold in the domestic market, normal values were determined pursuant to section 15 of SIMA based on the normal value of the most comparable model, with an upward quality adjustment pursuant to SIM Regulation 5(a) to account for the respective cost difference between the two products.

In determining normal values, the following additional SIM Regulation adjustments were granted:

Regulation 6 - Differed Rebates: A downward adjustment to domestic selling prices was made to account for differed rebates that were generally granted.

Regulation 7 - Freight: A downward adjustment was made to domestic selling prices to account for freight costs incurred in the domestic market.

Regulation 9 - Trade Level: A downward adjustment was made to domestic selling prices to account for differences in trade level.

Regulation 10 - Taxes: A downward deduction was made to domestic selling prices to remove the amount of GST in domestic selling prices.

Export Prices:

As the goods were sold to an unrelated importer in Canada, export prices were determined pursuant to section 24 of SIMA, on the basis of the ex-factory net selling price to Canada.

Margins of Dumping:

The margin of dumping was determined by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI, including any individual sales of product models or types that were made at undumped prices. It was determined that none of the subject goods exported to Canada by Kronopol were dumped.

Appendix 2

CERTAIN LAMINATE FLOORING

MARGINS OF DUMPING BY EXPORTER/COUNTRY

Country of Origin/Exporter

Weighted Average Margin of Dumping 1

Austria

  

Kaindl

0.0%

Mohawk

8.3%

All others

0.0%

Austria Average

0.1%

Belgium

 

Unilin

1.0%

All others

1.0%

Belgium Average

1.0%

The People's Republic of China

  

Asia Dekor

17.0%

Beijing Kronosenhua

2.5%

Vöhringer

9.7%

Yekalon

0.0%

All others

9.7%

China Average

7.8%

France

  

EPI

7.0%

All others

7.0%

France Average

7.0%

The Federal Republic of Germany

  

Classen Group

0.0%

Kronotex

2.6%

Kronoflooring

0.0%

All others

1.1%

Germany Average

1.1%

The Republic of Poland

  

Kronopol

0.0%

All others

0.0%

Poland Average

0.0%

1 As a percentage of export price.

Appendix 3

PEOPLE'S REPUBLIC OF CHINA

SUMMARY OF ACTIONABLE SUBSIDY PROGRAMS

Preferential Income Tax Programs

Definition of Foreign Invested Enterprises (FIEs)

For FIEs ineligible for preferential income tax treatment, the applicable income tax rate on worldwide income is 33%, consisting of 30% national income tax and 3% local income tax.16

An FIE can be formed in one of three ways17:

1. Chinese-foreign equity joint venture:

  • Joint venture between a Chinese company, enterprise, or other business organization and a foreign company, enterprise, business organization or individual set up in the form of a Chinese limited liability company.
  • The characteristics of a Chinese-foreign equity joint venture are joint investment, joint operation, and the participants share profits, risks and losses in proportion to their respective contributions to the registered capital of the joint venture.
  • The proportion of the investment by the foreign party is no less than 25% in the registered capital of equity joint venture.

2. Chinese-foreign contractual joint venture:

  • Established by foreign enterprises and other economic organizations or individuals and Chinese enterprises or other economic organizations within the territory of China. The rights and obligations of each part are determined in accordance with the agreement specified in the contractual joint venture contract. The investment or conditions for cooperation contributed by the Chinese and foreign parties may be provided in cash or in kind, or may include the right to the use of land, industrial property rights, non-patent technology or other property rights.

3. Wholly foreign owned enterprises:

  • A wholly foreign owned enterprise is established by foreign enterprises and other economic organizations or individuals pursuant to the Chinese laws within the territory of China and all its capital is invested by foreign investors. It is also referred to as a Foreign Enterprise (FE).

Definition of Domestic Invested Enterprises (DIEs)

For DIEs ineligible for preferential income tax treatment, the applicable income tax rate on taxable income is 33%.18 The following types of enterprises, excluding FIEs as described above, are considered DIEs for the purpose of taxation on income19:

  • State-owned enterprises;
  • Collective enterprises;
  • Private enterprises;
  • Joint venture enterprises;
  • Joint stock enterprises;
  • Any other organization deriving income from production and business operations and other income.

1) Productive FIEs Scheduled to Operate for a Period not Less than 10 Years

General Information:

This program is established in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on April 9, 1991, and came into effect on July 1, 1991. This program was established in order to encourage foreign investment in or establishment of productive enterprises in China. The authority responsible for administering this program is the State Administration of Taxation of the People's Republic of China. In addition to the headquarters, there are nine additional municipal and provincial offices and over 1,000 local tax offices, each of which is responsible for administrating taxation in China. These local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential income tax treatment.

Under this program, from the year an FIE begins to make a profit, they may apply for and receive an exemption from income tax in the first and second years and a 50% reduction in the third, fourth, and fifth years of profitable operation.

However, FIEs engaged in the exploitation of resources such as petroleum, natural gas, rare metals, and precious metals, will be regulated separately by the State Council in relation to this program. Further, should an FIE cease operation following a period of less than 10 years, that enterprise will be responsible for repaying the amount of tax that has been reduced or exempted under this program.

If the FIEs business license prescribes a scope that encompasses both business of a productive nature and of a non-productive nature, the FIE may only apply for and receive benefits under this program in years where the income from productive business exceeds 50% of its total income. Should the scope of the FIE not include business of a productive nature in the scope prescribed by its business license, it may not receive benefits under this program under any circumstance, regardless if it has productive business income that exceeds 50% of total income.20

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The income tax reduction and exemption for FIEs under this program is provided for in Article 8 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises. The program is administered in accordance with the Notice of the State Administration of Taxation on the Implementation of Income Tax for the Enterprises with Foreign Investment and Foreign Enterprise.

Based on the information obtained during the course of the investigation, the CBSA has determined that at least three of the Chinese exporters of subject goods received preferential income tax rates under this program21.

Eligibility Criteria:

As noted above, FIEs of a productive nature are eligible for this program as long as they are scheduled to operate for a period not less than ten years. FIEs of a productive nature are defined in Article 72 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises as FIEs engaged in the following industries:

a. Machine manufacturing and electronics industries;

b. Energy resource industries (not including exploitation of oil and natural gas);

c. Metallurgical, chemical and building material industries;

d. Light industries, and textiles and packaging industries;

e. Medical equipment and pharmaceutical industries;

f. Agriculture, forestry, animal husbandry, fisheries and water conservation;

g. Construction industries;

h. Communications and transportation industries (not including passenger transport);

i. Development of science and technology, geological survey and industrial information consultancy directly for services in respect of production and services in respect of repair and maintenance of production equipment and precision instruments;

j. Other industries as specified by the tax authorities under the State Council.

For further clarification regarding the definition of enterprises with a productive nature, the GPRC provided the following supplemental definition:

"Enterprise(s) with foreign investment which specialize in the sales business by purchasing commodities to carry out simple assembly, separate loading, packaging, cleaning, selecting and arranging and which do not change the forms, properties and components of the original commodities all belong to engaging in the commodity sales business and should not be designated as productive enterprise with foreign investment, for example, enterprises which engage in purchasing or importing complete sets of electrical appliances or equipment pieces and selling these products after simple assembly; enterprises which engage in purchasing various types of drinks and foodstuffs and sales business after loading, separate loading, and packaging of these products, including trades which specially provide loading, separate loading and packaging services."22

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it was determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, i.e. amounts that were otherwise owing and due to the government were reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

Determination of Specificity:

Preferential income tax rates provided to FIEs were found to be limited, in law, to a particular enterprise23 pursuant to paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises. The CBSA has determined that, in this case, the particular enterprise consists of a group of FIEs which meet the above-mentioned eligibility criteria.

It should also be noted that the GPRC has identified this preferential income tax policy for FIEs as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.24

2) FIEs in Industries and Sectors Where Foreign Investment is Encouraged by the State

General Information:

This program is established in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on April 9, 1991, and came into effect on July 1, 1991. This program was established in order to encourage foreign investment in China and accelerate development of the local economies. The authority responsible for administering this program is the State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential income tax treatment.

Under this program, FIEs that operate in an industry or undertake a project encouraged by the State may apply for and receive a reduction or exemption from local income tax subject to the approval of the province, autonomous region, or municipality.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The local income tax reduction and exemption for FIEs under this program is provided for in

Article 9 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.

Based on the information obtained during the course of the investigation, the CBSA has determined that at least three of the Chinese exporters of subject goods received preferential income tax rates under this program.

Eligibility Criteria:

As noted above, FIEs that operate in an industry or undertake a project encouraged by the State may apply for and receive a reduction or exemption from local income tax subject to the approval of the province, autonomous region, or municipality. Industries and projects encouraged by the State are listed in the Guideline Catalogue for Foreign Investment Industries, which was issued by the State Planning Commission, the State Economic and Trade Commission, and the Foreign Economic and Trade Ministry on March 11, 2002, and was in effect during the POI. Further, the State Development and Reform Commission and the Ministry of Commerce jointly promulgated an amended Industrial Catalogue for Foreign Investment on November 30, 2004, which will take effect on January 1, 2005, and supersede the one issued on March 11, 2002. Based on the information provided by the GPRC, the laminate flooring industry is considered to be in included in the encouraged industry category. Therefore, enterprises in this industry would be eligible to apply for and receive such local income tax reductions or exemptions subject to the approval of the province, autonomous region, or municipality.

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it was determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, i.e. amounts that were otherwise owing and due to the government were reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

Determination of Specificity:

Preferential income tax rates provided to FIEs were found to be limited, in law, to a particular enterprise, pursuant to paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises. The CBSA has determined that, in this case, the particular enterprise consists of a group of FIEs which meet the above-mentioned eligibility criteria.

It should also be noted that the GPRC has identified this preferential income tax policy for FIEs as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.25

3) Re-investment of Profits by Foreign Investor

General Information:

This program was established in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on

April 9, 1991, and came into effect on July 1, 1991, as all other tax programs listed in this report. This program was established in order to encourage foreign investors to re-invest profits into businesses in China. The authority responsible for administering this program is the

State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential income tax treatment.

Under this program, foreign investors who reinvest their profits received from an FIE back into that FIE by increasing its registered capital, or use their FIE derived profit to establish another FIE which is planned to operate for a period not less than five years, are eligible to receive a refund of the income tax already paid on the profit that was reinvested.

Article 10 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises clearly identifies that any foreign investors who directly reinvest their after-tax profit into the organization from which they received the profit from, or use the profits to establish a new foreign enterprise, will be refunded 40% of the tax paid on the profit amount directly re-invested. Further, if the direct re-investment is in a new foreign enterprise and the investor withdraws the investment before five years have passed, the tax refunded must be repaid. It also states that should State Council pass regulations relating to the provision of this preferential treatment, the provisions of those regulations will be applied.

Article 80 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises refers to "direct reinvestment" as using the profits referred to above, prior to their receipt, to increase registered capital in the FIE who provided the profits, or, following receipt of those profits, establishing another FIE.

Article 81 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises addresses the preferential provisions passed by State Council, as referred to above. It states that where a foreign investor directly reinvests profits in the following ways, 100% of the income tax paid on the reinvested profit will be refunded:

  • in order to establish or expand export-oriented enterprises or advanced technology enterprises;
  • profits from enterprises in the Hainan SEZ are reinvested in infrastructure projects and agriculture development enterprises within this zone.

Article 82 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises provides the formula used to calculate the refund. Further, the Notice of the State Tax Administration on Problems Concerning Return of Corporate Income Tax to Foreign Investors Making Reinvestment provides rules for refund treatment in situations involving investments in foreign currency as well as providing a reinvestment limit calculation which sets the maximum amount of tax that can be refunded in that year.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The income tax refund for FIEs under this program is provided for in Article 10 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises and is administered in accordance with Articles 80, 81 and 82 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.

Based on the information obtained during the course of the investigation, the CBSA has determined that at least one of the Chinese exporters of subject goods received an income tax refund under this program.

Eligibility Criteria:

In order for a foreign investor to obtain this preferential income tax treatment, 100% of the shares of the foreign investor enterprise must be foreign owned and located outside China. Therefore,

foreign-funded enterprises inside China that act as investors in other enterprises will not be considered foreign investors for the purposes of preferential treatment under this program.26

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it was determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and confers a benefit to the recipient equal to the amount of income tax refunded.

Determination of Specificity:

Income tax refunds provided to FIEs under this program were found to be limited, in law, to a particular enterprise, pursuant to paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises and the Official Reply to Problems Concerning Re-investment Drawback of Foreign-Funded Enterprises (Guoshuihanfa [1995] No. 154). The CBSA has determined that, in this case, the particular enterprise consists of a group of FIEs which meet the above-mentioned eligibility criteria.

It should also be noted that the GPRC has identified this preferential income tax policy for FIEs as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.27

4) Enterprises Located in Special Economic Zones (SEZs) - Excluding the Pudong Area of Shanghai

General Information:

This program is established for FIEs in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on

April 9, 1991, and came into effect on July 1, 1991.

For DIEs, the GPRC has indicated that this program is also available to all DIEs located in SEZs. Unlike FIEs, this program does not appear to be specifically established in either the Provisional Regulations of the People's Republic of China on Enterprises Income Tax or the Rules for the Implementation of the Provisional Regulations of the People's Republic of China on Enterprises Income Tax. However, it would appear that the provincial and/or municipal regulations provided by the GPRC would support the GPRC's response stating that DIEs located in SEZs are also eligible for this program.

This program was established in order to encourage investment in Special Economic Zones (SEZs). The authority responsible for administering this program is the State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential income tax treatment.

Under this program, non-wholly foreign owned FIEs established in SEZs, FEs (wholly foreign owned FIEs) established in SEZs, and DIEs established in SEZs shall pay income tax at a reduced rate of 15%.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The income tax rate reduction for FIEs under this program is specifically provided for in Article 7 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.

The income tax rate reduction for DIEs under this program for enterprises located in the Shenzhen, Zhuhai, and Shantou SEZs is provided for in Article 14 of the Regulations on Special Economic Zones in Guangdong Province. The income tax rate reduction for enterprises in the Shenzhen SEZ is also addressed in Article 6 of the Provisions Pertaining to Tax Policies for Enterprises in Shenzhen Special Economic Zone by the Municipal People's Government of Shenzhen.

These legal documents also clearly indicate that the reduced income tax rate of 15% is to apply to all enterprises, including FIEs, located in the aforementioned SEZs

Based on the information obtained during the course of the investigation, the CBSA has determined that at least two of the Chinese exporters of subject goods received preferential income tax rates under this program.

Eligibility Criteria:

The eligibility criteria relating to FIEs for this program can be found in the following Article 69 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, which defines SEZs as the special economic zones of Shenzhen, Zhuhai, Shantou and Xiamen and the Hainan SEZ established by law or established upon approval of the State Council.

The eligibility criteria for this program relating to DIEs located in the Shenzhen, Zhuhai, and Shantou SEZs can be found in Articles 1 and 6 of the Regulations on Special Economic Zones in Guangdong Province.

Further, Article 1 of the Circular of the Shenzhen Taxation Bureau on Interpretations of the Provisions Pertaining to Tax Policies for Enterprises in Shenzhen Special Economic Zone by the Municipal People's Government of Shenzhen clearly states that the word enterprises used in the provisions includes all enterprises in the Shenzhen SEZ, which indicates that the reduced income tax rate to apply to all enterprises, including both FIEs and DIEs.

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it was determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, i.e. amounts that were otherwise owing and due to the government, were reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

Determination of Specificity:

Preferential income tax rates provided to enterprises located in SEZs were found to be limited, in law, to a particular enterprise, pursuant to paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises . The CBSA has determined that, in this case, the particular enterprise consists of a group of enterprises which are specifically located in SEZs.

It should also be noted that the GPRC has identified this preferential income tax policy, in relation to FIEs only, as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.28

5) FIEs Located in Coastal Economic Open Zones or in the Old Urban Districts of Cities Where the SEZs or the Economic and Technology Development Zones (ETDZs) are Located or in Any Other Regions Defined by the State Council

This program is established in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on April 9, 1991, and came into effect on July 1, 1991. This program was established in order to encourage foreign investment in coastal economic open zones or in the old urban districts of cities where the SEZs or the ETDZs are located or in any other regions defined by the State Council. The authority responsible for administering this program is the State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential income tax treatment.

Under this program, FIEs of a productive nature established in coastal economic open zones or in the old urban districts of cities where the SEZs or the ETDZs are located shall pay income tax at a reduced rate of 24%. However, if the FIEs established in coastal economic open zones or in the old urban districts of cities where the SEZs or the ETDZs are located or in any other regions defined by the State Council, who are engaged in activities relating to energy, communications, harbour, wharf or other projects encouraged by the State, may be levied at the reduced rate of 15%.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The income tax rate reduction for FIEs under this program is provided for in Article 7 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.

Based on the information obtained during the course of the investigation, the CBSA has determined that at least two of the Chinese exporters of subject goods received preferential income tax rates under this program, as they were located in one of the coastal opening cities identified below.

Eligibility Criteria:

The eligibility criteria for this program can be found in Article 70 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, which defines coastal economic open zones as "those cities, counties and districts established as coastal economic open zones upon approval of the State Council".

The GPRC indicates that the eligible cities for this program are specifically defined in Article 2 of the Provisions of the Customs of the People's Republic of China for the Control of Goods Entering and Leaving the Coastal Opening Cities and Areas.

Coastal opening cities include the city proper of the following 14 coastal port cities: Tianjin, Shanghai, Dalian, Qinhuangdao, Yantai, Qindao, Lianyungang, Nantong, Ningbo, Wenzhou, Fuzhou, Guangzhou, Zhanjiang, Beihai, and the proper of cities that enjoy the status of a coastal opening city as approved by the State Council. It should be noted that information provided by one of the enterprises indicates that Beijing is also considered to be an open coastal city. A document issued by the Foreign Taxation Administration Branch of Beijing Municipal Office provided to the enterprise indicates that they are eligible for this program as the State Department approved the setting of Beijing as an open coastal city.

Coastal economic opening areas include the Yangtze River Delta, the Pearl River Delta. The Xiamen-Zhangzhou-Quanzhou Triangular area in South Fujian, the Liaodong and Jiodong peninsulas, the proper of the opening cities in the defined domain of other regions in the coastal areas, the areas just outside a city gate of key counties (or key industrial satellite townships approved by the people's government of a province, an autonomous region or a municipality directly under the central government), and villages governed by the above-said cities and counties where agricultural technologies are imported through foreign-funded projects for the development of export and where there are bases for producing agricultural products and factories for the processing of primary agricultural products.

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it was determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, i.e. amounts that were otherwise owing and due to the government, were reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

Determination of Specificity:

Preferential income tax rates provided to FIEs were found to be limited, in law, to a particular enterprise pursuant to paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises. The CBSA has determined that, in this case, the particular enterprise consists of a group of FIEs which are specifically located in coastal economic open zones or in the old urban districts of cities where the SEZs or the ETDZs are located or in any other regions defined by the State Council.

It should also be noted that the GPRC has identified this preferential income tax policy for FIEs as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.29

6) Enterprises Located in the Special Economic Zone of the Pudong New Area of Shanghai

General Information:

This program is established for FIEs in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on

April 9, 1991, and came into effect on July 1, 1991.

As noted above, the GPRC has indicated that that preferential income tax programs in SEZs are available to all DIEs and FIEs located in SEZs. Unlike FIEs, this program does not appear to be specifically established in either the Provisional Regulations of the People's Republic of China on Enterprises Income Tax or the Rules for the Implementation of the Provisional Regulations of the People's Republic of China on Enterprises Income Tax. Rather, the Circular on Income Tax Rate Applied to Chinese Joint Ventures in Pudong New Area of Shanghai indicates that this program is available to DIEs.

This program was established in order to encourage investment in SEZs. The authority responsible for administering this program is the State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential income tax treatment.

Under this program, non-wholly foreign owned FIEs established in SEZs, FEs (wholly foreign owned FIEs) established in SEZs, joint-venture DIEs, and single-investor DIEs established in the SEZ of the Pudong New Area of Shanghai shall pay income tax at a reduced rate of 15%.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The income tax rate reduction for FIEs under this program is specifically provided for in Article 7 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.

The income tax rate reduction for Chinese joint venture and single-investor DIEs under this program can be found in the Circular on Income Tax Rate Applied to Chinese Joint Ventures in Pudong New Area of Shanghai.

These legal documents also clearly indicate that the reduced income tax rate of 15% is to apply to all enterprises, including FIEs, located in the aforementioned SEZs

Based on the information obtained during the course of the investigation, the CBSA has determined that at least one of the Chinese exporters of subject goods received preferential income tax rates under this program.

Eligibility Criteria:

The eligibility criteria relating to FIEs for this program can be found in Article 73 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, which specifically identifies productive-oriented FIEs established in the Pudong New Area of Shanghai as being eligible for the reduced income tax rate of 15%.

The eligibility criteria for this program relating to DIEs located in the Pudong New Area of Shanghai can be found in the Circular on Income Tax Rate Applied to Chinese Joint Ventures in Pudong New Area of Shanghai, which specifically identifies Chinese joint venture and single-investor DIEs established in the Pudong New Area of Shanghai as being eligible for the reduced income tax rate of 15%.

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it was determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, i.e. amounts that were otherwise owing and due to the government, were reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

Determination of Specificity:

Preferential income tax rates provided to enterprises located in the SEZ of the Pudong New Area of Shanghai were found to be limited, in law, to a particular enterprise, pursuant to paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises and the Circular on Income Tax Rate Applied to Chinese Joint Ventures in Pudong New Area of Shanghai. The CBSA has determined that, in this case, the particular enterprise consists of a group of enterprises which are specifically located in the SEZ of the Pudong New Area of Shanghai.

It should also be noted that the GPRC has identified this preferential income tax policy, in relation to FIEs only, as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.30

7) Enterprises Located in the Western Region and Other Specified Locations

General Information:

This program is established for DIEs and FIEs in the Circular of the Ministry of Finance, State Administration of Taxation and General Administration of Customs on the Preferential Tax Policy of Development of the Western Region, which was promulgated on December 30, 2001, and came into effect as of January 1, 2001.

This program appears to be established in order to encourage investment in the western region of China. The authority responsible for administering this program is the State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential income tax treatment.

Under this program, DIEs in industries classified in the encouraged category in The Current Catalogue of Key Industries, Products and Technologies The Development of Which is Encouraged by the State (Provisional) and FIEs classified in the encouraged category in Guideline Catalogue for Foreign Investment Industries, and who are located in the western region and other specified locations are eligible for a preferential income tax rate of 15%.

The program was in operation during the POI and is scheduled to expire in 2010.

Legal Basis:

The income tax rate reduction is specifically provided for in Section II, Article 1 of the Circular of the Ministry of Finance, State Administration of Taxation and General Administration of Customs on the Preferential Tax Policy of Development of the Western Region.

Based on the information obtained during the course of the investigation, the CBSA has determined that at least one of the Chinese exporters of subject goods received preferential income tax rates under this program.

Eligibility Criteria:

The eligibility criteria relating to this program can be found in Section I and Section II, Article 1 of the Circular of the Ministry of Finance, State Administration of Taxation and General Administration of Customs on the Preferential Tax Policy of Development of the Western Region.

The eligibility criteria states that enterprises located in the western region and in industries classified as encouraged in The Current Catalogue of Key Industries, Products and Technologies The Development of Which is Encouraged by the State (Provisional) or in the Guideline Catalogue for Foreign Investment Industries, are eligible for the preferential income tax rate of 15% provided they are major businesses and their income from major businesses accounts for more than 70% of total income.

The western region for the purposes of this program is defined as: the Municipality of

Chongqing, Sichuan Province, Guizhou Province, Yunnan Province, the Tibet Autonomous Region, Shaanxi Province, Gansu Province, the Ningxia Hui Autonomous Region, Qinghai Province, the Xinjiang Uygur Autonomous Region, the Xinjiang Production and Construction Crops,

Inner Mongolia Autonomous Region and the Guangxi Zhuang Autonomous Region.

In addition to the western region as defined above, enterprises in the following locations are also eligible for the preferential income tax rate: Hunan Province Tujia-Miao Autonomous Prefecture of Xiangxi, Hubei Province Enshi Tujia-Miao Autonomous Prefecture, and Jilin Province Korean Autonomous Prefecture of Yanbian.

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it was determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, i.e. amounts that were otherwise owing and due to the government,t were reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

Determination of Specificity:

Preferential income tax rates provided to enterprises located in the western region and other specified locations were found to be limited, in law, to a particular enterprise, pursuant to paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Circular of the Ministry of Finance, State Administration of Taxation and General Administration of Customs on the Preferential Tax Policy of Development of the Western Region. The CBSA has determined that, in this case, the particular enterprise consists of a group of enterprises which are specifically located in the western region and other specified locations.

8) Enterprises Operating in the Forestry Industry

General Information:

This program is established for DIEs and FIEs in the Circular Jointly Issued by Ministry of Finance and State Administration of Taxation Concerning Issues of Taxation on Forestry [2001] No. 171, which was issued in November 2001. This circular was provided by a Chinese exporter of subject goods that received the tax exemption on all income earned including the income earned on sales of laminate flooring.

This program was established in order to support the forestry industry and accelerate the development of ecological conservation of forestry. The authority responsible for administering this program is the State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential income tax treatment.

Under this program, all enterprises, including DIEs, FIEs, and state-owned enterprises and institutions in the forestry industry are eligible for a temporary income tax exemption.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The income tax exemption is specifically provided for in Section II of the Circular Jointly Issued by Ministry of Finance and State Administration of Taxation Concerning Issues of Taxation on Forestry [2001] No. 171.

Based on the information obtained during the course of the investigation, the CBSA has determined that at least one of the Chinese exporters of subject goods received an income tax exemption under this program.

Eligibility Criteria:

The eligibility criteria relating to this program can be found in Section II of the Circular Jointly Issued by Ministry of Finance and State Administration of Taxation Concerning Issues of Taxation on Forestry [2001] No. 171.

The eligibility criteria states that income tax imposed on all income of all enterprises and institutions, including state-owned enterprises and institutions, which they earn through cultivating trees, tree seeds, nursery stock crops, and the elementary processing of timber products, shall be temporarily exempted. No further explanation or definition regarding these terms is provided for in this circular and no further documentation relating to this program and this circular was received.

Based on the fact that one of the Chinese exporters of subject goods received the income tax exemption under this program and that the program applied to income earned from laminate flooring, it seems that laminate flooring is eligible for this program due to the fact that laminate flooring manufacturing involves processing timber products.

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it was determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, i.e. amounts that were otherwise owing and due to the government, were exempted, and confers a benefit to the recipient equal to the amount of the exemption.

Determination of Specificity:

Income tax exemptions provided to enterprises operating in the forestry industry were found to be limited, in law, to a particular enterprise, pursuant to paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Circular Jointly Issued by Ministry of Finance and State Administration of Taxation Concerning Issues of Taxation on Forestry [2001] No. 171. The CBSA has determined that, in this case, the particular enterprise consists of a group of enterprises which specifically operate in the forestry industry.

Relief from Duties and Taxes on Materials and Equipment

9) Refund of Value-Added Tax (VAT) for Production of Goods Using Fuel Wood and Other Low-Valued Wood

General Information:

This program is established and administered in accordance with the Circular of Ministry of Finance and State Administration of Taxation Regarding the VAT Favorable Policy of the Comprehensively Used Product Produced and Processed with the Three Residues and Small Firewood Materials as Raw Materials, which was issued on April 29, 2001, and came into effect as of January 1, 2001. The circular also indicates that this program will expire on December 31, 2005. This program was established in order to protect China's forestry resources, which are insufficient in terms of both quality and quantity and also promote the use of this type of timber. The authorities responsible for jointly administering this program are the Ministry of Finance and the State Administration of Taxation of People's Republic of China whose local tax offices are responsible for implementing this policy within their respective areas.

Under this program, all eligible wood products purchased domestically for the production and processing of the specific types of goods outlined in the circular, referred to as comprehensively used products, are eligible for the VAT immediate refund after levy policy, which results in a full refund of 13% VAT levied against the wood inputs. In order to receive the exemption from VAT, enterprises, both domestic and foreign invested, are required to separately calculate the sales volume of the comprehensively used products and the output tax amount and input tax amount of the VAT. Failure to calculate these amounts separately or accurately will result in the inability to receive the exemption provided for under this program.

While both domestic and foreign invested enterprises are eligible for this program, this immediate VAT refund program is not available to those enterprises that export the comprehensively used products.

Under normal circumstances, enterprises producing products, which do not use the types of raw materials identified under this program, for sale within the domestic market would be subject to VAT and would not receive a refund for the VAT paid on those raw materials used in production.

Based on the information obtained during the course of the investigation, the CBSA has determined that at least two of the Chinese exporters of subject goods received a benefit, either directly or indirectly, under this program.

The program was in operation during the POI and is scheduled to expire on December 31, 2005.

Legal Basis:

The immediate VAT refund provided under this program is provided for and administered in accordance with Circular of Ministry of Finance and State Administration of Taxation Regarding the VAT Favorable Policy of the Comprehensively Used Product Produced and Processed with the Three Residues and Small Firewood Materials as Raw Materials.

Based on the information obtained during the course of the investigation, the CBSA has determined that at least two of the Chinese exporters of subject goods received VAT refunds under this program.

Eligibility Criteria:

The eligibility criteria for this program can be found in the Circular of Ministry of Finance and State Administration of Taxation Regarding the VAT Favorable Policy of the Comprehensively Used Product Produced and Processed with the Three Residues and Small Firewood Materials as Raw Materials and the attached Catalogue of Comprehensively Used Products.

Article 2 of the circular contains the definitions of the three residues and small firewood materials. The residues refer to the leftover material that results from tree cutting, log making, and processing including, for example, the branches, treetops, roots, bark, sawdust, chip veneer, blocks of wood and leftover bits and pieces, etc. Small firewood materials refers to, as an example, firewood, small lowest quality logs, strips of logs, etc.

As noted above, Article 3 of the circular specifies that this immediate VAT refund program is not available to those enterprises that export the comprehensively used products.

The Catalogue of Comprehensively Used Products is below:

Serial No.

Name of product

Serial No.

Name of product

1

Wood and bamboo fiberboard

12

Active carbon

2

Wood and bamboo flakeboard

13

Tannin extract

3

Wood and bamboo

14

The plate material with length less than 2 m (excluding 2 m) (only refers to the plate material processed from material forming truncation and the slab)

4

Wood and bamboo chip

5

Floor block

6

Wood turned product

15

Wood, bamboo beads, wood, bamboo toothpick, little veneer, grey strip, wood pieces, wood bamboo strip, wood and bamboo cuti, leaves, root, sawdust and its comprehensive used product, oxalic acid, sawdust, carbon pencil, etc., stick of frozen sucker and popsicle, spoon of Popsicle, bamboo chip board, strike-off board

7

Hydrolyzed alcohol

8

Furfural

9

Feedstuff yeast

10

Conifer feedstuff

11

Charcoal

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it was determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, i.e. amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not collected.

One of the exporters of the subject goods that benefited from this program did so as an indirect subsidy (i.e. an "upstream subsidy") that was received from a related supplier of the HDF who was the direct beneficiary of the VAT refund. In accordance with subsection 2(1) of SIMA, "subsidized goods" includes any goods in which subsidized goods (i.e. subsidized inputs) are incorporated. However, this requires evidence that the subsidy has been passed through to the downstream purchaser of the input product. This normally requires that a "pass-through" analysis be undertaken to determine if the selling price of the upstream product reflects the subsidy and in what amount the subsidy has been passed-through. However, under CBSA practices, a subsidy received by an upstream supplier is presumed to have been passed through in its entirety to the downstream purchaser of the subsidized input when the parties are related. Accordingly, no "pass-through" analysis is required in this instance since the supplier of the subsidized input product (i.e. the HDF) and producer of the subject goods (i.e. the laminate flooring) are related parties.

Determination of Specificity:

The refund of VAT provided to enterprises who produce goods using fuel wood and other

low-valued wood was found to be limited, in law, to a particular enterprise, pursuant to

paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Circular of Ministry of Finance and State Administration of Taxation Regarding the VAT Favorable Policy of the Comprehensively Used Product Produced and Processed with the Three Residues and Small Firewood Materials as Raw Materials. The CBSA has determined that, in this case, the particular enterprise consists of a group of enterprises who produce comprehensively used products using fuel wood and other low-valued wood and sell these comprehensively used products in the domestic market.

It should also be noted that the GPRC has identified this preferential VAT policy for FIEs as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.31

10) Exemption on Tariffs and VAT on Imported Equipment

General Information:

The exemptions of tariffs and import-linked VAT is provided for and administered in accordance with the Circular of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment, which was established on December 29, 1997, and came into effect on January 1, 1998. This program was established in order to attract foreign advanced technology and equipment and encourage structural improvement and technological advancement in industry.

The authorities responsible for administering this program are the Ministry of Finance and the Customs General Administration People's Republic of China in cooperation with local provincial and municipal customs branches.

Under this program, enterprises meeting the eligibility criteria set forth below may apply for exemption from tariffs and VAT on imported equipment and its related technologies, components, and parts. The enterprise must receive approval of its application from the appropriate authority, and subsequently that approval documentation is submitted to the local customs officials who verify that the documents presented are adequate and that the imported items are not listed in the catalogues of commodities that are not eligible for tax exemptions.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The immediate VAT exemption provided under this program is administered in accordance with the Circular of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment. Article 12 of the Measures of the People's Republic of China on Control Over and Taxation for Import and Export Goods of Enterprises with Foreign Investment provides for preferential reductions and exemptions of tariffs and taxes on imported equipment as provided for in the circular noted above. The eligibility criteria related to this program also takes into consideration the following documents:

The Current Catalogue of Key Industries, Products and Technologies The Development of Which is Encouraged by the State (Provisional);

Guideline Catalogue for Foreign Investment Industries;

The Directory of Imported Commodities of Non-Tax Exemption to be Used in Domestic Invested Projects;

The Directory of Imported Commodities of Non-Tax Exemption to be Used in Foreign Invested Projects.

Based on the information obtained during the course of the investigation, the CBSA has determined that at least two of the Chinese exporters of subject goods received an exemption from tariffs and VAT under this program.

Eligibility Criteria:

In accordance with the circular noted above, in order for a domestic invested enterprise (DIE) to be eligible for tariff and VAT exemptions on imported equipment, the domestic investment project the equipment relates to must be listed in The Current Catalogue of Key Industries, Products and Technologies The Development of Which is Encouraged by the State (Provisional). In addition, the equipment must be for the applicant's own use and the value of the equipment must be within the total amount of investment in the domestic project. Finally, any type of equipment that is imported and listed in The Directory of Imported Commodities of Non-Tax Exemption to be Used in Domestic Invested Projects is not eligible for the exemptions under this program.

In order for an FIE to be eligible for tariff and VAT exemptions on imported equipment, the foreign investment project the equipment relates to must relate to the projects listed in the Guideline Catalogue for Foreign Investment Industries under the encouragement category or the restricted B category. In addition, the equipment must be for the applicant's own use and the value of the equipment must be within the total amount of investment in the foreign project. Finally, any type of equipment that is imported and listed in The Directory of Imported Commodities of Non-Tax Exemption to be Used in Foreign Invested Projects is not eligible for the exemptions under this program.

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it has been determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, i.e. amounts that would otherwise be owing and due to the government, are reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

Determination of Specificity:

Based on the directories for commodities of non-tax exemption that were provided for both domestic and foreign invested projects, there is an inconsistency between the number and type of items listed in the directory for domestic projects in comparison to the directory for foreign projects.

Based on the information obtained throughout the investigation, it was determined that this program gives rise to a subsidy by means of providing reductions or exemptions of tariffs and VAT for equipment purchased by FIEs, whereas such reductions and exemptions would not be provided to DIEs purchasing the same equipment due to the inconsistency between the directories and treatment of items contained therein. Therefore, this constitutes a specific subsidy pursuant to

paragraph 2(7.2)(a) of SIMA, i.e. as it is limited to particular enterprises, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Circular of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment. The CBSA has determined that, in this case, the particular enterprise consists of a group of FIEs that can import equipment exempt of tariffs and VAT which would otherwise be subject to tariffs and VAT should this group of enterprises consist of DIEs.

Grants

11) Loan Interest Assistance Grant Provided to Enterprises With Loans Relating to Investments in Fast-Growth-High-Yield Plantations

General Information:

The guiding principles regarding loan agreements are addressed in the General Principles of Loan. The interest loan subsidies for this program are administered in accordance with the Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction which was issued and implemented on September 24, 2003. The purpose of this program is to encourage the development of particular capital construction projects, including the development of fast-growth-high-yield plantations. As discussed earlier, China has a shortage of forestry resources and, therefore, has identified the need to accelerate the development of the domestic wood industry in order to meet future requirements for timber and to also better conserve its forests. The authority responsible for administering this program is the Ministry of Finance. The fund for this program is provided for in the central financial budget.

Under this program, companies investing in fast-growth-high-yield plantations of trees, which have not received other types of interest assistance from the Ministry of Finance32, may apply for loan interest assistance over a period of 5-10 years33. The maximum amount of a loan interest assistance grant to be provided annually is equal to 3% of the loan principal.

This program was in effect during the POI and continues to be in effect to date.

Legal Basis:

The guiding principles regarding loan agreements are provided for in the General Principles of Loan. An excerpt from the Planning for the Construction of Fast-growth-high-yield Plantation Base was also submitted regarding this type of plantation investment and shows the planned preferential terms relating to loans of this nature. As noted above, the program is administered in accordance with the Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction.

Based on the information obtained during the course of the investigation, the CBSA has determined that at least one of the Chinese exporters of subject goods received a grant under this program.

Eligibility Criteria:

According to Article 15 of General Principles of Loan, relevant government departments may subsidize loans for the purpose of encouraging particular industries and local economies according to state policies.

Article 5 of the Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction stipulates that only medium and large scale projects are eligible for the loan interest assistance. The project scales have been established in accordance to the investment amounts determined by the State Planning Committee, in particular, operation projects with a total investment amount equal to or greater than 50 million Yuan and non-operational projects with a total investment amount equal to or greater than 50 million Yuan.

The circular also identifies the specific industries and projects targeted to receive the loan interest assistance in ranking order of preference. The targeted industries are as follows34:

(I) Agriculture:

1. Construction project of the state commodity grain base;

2. Construction project of caoutchouc (rubber) base;

3. Purchase and construction project of marine professional fisher.

(II) Forestry:

1. Construction project of the base of high yield fast-growing forest;

2. Construction project of the production change of natural forest protection project.

(III) Irrigation works: the trans-region and trans-drainage basin water conservancy pivotal project (excluding the power plant part) excluding:

1. Hydraulic hinge project directly under the Ministry of Water Resource;

2. Hydraulic hinge project of South-to-North water diversion;

3. Major hydraulic hinge projects in the western area except the above 1 and 2;

4. Prison and labor education and rehabilitation project belonging to the Ministry of Justice and Xinjiang Construction Corps;

5. High-new technical industry development zone at state level approved by the Ministry of Science and Technology, Suzhou Industrial Park Area, Infrastructure Project of Mianyang Sci-tech City. Mainly include the infrastructure projects such as roads, bridge, tunnel, sewage, life rubbish treatment facilities, power supply, heat supply, gas supply, water supply and communication network, etc.;

6. "Three wires" rebuilding project of the war industry corps;

7. Nuclear power project (take priority consideration of the pile form designed and manufactured domestically);

8. Project of western railway;

9. Projects determined by the State Council to reduce the interest and other projects confirmed by the Ministry of Finance.

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it has been determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and confers a benefit to the recipient equal to the amount of loan interest assistance grant provided.

Determination of Specificity:

The loan interest assistance grant provided to enterprises with loans relating to investments in fast-growth-high-yield plantations was found to be limited, in law, to a particular enterprise, pursuant to paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction. The CBSA has determined that, in this case, the particular enterprise consists of a group of enterprises that obtain loans for projects and operates in one of the targeted industries listed above under the eligibility criteria.

12) Grants from Development Zone Management Committees Under the Authority of Town Governments

General Information:

Under this program, enterprises located in development zones organized by the local town government are able to establish agreements with the development zone management committee entitling the enterprise to receive a grant which uses a percentage of the amount of income tax and VAT paid by the enterprise as a mechanism to calculate the grant.

In response to this program, the GPRC very clearly indicated that the grant that was provided to the enterprise was strictly as an award and that it was not to be considered a refund of income tax and VAT. They stated that the calculations stipulated in the agreement between the Chinese exporter of subject goods and the Development Zone Management Committee which were used to determine the award (grant amount) simply used VAT and income tax as a basis for calculation as part of the award mechanism.

Based on the information obtained from the GPRC, the CBSA has determined that the Development Zone Management Committee is to be considered government for SIMA purposes, as the town government appoints the management of the committee and the committee is under the town's administration. It was also stated that the committee is considered to be a functional branch of the town government.

This program was in effect during the POI and has been terminated in March 2003.

Legal Basis:

In response to this program, the GPRC indicated that they were unaware of the existence of the agreement between the development zone management committee and the enterprise at the time it was signed. Further, they were unable to conclude on whether any such other agreements existed or were in existence during the POI. In attempting to explain the situation regarding the zone and the agreement between the committee and the enterprise, the GPRC was unable to provide a consistent explanation and was unable to provide any laws, regulations, or other documentation to support its inconsistent explanations.

Further, they were unable to provide any laws or regulations which supported the existence of the development zone, any possible incentives for enterprises located in the zone, or the eligibility criteria involved in establishing an enterprise in the zone.

Based on the information obtained during the course of the investigation, the CBSA has determined that at least one of the Chinese exporters of subject goods received a grant under this program.

Eligibility Criteria:

As noted above, the GPRC were unable to provide any laws or regulations which supported the existence of the development zone, any possible incentives for enterprises located in the zone, the eligibility criteria involved in establishing an enterprise in the zone, or supporting documentation in regards to the agreement established between the committee and the enterprise.

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it has been determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and confers a benefit to the recipient equal to the amount of the grant provided.

Determination of Specificity:

The grant provided for under this program is considered to be specific pursuant to

paragraph 2(7.3)(d) of SIMA, i.e. in regards to the manner in which discretion is exercised by the granting authority indicates that the subsidy is not generally available, in this case, the GPRC was unable to determine whether other enterprises in the zone in fact received the same grant as the enterprise discussed above or whether such agreements as the one between that enterprise and the Development Zone Management Committee exist or have existed in the past. The CBSA has determined that this program is specific due to the manner in which the granting authority exercised its discretion, in this case, the granting authority having this contract with one specific enterprise and the authority's inability to determine whether such agreements have or continue to exist.

13) Grants Provided to Companies Newly Established in the Pudong New Area of Shanghai

General Information:

This program is established in the Suggestions on Financial support of Economic Development in the Pudong New District During the Tenth Five-Year Plan, which was issued in December 2000, and came into effect as of January 1, 2001. The circular also indicates that this program will expire on December 31, 2005. This program was established in order to optimize resource allocation and accelerate the economic development and functional expansion of the Pudong New Area. The authorities responsible for administering this program are the Pudong New District Financial Bureau and the Pudong New District Taxation Authority.

Under this program, newly established enterprises located in the Pudong New Area of Shanghai are eligible to receive a grant based on a percentage of their total profit in the first, second and third year of operation. The maximum percentage of profit to be used for calculating the grant is 14% in the first year, and at half the first year rate in the second and third year. The percentage of profit used in the calculation is dependant on a variety of factors including taking into consideration other incentives made available to the enterprise such as preferential income tax reductions and exemptions. If such incentives are received following the receipt of the grant, an adjustment to the grant calculation will be made according to the stipulated procedures.

This program was in effect during the POI and is scheduled to expire on December 31, 2005.

Legal Basis:

The grant under this program is specifically provided for in Section I, Article 27 of the Suggestions on Financial support of Economic Development in the Pudong New District During the Tenth Five-Year Plan. Further, the eligibility criteria for qualifying enterprises for this grant and other provisions found in the Suggestions on Financial support of Economic Development in the Pudong New District During the Tenth Five-Year Plan is provided for in the List of Submitted Materials for Qualifications Accreditation of Enterprises Meeting Requirements of Financial support for Economic Development in Pudong New Area during the Period of "Tenth Five-year Plan".

Based on the information obtained during the course of the investigation, the CBSA has determined that at least one of the Chinese exporters of subject goods received a grant under this program.

Eligibility Criteria:

For this particular program, newly established enterprises found in the listing referred to above are eligible to receive a grant in the first, second, and third year of operation which is based on the calculations provided for in the Suggestions on Financial support of Economic Development in the Pudong New District During the Tenth Five-Year Plan. In the case of the Chinese exporter of subject goods which received approval for the grant under this program, the newly established enterprise was classified in the List of Submitted Materials for Qualifications Accreditation of Enterprises Meeting Requirements of Financial support for Economic Development in Pudong New Area during the Period of "Tenth Five-year Plan" as Type of Enterprise - 9 - Other enterprises - 38 - Newly-established enterprises with over 10 years of business period.

Determination of Subsidy:

Based on the information obtained during the course of the investigation, it has been determined that this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and confers a benefit to the recipient equal to the amount of the grant provided.

Determination of Specificity:

Grants provided to newly established enterprises located in the Pudong New Area of Shanghai were found to be limited, in law, to a particular enterprise, pursuant to paragraph 2(7.2)(a) of SIMA, i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Suggestions on Financial support of Economic Development in the Pudong New District During the Tenth Five-Year Plan. The CBSA has determined that, in this case, the particular enterprise consists of a group of enterprises which are specifically located in the Pudong New Area of Shanghai.

Appendix 4

CERTAIN LAMINATE FLOORING

AMOUNTS OF SUBSIDY BY EXPORTER - CHINA

Exporters

Subsidized Goods as Percentage of Total Goods Exported

Amount of Subsidy in Chinese Renminbi per Square Metre (m2)

Amount of Subsidy as a Percentage of Export Price

Asia Dekor Industries (Shenzhen) Co. Ltd.

100%

1.95

5.3%

Beijing Kronoshnhua Flooring Co. Ltd.

100%

1.25

3.1%

Fujian Yongan Forestry (Group) Joint Stock Co. Ltd.

100%

3.16

8.7%

Shanghai Everglory Import and Export Co. Ltd.

100%

0.10

0.3%

Shanghai Oceanic Furniture & Decoration Co. Ltd.

0%

0.00

0.0%

Sichuan Shengda Wooden Products Co. Ltd.

100%

0.12

0.3%

Vöhringer Wood Products (Shanghai) Co. Ltd.

100%

0.76

2.0%

Yekalon Industry Inc.

100%

1.37

3.8%

All other exporters from China35

100%

3.54

9.2%

Total

99.8%

1.16

3.0%

1 R.S. 1985, c. S-15.

2 S.C. 1997, c. 36, as amended by 1998, c. 19; 1999, c. 17; 2001, c. 16; 2001, c. 25; 2001, c. 28; 2002, c. 19; 2002, c. 22.

3 OECD, DAC List of Aid Recipients - As at 1 January 2003, online: http://www.oecd.org/dataoecd/35/9/248852.pdf

4 Page 5 - Exhibit 383 - Listing of Exhibits - Dumping

5 Page 12 - Exhibit 383 - Listing of Exhibits - Dumping

6 Page 19 - Exhibit 383 - Listing of Exhibits - Dumping

7 Page 5 - Exhibit 446 - Listing of Exhibits - Dumping

8 Page 1 - Exhibit 456 - Listing of Exhibits - Dumping

9 United States - Final Countervailing Duty Determination With Respect To Certain Softwood Lumber From Canada, WT/DS257/AB/R, 19 January 2004

10 International Standard Industrial Classification of All Economic Activities (ISIC), Revision 3.1, United Nations, para. 53

11 United States - Final Countervailing Duty Determination With Respect To Certain Softwood Lumber From Canada, WT/DS257/AB/R, 19 January 2004 at para. 7.125

12 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures.

13 CBSA Final Determination, Statement of Reasons, Outdoor Barbeques Originating in or Exported From the People's Republic of China, December 3, 2004 at para. 75

14 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures

15 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section XVI

16 Article 5 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises

17 Statement of Reasons - Termination of Investigation - Outdoor barbeques originating in or exported from the People's Republic of China, December 3, 2004

18 Article 3 of Provisional Regulation of the People's Republic of China on Enterprises Income Tax

19 Articles 1 and 3 of Provisional Regulation of the People's Republic of China on Enterprises Income Tax

20 Circular of the State Administration of Taxation on the Question Concerning How Enterprises with Foreign Investment Which Concurrently Engage in Productive and Non-Productive Enjoy Preferential Tax Treatment

21 The CBSA is unable to determine for certain the exact number of Chinese exporters of subject goods, including their related enterprises, that received benefits under the identified programs in this appendix as a number of exporters of subject goods failed to provide the necessary information required by the CBSA and/or cooperate during the investigation

22 Ministry of Finance and the State Administration of Taxation on Circular on Interpretation of Related Projects as Set in Article 72 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises

23 The term "enterprise" includes a group of enterprises, an industry and a group of industries

24 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section VIII - Item 7(1)

25 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section VIII - Item 7(5)

26 Official Reply to Problems Concerning Re-investment Drawback of Foreign-Funded Enterprises (Guoshuihanfa [1995] No. 154)

27 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section VIII - Item 7(6)

28 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section V

29 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Sections V and VI

30 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section VII

31 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section XVI

32 Article 5 - Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction

33 Planning for the Construction of Fast-growth-high-yield

34 Article 5 of the Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction

35 In Appendix 3 of the preliminary determination Statement of Reasons, the CBSA identified 15 Chinese exporters that provided a response to the CBSA's RFI. The following companies are now included with "all other exporters from China" as the CBSA was unable to determine specific amounts of subsidy for these companies: Chang Zhou Ouqiang Flooring Factory, Chuzhou Chuzhou Wood Industry Co. Ltd., Danyang City Yate Flooring Co. Ltd., Jilin Forestry Industry Co. Ltd., New Global Trading Co., Shangdong Chenming Panels Co. Ltd., and China World Best/Shanghai Allsun Wood Industry Co. Ltd.

Date Modified: 2005-06-02

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