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OTTAWA, September 14, 2006

4214-11
AD/1353

DECISION

On August 30, 2006, pursuant to paragraph 41(1)(a) of the Special Import Measures Act, the President of the Canada Border Services Agency made a final determination of dumping respecting single or multilayer cross-linked polyethylene tubing in nominal tubing sizes up to and including 1 inch or the metric equivalent, excluding cross-linked polyethylene tubing with an oxygen barrier layer, originating in or exported from the United States of America.

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Cet Énoncé des motifs est également disponible en français. Veuillez vous reporter à la section “Renseignements”.
This Statement of Reasons is also available in French. Please refer to the “Information” section.

TABLE OF CONTENTS

SUMMARY OF EVENTS
PERIOD OF INVESTIGATION
INTERESTED PARTIES
PRODUCT DEFINITION
ADDITIONAL PRODUCT INFORMATION
CANADIAN INDUSTRY
IMPORTS INTO CANADA
INVESTIGATION PROCESS
INVESTIGATION
REPRESENTATIONS AND OTHER ISSUES
DECISION
FUTURE ACTION
RETROACTIVE DUTY ON MASSIVE IMPORTATIONS
PUBLICATION
INFORMATION
APPENDIX 1

STATEMENT OF REASONS

SUMMARY

1. On March 3, 2006, the President of the Canada Border Services Agency (CBSA) initiated an investigation into the alleged injurious dumping of certain cross-linked polyethylene tubing
   (PEX tubing) originating in or exported from the United States of America (United States).
   
   
2. The investigation was initiated in response to a complaint filed by Vanguard Piping Systems (Canada) Inc. (Vanguard) of Mississauga, Ontario, on February 7, 2006. On February 13, 2006, the CBSA informed Vanguard that the complaint was properly documented and notified the government of the United States that a properly documented complaint had been filed. The complainant provided evidence that certain PEX tubing had been dumped, and that the dumping had caused injury to Canadian producers of these goods.
   
   
3. Upon receiving notice of the initiation of the investigation, the Canadian International Trade Tribunal(Tribunal) started its preliminary injury inquiry. On May 2, 2006, the Tribunal made a preliminary determination that the evidence disclosed a reasonable indication that the dumping of certain PEX tubing has caused injury to the Canadian industry.
   
   
4. On June 1, 2006, as a result of the CBSA's preliminary investigation and pursuant to subsection 38(1) of the Special Imports Measures Act (SIMA), the President of the CBSA (President) made a preliminary determination of dumping respecting certain PEX tubing originating in or exported from the United States. For details regarding the basis of the preliminary determination, consult the Statement of Reasons issued on June 16, 2006, which is available on the CBSA Web site at http://www.cbsa-asfc.gc.ca/sima-lmsi/menu-eng.html.
   
   
5. The CBSA continued its investigation and, on the basis of the results, the President is satisfied that certain PEX tubing originating in or exported from the United States have been dumped and that the margins of dumping are not insignificant. Consequently, on August 30, 2006, the President made a final determination of dumping pursuant to paragraph 41(1)(a) of SIMA.
   
   
6. The CBSA continued its investigation and, on the basis of the results, the President is satisfied that certain PEX tubing originating in or exported from the United States have been dumped and that the margins of dumping are not insignificant. Consequently, on August 30, 2006, the President made a final determination of dumping pursuant to paragraph 41(1)(a) of SIMA.
   
   

PERIOD OF INVESTIGATION

7. The investigation covered all subject goods released into Canada during the period of investigation (POI), that is, from January 1, 2005 to December 31, 2005.

INTERESTED PARTIES

Complainant

8. The complainant, Vanguard, is one of the largest Canadian producers of certain PEX tubing. The complainant's headquarters is located at 1205 Matheson Blvd. East in Mississauga, Ontario, while its production facility is located in Burnaby, British Columbia.

Exporters

9. At the time of the initiation of the investigation, the CBSA had identified nine (9) known or possible exporters of the subject goods. A Request for Information (RFI) was sent to all of those nine (9) companies. During the investigation, the CBSA conducted further analysis of customs documentation and other available information, with the refined data indicating that there are eight (8) identified exporters or possible exporters of the subject goods. No responses to the RFI were received from exporters prior to the preliminary determination, although one exporter submitted a statement that it had not exported the subject goods to Canada during the period of investigation. After the preliminary determination, one exporter provided a complete response to the RFI.

Importers

10. When the investigation was initiated, the CBSA identified nineteen (19) known or possible importers of the subject goods. Further analysis after initiation indicated that in total there were eighteen (18) identified importers or possible importers of the subject goods during the POI. Similarly as for the exporters, an RFI was sent to all identified importers or possible importers. Submissions were received from two (2) importers, both of whom are related to exporters. Neither of these two (2) related exporters provided responses to the RFIs that were sent to them. An additional six (6) importer replies were received stating that the respondent had not imported subject goods during the POI.

PRODUCT DEFINITION

11. For the purpose of this investigation, the subject goods are defined as:

    Single or multilayer cross-linked polyethylene tubing in nominal tubing sizes up to and including 1 inch or the metric equivalent, excluding cross-linked polyethylene tubing with an oxygen barrier layer, originating in or exported from the United States of America.

ADDITIONAL PRODUCT INFORMATION

Technical Information

12. The subject goods are commonly referred to as "PEX tubing" in the industry, PEX being an acronym for cross-linked polyethylene. Cross-linking involves the formation of links between individual polyethylene macromolecules to create a single large molecule of polyethylene. The resulting large molecule is resistant to temperature extremes, chemical attack and creep deformation. As a result of these properties, PEX tubing is used in hot and cold potable water distribution systems; potable water being defined as water that meets applicable water quality standards and is safe to be consumed. PEX tubing is primarily designed and marketed to replace the traditional copper systems commonly used in residential and commercial dwellings. PEX tubing is marketed in the same dimensions as copper tubing and is sold in either straight lengths or coils.
    
    
13. For further clarity, for purposes of the investigation the terms "tubing" and "pipe" can be used interchangeably when referring to PEX tubing.
    
    
14. Multilayer PEX tubing, a recent development, provides the same benefits as single layer PEX tubing, with the extra feature of added ultraviolet protection. Single layer PEX tubing degrades quickly if exposed to ultraviolet light (UV) (i.e. sunlight). Through the addition of multiple layers, the multilayer variation of PEX tubing meets the relevant standards for chlorinated, potable water systems after extended UV exposure.
    
    
15. The subject goods exclude PEX tubing with an oxygen barrier layer that resists the passage of oxygen through the wall of the tubing. The oxygen barrier, ethylene vinyl alcohol (EVOH), is applied to the PEX tubing during the extrusion process. Typically used in hydronic radiant heating piping systems, the additional oxygen barrier layer is added to limit the amount of oxygen that can permeate into the system through the tubing, thus preventing rust from forming on any ferrous metal parts. PEX tubing with an oxygen barrier tends to command a significant premium in terms of price, although the relative size of this premium appears to vary depending on the individual manufacturer. It is possible for PEX tubing with an oxygen barrier to be used in potable water applications but, due to the additional cost premium, this is rarely done. It is generally marketed using a very bright red/orange colouring, as opposed to the red, white or blue colouring normally used to market the PEX tubing without an oxygen barrier. In addition, the markings on the excluded tubing are usually distinct from that used on PEX tubing without an oxygen barrier.
    
    
16. PEX tubing is marketed as complying with the American Society for Testing and Materials (ASTM) standards F 876 and F 877, certifying that a given manufacturer's goods have met and/or exceeded performance and toxicological standards, and/or the equivalent NSF, CSA, IAPMO, SBCCI, BOCA, ICBO, IPC, and NSPC standards. Generally, manufacturers market their products in Canada as complying with both the CSA and ASTM standards, as well as having been certified by NSF International.

Production Process

17. PEX tubing is made via one of three processes: the silane method, the irradiation method, or the peroxide procedure method. The finished properties of cross-linked material from all of these production methods are similar and all yield products that are compliant with the appropriate standards. The complainant uses the silane process in manufacturing the goods.
    
    
18. The silane manufacturing process begins with a medium to high-density polyethylene resin. Additives such as colorant and catalysts are mixed with the base resin in exact ratios in a "Hopper". The pre-mixed material is then fed into an extruder, which operates at temperatures of approximately 400 degrees Fahrenheit. Printers are used immediately following extrusion to print all the necessary information on the tubing (such as the trade name and size, date of manufacture, and certifications). Hot extruded pipe is then pulled through a vacuum and cooling tank which brings the tubing to room temperature and finalizes the dimensions of the tubing. A "Haul-Off" is used to "pull" the tubing through the tanks. Depending on the required final product, a cutter will cut the tubing into straight lengths (20 foot lengths are the most common in the industry) or a coiler will be used to create coils (ranging in length from 100 feet to 1,000 feet). Bundles of lengths are subsequently bagged on a bundle table; coils are taped or strapped in place. Coils or straight length bundles are then ready for the cross-linking process, which involves exposing the tubing to heat and moisture (i.e. steam). In summary, the silane method of cross-linking as utilized by the complainant involves the combination of the substrate material, the polyethylene resin, with additives that react when the extruded tubing is exposed to heat and moisture. The resulting chemical reaction ceases when the cross-linking reaches 70-80%.
    
    
19. Apart from the silane method, the irradiation method of cross-linking uses high-energy irradiation directed at the extruded pipe to form the molecular links. The third method of cross-linking, known as the peroxide procedure or, alternatively, as the Engel method, uses heat-activated chemicals that generate free radicals for cross-linking.
    
    
20. Based on the CBSA's own research it appears that at least some PEX tubing manufactured using the peroxide/Engel method has been certified to be used in commercial buildings such as office towers and condominiums, where fire barriers are utilized. PEX tubing manufactured using other production techniques does not appear, as of yet, to have been similarly certified.

CLASSIFICATION OF IMPORTS

21. The subject goods are commonly classified under the following Harmonized System (HS) classification numbers:

    3917.21.00.10
    3917.21.00.30
    3917.31.90.10
    3917.21.00.20
    3917.21.00.90

CANADIAN INDUSTRY

22. Vanguard is one of the major Canadian producers of certain PEX tubing. The goods are produced at its manufacturing facilities in Burnaby, British Columbia. Vanguard has its corporate headquarters in Mississauga, Ontario, and sales offices in Quebec and British Columbia.
    
    
23. Prior to initiation, the CBSA confirmed that the standing requirements of subsection 31(2) of SIMA had been met. There has been no change in the structure of the Canadian industry since the initiation of the investigation.

IMPORTS INTO CANADA

24. During the final phase of the investigation, the CBSA further refined its estimates of the volume of imports from all sources. For this purpose, the CBSA utilized its internal information system, reviewed customs accounting documents and examined information received during the investigation from importers and exporters.
    
    
25. The CBSA's revised statistics regarding importations of subject and like goods, based on information gathered during the final phase of the investigation, are presented in the following table:

Apparent Canadian Imports (2005)

Imports into Canada	Volume (kilograms)	Market Share (%)
United States of America	109,121	70%
All Other Countries	45,666	30%
Total Imports	154,787	100.00%

INVESTIGATION PROCESS

26. At the time of the initiation of the investigation, RFIs respecting dumping were sent to nine (9) exporters in the United States. All RFIs included instructions indicating that exporters who were not also manufacturers were to forward the RFIs to the manufacturers of the goods.
    
    
27. One response to the RFI was received subsequent to the preliminary determination from an exporter who manufactured the subject goods.
    
    
28. Submissions were received from two (2) importers, both of whom are related to exporters. Neither of these two (2) related exporters provided a response to the RFI. An additional six (6) importer replies were received stating that the respondent had not imported subject goods during the period of investigation.

INVESTIGATION

29. In conducting its investigation, the CBSA requested that exporters provide sales and cost information necessary to determine the normal values and export prices of the subject goods.
    
    
30. Normal values are generally based on the domestic selling prices of the goods in the country of export or on the total cost of the goods (cost of production, administrative, selling and all other costs) plus an amount for profit.
    
    
31. The export price of goods shipped to Canada is generally the lesser of the exporter's selling price or the importer's purchase price. When the export price is less than the normal value, the difference is the margin of dumping.
    
    
32. Where information submitted to the CBSA by exporters was found to be substantially complete, such information was used in determining the margins of dumping. The overall margin of dumping for each exporter is 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 are reflected in the determination of the exporter's overall margin of dumping.
    
    
33. In determining the weighted average margin of dumping of a country, the overall margins of dumping found in respect of all exporters are weighted according to the volume of subject goods exported to Canada during the POI.
    
    

Results of the Investigation

34. One exporter located in the United States, Mercury Plastics Inc. (Mercury), provided a complete response to the CBSA's RFI during the final phase of the investigation.
    
    

Mercury Plastics Inc.

35. Mercury, located in Middlefield, Ohio, is a manufacturer and distributor of certain PEX tubing. During the final phase of the investigation, Mercury supplied sales and cost information respecting like goods sold in its domestic market and respecting goods exported to Canada. The information supplied by Mercury was used for the purposes of determining normal values and export prices.
    
    
36. Normal Values - Normal values were determined in accordance with section 15 of SIMA, based on the weighted average domestic selling prices to unrelated customers.
    
    
37. Export Prices - As the goods were sold to an unrelated importer in Canada, export prices were determined in accordance with section 24 of SIMA, on the basis of the lesser of the exporter's selling price and the importer's purchase price.
    
    
38. Margin of Dumping - The normal values were compared with the export prices for all subject goods imported into Canada during the POI. None of the subject goods were found to have been dumped.
    
    

All Other Exporters

39. For exporters of subject goods who did not provide a complete response to the RFI, the normal values and export prices of the goods were determined pursuant to a ministerial specification under section 29 of SIMA. According to the ministerial specification, normal values were based on the export price of the goods plus an advance of 60%, representing the highest margin of dumping (excluding anomalies) found using the best information available to the CBSA.
    
    
40. Due to the extremely small proportion of the total subject goods exported during the POI by the single exporter who provided a response, it was determined that it would be inappropriate to use the information provided by this exporter to determine the normal values of other exporters of subject goods. Accordingly, the best information available was determined to be that provided by the complainant and by the importers who responded to the CBSA's Request for Information, as well as information gleaned from the Customs Commercial System.
    
    

Summary of Results (Dumping)

Country	Dumped Goods as Percentage of Country Imports	Weighted Average Margin of Dumping *	CountryImports as aPercentage ofTotal Import	Dumped Goods as a Percentage of Total Imports
United States of America	99.6%	59.76%	70%	69.7%

* as a percentage of export price

41. 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. The table above indicates that the margin of dumping is not insignificant.
    
    
42. 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.
    
    
43. Details regarding the margins of dumping determined by exporter and country are provided in Appendix 1.
    
    

REPRESENTATIONS AND OTHER ISSUES

44. Following the preliminary determination of dumping, the CBSA received written representations from an exporter regarding the inclusion of single or multilayer cross-linked polyethylene tubing in a nominal tubing size of 1 inch (1 inch PEX tubing). The exporter contended that, based on its examination of the non-confidential information related to the investigation, no evidence had been included in the complaint that would specifically indicate that 1 inch PEX tubing had been dumped. Due to this lack of evidence, the exporter felt that it was unreasonable to expect the exporter to respond to the RFI and that the product definition should not include 1 inch PEX tubing.
    
    
45. While the complaint did not include supporting information specifically indicating 1 inch PEX tubing as having been dumped (primarily due to the small market share of 1 inch PEX tubing relative to the total Canadian market for the subject and like goods), the allegations of dumping included the 1 inch PEX tubing. If the Tribunal determines, in an injury inquiry, that dumped or subsidized imports have caused or threaten to cause material injury to a domestic industry, the Tribunal has, pursuant to the SIMA, the discretion to exclude products which would otherwise be subject to a finding or an order. This is therefore a matter that should properly be put before the Tribunal, and the exporter was advised accordingly.
    
    
46. The CBSA also received representations from the complainant regarding the import statistics that had been used for the preliminary determination. The complainant contended that these import statistics understated the relative size of imports of subject goods relative to total imports of all subject and like goods.
    
    
47. The vast majority of the goods imported under the relevant HS classifications are polyethylene and high-density polyethylene pipe and tubing (i.e. non-subject goods) that are intended for agricultural, industrial, oil-related, or other applications. In order to attain a reasonable estimate of the quantity of imports of subject goods, the CBSA refined its import statistics for goods originating in or exported from the United States to reflect only the subject goods. This refinement reduced the volumes of potentially subject goods from an original 125,240,048 kilograms to 2,960,827 kilograms by the time of initiation, and to 109,121 kilograms by the time of the preliminary determination. Following this refinement, the volume of dumped goods from the United States was found to be above 3% of the total imports, and, therefore, not negligible. Consequently, importations from other countries were not adjusted in a similar manner at the time of the preliminary determination, and all imports of goods falling under the relevant HS codes from these countries were treated as PEX tubing. The end result of this adjustment was to reduce the relative quantity of imports of subject goods from the United States, thus resulting in a more conservative estimate of the United States' share of total imports. Following the preliminary determination, the CBSA continued to review the import data, particularly regarding other countries, and further refined the import statistics for purposes of the final determination. The result of this refinement has been to reduce the volumes of like goods imported into Canada from other countries and thereby increase the United States' share of total imports of subject and like goods.
    
    

DECISION

48. On the basis of the results of the investigation, the President is satisfied that certain cross-linked polyethylene tubing originating in or exported from the United States has been dumped and that the margin of dumping is not insignificant. Consequently, on August 30, 2006, the President made a final determination of dumping pursuant to paragraph 41(1)(a) of SIMA.

FUTURE ACTION

The Canada Border Services Agency

49. The provisional period began on June 1, 2006, and will end on the date the Tribunal issues it's finding. The Tribunal is expected to issue its decision by September 29, 2006. Subject goods imported during the provisional period will continue to be assessed provisional duty as determined at the time of the preliminary determination of dumping. For further details on the application of provisional duty, refer to the Statement of Reasons issued for the preliminary determination of dumping, which is available on the CBSA Web site at http://www.cbsa-asfc.gc.ca/sima-lmsi/menu-eng.html.
    
    
50. If the Tribunal finds that the dumped 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.
    
    
51. If the Tribunal finds that the dumped goods have caused injury, the anti-dumping 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. 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 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.

RETROACTIVE DUTY ON MASSIVE IMPORTATIONS

52. Under certain circumstances, anti-dumping duty 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 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 goods that caused injury, imports of subject goods released by the CBSA in the 90 days preceding the day of the preliminary determination could be subject to anti-dumping duty.

PUBLICATION

53. A notice of this final determination of dumping will be published in the Canada Gazette pursuant to paragraph 41(3)(a) of SIMA.

INFORMATION

54. 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 Alex Lawton, Matthew Lerette, or Jean-Louis Lapratte as follows:
    
    

Mail	Canada Border Services Agency Anti-Dumping and Countervailing Program 100 Metcalfe Street, 11th Floor Ottawa, Ontario K1A 0L8 Canada
Telephone	Alex Lawton            613-954-7410 Matthew Lerette      613-954-7398 Jean-Louis Lapratte 613-954-7375
Fax	613-948-4844
Web site	http://www.cbsa-asfc.gc.ca/sima

Darwin Satherstrom
Acting Director General
Trade Programs Directorate

Attachment

Appendix 1

CERTAIN CROSS-LINKED POLYETHYLENE TUBING
MARGINS OF DUMPING BY EXPORTER/COUNTRY

Country of Origin/Exporter	Volume of Goods Dumped (Percentage)	Range of Margins of Dumping for Dumped Imports1	Weighted Average Margin of Dumping1
United States of America
Mercury Plastics Inc.	0%	-	0%
All Other Exporters2	100%	-	60%
Total/Average	99.6%	-	59.76%

1. As a percentage of export price
2. Margin of dumping based on best information available