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OTTAWA, September 27, 2011

Dumping case number: AD/1390
Dumping file number: 4214-31

Subsidy case number: CV/127
Subsidy file number: 4218-30

STATEMENT OF REASONS

Concerning the initiation of investigations into the dumping and subsidizing of

CERTAIN PUP JOINTS ORIGINATING IN OR EXPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA

DECISION

Pursuant to subsection 31(1) of the Special Import Measures Act, the President of the Canada Border Services Agency initiated investigations on September 12, 2011, respecting the alleged injurious dumping and subsidizing of oil country tubular goods pup joints, made of carbon or alloy steel, welded or seamless, heat-treated or not heat-treated, regardless of end finish, having an outside diameter from 2 3/8 inches to 4 1/2 inches (60.3 mm to 114.3 mm), in all grades, in lengths from 2 feet to 12 feet (61 cm to 366 cm) originating in or exported from the People's Republic of China.

For a PDF version of the Statement of Reasons, please click on the following link.

Cet Énoncé des motifs est également disponible en français. Veuillez consulter la section "Information".

This Statement of Reasons is also available in French. Please refer to the "Information" section.

TABLE OF CONTENTS

 

SUMMARY

  1. On July 22, 2011, the Canada Border Services Agency (CBSA) received a written complaint from Alberta Oil Tool (AOT), a division of Dover Corporation (Canada) Limited of Edmonton, Alberta, (hereafter, “the Complainant”) alleging that imports of certain pup joints originating in or exported from the People's Republic of China (China) are being dumped and subsidized and causing injury to the Canadian industry.

  2. On August 12, 2011, pursuant to subsection 32(1) of the Special Import Measures Act (SIMA), the CBSA informed the Complainant that the complaint was properly documented. The CBSA also notified the government of China (GOC) that a properly documented complaint had been received and provided the GOC with the non-confidential version of the subsidy portion of the complaint, which excluded sections dealing with normal value, export price and margin of dumping.

  3. The Complainant provided evidence to support the allegations that certain pup joints from China have been dumped and subsidized. The evidence also discloses a reasonable indication that the dumping and subsidizing have caused injury and are threatening to cause injury to the Canadian industry producing these goods.

  4. On September 9, 2011 consultations were held with the GOC in Ottawa pursuant to Article 13.1 of the Agreement on Subsidies and Countervailing Measures. During these consultations, China made representations with respect to its views on the evidence presented in the non-confidential version of the subsidy portion of the complaint.

  5. On September 12, 2011, pursuant to subsection 31(1) of SIMA, the President of the CBSA (President) initiated investigations respecting the dumping and subsidizing of certain pup joints from China.

INTERESTED PARTIES

Complainant

  1. The Complainant accounts for a major proportion of the production of like goods in Canada. The Complainant's goods are produced at manufacturing facilities in Edmonton, Alberta.

  2. The name and address of the Complainant are:

    Dover Corporation (Canada) Limited – Alberta Oil Tool Division
    9530 – 60th Avenue
    Edmonton, Alberta
    T6E 0C1

  3. Of the other producers certified to produce the like goods in Canada, only Tenaris Canada (Tenaris), of Sault Ste. Marie, Ontario, confirmed to be currently manufacturing them. Tenaris produces like goods which are premium pup joints in relatively small quantities and provided a letter supporting the complaint filed by Dover Corporation (Canada) Limited.

Exporters

  1. The CBSA identified 109 potential exporters and producers of the subject goods from its own research, information provided by the Complainant and CBSA import documentation over the period of July 1, 2010 to June 30, 2011.

Importers

  1. The CBSA identified 17 potential importers of the subject goods from information provided by the Complainant and CBSA import documentation over the period of July 1, 2010 to June 30, 2011.

Government of China

  1. For the purpose of these investigations, “Government of China” refers to all levels of government, i.e. federal, central, provincial/state, regional, municipal, city, township, village, local, legislative, administrative or judicial, singular, collective, elected or appointed. It also includes any person, agency, enterprise, or institution acting for, on behalf of, or under the authority of any law passed by, the government of that country or that provincial, state or municipal or other local or regional government.

PRODUCT INFORMATION

Definition

  1. For the purpose of these investigations, the subject goods are defined as:

    Oil country tubular goods pup joints, made of carbon or alloy steel, welded or seamless, heat-treated or not heat-treated, regardless of end finish, having an outside diameter from 2 3/8 inches to 4 1/2 inches (60.3 mm to 114.3 mm), in all grades, in lengths from 2 feet to 12 feet (61 cm to 366 cm) originating in or exported from the People's Republic of China.

Additional Product Information

  1. Pup joints are oil country tubular goods (OCTG) made from carbon or alloy steel pipes used for the exploration and exploitation of oil and natural gas. These pipes may be made by the electric resistance welded (ERW) or seamless production method, and are supplied to meet American Petroleum Institute (API) specifications 5CT or equivalent standard.1

  2. Pup joints are primarily used for the purpose of adjusting the depth of strings or down hole tools, particularly where exact depth readings in a well are required for any given purpose, such as setting valves, packers, nipples or circulating sleeves. Pup joints are also used with down hole pumps. The number and lengths of pup joints may vary widely from well to well, depending on the various equipment and performance requirements established by engineers of the purchasing end users.

  3. Pup joints may range from 2 feet to 12 feet in length with a permitted tolerance of plus or minus three inches. The sizes are generally 2, 4, 6, 8, 10 and 12 feet in length.

  4. The pipe is produced in accordance with API 5CT, and may be produced using either seamless or welded (ERW) OCTG. While pup joints may be made with ERW, the Canadian market employs predominantly seamless OCTG. All pup joints produced by the Complainant are seamless products.2

  5. The pup joints subject to these investigations are, by virtue of the outside diameter range, essentially short lengths of OCTG tubing.

  6. Theoretically, subject pup joints may be supplied to meet any grade including and not limited to, H40, J55, K55, M65, N80, L80, L80 HC, L80 Chrome 13, L80 LT, L80 SS, C90, C95, C110, P110, P110 HC, P110 LT, T95, T95 HC, and Q125, or proprietary grades manufactured as substitutes for these specifications. The most common demand in the Canadian market is for J55 or L80 specifications.

  7. The grade numbers define the minimum yield strength required of the grade in kilo-pounds [force] per square inch (“ksi” or 1,000 pounds per square inch). Pup joints may also be made to proprietary specifications. The Complainant makes or has the capability to produce pup joints in any of these grades.

  8. As with all OCTG, a standard pup joint must be able to withstand outside pressure and internal yield pressures within the well. Also, it must have sufficient joint strength to hold its own weight and must be equipped with threads sufficiently tight to contain the well pressure where lengths are joined.

  9. There is a small market segment for perforated pup joints. These are pup joints with holes in the body of the pup joint (usually 3/8 inch though they may have holes or slots of various sizes in the body). The product is produced with API 5CT tubing, though once perforated the product no longer conforms to an API 5CT specification, since it no longer meets the yield strength requirements. Perforated pup joints are employed to allow fluids to enter the production tubing. They can also be used to create a mud anchor. Perforated pup joints are included as goods subject to these investigations.

  10. On March 23, 2010, the Canadian International Trade Tribunal (Tribunal) excluded ‘pup joints' as part of its finding in Inquiry No. NQ-2009-004 on Certain Oil Country Tubular Goods. In that finding, the Tribunal stated:

    “The Tribunal hereby excludes pup joints, seamless or welded, heat-treated or not heat-treated, in lengths of up to 3.66 m (12 feet), from its injury finding.”3

  11. Consequently, the current investigation includes goods under the scope of goods excluded by the Tribunal in that finding.

Production Process

  1. Pup joints are manufactured in Canada by the Complainant using plain end tube as an input. For J55 grade pup joints, a length of J55 OCTG tubing is employed. For L80 grade pup joints, the input is an A-519 mechanical tube with the appropriate steel chemistry for L80 OCTG. The L80 input tube does not qualify for the API 5CT designation until it has been tested in accordance with API requirements. The Complainant performs the testing required.

  2. The Complainant acquires the input tubes for all its pup joints through arms length suppliers.

  3. The production process of the input pipe itself is virtually identical to that employed for OCTG tubing and casing. There are, however, significant subsequent costs associated with transforming the input tubing into pup joints including: cutting to length, end finishing, threading, and testing to meet the certification required.

  4. For J55 pup joints, the Complainant produces an upset end by heating (upset forging) and butting to thicken the end of the pipe diameter for threading. J55 tubing is cut 8 inches longer than the required pup joint length to accommodate this process. In the case of L80 pup joints, the production process uses profiling rather than upset ends, and accordingly only 1/4 inch of additional length is needed to accommodate finishing. Profiling refers to machining the pipe towards the ends of the pipe so it is thicker at the far ends. This process is used instead of upsetting because upsetting a pipe with steel chemistry for an L80 grade would require the producer to heat-treat the pipe again.

  5. Testing includes drift testing which is an assessment of the straightness within the hollow part of the tube, to ensure no bends or kinks exist after the pup joint was forged, and hydrostatic testing which assesses the pup joint's ability to withstand internal pressure.4

  6. For further information on the production process of the input tubes, see the CBSA's Initiation Statement of Reasons for Certain Oil Country Tubular Goods.

Classification of Imports

  1. The subject goods are usually classified under the following Harmonized System (HS) classification codes:

    • 7304.29.00.51
    • 7304.29.00.59
    • 7304.29.00.61
    • 7304.29.00.69
    • 7304.29.00.71
    • 7304.29.00.79

     

  1. The listing of HS codes is for convenience of reference only. The HS codes listed may include non-subject goods. Also, subject goods may fall under HS codes that are not listed. Refer to the product definition for authoritative details regarding the subject goods.

LIKE GOODS

  1. Subsection 2(1) of SIMA defines “like goods”, in relation to any other goods, as goods that are identical in all respects to the other goods, or in the absence of identical goods, goods for which the uses and other characteristics closely resemble those of the other goods.

  2. Pup joints produced by the domestic industry compete directly with and have the same end uses as the subject goods imported from China. The goods produced in Canada and China are completely substitutable. Therefore, the CBSA has concluded that the pup joints produced by the Canadian industry constitute like goods to the subject goods. Pup joints can be considered as a single class of goods notwithstanding that the subject goods may be further differentiated in terms of seamless or welded.

  3. The Tribunal has previously found that seamless OCTG and welded OCTG are not separate classes of goods (see: Certain Seamless Steel Casing NQ-2001-001 and Certain Oil Country Tubular Goods, NQ-2009-04).5

THE CANADIAN INDUSTRY

  1. As previously stated, the Complainant accounts for the major proportion of known domestic production of like goods.

Standing

  1. SIMA requires that the following conditions be met in order to initiate an investigation:

    • the complaint is supported by domestic producers whose production represents more than fifty per cent of the total production of like goods by those domestic producers who express either support for or opposition to the complaint; and
    • the production of the domestic producers who support the complaint represents twenty-five per cent or more of the total production of like goods by the domestic industry.

  1. Based on an analysis of information provided in the complaint, as well as other information gathered by the CBSA, the CBSA is satisfied that the standing requirements of subsection 31(2) of SIMA have been met by the Complainant.

CANADIAN MARKET

  1. All pup joints sold by the Complainant are sold to oilfield supply distributors who in turn sell the products to end users. The Complainant makes some sales directly to large volume end users and specialty manufacturing companies that require the product in conjunction with their own manufactured products (i.e. down hole pumps and wellheads).6

  2. The Complainant estimated the import portion of the Canadian market using the best information available to them, recognizing that there is no publicly available information which segregates pup joints from the larger category of products which are oil country tubular goods.

  3. The Complainant's commercial intelligence indicates that China and the United States are the only countries that export commercially significant quantities of pup joints to Canada.

  4. The Complainant provided estimates respecting the Canadian market for pup joints. These figures are based on their own domestic sales reports and on publicly available import data.

  5. The CBSA conducted its own analysis of imports of goods based on actual import data from CBSA documentation.

  6. A review of CBSA import data demonstrated similar trends with respect to subject good imports to those provided by the Complainant.

  7. Detailed information regarding the volume of subject imports and domestic production cannot be divulged for confidentiality reasons. The CBSA has, however, prepared the following table to show the estimated import share of certain pup joints in Canada.

CBSA Estimates of Import Share
(By Volume)

Country 2008 2009 2010 Q1-Q2
2011
Imports China 50.59% 92.59% 86.49% 92.71%
Imports U.S.A. 21.66% 3.25% 5.92% 3.19%
Other Country Imports 27.75% 4.16% 7.59% 4.09%
Total Imports 100% 100% 100% 100%

EVIDENCE OF DUMPING

  1. The Complainant alleged that subject goods from China have been injuriously dumped into Canada. Dumping occurs when the normal value of the goods exceeds the export price to importers in Canada. The Complainant provided information to support the allegation that the OCTG sector in China, which includes pup joints, may not be operating under competitive market conditions and as such, normal values should be determined under section 20 of SIMA. This included reference to the CBSA's previous section 20 determinations in respect of its Certain Seamless Steel Casing and Certain Oil Country Tubular Goods final determinations on February 7, 2008 and February 22, 2010 respectively.

  2. Normal values are generally based on the domestic selling price of like goods in the country of export where competitive market conditions exist, or on the full cost of the goods plus a reasonable amount for profit. If there is sufficient reason to believe that conditions described in section 20 of SIMA exist in the sector under investigation, normal values will be determined, where such information is available, on the basis of the domestic price or cost of the like goods sold by producers in any country designated by the President and adjusted for price comparability; or the selling price in Canada of like goods imported from a designated country and adjusted for price comparability.

  3. The export price of goods sold to importers in Canada is generally the lesser of the exporter's selling price and the importer's purchase price, less all costs, charges, and expenses resulting from the exportation of the goods.

  4. Estimates of normal value and export price are discussed below.

Normal Value

  1. The Complainant provided information supporting a request that a section 20 inquiry be initiated in investigating their allegation of injurious dumping of the subject goods. Due to the lack of available information and because they believe that the conditions of section 20 exist, the Complainant did not provide any analysis regarding the domestic selling price of pup joints in China.

  2. The Complainant proposed that the CBSA use the United States as a surrogate country. Reference was made to the previous Certain Oil Country Tubular Goods investigation where normal values were determined under a methodology that used selling prices of OCTG in the United States as a basis. The complaint further referred to this previous investigation as its justification given the size comparability between the United States and China as both producers and consumers of OCTG.7

  3. Accordingly, the Complainant provided cost-based normal value estimates that considered their own cost of production, with downwards adjustments aimed to moderate the impact labour has on normal values, such that the resulting normal value is appropriately conservative and not inflated.8 The estimated full cost of the goods (including selling and administrative expenses) was then marked-up with an estimated amount for profit, using publicly available consolidated financial statements of an OCTG producer with production facilities in multiple countries.

  4. Estimated normal values were provided for models of pup joints that represent a major proportion of goods normally sold in Canada by the Complainant. The CBSA also noted that these products represented just over 50% of the specific products (i.e. matching grade, outside diameter and length) imported during the POI on a value basis.

  5. The CBSA also estimated normal values using a cost-based methodology as described above.

  6. The CBSA took information provided by the Complainant in respect of the relevant cost factors and made only minor adjustments. The costs associated with the direct material component of the normal value methodology were found to be acceptable. Invoices of pipe purchases from the Complainant's suppliers aided in verifying the cost of materials presented in the normal value calculations.9 The CBSA reduced the Complainant's factory overhead cost estimates in light of the company's low capacity utilization rates.10 The resulting costs formed the basis for the CBSA's normal value estimates.

  7. The CBSA added to these costs the estimated amount for profit as calculated by the Complainant. This amount was found to be reasonable as a review of publicly available information for several OCTG producers worldwide by the CBSA revealed that a profit margin as used by the Complainant was consistent with these findings.11

Export Price

  1. The export price of imported goods is generally determined in accordance with section 24 of SIMA as being an amount equal to the lesser of the exporter's selling price for the goods and the price at which the importer has purchased or agreed to purchase the goods adjusting by deducting all costs, charges, and expenses, duties and taxes resulting from the exportation of the goods.

  2. The Complainant used a deductive methodology to estimate export prices, beginning with a price they allegedly had to compete with on prospective sales to Canadian customers. The Complainant provided evidence in their complaint to support these competing prices.12

  3. The Complainant essentially deducted from these prices an estimate of the expenses that this price would have to cover, in order to work their way back to an FOB China mill price. Such expenses include the commission earned by the distributor on the sale in Canada and the applicable freight charges, including ocean freight and inland delivery costs. The Complainant also provided documentation and explanations to support these estimates.13

  4. The CBSA's calculation of export prices considered imports during the POI of July 1, 2010 to June 30, 2011. Actual import data was retrieved and refined through a review of ACROSS entries and consequently, the information used by the CBSA for its estimate is more comprehensive than what was available to the Complainant.14 Export prices were established for every subject good transaction during the POI.

  5. Given the greater accuracy of the CBSA's estimate of export prices using actual import data, the CBSA's margin of dumping estimate incorporated export price estimates using this data.

Estimated Margins of Dumping

  1. The CBSA estimated margins of dumping by comparing its estimates of normal values (based on the cost-plus methodology), with the export prices obtained from actual CBSA import data.

  2. Based on this analysis, it is estimated that the subject goods from China were dumped. The overall weighted average margin of dumping is estimated to be 32.4%, expressed as a percentage of export prices.

MARGIN OF DUMPING AND VOLUME OF DUMPED GOODS

  1. Under section 35 of SIMA, if, at any time before the President makes a preliminary determination, the President is satisfied that the margin of dumping of the goods of a country is insignificant or the actual and potential volume of dumped goods of a country is negligible, the President must terminate the investigation with respect to that country.

  2. Pursuant to subsection 2 (1) of SIMA, a margin of dumping of less than 2% of the export price is defined as insignificant and a volume of dumped goods is considered negligible if it accounts for less than 3% of the total volume of goods that are released into Canada from all countries that are of the same description as the dumped goods.

  3. On the basis of the estimated margin of dumping and the import data for the period of July 1, 2010 to June 30, 2011, summarized in the table below, the estimated margin of dumping is not insignificant and the estimated volume of dumped goods is not negligible.

Estimated Margin of Dumping and Imports of Subject Pup Joints
July 1, 2010 to June 30, 2011

Country Estimated share of Total Imports by volume Estimated Dumped Goods as % of Total Imports by volume Estimated Margin of Dumping as % Export Price
China 88.9% 77.2% 32.4%
USA 5.8% N/A* N/A*
Other 5.3% N/A* N/A*
Total Imports 100% N/A* N/A*
*N/A indicates Not Applicable.

 

SECTION 20 INQUIRY

  1. Section 20 is a provision of SIMA that may be applied to determine the normal value of goods in a dumping investigation where certain conditions prevail in the domestic market of the exporting country. In the case of a prescribed country under paragraph 20(1)(a) of SIMA,15 it is applied where, in the opinion of the President, the government of that country substantially determines domestic prices and there is sufficient reason to believe that the domestic prices are not substantially the same as they would be in a competitive market.

  2. The Complainant alleged that the conditions described in section 20 prevail in the OCTG sector in China, which includes pup joints. That is, the Complainant alleges that this industry sector in China does not operate under competitive market conditions and consequently, prices established in the Chinese domestic market for pup joints are not reliable for determining normal values.

  3. The Complainant has relied heavily on the CBSA's final determinations on Certain Seamless Steel Casing and Certain Oil Country Tubular Goods in support of this position. The Complainant has also cited more specific items such as the extensive state ownership in the Chinese steel industry and China's National Steel Policy (NSP).16

  4. [69] The information currently available to the CBSA indicates that there are numerous GOC industrial policies that have been implemented which influence the steel sector in China, including the OCTG sector. In previous section 20 inquiries, the GOC's National Steel Policy and the 2009 Steel Revitalization/Rescue Plan have been found to strongly influence the decisions of steel enterprises in China.

  5. The President of the CBSA has issued several recent decisions, forming the opinion that the conditions set forth in section 20 exist in the sectors covering the following steel products in China:

    • Certain Hot-rolled steel plate (2007 & 2010);
    • Certain Hot-rolled steel sheet and strip (2005, 2007 & 2010);
    • Certain Seamless steel casing (2008);
    • Certain Carbon steel welded pipe (2008 & 2011); and
    • Certain Oil Country Tubular Goods (2010)

  1. With respect to the OCTG sector, which includes pup joints, the CBSA has information which demonstrates that the prices of OCTG products may be significantly affected by the GOC's actions and as a result, prices of OCTG in China may not be substantially the same as they would be if they were determined in a competitive market.

  2. Consequently, on September 12, 2011, the CBSA initiated a section 20 inquiry based on the information available in order to determine whether the conditions set forth in paragraph 20(1)(a) of SIMA prevail in the OCTG sector, which includes pup joints, in China. A section 20 inquiry refers to the process whereby the CBSA collects information from various sources so that the President may, on the basis of this information, form an opinion regarding the presence of the conditions described under section 20 of SIMA, in the sector under investigation.

  3. As part of this section 20 inquiry, the CBSA sent section 20 questionnaires to all known exporters and producers of OCTG in China, as well as to the GOC requesting detailed information related to the OCTG sector which includes pup joints in China. In addition, the CBSA requested that producers in other countries, who are not subject to the present investigation, provide domestic pricing and costing information concerning pup joints.

  4. In the event that the President forms the opinion that domestic prices of pup joints in China are substantially determined by the GOC and there is sufficient reason to believe that the domestic prices are not substantially the same as they would be if they were determined in a competitive market, the normal values of the goods under investigation will be determined, where such information is available, on the basis of the domestic price or cost of the like goods sold by producers in any country designated by the President and adjusted for price comparability; or the selling price in Canada of like goods imported from a designated country and adjusted for price comparability.

EVIDENCE OF SUBSIDIZING

  1. In accordance with section 2 of SIMA, a subsidy exists where 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 World Trade Organization (WTO) Agreement, that confers a benefit.

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

    1. practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities;
    2. 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;
    3. the government provides goods or services, other than general governmental infrastructure, or purchases goods, or;
    4. the government permits or directs a non-governmental body to do any thing referred to in any of paragraphs (a) to (c) above 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.

  1. 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." Any subsidy which is contingent, in whole or in part, on export performance or on the use of goods that are produced or that originate in the country of export is considered to be a prohibited subsidy and is, therefore, automatically considered to be specific for the purposes of a subsidy investigation.

  2. A state-owned enterprise (SOE) may be considered to constitute “government” for the purposes of subsection 2(1.6) of SIMA if it possesses, exercises, or is vested with, governmental authority. Without limiting the generality of the foregoing, the CBSA may consider the following factors as indicative of whether the SOE meets this standard: 1) the SOE is granted or vested with authority by statute; 2) the SOE is performing a government function; 3) the SOE is meaningfully controlled by the government; or some combination thereof.

  3. In accordance with subsection 2(7.3) of SIMA, notwithstanding that a subsidy is not specific in law, a subsidy may also be considered specific in fact, having regard as to whether:

    1. there is exclusive use of the subsidy by a limited number of enterprises;
    2. there is predominant use of the subsidy by a particular enterprise;
    3. disproportionately large amounts of the subsidy are granted to a limited number of enterprises; and
    4. the manner in which discretion is exercised by the granting authority indicates that the subsidy is not generally available.

  1. 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 countervailable.

  2. The Complainant alleged that the subject goods originating in China have benefited from actionable subsidies provided by various levels of the GOC, which may include the governments of the respective provinces in which the exporters are located, and from the governments of the respective municipalities in which the exporters are located. In support of their allegations, the Complainant provided documents such as CBSA's Statements of Reasons for various investigations,17 a United States countervailing duty investigation,18 and other media sources and reports.19

  3. Due to the history and timeliness of CBSA countervailing investigations against Chinese steel products, the Complainant relied largely on the information available from these cases in identifying programs they believe may be actionable under SIMA.

Programs Being Investigated

  1. In reviewing the information provided by the Complainant and obtained by the CBSA through its own research, the CBSA has developed the following categories of programs and incentives that may be provided to manufacturers of the subject goods in China:

    1. Special Economic Zones (SEZ) and other Designated Areas Incentives;
    2. Grants;
    3. Equity Programs;
    4. Preferential Loan Programs;
    5. Preferential Income Tax Programs;
    6. Relief from Duties and Taxes on Materials and Machinery;
    7. Reduction in Land Use Fees; and
    8. Goods/Services Provided by the Government at Less than Fair Market Value.

  1. A full listing of all programs to be investigated by the CBSA may be found in Appendix 1. As explained in more detail therein, there is sufficient reason to believe that these programs may constitute actionable subsidies provided by the GOC and that the exporters and producers of the subject goods benefit from these programs.

  2. In the case of programs where an enterprise's eligibility or degree of benefit is contingent upon export performance or the use of goods that are produced or originate in the country of export, such programs may constitute prohibited subsidies under SIMA.

  3. For those programs where incentives are provided to enterprises operating in specified areas such as the Pudong New Area of Shanghai or Special Economic Zones, the CBSA considers that these may constitute actionable subsidies for the reason that eligibility is limited to enterprises operating in such regions.

  4. As well, the CBSA is satisfied that there is sufficient evidence indicating that the exporters of subject goods may receive subsidies in the form of grants, preferential loans, relief from duties or taxes, and provision of goods and services, which provide a benefit and that are not generally granted to all companies in China.

  5. The CBSA will investigate whether such programs constitute actionable subsidies.

Programs Not Being Investigated

  1. The following 11 grant programs, which were identified by the Complainant and previously investigated by the CBSA, were found to not be relevant to the pup joints investigation. The reason for their lack of relevance is that none of the exporters identified for this investigation are located in regions that would allow them to qualify for these subsidies. The affected programs are as follows:

    • Accelerated Depreciation on Fixed Assets in Binhai New Area of Tianjin
    • Supportive Fund Provided by the Government of Xuyi County, Jiangsu Province
    • Five Points, One Line Strategy in Liaoning Province
    • Changzhou Qishuyan District Environmental Protection Fund
    • Changzhou Technology Plan
    • Enterprise Innovation Award of Qishuyan District
    • Jiangdu City Industrial Economy Performance Award
    • Income Tax Refund for Enterprises Located in Tianjin Jinnan Economic Development Area
    • Enterprise Technology Centers of Tianjin City and Jinnan District
    • Grant – Gaocun Government
    • Grant – Wengeng Government

  1. The above-mentioned programs will not be investigated by the CBSA unless sufficient information is provided to justify their investigation. In this respect, the CBSA may further examine location-specific subsidy programs in the event that such programs are found in the areas where the identified pup joints producers are located.

Additional Programs to be Investigated

  1. Following from the additional programs identified by the Complainant through the United States Department of Commerce (USDOC) investigation on pressure pipes, the CBSA will also investigate the following programs:

    • Deed Tax Exemptions for Land Transferred through Merger or Restructuring
    • Coke Provided by Government at Less than Fair Market Value
    • Exemption of VAT on Purchases of Equipment

DEED TAX EXEMPTIONS FOR LAND TRANSFERRED THROUGH MERGER OR RESTRUCTURING

  1. Under this program, benefits may be received when new enterprises are formed through the merging or restructuring of companies which results in land being transferred to the new company from former SOEs involved in the merger or restructuring. The company is subsequently exempt from paying taxes on the land, which represents a financial contribution in the form of forgone revenue for the government.20

COKE PROVIDED BY GOVERNMENT AT LESS THAN FAIR MARKET VALUE

  1. Under this program, the GOC's export restraints on coke result in a financial benefit to downstream producers that use coke in their steel production, as the price of coke is ultimately suppressed through the excess supply on the domestic market, resulting in a provision of goods by the government at less than fair market value.21

EXEMPTION OF VAT ON PURCHASES OF EQUIPMENT

  1. Under this program, producers receive VAT refunds on purchases of equipment. Eligibility for this program is restricted to a small number of industries. The program is only available to 26 municipalities covering six provinces in the Central Region of China. The exemptions under this program constitute a financial contribution in the form of revenue forgone by the government that is otherwise due, conferring a benefit upon the recipient in the form of the amount of the VAT exemption.22

Conclusion

  1. Sufficient evidence is available to support the allegation that the subsidy programs outlined in Appendix 1 are available to exporters and producers of the subject goods in China. In investigating these programs, the CBSA has requested information from the GOC, exporters and producers to determine whether these programs are “actionable subsidies” and, therefore, countervailable under SIMA.

Estimated Amount of Subsidy

  1. The Complainant alleged that these programs significantly lower the cost of production of the subject goods; however, the Complainant was unable to accurately assess the value of the alleged subsidies on a per-unit basis, due to a scarcity of available information.

  2. For purposes of this initiation, the CBSA estimated the amount of subsidy conferred to producers of the subject goods by comparing their cost of production, as estimated by the CBSA, with the average selling prices of subject goods sold to Canada.

  3. The CBSA's analysis of the information indicates that goods imported into Canada during the period of January 1, 2010 to June 30, 2011, were subsidized and that the estimated amount of subsidy is 13.3% of the export price of the subject goods.

AMOUNT OF SUBSIDY AND VOLUME OF SUBSIDIZED GOODS

  1. Under section 35 of SIMA, if, at any time before the President makes a preliminary determination, the President is satisfied that the amount of subsidy on the goods of a country is insignificant or the actual and potential volume of subsidized goods of a country is negligible, the President must terminate the investigation with respect to that country. Under subsection 2(1) of SIMA, an amount of subsidy of less than 1% of the value of the goods is considered insignificant and a volume of subsidized goods of less than 3% of total imports is considered negligible, the same threshold for the volume of dumped goods.

  2. However, according to section 41.2 of SIMA, the President is required to take into account Article 27.10 of the WTO Agreement on Subsidies and Countervailing Measures when conducting a subsidy investigation. This provision stipulates that a countervailing duty investigation involving a developing country should be terminated as soon as the authorities determine that the overall level of subsidies granted upon the product in question does not exceed 2% of its value calculated on a per unit basis or the volume of subsidized imports represents less than 4% of the total imports of the like product in the importing Member.

  3. SIMA does not define or provide any guidance regarding the determination of a “developing country” for purposes of Article 27.10 of the WTO Agreement on Subsidies and Countervailing Measures. As an administrative alternative, the CBSA refers to the Development Assistance Committee List of Official Development Assistance Recipients (DAC List of ODA Recipients) for guidance.23 As China is included in the listing, the CBSA will extend developing country status to China for purposes of this investigation.

  4. The CBSA used actual import data for all countries for the period of January 1, 2010 to June 30, 2011. On the basis of this information, the volume of subsidized goods as a percentage of the volume of total imports is estimated as follows:

Estimated Amount of Subsidy
January 1, 2010 to June 30, 2011

Country Percentage of Total Imports Estimated Subsidized Goods as % of Country Total Estimated Subsidized Goods as % of Total Imports Estimated Amount of Subsidy as % of Export Price
China 89.5% 70.3% 62.8% 13.3%

  1. The volume of subsidized goods, estimated to be 62.8% of total imports from all countries, is greater than the threshold of 4% and is therefore not considered negligible. The amount of subsidy, estimated to be 13.3% of the export price, is greater than the threshold of 2% and is therefore not considered insignificant.

EVIDENCE OF INJURY

  1. SIMA refers to material injury caused to the domestic producers of like goods in Canada. The CBSA has accepted that the pup joints produced by the Complainant are like goods to those imported from China. The CBSA's analysis primarily included information on the Complainant's domestic sales, with a focus on the impact of the allegedly dumped and subsidized goods on their production and sale of like goods in Canada.

  2. The Complainant alleged that the subject goods have been dumped and subsidized and that such dumping and subsidizing has caused and is threatening to cause material injury to the pup joint industry in Canada. In support of its allegations, the Complainant provided evidence of increased volumes of dumped and subsidized goods, lost sales, price erosion, price suppression, lost revenues, reduced gross margins, reduced profitability, loss of market share, loss of employment, reduced returns on investment, and underutilization of capacity.

  3. The complaint cited the increase in subject welded casing/tubing immediately following the Tribunal finding on Certain Seamless Steel Casing, which subsequently resulted in measures against those products under the Certain Oil Country Tubular Goods finding, as evidence that in the absence of protection, the threat of injury on accessory products like pup joints will persist.

Volume of Subject Goods

  1. The import volumes were difficult for the Complainant to estimate, given that the subject goods would normally be imported under the same HS codes as other OCTG products. Consequently, there is no way for the Complainant to take the publicly available information which is segregated by HS code and accurately assess the value and quantity of certain pup joints imported into Canada. However, given that the Complainant knows the volume of sales they typically made to customers who now buy from Chinese sources, they were able to estimate the volume of Chinese imports.

  2. The Complainant's information shows a rise in imports from China from 2008 to 2010. Imports in 2009 are estimated to be the highest of the three periods as the Certain Oil Country Tubular Goods investigation had its greatest effect on temporarily halting subject imports in Q1 2010.24 The CBSA analysis corroborates this trend of 2009 being the highest import period of the three years. The Complainant's estimate of the share of Chinese imports of the Canadian market in 2010 of 24% is only slightly higher than the CBSA estimate.25

  3. Import data generated by the CBSA made use of ACROSS statements, which typically specify when OCTG tubing are pup joints and is thus more accurate, indicating comparable trends to those provided by the Complainant in terms of the relationship of subject imports to the total share of imports and to the overall Canadian market.

  4. The CBSA's analysis of Chinese pup joint imports in Q1 and Q2-2011 supports the Complainant's position that subject goods are taking an increasing share of the Canadian market, as subject import volumes in that period increased to more than what was imported for the entire 2010 period.

  5. The increase in Chinese imports is particularly noticeable in Q4-2010, where according to the data from FIRM,26 the two most significant lost customers identified by the Complainant began importing Chinese pup joints in substantial volumes. These two parties are in fact two of the three largest importers of Chinese origin pup joints during the July 1, 2010 to June 30, 2011 POI, accounting for over half of the value of subject imports.

Lost Sales

  1. The Complainant submitted documentation in their complaint in respect of specific instances where sales to Canadian customers were lost to alleged dumped and subsidized imports of subject goods.

  2. The Complainant identified lost sales on a customer-by-customer basis. There were numerous examples of lost sales as a result of competition from allegedly dumped and subsidized subject goods.

  3. The Complainant also included internal correspondence related to sales negotiations that document their inability to compete against low-priced imports, which are alleged to be of Chinese origin.

Price Erosion and Price Suppression

  1. The Complainant provided several examples of its efforts to substantially discount off its list price to maintain customers as they strove to compete with alleged dumped and subsidized imports of subject goods from China.

  2. The Complainant further stated that despite recent increases in tubing input costs, which were substantially higher in Q1-2011 than at the time of their last price list issuance, they have been unable to pass these costs on via price increases to their customers.27

Lost Revenues

  1. As a result of a significant number of lost sales, detailed through documentation provided in the complaint, as well as reductions in prices to maintain its relationships with customers, the Complainant alleges to have lost significant revenues.

  2. The loss of sales to its largest customers in addition to other smaller customers, which cumulatively accounted for substantial portions of the Complainant's pup joint revenue, has resulted in reduced revenues which have failed to reach those achieved in 2008.

Reduced Gross Margins

  1. To illustrate the downward trend in their pup joints business, the Complainant offered a comparison between the pup joints segment and the overall business of the division, to demonstrate that the pup joints segment's decline in gross margins is not a reflection of their overall business.

  2. In 2008, the Complainant's pup joints business segment outperformed their total operations. Overall gross margins dipped in 2009 due to the recession but in 2010 and Q1-2011, overall gross margins have grown substantially, such that they exceed margins achieved on pup joints. Pup joint margins have conversely dropped over this same period.

Reduced Profitability

  1. The Complainant used a similar comparison of its relatively higher profitability in other oilfield products as evidence that dumped and subsidized Chinese pup joints have reduced profitability of their pup joint sales.

  2. From 2008 to 2009, the Complainant's total division results reported a modest decrease in profitability as a percentage of sales. Since then, the Complainant's total division profitability has risen in 2010 and further in Q1-2011.

  3. In contrast, the Complainant's pup joints business reported a substantial drop in profits as a percentage of sales revenues from 2008 to 2009, with only a modest recovery in 2010 and Q1-2011, largely underperforming the division as a whole.

Loss of Market Share

  1. The Complainant alleged that their market share has steadily diminished since the emergence of Chinese pup joints in Canada after 2008. In fact, according to the CBSA's estimate, the Complainant's share of the Canadian market has decreased substantially since 2008.

  2. With Q1 and Q2-2011 imports of subject goods already eclipsing the total volume of subject goods estimated by the CBSA to have been imported in all of 2010, the most recent evidence indicates that the Complainant is continuing to lose market share to alleged dumped and subsidized pup joints.

Loss of Employment

  1. The Complainant stated that with a decline in orders for their like goods, which is attributable to the alleged dumped and subsidized imports of subject goods from China, their employment directly associated with the production of pup joints dropped considerably from 2008 to 2010.28

Reduced Returns on Investment

  1. With reduced revenues and profits come reduced returns on investment. It is important for producers in the steel industry to maximize their profits during peak periods given the enormous capital investments required to operate steelmaking facilities, as well as to maintain them over time. Given the cyclical nature of the industry, it is understood that there will be periods of depressed sales, followed by periods of high returns.

  2. The Complainant is particularly concerned with its recent investment in paint and threading systems for pup joints, which was required with the transfer of certain production from facilities from its affiliate in the United States. The injury caused by the alleged dumped and subsidized pup joints will make it more difficult to recoup on this investment, given the total cost of the project.

Underutilization of Capacity

  1. The Complainant stated that they have the available capacity to meet considerably more Canadian demand were they not having to compete with dumped and subsidized Chinese pup joints. The Complainant reported capacity utilization declined considerably from 2008 to 2010.

THREAT OF INJURY

  1. The Complainant alleges that the current growing trend of lost customers in Canada through the first half of 2011 is an indication that these customers are increasingly sourcing pup joints from China.

  2. The Complainant has provided sufficient support for these allegations and further cited the increase in subject welded casing/tubing immediately following the Canadian International Trade Tribunal (Tribunal) finding on Certain Seamless Steel Casing as evidence that in absence of full protection on OCTG products, the threat of injury on associated goods will persist.

  3. The Complainant further emphasized that Chinese producers of OCTG have demonstrated the ability to rapidly increase exports to the Canadian market (i.e. Certain Seamless Steel Casing and Certain Oil Country Tubular Goods) and the willingness to move from one category of OCTG to another in response to anti-dumping and countervailing proceedings. Consequently, there is evidence to support the allegations of threat of injury.

CAUSAL LINK DUMPING/SUBSIDIZING AND INJURY

  1. The CBSA finds that the Complainant provided sufficient evidence that there is a reasonable indication that it has suffered injury due to the alleged dumping and subsidizing of subject goods imported into Canada. There is a reasonable indication that the injury the Complainant has suffered, in terms of lost sales, price erosion, price suppression, lost revenues, reduced gross margins, reduced profitability, loss of market share, loss of employment, reduced returns on investment, and underutilization of capacity is related to the price advantage the alleged dumping and subsidizing have produced between the subject imports and the Canadian produced goods.

  2. In summary, the information provided in the complaint has established a reasonable indication that the alleged dumping and subsidizing has caused injury and is threatening to cause injury to the Canadian production of like goods.

CONCLUSION

  1. Based on information provided in the complaint, other available information, and the CBSA's internal data on imports, there is evidence that certain pup joints originating in or exported from China have been dumped and subsidized, and there is a reasonable indication that such dumping and subsidizing has caused or is threatening to cause injury to the Canadian industry. As a result, based on the CBSA's examination of the evidence and its own analysis, dumping and countervailing investigations were initiated on September 12, 2011.

SCOPE OF THE INVESTIGATION

  1. The CBSA will conduct investigations to determine whether the subject goods have been dumped and/or subsidized.

  2. The CBSA has requested information relating to the subject goods imported into Canada from China during the period of July 1, 2010 to June 30, 2011, the selected period of investigation for the dumping investigation. The information requested from identified exporters and importers will be used to estimate normal values and export prices and ultimately to determine whether the subject goods have been dumped.

  3. The CBSA has also requested costing and sales information from producers of pup joints in multiple countries. Where sufficiently available, this information may be used to determine normal values of the goods in the event that the President of the CBSA forms an opinion that the evidence in this investigation demonstrates that section 20 conditions apply in the OCTG sector, which includes pup joints, in China.

  4. Information relating to shipments into Canada of the subject goods from January 1, 2010 to June 30, 2011, the selected period of investigation for the subsidy investigation, has been requested from the GOC and the identified exporters. The information requested will be used to determine whether the subject goods have been subsidized and to estimate the amounts of subsidy.

  5. All parties have been clearly advised of the CBSA's information requirements and the time frames for providing their responses.

FUTURE ACTION

  1. The Canadian International Trade Tribunal (Tribunal) will conduct a preliminary inquiry to determine whether the evidence discloses a reasonable indication that the alleged dumping and subsidizing of the goods has caused or is threatening to cause injury to the Canadian industry. The Tribunal must make its decision on or before the 60th day after the date of the initiation of the investigations. If the Tribunal concludes that the evidence does not disclose a reasonable indication of injury to the Canadian industry, the investigations will be terminated.

  2. If the Tribunal finds that the evidence discloses a reasonable indication of injury to the Canadian industry and the ongoing CBSA investigations reveal that the goods have been dumped and/or subsidized, the CBSA will make a preliminary determination of dumping and/or subsidizing within 90 days after the date of the initiation of the investigations, by December 12, 2011. Where circumstances warrant, this period may be extended to 135 days from the date of the initiation of the investigations.

  3. If, in respect of the named country, the CBSA's investigations reveal that imports of the subject goods have not been dumped or subsidized, that the margin of dumping or amount of subsidy is insignificant or that the actual and potential volume of dumped or subsidized goods is negligible, the investigations will be terminated.

  4. Imports of subject goods released by the CBSA on and after the date of a preliminary determination of dumping and/or subsidizing may be subject to provisional duty in an amount not greater than the estimated margin of dumping or the estimated amount of subsidy on the imported goods.

  5. Should the CBSA make a preliminary determination of dumping and/or subsidizing, the investigations will be continued for the purpose of making a final determination within 90 days after the date of the preliminary determination.

  6. If a final determination of dumping and/or subsidizing is made, the Tribunal will continue its inquiry and hold public hearings into the question of material injury to the Canadian industry. The Tribunal is required to make a finding with respect to the goods to which the final determination of dumping and/or subsidizing applies, not later than 120 days after the CBSA's preliminary determination.

  7. In the event of an injury finding by the Tribunal, imports of subject goods released by the CBSA after that date will be subject to anti-dumping duty equal to the applicable margin of dumping and countervailing duty equal to the amount of any actionable subsidy on the imported goods. Should both anti-dumping and countervailing duties be applicable to subject goods, the amount of any anti-dumping duty may be reduced by the amount that is attributable to an export subsidy.

RETROACTIVE DUTY ON MASSIVE IMPORTATIONS

  1. When the Tribunal conducts an inquiry concerning 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 an investigation constitute massive importations over a relatively short period of time and have caused injury to the Canadian industry.

  2. Should the Tribunal issue such a finding, anti-dumping and countervailing duties may be imposed retroactively on subject goods imported into Canada and released by the CBSA during the period of 90 days preceding the day of the CBSA making a preliminary determination of dumping and/or subsidizing.

  3. In respect of importations of subsidized goods that have caused injury, however, this provision is only applicable where the CBSA has determined that the whole or any part of the subsidy on the goods is a prohibited subsidy, as explained in the previous section “Evidence of Subsidizing.” In such a case, the amount of countervailing duty applied on a retroactive basis will be equal to the amount of subsidy on the goods that is a prohibited subsidy.

UNDERTAKINGS

  1. After a preliminary determination of dumping by the CBSA, an exporter may submit a written undertaking to revise selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated. An acceptable undertaking must account for all or substantially all of the exports to Canada of the dumped goods.

  2. Similarly, after a preliminary determination of subsidizing by the CBSA, a foreign government may submit a written undertaking to eliminate the subsidy on the goods exported or to eliminate the injurious effect of the subsidy, by limiting the amount of the subsidy or the quantity of goods exported to Canada. Alternatively, exporters with the written consent of their government may undertake to revise their selling prices so that the amount of the subsidy or the injurious effect of the subsidy is eliminated.

  3. Interested parties may provide comments regarding the acceptability of undertakings within nine days of the receipt of an undertaking by the CBSA. The CBSA will maintain a list of parties who wish to be notified should an undertaking proposal be received. Those who are interested in being notified should provide their name, telephone and fax numbers, mailing address and e-mail address, if available, to one of the officers identified in the “Information” section of this document.

  4. If an undertaking were to be accepted, the investigations and the collection of provisional duty would be suspended. Notwithstanding the acceptance of an undertaking, an exporter may request that the CBSA's investigations be completed and that the Tribunal complete its injury inquiry.

PUBLICATION

  1. Notice of the initiation of these investigations is being published in the Canada Gazette pursuant to subparagraph 34(1)(a)(ii) of SIMA.

INFORMATION

  1. Interested parties are invited to file written submissions presenting facts, arguments, and evidence that they feel are relevant to the alleged dumping and subsidizing. Written submissions should be forwarded to the attention of one of the officers identified below.

  2. To be given consideration in this phase of these investigations, all information should be received by the CBSA by October 19, 2011.

  3. Any information submitted to the CBSA by interested parties concerning these investigations is deemed to be public information unless clearly marked “confidential.” Where the submission by an interested party is confidential, a non-confidential version of the submission must be provided at the same time. This non-confidential version will be made available to other interested parties upon request.

  4. Confidential information submitted to the President will be disclosed on written request to independent counsel for parties to these proceedings, subject to conditions to protect the confidentiality of the information. Confidential information may also be released to the Tribunal, any court in Canada, or a WTO/NAFTA dispute settlement panel. Additional information respecting the Directorate's policy on the disclosure of information under SIMA may be obtained by contacting one of the officers identified below or by visiting the CBSA's Web site.

  5. The investigation schedules and a complete listing of all exhibits and information are available at /www.cbsa-asfc.gc.ca/sima-lmsi/i-e/menu-eng.html. The exhibits listing will be updated as new exhibits and information are made available.

  6. This Statement of Reasons has been provided to persons directly interested in these proceedings. It is also posted on the CBSA's Web site at the address below. For further information, please contact the officers identified as follows:

Mail:
SIMA Registry and Disclosure Unit
Anti-dumping and Countervailing Directorate
Canada Border Services Agency
100 Metcalfe Street, 11th Floor
Ottawa, Ontario K1A OL8
CANADA

Telephone:
Andrew Manera        613-946-2052
 
Patrick Mulligan        613-952-6720

Fax:
613-948-4844

E-mail:
simaregistry-depotlmsi@cbsa-asfc.gc.ca

Website:
www.cbsa-asfc.gc.ca/sima-lmsi/i-e/menu-eng.html

 

Original signed by

Daniel Giasson

Director General

Anti-dumping and Countervailing Directorate

APPENDIX I - DESCRIPTION OF IDENTIFIED PROGRAMS AND INCENTIVES

Evidence provided by the Complainant suggests that the Government of China may have provided support to manufacturers of subject goods in the following manner. For purposes of this investigation, "Government of China" (GOC) refers to all levels of government, i.e. federal, central, provincial/state, regional municipal, city, township, village, local, legislative, administrative or judicial. Benefits provided by state-owned enterprises, which possess, exercise or have been vested with governmental authority may also be considered to be provided by the GOC for purposes of this investigation.

I. Special Economic Zone (SEZ) Incentives and other Designated Areas

Program 1:

Preferential Tax Policies for Enterprises with Foreign Investment (FIEs) Established in Special Economic Zones (excluding Shanghai Pudong Area)

Program 2:

Preferential Tax Policies for FIEs Established in the Coastal Economic Open Areas and in the Economic and Technological Development Zones

Program 3:

Preferential Tax Policies for FIEs Established in the Pudong Area of Shanghai

Program 4:

Preferential Tax Policies in the Western Regions

Program 5:

Corporate Income Tax Exemption and/or Reduction in SEZs and other Designated Areas

Program 6:

Local Income Tax Exemption and/or Reduction in SEZs and other Designated Areas

Program 7:

Exemption/Reduction of Special Land Tax and Land Use Fees in SEZs and Other Designated Areas

Program 8:

Tariff and Value-added Tax (VAT) Exemptions on Imported Materials and Equipment in SEZs and other Designated Areas

Program 9:

Income Tax Refund where Profits Re-invested in SEZs and other Designated Areas

Program 10:

Preferential Costs of Services and/or Goods Provided by Government or State-owned Enterprises (SOEs) in SEZs and Other Designated Areas

II. Grants

Program 11:

The State Key Technology Renovation Projects

Program 12:

Reimbursement of Anti-dumping and/or Countervailing Legal Expenses by the Local Governments

Program 13:

Repaying Foreign Currency Loan by Returned VAT

Program 14:

Government Export Subsidy and Product Innovation Subsidy

Program 15:

Export Assistance Grant

Program 16:

Research & Development (R&D) Assistance Grant

Program 17:

Innovative Experimental Enterprise Grant

Program 18:

Superstar Enterprise Grant

Program 19:

Awards to Enterprises Whose Products Qualify for “Well-Known Trademarks of China” or “Famous Brands of China”

Program 20:

Export Brand Development Fund

Program 21:

Provincial Scientific Development Plan Fund

Program 22:

Technical Renovation Loan Interest Discount Fund

Program 23:

Venture Investment Fund of Hi-Tech Industry

Program 24:

National Innovation Fund for Technology Based Firms

Program 25:

Guangdong – Hong Kong Technology Cooperation Funding Scheme

Program 26:

Grants for Encouraging the Establishment of Headquarters and Regional Headquarters with Foreign Investment

Program 27:

Innovative Small and Medium-Sized Enterprise Grants

Program 28:

Product Quality Grant

Program 29:

2009 Energy-saving Fund

Program 30:

Energy-Saving Technique Special Fund

Program 31:

Grants to Privately-Owned Export Enterprises

Program 32:

Grants for Export Activities

Program 33:

Grants for International Certification

Program 34:

Liaoning High-Tech Products & Equipment Exports Interest Assistance

Program 35:

Emission Reduction and Energy-saving Award

Program 36:

Grant for Market Promotion and Trade Development

Program 37:

Refund of Land Transfer Fee

Program 38:

Grant – Assistance for Exhibition Booth Fees

Program 39:

Grant – Assistance for Exhibition Booth Fees

Program 40:

Grant – State Service Industry Development Fund

Program 41:

Grant – Changzhou Five Major Industries Development Special Fund

Program 42:

Grant – Ecological Garden Enterprise Reward

Program 43:

Grant – Ecological Garden Enterprise Reward

Program 44:

Grant – Cleaning-production Qualified Enterprise Reward

Program 45:

Grant – Provisional Industry Promotion Special Fund

Program 46:

Grant – Jiangsu Province Finance Supporting Fund

Program 47:

Grant – Guaranteed Growth Fund

Program 48:

Grant - Water Pollution Control Special Fund for Taihu Lake

Program 49:

Grant – Provincial Foreign Economy and Trade Development Special Fund

Program 50:

Grant – Subsidy from Water Saving Office

Program 51:

Grant – Insurance Expense Compensation

Program 52:

Grant – Industrial Science and Technology Breakthrough Special Fund

Program 53:

Grant – Special Supporting Fund for Commercialization of Technological Innovation and Research Findings

Program 54:

Grant – Changzhou City Key Supporting Industry Upgrading Special Fund

Program 55:

Grant – Changzhou City Key Supporting Industry Upgrading Special Fund

Program 56:

Grant – Financial Subsidies from Wei Hai City Gao Cun Town Government

Program 57:

Grant – Policy on Value-added Tax for Recyclable Resources

Program 58:

Grant – Large Taxpayer Award

Program 59:

Grant – Resources Conservation and Environment Protection Grant

III. Equity Programs

Program 60:

Debt-to-Equity Swaps

Program 61:

Exemptions for SOEs from Distributing Dividends to the State

IV. Preferential Loans

Program 62:

Loans and Interest Subsidies Provided Under the Northeast Revitalization Program

V. Preferential Income Tax Programs

Program 63:

Reduced Tax Rate for Productive FIEs Scheduled to Operate for a Period not Less Than 10 Years

Program 64:

Preferential Tax Policies for Foreign Invested Export Enterprises

Program 65:

Preferential Tax Policies for FIEs which are Technology Intensive and Knowledge Intensive

Program 66:

Preferential Tax Policies for the Research and Development of FIEs

Program 67:

Preferential Tax Policies for FIEs and Foreign Enterprises Which Have Establishments or Places in China and are Engaged in Production or Business Operations Purchasing Domestically Produced Equipments

Program 68:

Preferential Tax Policies for Domestic Enterprises Purchasing Domestically Produced Equipments for Technology Upgrading Purpose

Program 69:

Income Tax Refund for Re-investment of FIE Profits by Foreign Investors

Program 70:

VAT and Income Tax Exemption/Reduction for Enterprises Adopting Debt to Equity Swaps

Program 71:

Corporate Income Tax Reduction for New High-Technology Enterprises

VI. Relief from Duties and Taxes on Materials and Machinery

Program 72:

Exemption of Tariff and Import VAT for the Imported Technologies and Equipment

Program 73:

Relief from Duties and Taxes on Imported Material and Other Manufacturing Inputs

Program 74:

Exemption of VAT on Purchases of Equipment

VII. Reduction in Land Use Fees

Program 75:

Reduction in Land Use Fees, Land Rental Rates, and Land Purchase Prices

Program 76:

Deed Tax Exemptions For Land Transferred through Merger or Restructuring

VIII. Goods/Services Provided by Government at Less than Fair Market Value

Program 77:

Input Materials Provided by Government at Less than Fair Market Value

Program 78:

Utilities Provided by Government at Less than Fair Market Value

Program 79:

Acquisition of Government Assets at Less than Fair Market Value

Program 80:

Coke Provided by Government at Less than Fair Market Value

DETERMINATIONS OF SUBSIDY AND SPECIFICITY

Available information indicates that the programs identified under: SEZ and Other Designated Areas Incentives; Preferential Loans; Preferential Income Tax Programs; Relief from Duties and Taxes on Materials and Machinery; and Reduction in Land Use Fees, would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced and/or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.

Grants and Equity Programs would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA in that they involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities; and pursuant to paragraph 2(1.6)(b) of SIMA as amounts owing and due to the government that are forgiven or not collected.

Goods/Services Provided by Government at Less than Fair Market Value would likely constitute a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA as they involve the provision of goods or services, other than general governmental infrastructure.

Benefits provided to certain types of enterprises or limited to enterprises located in certain areas under program categories: SEZ and Other Designated Areas Incentives; Preferential Loans; Preferential Income Tax Programs; Relief from Duties and Taxes on Materials and Machinery; and Reduction in Land Use Fees, would likely be considered specific pursuant to paragraph 2(7.2)(a) of SIMA.

As well, Grants, Equity Programs and Goods/Services Provided by Government at Less than Fair Market Value would likely be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Notes:

  1. Perforated pup joints are an exception as they do not meet API 5CT.

  2. Dumping Exhibit 2 (NC) – Complaint narrative, page 3.

  3. Tribunal finding on certain Oil Country Tubular Goods, Inquiry No. NQ-2009-004, March 23, 2010, paragraph 256.

  4. CBSA's Initiation Statement of Reasons for Certain Oil Country Tubular Goods, paragraphs 21-27, September 8, 2009.

  5. For further information on the production process of the input tubing, see the CBSA's Initiation Statement of Reasons for Certain Oil Country Tubular Goods, paragraphs 21-27, September 8, 2009.http://www.cbsa-asfc.gc.ca/sima-lmsi/i-e/ad1385/ad1385-i09-de-eng.html

  6. Dumping Exhibit 2 (NC) – Complaint narrative, page 6.

  7. Dumping Exhibit 2 (NC) – Complaint narrative, page 15.

  8. Dumping Exhibit 1 (PRO) – Complaint Appendix 12, page 606.

  9. Dumping Exhibit 1 (PRO) – Complaint Appendix 10, pages 391-455.

  10. Dumping Exhibit 2 (NC) – Complaint narrative, page 33.

  11. This included a review of US, Indian and European OCTG producers, segregated to examine only financial results related to OCTG tubing where available. OCTG tubing is the product segment most closely related to the pup joints subject to these investigations. Segregated financial reporting at the more specific ‘pup joint' level was not found.

  12. Dumping Exhibit 1 (PRO) – Complaint Appendix 13, pages 692-695.

  13. Dumping Exhibit 1 (PRO) – Complaint narrative, page 17 and Appendix 13, pages 696-697.

  14. ACROSS is the Accelerated Commercial Release Operations Support System. www.cbsa-asfc.gc.ca/eservices/ogd-amg/across-eng.html#c03

  15. China is a prescribed country under SIM Regulation 17.1.

  16. Dumping Exhibit 2 (NC) – Complaint narrative, pages 15-16.

  17. Dumping Exhibit 2 (NC) – Appendices 8, 9 & 11 of the complaint.

  18. Dumping Exhibit 2 (NC) – Appendix 27 of the complaint, Department of Commerce Final Determination on Seamless Pipe.

  19. Dumping Exhibit 2 (NC) – Appendices 7and 16 of the complaint.

  20. Dumping Exhibit 2 (NC) – Complaint Appendix 27, page 907.

  21. Dumping Exhibit 2 (NC) – Complaint Appendix 27, page 911.

  22. Dumping Exhibit 2 (NC) – Complaint Appendix 27, page 908.

  23. The Organization for Economic Co-operation and Development, DAC List of ODA Recipients as at January 1, 2006, the document is available at www.oecd.org/dataoecd/23/34/37954893.pdf.

  24. Pup Joints were subject to the Certain Oil Country Tubular Goods investigation prior to their exclusion at the Tribunal. The provisional period for that investigation began November 23, 2009, so that year was largely unaffected by the investigation.

  25. Dumping Exhibit 43 (PRO) – Complaint Analysis, Attachment 6.

  26. FIRM is the Facility for Information Retrieval Management; a CBSA database for import documentation.

  27. Dumping Exhibit 2 (NC) – Complaint narrative, page 29.

  28. Dumping Exhibit 1 (PRO) – Complaint Appendix 23, page 839.

 

Date Modified: 2011-09-27

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