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OTTAWA, November 10, 2011

Dumping case number: AD/1392
Dumping file number: 4214-32

Subsidy case number: CV/129
Subsidy file number: 4218-31

STATEMENT OF REASONS

Concerning the initiation of investigations into the dumping and subsidizing of

CERTAIN STAINLESS STEEL SINKS 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 October 27, 2011, respecting the alleged injurious dumping and subsidizing of stainless steel sinks with a single drawn bowl having a volume between 1,600 and 5,000 cubic inches (26,219.30 and 81,935.32 cubic centimetres) or with multiple drawn bowls having a combined volume between 2,200 and 6,800 cubic inches (36,051.54 and 111,432.04 cubic centimetres), excluding sinks fabricated by hand, 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 September 6, 2011, the Canada Border Services Agency (CBSA) received a written complaint from Novanni Stainless Inc. (Novanni) of Coldwater, Ontario, and Franke Kindred Canada Limited (FKC) of Midland, Ontario (hereafter “the complainants”), alleging that imports of certain stainless steel sinks 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 September 27, 2011, pursuant to subsection 32(1) of the Special Import Measures Act (SIMA), the CBSA informed the complainants 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 complainants provided evidence to support the allegations that certain stainless steel sinks 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 October 24, 2011, consultations were held with the GOC 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 accuracy and adequacy of the evidence presented in the non-confidential version of the subsidy portion of the complaint. On October 26, 2011, the CBSA received written representations from the GOC with respect to its views. The CBSA considered these written representations in its analysis of whether there was sufficient evidence of subsidization to warrant a subsidy investigation.

  5. On October 27, 2011, pursuant to subsection 31(1) of SIMA, the President of the CBSA (President) initiated investigations respecting the dumping and subsidizing of certain stainless steel sinks from China.

INTERESTED PARTIES

Complainant

  1. The complainants account for a major proportion of the production of like goods in Canada. The complainants' goods are produced at manufacturing facilities located in Coldwater, Ontario and Midland, Ontario.

  2. The name and address of the complainants are:

    Novanni Stainless Inc.
    2978 Southorn Road, P.O. Box 189
    Coldwater, ON L0K 1E0

    Franke Kindred Canada Limited
    1000 Franke Kindred Road
    Midland, ON L4R 4K9

  3. There are no other known manufacturers of subject goods in Canada.

Exporters

  1. The CBSA identified 199 potential exporters and producers of the subject goods from its own research, information provided by the complainants and CBSA import documentation over the period of September 1, 2010 to August 31, 2011.

Importers

  1. The CBSA identified 287 potential importers of the subject goods from information provided by the complainants and CBSA import documentation over the period of September 1, 2010 to August 31, 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:

    stainless steel sinks with a single drawn bowl having a volume between 1,600 and 5,000 cubic inches (26,219.30 and 81,935.32 cubic centimetres) or with multiple drawn bowls having a combined volume between 2,200 and 6,800 cubic inches (36,051.54 and 111,432.04 cubic centimetres), excluding sinks fabricated by hand, originating in or exported from the People's Republic of China.

Additional Product Information

  1. For purposes of the definition of the subject goods, volume is calculated as the product of the length, width and depth of the bowl, regardless of the taper and radius of the bowl, where length and width are measured from front to back and left to right of the bowl rim and where depth is measured from the bowl rim to the bottom of the sink at the point closest to the drain.

  2. For purposes of the definition of the subject goods, “sinks fabricated by hand” refers to the process by which sinkware is formed by hand. The sink stock is notched and folded, and sides are then welded and hand-polished to form a box-like shape. Hand-fabricated sinks may also be referred to as handcrafted or handmade sinks.

  3. The subject goods may be supplied with seals, strainer or strainer sets, mounting clips, fasteners, sound-deadening pads, cut-out templates, and additional accessories such as rinsing baskets and bottom grids.

  4. Stainless steel sinks are commonly used in residential and non-residential installations including in kitchens, bathrooms, utility and laundry rooms. Stainless steel sinks sold in Canada are required to be manufactured in accordance with ASME A112.l9.3-2008/CSA B45.4.081. However, the complainants believe it is possible that some of the subject goods from China do not meet these standards. Stainless steel sinks are available in a variety of shapes and configurations. They may have single or multiple bowls, and may be undermount, top mount, or designed as work tops.

  5. Stainless steel sinks are generally made from grades 302, 304 and 316 cold-rolled stainless steel sheet that is 16, 18 or 20 gauge. The subject goods may be made of additional stainless steel grades and thinner or thicker gauges. Indeed, the complaint states that 15 and 22 gauge stainless steel sinks and grade 202 and 416 stainless steel sinks from China have been observed in the Canadian market. Gauge refers to the nominal thickness of steel. Typically, the lower the number, the thicker the material (e.g. 16 gauge = 0.060 inches, 18 gauge = 0.046 inches, 20 gauge = 0.035 inches). Grade identifiers such as T302, T304 and T316 are American Iron and Steel Institute (AISI) designations for the chemical composition of stainless steel. Each designation has a specific chemical makeup that provides the steel with its unique properties (e.g. mechanical properties, weldability and corrosion resistance). Terms such as 18-8 and 18-10 are commonly used to describe the chemical composition of the stainless steel. The first number defines the nominal percentage of chromium in the steel and the second number defines the nominal percentage of nickel in the steel.

Production Process2

  1. The process begins with sheets of stainless steel that are sheared into pieces, referred to as “blanks”. The blanks undergo a series of forming, shearing, welding and finishing operations.

  2. A sink bowl is formed through a combination of two forming operations: deep drawing and stretch-forming. In the first operation, the blanks are conveyed through mechanical or hydraulic presses that punch the blanks into rough sink shapes. For each different bowl shape, there is a unique punch and die set that is interchangeable with the press. At this stage, the depth and diameter of the bowl are slightly less than the required dimensions. The early stage forms are placed through further equipment that uses a re-draw process to stretch the sink bowl to its final depth.

  3. Following the stretch-forming step, the edges of the bowl are trimmed and a drain hole is punched. Hold-downs (metal clips) are then spot-welded to the sides of the sink bowl.

  4. In some cases, double and triple bowl sinks are made by taking single drawn bowls shearing them so that the ledges are straight, then tig-welding the ledges.

  5. At this stage, the bottom and sides of the sink bowl are buffed. The deck of the sink is also buffed to produce a mirror-type finish.

  6. A ring-form operation trims the sink to its final form and creates decorative edging. The sinks may be further buffed and washed following this operation. Sound dampening pads are then added to the sink and the finished sinks are packaged for market.

Classification of Imports

  1. The subject goods are usually classified under Harmonized System (HS) classification code 7324.10.00.11.

  2. The subject goods may also be classified under the following HS classification codes:

    • 7324.10.00.19
    • 7324.10.00.21
    • 7324.10.00.29

  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. Certain stainless steel sinks produced by the domestic industry compete directly with and have the same end uses as the subject goods imported from China. Subject and like goods are made from the same input material and produced in the same general manner. Although certain stainless steel sinks have varying physical characteristics (finish, corner radius, etc.), they are fully interchangeable. When sold, certain stainless steel sinks are sold via the same channels of distribution, whether subject or like goods, to the same types of customers and in many cases, to the same customers.

  3. After considering questions of use, physical characteristics and all other relevant factors, the CBSA is of the opinion that subject and like goods constitute only one class of goods.

CANADIAN INDUSTRY

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

Standing

  1. Subsection 31(2) of SIMA requires that the following conditions be met in order to initiate an investigation:

    1. the complaint is supported by domestic producers whose production represents more than 50% of the total production of like goods by those domestic producers who express either support for or opposition to the complaint; and

    2. the production of the domestic producers who support the complaint represents 25% 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 complainants.

CANADIAN MARKET

  1. In Canada, imported and domestically produced stainless steel sinks are sold to end-users through the following channels:

    • Master distributors/importers;
    • Plumbing & heating wholesale distributors;
    • Kitchen and bath specialty distributor;
    • Solid surface countertop fabricators;
    • Traditional retail (including national and independent chains);
    • Online retailers.3

  1. The complainants provided estimates respecting the Canadian market for certain stainless steel sinks. These estimates are based on their own domestic sales and import data from Statistics Canada for HS code 7324.10.00.11.

  2. The complainants recognize that the Statistics Canada data used may include sinks that are outside the scope of this complaint (e.g. by virtue of their capacity or method of manufacture). Nevertheless, based on their own sales of like goods and their knowledge of the Canadian market, the complainants maintain that the percentage of non-subject sinks included in the data is negligible and does not impact the general trends in the data.

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

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

  5. The CBSA's analysis supports the complainants' claims that import volumes of allegedly dumped and subsidized goods from China have been increasing, and are not negligible.

  6. 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 stainless steel sinks in Canada.

CBSA Estimates of Import Share
(By Volume)

  2008 2009 2010 Q1 2010 Q1 2011
China Imports 62.9% 71.7% 82.2% 74.7% 82.2%
Non-Subject Country Imports 37.1% 28.3% 17.8% 25.3% 17.8%
Total Imports 100.0% 100.0% 100.0% 100.0% 100.0%

EVIDENCE OF DUMPING

  1. The complainants 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.

  2. Normal value is 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.

  3. The export price of goods sold to importers in Canada is 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. The complainants' allegations of dumping are based on a comparison of estimated normal values for allegedly dumped goods with estimated export prices based on price-quotations for shipments of subject goods to Canada during 2010 and 2011.

  5. The CBSA's analysis of the alleged dumping is based on a comparison of the complainants' estimated normal values with estimated export prices obtained from CBSA documentation.

Estimated Normal Value

  1. The complainants estimated normal values using a constructed cost approach to reflect the methodology defined under section 19 of SIMA4. The complainants considered their own cost of production, with downward adjustments to take into account differences in labour and overhead costs. Financial expenses, as well as general, selling and administrative expenses, were excluded in order to arrive at a conservative estimate of the cost of production. This estimated full cost of the goods was then marked-up with an estimated amount for profit that was corroborated using publicly available information concerning the profits earned by a Chinese producer of kitchen and bathroom hardware.

  2. Due to the large number of stainless steel sinks included within the subject goods definition, the complainants selected a range of representative high-volume models to act as benchmarks. Normal values were constructed for these benchmark models.

  3. The CBSA found the complainants' normal value estimates to be reasonable and representative. The amount for profit added to the cost of goods estimate was also found to be reasonable. As such, the CBSA has accepted the complainants' estimated normal values.

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 complainants estimated export prices in accordance with section 24 of SIMA, using actual quoted prices received from Chinese exporters. Where delivered prices were quoted, an adjustment for ocean freight was made. No adjustments for insurance or other shipping-related costs were made. In one instance, the export price was estimated using the price quoted by a Chinese manufacturer to an intermediary, then adjusted to take into account an amount for profit for the intermediary. In light of what was provided and reasonably available to the complainants, the CBSA found the complainants' estimates to be reasonable.

  3. The CBSA used actual import data from its internal information system and documentation to arrive at the estimated export prices of the allegedly dumped goods.

  4. The CBSA reviewed and selected sales to Canada by Chinese exporters for the period of September 1, 2010 to June 30, 2011.

  5. Within all of the transactions reviewed, the CBSA identified export models with identical characteristics to the majority of the benchmark models for which the CBSA had estimated normal values.

Estimated Margins of Dumping

  1. The CBSA estimated the margin 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 20.5%, 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 September 1, 2010 to August 31, 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 Stainless Steel Sinks
September 1, 2010 to August 31, 2011

Country Estimated Share of Total
Imports by Volume		 Estimated Margin
of Dumping as
% Export Price
China 84.7% 20.5%
Total Imports
(All Countries)		 100% -

 

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 anything 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 complainants 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 complainants provided documents such as CBSA's Statements of Reasons for various investigations,5 a memo by the United States Department of Commerce pertaining to a countervailing duty investigation,6 and a series of other studies and reports.7

  3. Due to the history and timeliness of CBSA subsidy investigations against Chinese steel products, the complainants 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 complainants 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. Relief from Duties and Taxes on Materials and Machinery;
    8. Goods/Services Provided by the Government at Less than Fair Market Value.

  1. The CBSA considered the 92 programs investigated as part of the current pup joints investigation, oil country tubular goods and seamless casing re-investigations, as well as the certain steel grating investigation as those that may be most applicable to the subject goods. In total, 86 alleged subsidy programs will be investigated by the CBSA. A full listing of all programs to be investigated by the CBSA may be found in the appendix. 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 Special Economic Zones or Other Designated Areas, 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, 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 seven subsidy programs, which were identified by the complainants and previously investigated by the CBSA, were found to not be relevant to the stainless steel sinks 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;
    • Five Points, One Line Strategy in Liaoning Province;
    • Income Tax Refund for Enterprises Located in Tianjin Jinnan Economic Development Area;
    • Enterprise Technology Centers of Tianjin City and Jinnan District;
    • Liaoning High-Tech Products & Equipment Exports Interest Assistance;
    • Loans and Interest Subsidies Provided Under the Northeast Revitalization Program.

  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 stainless steel sink producers are located.

Conclusion

  1. Sufficient evidence is available to support the allegation that the subsidy programs outlined in the appendix 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.

  2. On October 20, 2011, pursuant to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing Measures, the Delegation of China circulated a new notification of information on programs granted or maintained at the central government level during the period from 2005 to 2008 8. The CBSA will take the information provided into consideration as part of its subsidy investigation related to the subject goods.

Estimated Amount of Subsidy

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

  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 selling prices reported in customs entry documents of subject goods sold to importers in Canada.

  3. The CBSA's analysis of the information indicates that goods imported into Canada during the period of January 1, 2010 to August 31, 2011, were subsidized and that the estimated amount of subsidy is 15.7% 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 goods of 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 as 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.9 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 August 31, 2011. On the basis of this information, the amount of subsidy and the volume of subsidized goods as a percentage of the volume of total imports is estimated as follows:

Estimated Amount of Subsidy and Volume of Subsidized Goods
January 1, 2010 to August 31, 2011

Country Estimated Share of Total Imports by Volume Estimated Subsidized Goods as % of Country Total Estimated Subsidized Goods as % of Total Imports Estimated Amount of Subsidy as % of Export Price
China 83.3% 63.1% 52.6% 15.7%

  1. The volume of subsidized goods, estimated to be 52.6% 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 15.7% 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 stainless steel sinks produced by the complainants are like goods to those imported from China. The CBSA's analysis primarily included information on the complainants' 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 complainants allege that the goods have been dumped and subsidized, and that such dumping and subsidizing has caused and is threatening to cause injury to the stainless steel sink industry in Canada. In support of their allegations, the complainants provided evidence of an increase in the volume of imports of the dumped or subsidized goods, loss of market share, loss of sales, price erosion, declining capacity utilization, reduction in employment and declining revenues, margins and profits.

Increased Volume of Dumped and Subsidized Imports

  1. The import volumes provided by the complainants shows a continuing trend of rising imports from China, which increased from 62.9% of total imports in 2008, to 71.7% in 2009, to 82.2% in 2010, with the first quarter of 2011 also standing at 82.2%10. Indeed, from 2008 to 2010, the volume of subject imports from China increased by 170%.

  2. This information is also substantiated by the CBSA's import data. This import data shows comparable trends to those provided by the complainants in terms of relative share of imports in comparison to other countries and total share of imports.

Loss of Market Share

  1. During this period of increasing Chinese imports, the complainants' market share has steadily declined. Based on the complainants' information, their market share in terms of volume decreased in every year between 2008 and 2010. In contrast, the market share for subject goods from China increased in every one of these same periods.

  2. In terms of value, the complainants' market share has also steadily decreased between 2008 and 2010, while the market share by value for subject goods from China has increased during this same period.

Loss of Sales

  1. The complainants each provided a table which illustrates lost sales on a customer-specific basis.11 These tables illustrate declining sales to both companies' major accounts. As substantiation, the complainants submitted reports12 documenting specific instances of lost sales to allegedly dumped and subsidized Chinese imports, on the basis of lower pricing.

Price Erosion

  1. The complainants stated that the allegedly dumped and subsidized goods have been undercutting Canadian prices since 2008 and that the complainants' prices have been eroding as a result.13

  2. The complainants provided documentation highlighting instances where the complainants were forced to lower prices or lose sales in response to allegedly dumped and subsidized imports from China.

  3. The average import price of Chinese goods sold to Canada was significantly lower than the complainants' average price for 2008, 2009, 2010 and the first quarter of 2011.14

Declining Capacity Utilization

  1. The complainants reported a declining trend in production volumes and capacity utilization. Indeed, from 2008 to the second quarter of 2011, there was a steady decline in capacity utilization for both of the complainants.15

  2. Additionally, the complainants' combined production volumes fell steeply from 2008 to 2010.

Reduction in Employment

  1. The complainants stated that the decline in production volumes attributable to the allegedly dumped and subsidized subject goods has caused a significant decline in levels of employment. Between 2008 and the second quarter of 2011, both companies have had to reduce their numbers of employees, with the second quarter of 2011 being particularly pronounced.16

Declining Revenues, Margins and Profits

  1. The complainants allege that the lost sales and price erosion referred to above has had a negative impact on their financial performance.

  2. As a result of a significant number of lost sales, detailed through documentation provided in the complaint,17 as well as reductions in prices to maintain its relationships with customers, the complainants allege to have lost significant revenues.

  3. Between 2008 and 2010, both companies reported a decline in gross margins, which they attribute to the presence of dumped and subsidized imports on the Canadian market.

THREAT OF INJURY

  1. The complainants allege that the rapid increase in the volume of dumped and subsidized subject goods at prices that undercut those of domestically produced like goods pose a threat of further injury to the Canadian industry.

  2. The complainants have observed that Chinese producers have established direct relationships with Canadian wholesalers, retailers and fabricators, who are now increasingly importing subject goods directly from the producers and bypassing traditional importer/distributors. The complainants believe this trend indicates a likelihood that the volume of imports of subject goods will continue to increase in the near future.

  3. Import data from Statistics Canada shows a declining trend in the average price of imported stainless steel sinks from China. The complainants state that this trend, combined with evidence of price undercutting, indicates a likelihood that subject goods will continue to enter the Canadian market at prices that will have a depressive effect on the prices of domestically produced like goods.

  4. According to the complainants, there also exist a great number of Chinese producers of stainless steel sinks, having a combined production capacity that is very large relative to the size of the Canadian market. The complainants believe this disposable production capacity poses a threat of future injury to the Canadian industry.

  5. The complainants also noted that Chinese producers of stainless steel sinks have previously demonstrated a propensity to dump their products in foreign markets. On September 17, 2009, the International Trade Commission of South Africa made a final determination of dumping respecting stainless steel sinks originating in or exported from China.18

  6. [105] The complainants have provided sufficient evidence to support these allegations of threat of injury.

CAUSAL LINK DUMPING/SUBSIDIZING AND INJURY

  1. The CBSA finds that the complainants 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 complainants have suffered, in terms of loss of market share, loss of sales, price erosion, declining capacity utilization, reduction in employment and declining revenues, margins and profits is related directly to the increase in the volume of subject imports and the price advantage the apparent dumping and subsidizing has produced between the Chinese 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 stainless steel sinks originating in or exported from China have been dumped and subsidized, and there is a reasonable indication that such dumping and subsidizing has caused and 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 subsidy investigations were initiated on October 27, 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 September 1, 2010 to August 31, 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 requested information relating to shipments into Canada of the subject goods from January 1, 2010 to August 31, 2011, the selected period of investigation for the subsidy investigation. The information has been requested from the GOC and the identified exporters, and will be used to determine whether the subject goods have been subsidized and to estimate the amounts of subsidy.

  4. 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 January 25, 2012. Where circumstances warrant, this period may be extended to 135 days from the date of the initiation of the investigations.

  3. If 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 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 December 5, 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 complete listings 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 in English and French 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:
Danielle Newman        613-952-1963
 
Nalong Manivong        613-960-6096

Fax:
613-948-4844

E-mail:
SIMA_Disclosure_and_Registry_Unit@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 complainants 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. Manufacturing standard established by the American Society of Mechanical Engineers (ASME) and the Canadian Standards Association (CSA).

  2. Dumping Exhibit 2 (NC) - Complaint narrative, pages 10 and 11.

  3. Dumping Exhibit 2 (NC) – Complaint, Section 2.6, page 12.

  4. Dumping Exhibit 2 (NC) – Complaint, Appendix 5.

  5. Dumping Exhibit 2 (NC) – Complaint, Appendices 8, 9, 10, and 11.

  6. Dumping Exhibit 2 (NC) – Complaint, Appendix 12.

  7. Dumping Exhibit 2 (NC) – Complaint, Appendix 7.

  8. http://www.wtocenter.org.tw/SmartKMS/fileviewer?id=120669

  9. The Organization for Economic Co-operation and Development, DAC List of ODA Recipients as at August 2009. The document is available at http://www.oecd.org/dataoecd/32/40/43540882.pdf.

  10. Dumping Exhibit 2 (NC) – Complaint, Table 4, page 29.

  11. Dumping Exhibit 2 (NC) – Complaint, Tables 7 and 8, pages 33 and 36.

  12. Dumping Exhibit 2 (NC) – Complaint, Appendices 14 and 15.

  13. Dumping Exhibit 2 (NC) – Complaint, Section 8.2, pages 31 and 32.

  14. Dumping Exhibit 2 (NC) – Complaint, Table 6, page 32.

  15. Dumping Exhibit 2 (NC) – Complaint, Tables 12 and 13, page 41.

  16. Dumping Exhibit 2 (NC) – Complaint, Tables 12 and 13, page 41.

  17. Dumping Exhibit 2 (NC) – Complaint, Tables 10 and 11, pages 39-40.

  18. Dumping Exhibit 2 (NC) – Complaint, Appendix 21.

 

Date Modified: 2013-02-20

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