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TABLE OF CONTENTS

• Summary of Events
• Period of Investigation
• Profitability Analysis Period
• Interested Parties
  • Complainant
  • Importers
  • Exporters
  • Surrogate Producers
  • Government of China
• Product Information
  • Definition
  • Additional Product Information
  • Production Process
  • Classification of Imports
• Like Goods
• The Canadian Industry
• Imports Into Canada
• Investigation Process
• Dumping Investigation
  • Normal Values
  • Export Prices
  • Results of the Dumping Investigation by Country
  • China
  • Israel
  • Spain
  • All Other Exporters - Margin of Dumping
  • Summary of Results - Dumping
  • Representations Concerning the Dumping Investigation
• Subsidy Investigation
  • Results of the Subsidy Investigation
  • Summary of Results – Subsidy
• Undertaking Proposals
• Decisions
• Future Action
• Retroactive Duty on Massive Importations
• Publication
• Information
• Appendix 1 – Summary of Margins of Dumping and Amounts of Subsidy
• Appendix 2 – Summary of Findings for Named Subsidy Programs
• Appendix 3 – Dumping and Subsidy Representations

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Summary of Events

[1] On November 30, 2012, the Canada Border Services Agency (CBSA) received a written complaint from Tree Island Steel Ltd. (Tree Island) of Richmond, British Columbia (the complainant), alleging that imports of certain galvanized steel wire (GSW) originating in or exported from the People’s Republic of China (China), the State of Israel (Israel) and the Kingdom of Spain (Spain) are being dumped and that imports of certain GSW originating in or exported from China are being subsidized. The complainant alleged that the dumping and subsidizing had caused injury and are threatening to cause injury to the Canadian industry producing these goods.

[2] On December 21, 2012, pursuant to paragraph 32(1)(a) of the Special Import Measures Act (SIMA), the CBSA informed the complainant that the complaint was properly documented. The CBSA also notified the governments of China, Israel and Spain that a properly documented complaint had been received and provided the Government of China (GOC) with the non‑confidential version of the subsidy complaint. The GOC was invited for consultations prior to the initiation of the investigations, pursuant to Article 13.1 of the Agreement on Subsidies and Countervailing Measures; however, no such consultations took place.

[3] The complainant provided evidence to support the allegations that certain GSW from China, Israel and Spain had been dumped and that certain GSW from China had been subsidized. The evidence also discloses a reasonable indication that the dumping and subsidizing had caused injury and are threatening to cause injury to the Canadian industry producing these goods.

[4] On January 21, 2013, pursuant to subsection 31(1) of SIMA, the President of the CBSA (President) initiated investigations respecting the dumping of certain GSW from China, Israel and Spain and the subsidizing of certain GSW from China.

[5] Upon receiving notice of the initiation of the investigations, the Canadian International Trade Tribunal (Tribunal) commenced a preliminary injury inquiry, pursuant to subsection 34(2) of SIMA, into whether the evidence discloses a reasonable indication that the alleged dumping of certain GSW from China, Israel and Spain and the alleged subsidizing of certain GSW from China have caused injury or retardation or are threatening to cause injury to the Canadian industry producing the goods.

[6] On March 22, 2013, pursuant to subsection 37.1(1) of SIMA, the Tribunal made a preliminary determination that there is evidence that discloses a reasonable indication that the dumping of certain GSW originating in or exported from China, Israel and Spain and the subsidizing of certain GSW originating in or exported from China have caused injury or are threatening to cause injury.

[7] On April 22, 2013, as a result of the CBSA’s preliminary investigations and pursuant to subsection 38(1) of SIMA, the President made preliminary determinations of dumping of certain GSW originating in or exported from China, Israel and Spain and subsidizing of certain GSW originating in or exported from China and began imposing provisional duties on imports of the subject goods pursuant to subsection 8(1) of SIMA.

[8] On April 23, 2013, the Tribunal initiated a full inquiry pursuant to section 42 of SIMA to determine whether the dumping and subsidizing of the above-mentioned goods had caused injury or were threatening to cause injury to the Canadian industry.

[9] On June 21, 2013, the CBSA received a formal undertaking proposal from an exporter of GSW originating in or exported from China. The proposal was submitted by an exporter who undertook to revise the price at which they sell the subject goods to importers in Canada. The exporter proposed a minimum price level, which they claimed was sufficient to eliminate the injury to Canadian producers caused by the dumping. Upon receipt of the undertaking proposal, the CBSA posted a notice on its Web site and consulted with interested parties in the manner prescribed in subsection 49(5) of SIMA.

[10] On July 1, 2013, the CBSA received a second undertaking proposal from an exporter of GSW in China.

[11] On July 5, 2013, the exporters responsible for the proposed undertakings were notified that the proposed undertakings did not meet the requirements set forth in SIMA and were not accepted by the CBSA.

[12] The CBSA continued its investigation and, on the basis of the results, the President was satisfied that certain GSW originating in or exported from China, Israel and Spain had been dumped and that the margins of dumping were not insignificant. Consequently, on July 22, 2013, the President made a final determination of dumping pursuant to paragraph 41(1)(a) of SIMA.

[13] Similarly, the President was satisfied that certain GSW originating in or exported from China had been subsidized and that the amount of subsidy was not insignificant. As a result, on July 22, 2013, the President also made a final determination of subsidizing pursuant to paragraph 41(1)(a) of SIMA.

[14] The Tribunal’s inquiry into the question of injury to the Canadian industry is continuing. Provisional duties will continue to be imposed on the subject goods from the three countries until the Tribunal renders its decision. The Tribunal has announced that it will issue its finding by August 20, 2013.

Period of Investigation

[15] The period of investigation with respect to dumping (dumping POI), covered all subject goods released into Canada from January 1, 2012 to December 31, 2012.

[16] The period of investigation with respect to subsidizing (subsidy POI), covered all subject goods released into Canada from January 1, 2011 to December 31, 2012.

Profitability Analysis Period

[17] The profitability analysis period (PAP) covered domestic sales and costing information for goods sold from January 1, 2012 to December 31, 2012.

Interested Parties

Complainant

[18] The complainant is a large Canadian producer of GSW, accounting for a major proportion of the production of like goods in Canada.[1] The complainant’s goods are produced at a manufacturing facility in Richmond, British Columbia.

[19] The name and address of the complainant is:

Tree Island Steel Ltd.
3933 Boundary Road
Richmond, B.C.
V6V 1T8

[20] Tree Island was founded in 1964. It produces a range of steel wire and steel wire products. Tree Island’s principal product is GSW, though plain steel wire is also produced. In addition, Tree Island further employs GSW to produce fencing, barb wire, wire mesh and nail products.

[21] The other producers of GSW in Canada are:

ArcelorMittal Montreal Inc. 5900, rue Saint-Patrick Montréal, Quebec H4E 1B3	Davis Wire Ltd. 960 Dervent Way New Westminster, B.C. V3M 5R1
Bekaert Canada Ltd. 11041 Elevator Road Surrey, B.C. V3V 2R8	Sivaco Wire Group 800, rue Ouellette Marieville, Quebec J3M 1P5

[22] Three of the Canadian producers of GSW, ArcelorMittal Montreal Inc.,[2] Davis Wire Ltd.[3] and Sivaco Wire Group[4] supported the complaint. One producer, Bekaert Canada Ltd.[5] has a neutral position. No producers opposed the complaint.

Importers

[23] At the initiation of the investigations, the CBSA identified 151 potential importers of the subject goods from information provided by the complainant and CBSA import entry documentation over the period of January 1, 2011 to September 30, 2012.

[24] The CBSA sent an importer Request for Information (RFI) to all potential importers of the goods. The CBSA received 12 responses to the importer RFI, with varying degrees of completeness.

Exporters

[25] At the initiation of the investigations, the CBSA identified 130 potential exporters and producers of the subject goods from information provided by the complainant and CBSA import entry documentation.[6] The CBSA sent a dumping RFI to each potential exporter and section 20 and subsidy RFIs to each potential exporter and producer in China. As part of the section 20 inquiry, the CBSA sent section 20 RFIs to 49 wire rod producers in China.

[26] The CBSA received seven responses to the exporter dumping RFI and four responses to the exporter subsidy RFI. Of these, four responses to the exporter dumping RFI and two responses to the exporter subsidy RFI were complete and could be used for the purposes of the final determinations. One additional response to the subsidy RFI was received after the due date and was considered during the final phase of the investigation. The CBSA received four responses to the exporter section 20 RFI, one from a producer and three from exporters that are not producers.

Surrogate Producers

[27] As part of the section 20 inquiry, surrogate country RFIs were sent to all known producers of GSW in Brazil, Chinese Taipei, India, Mexico and South Africa. A total of 22 RFIs were sent to these producers requesting domestic selling prices and costing information for GSW produced at their facilities.

[28] The above-mentioned countries were selected as their growing economies and well‑developed steel industries are comparable to the situation in China. These countries are also producers and exporters of GSW to Canada.

[29] The CBSA received no responses to these surrogate country RFIs.

Government of China

[30] 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, 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.

[31] At the initiation of the investigations, the CBSA sent subsidy and section 20 RFIs to the GOC. The GOC did not respond to the subsidy or section 20 RFI.

Product Information

Definition

[32] For the purpose of these investigations, subject goods are defined as:

cold-drawn carbon or alloy steel wire, of solid cross section with an actual diameter of 1.082 mm (0.0426 inch) to 12.5 mm (0.492 inch), plated or coated with zinc or zinc alloy, whether or not coated with plastic, excluding flat wire, originating in or exported from the People’s Republic of China, the State of Israel and the Kingdom of Spain.

Additional Product Information

[33] GSW can be round, flat or shaped and is typically sold in coils. It is plated or coated with zinc or zinc alloy, whether by hot-dipping or electroplating. The definition of subject goods covers most GSW, but does not extend to flat wire. Flat wire is a more expensive specialty product with two flat sides and is produced on a separate rolling mill or by drawing the wire a second time through a special set of dies.

[34] The subject goods include all galvanized coatings. In North America, galvanizing standards are reflected in ASTM A641.[[7] There are similar standards that may be applicable in other jurisdictions. ASTM A641 provides for minimum mass of zinc per unit of area to qualify under particular classes. The amount of zinc varies with the wire diameter. In addition, zinc coated wire produced as “regular coating” (also known as commercial grade) does not have a specified minimum weight of coating, and tends to range from 50 g/m2 (0.17 oz/ft2) and less. Commercial grades are not covered by ASTM A641.

[35] GSW is available in a wide range of gauges (diameters), carbon levels, tensile strengths and coating thicknesses. GSW may be sold for use as baling wire, vineyard wire, or for production into a wide range of products including fencing, fasteners, and construction products. For certain applications, GSW may be further coated with polyvinyl chloride plastic (PVC).

[36] Products with higher carbon content have increased hardness and are accordingly more difficult to draw. These products tend to be in the higher range of GSW prices because of the more demanding engineering specifications. The wire must be drawn more slowly resulting in a higher energy cost per tonne and generates higher wear and tear on equipment such as dies. Major markets for high carbon GSW are the pulp baling market and certain waste baling applications.

[37] The gauge or thickness of the wire is also an important determinant of cost. The thinner the wire, the more the product must be drawn, and the higher the relative cost by weight. Similarly, zinc coating can vary. The thicker the coating, measured in ounces per square foot or grams per square meter, the more expensive the product is to produce.

[38] There is a wide range of terminology used to describe thickness of the wire. Diameter is most accurately expressed in millimetres or in inches; but the industry commonly refers to the gauge of a wire. Although American Steel & Wire (AS&W) wire gauges are most commonly used,[8] other gauge measurement may differ; some with different size ranges, and others that do not incorporate fractional sizes.[9] In addition, there are permitted tolerances for each gauge size or fractional size.

Production Process

[39] The production process begins with steel wire rod with the necessary chemical properties as an input. The wire rod is first de-scaled to remove ferrous oxide. This process can be accomplished by performing a chemical de-scaling by “pickling” the wire rod in an acid bath. This process can also be accomplished through mechanical means using methods such as reverse bending, wire brushing, belt polishing or sanding, shaving or shot blasting. Once de-scaled, the wire rod is coated with a lubricant and then drawn successively through a series of dies until it reaches the desired thickness.

[40] Depending upon the end use of the wire, it may require heat treatment. Heat treatment removes residual stresses and improves ductility in the wire that has been cold-work hardened in the drawing process. One way to achieve this is to use an inline annealing process where the wire is drawn through a bath of molten lead. Other methods of heat treatment include a fluidized bed (pulled through sand or other medium heated by gas) and induction heating (passing electric current through wire).

[41] Wire is then galvanized either through a hot-dip process or by using an electro-galvanizing process (or “electroplating”). Before galvanizing, the drawn wire is degreased, and again passed through an acid bath before a water rinse and immersion in a flux bath to prevent oxidization of the wire before application of the zinc. In the hot-dip process, the wire is then passed through molten zinc. A chemical reaction between the zinc and wire creates layers of zinc iron alloy on the surface of the wire, with the external layer being entirely zinc.

[42] The molten zinc generally includes a small quantity of molten lead, usually 1% or less. Some common zinc alloy coatings include higher lead levels, aluminum (generally 5% content) or brass.

[43] After hot-dip galvanizing, the wire is passed through a scrubber to ensure uniformity of the zinc coating. This can be achieved by employing both pad wipe and nitrogen wipe methods. Pad wipes are used for lighter coatings, while nitrogen wipes (use of forced nitrogen air) are employed for products with thicker zinc coatings. Other processes used as a scrubber include pulling the wire through inert gas gravel, or the use of a magnetic wipe. The wire is then sprayed with water to cool.

[44] In electroplating, the wire is passed through a chemical solution in which zinc has been dissolved. The wire is electrically charged, and zinc adheres to it to form a zinc coating. The slower the wire is passed through the bath, the thicker the zinc coating. For certain applications, GSW may be further coated with PVC. PVC is available in a variety of different colours of which green, brown and white are most common.

[45] Once finished, GSW may be wound onto a reel or wire stand, or packaged for shipment in coils with a range of sizes, from 50 kg up to 2 tonnes. Users of GSW can put the packaging directly on their production lines.

Classification of Imports

[46] The subject goods are usually classified under the following Customs Tariff Harmonized System (HS) classification numbers:

• 7217.20.00.11
• 7217.20.00.12
• 7217.20.00.19
• 7217.20.00.21
• 7217.20.00.22
• 7217.20.00.29

• 7217.20.00.31
• 7217.20.00.32
• 7217.20.00.39
• 7217.90.00.10
• 7217.90.00.90

[47] The subject goods may also be classified under the following HS classification number:

7229.90.00.20

[48] Prior to January 1, 2012, the subject goods were normally classified under the following HS classification numbers:

• 7217.20.20.11
• 7217.20.20.19
• 7217.20.20.21
• 7217.20.20.29
• 7217.20.20.31
• 7217.20.20.39
• 7217.20.90.11
• 7217.20.90.12

• 7217.20.90.19
• 7217.20.90.21
• 7217.20.90.22
• 7217.20.90.29
• 7217.20.90.31
• 7217.20.90.32
• 7217.20.90.39
• 7217.90.10.10

• 7217.90.10.90
• 7217.90.90.11
• 7217.90.90.19
• 7217.90.90.21
• 7217.90.90.22
• 7217.90.90.29

[49] Note that flat wire, which is not subject to these investigations, can be properly classified in some instances under the “other” categories which some of the above-mentioned HS classification numbers pertain to. Other products, outside of the diameter range provided by the product definition, may also be properly classified under these HS classification numbers.

[50] The listing of HS classification numbers is for convenience of reference only. Refer to the product definition for authoritative details regarding the subject goods.

Like Goods

[51] 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 the uses and other characteristics of which closely resemble those of the other goods.

[52] GSW produced by the domestic industry competes directly with, has the same end uses as, and can be substituted for, the subject goods. Therefore, the CBSA has concluded that the GSW produced by the Canadian industry constitutes like goods to the subject goods.

[53] 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.

[54] In the Tribunal’s Determination and Reasons – Preliminary Injury Inquiry No. PI-2012-005 Galvanized Steel Wire issued on April 8, 2013, the Tribunal stated that it was unable to conclude, at this preliminary stage, that there was more than one class of goods. Accordingly, for the purposes of determining whether there was a reasonable indication of injury, the Tribunal considered that GSW constituted a single class of goods.

[55] However, as stated in the Tribunal’s Determination and Reasons, the Tribunal was of the view that there was evidence on the record which suggested that there may be more than one class of goods. In particular, the Tribunal considered that, in the context of an inquiry under section 42 of SIMA, there may be merit in assessing injury on the basis of the following two classes of goods: (1) 17/18 gauge product (diameter ranging from 1.082 mm to 1.41 mm); and (2) the remainder of the subject goods.

[56] Consequently, on April 11, 2013, the Tribunal requested the CBSA to collect separate information on the dumping and subsidizing of the above two potential classes of goods. In response to this request, on April 22, 2013, the CBSA submitted to the Tribunal information it had available on the potential two classes of goods.

[57] On May 16, 2013, the Tribunal notified the CBSA that after having considered the evidence on the record and the arguments made by parties, the Tribunal determined that 17/18 gauge product (diameter ranging from 1.082 mm to 1.41 mm) and the remainder of the subject goods constitutes a single class of goods. The Tribunal will, therefore, conduct its injury analysis on the basis of a single class of goods. At this time the Tribunal also notified the CBSA that, as a result of this determination, it was no longer necessary to collect separate information on the dumping and subsidizing of the above two potential classes of goods.

The Canadian Industry

[58] As previously stated, the complainant accounts for a major proportion of domestic production of like goods.

Imports Into Canada

[59] During the preliminary phase of the investigations, the CBSA refined the estimated volume of imports based on information from CBSA import entry documentation and other information received from exporters and importers.

[60] The following table presents the CBSA’s analysis of imports of certain GSW for purposes of the final determinations:

Investigation Process

[61] Regarding the dumping investigation, information was requested from known and potential exporters, vendors and importers, concerning shipments of subject GSW released into Canada during the dumping POI of January 1, 2012 to December 31, 2012.

[62] Regarding the subsidy investigation, information related to potential actionable subsidies was requested from known and potential exporters in China and from the GOC concerning financial contributions made to exporters or producers of subject GSW released into Canada during the subsidy POI of January 1, 2011 to December 31, 2012.

[63] After reviewing the responses to the RFIs, supplemental RFIs were sent to each of the responding parties to clarify information provided in the submissions. In addition, on-site verifications were conducted at the premises of selected exporters during the final phase of the dumping and subsidy investigations.

[64] Details pertaining to the information submitted by the exporters in response to the exporter dumping RFI as well as the results of the CBSA’s dumping investigation can be found in the “Dumping Investigation” section below. Details pertaining to the information submitted by the exporters in response to the subsidy RFI as well as the results of the CBSA’s subsidy investigation can be found in the “Subsidy Investigation” section below.

[65] As part of the final stage of the investigations, case briefs and reply submissions were provided by counsel representing the complainant and exporters. Details of all representations can be found in Appendix 3 of this document.

[66] Under Article 15 of the World Trade Organization (WTO) Anti-dumping Agreement, developed countries are to give regard to the special situation of developing country members when considering the application of anti-dumping measures under the Agreement. Possible constructive remedies provided for under the Agreement are to be explored before applying anti-dumping duty where they would affect the essential interests of developing country members. As China is listed on the Development Assistance Committee (DAC) List of Official Development Assistance (ODA) Recipients maintained by the Organization for Economic Co-operation and Development (OECD)[10], the President recognizes China as a developing country for purposes of actions taken pursuant to SIMA.

[67] Accordingly, the obligation under Article 15 of the WTO Anti-dumping Agreement was met by providing the opportunity for exporters to submit price undertakings. In this particular investigation, the CBSA received two undertaking proposals from exporters in China.

Dumping Investigation

[68] The CBSA received complete responses to the exporter dumping RFI from the following companies:

China

Tianjin Huayuan Times Metal Products Co., Ltd. (Times Metal)[11]

Sunny Loan Top Co., Ltd. (Sunny Loan)[12] / Qin Huangdao King Power Metal Wire Co., Ltd. (King Power)[13]

Israel

Yehuda Welded Mesh Ltd. (Yehuda)[14]

Spain

Moreda-Riviere Trefilerías S.A. (MRT)[15]

[69] The CBSA also received responses to the exporter dumping RFI from two exporters, Hebei Minmetals Co., Ltd. (Hebei Minmetals) and Tianjin Sewintar International Trade Co., Ltd. (Sewintar). Both of these companies are exporters of subject goods, however, they do not produce the subject goods. The CBSA did not receive a response to the exporter dumping RFI from the producers of the subject goods. As such, the RFI responses from Hebei Minmetals and Sewintar did not contain sufficient information to enable the determination of company-specific normal values.

Normal Values

[70] The normal value of goods sold to importers in Canada is generally based on the domestic selling prices of like goods in the country of export pursuant to section 15 of SIMA, or on the aggregate of the cost of production of the goods, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits, pursuant to paragraph 19(b) of SIMA. Where, in the opinion of the President, sufficient information has not been furnished or is not available, normal values are determined pursuant to a ministerial specification in accordance with subsection 29(1) of SIMA.

Export Prices

[71] The export price of goods sold to importers in Canada is generally based on the lesser of the adjusted exporter’s sale price for the goods or the adjusted importer’s purchase price, pursuant to section 24 of SIMA. These prices are adjusted where necessary by deducting the costs, charges, expenses, duties and taxes resulting from the exportation of the goods, as provided for in subparagraphs 24(a)(i) to 24(a)(iii) of SIMA. Where, in the opinion of the President, sufficient information has not been furnished or is not available, export prices are determined pursuant to a ministerial specification in accordance with subsection 29(1) of SIMA.

Results of the Dumping Investigation by Country

[72] With respect to the exporters that provided complete responses to the RFI, the CBSA determined a margin of dumping by comparing the total normal value with the total export price of the goods. When the total export price is less than the total normal value, the difference is the margin of dumping for that specific exporter.

[73] The determination of the volume of dumped goods was calculated by taking into consideration each exporter’s net aggregate dumping results. Where a given exporter has been determined to be dumping on an overall or net basis, the total quantity of exports attributable to that exporter (i.e., 100%) is considered dumped. Similarly, where a given exporter’s net aggregate dumping results are zero, then the total quantity of exports considered to be dumped by that exporter is zero.

[74] In determining the margin of dumping for each country, the overall margins of dumping found in respect of each exporter were weighted according to each exporter’s volume of subject GSW exported to Canada during the dumping POI.

[75] Based on the preceding, 100% of GSW originating in or exported from China, Israel and Spain, and imported into Canada during the POI, was dumped. The margin of dumping for each country can be found in Table 2 at the end of this section.

[76] Under paragraph 41(1)(a) of SIMA, the President shall make a final determination of dumping when he is satisfied that the goods have been dumped and that the margin of dumping of the goods of a country is not insignificant. Pursuant to subsection 2(1) of SIMA, a margin of

dumping of less than 2% of the export price of the goods is defined as insignificant. The margin of dumping of GSW from China, Israel and Spain is not less than 2% of the export price of the goods and is, therefore, not insignificant.

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

[78] A summary of the margins of dumping determined for this investigation is found in Appendix 1.

China

Section 20 Inquiry

[79] Section 20 of SIMA 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,[16] it is applied where, in the opinion of the President, domestic prices are substantially determined by the government of that country and there is sufficient reason to believe that they are not substantially the same as they would be if they were determined in a competitive market. Where section 20 is applicable, the normal values of goods are not determined using domestic prices or costs in that country.

[80] For purposes of a dumping proceeding, the CBSA proceeds on the presumption that section 20 of SIMA is not applicable to the sector under investigation, absent sufficient information to the contrary. The President may form an opinion where there is sufficient information that the conditions set forth in paragraph 20(1)(a) of SIMA exist in the sector under investigation.

[81] The CBSA is also required to examine the price effect resulting from substantial government determination of domestic prices and whether there is sufficient information on the record for the President to have reason to believe that the resulting domestic prices are not substantially the same as they would be in a competitive market.

[82] For the purpose of this investigation, the complainant requested that section 20 be applied in the determination of normal values due to the alleged existence of the conditions set forth in paragraph 20(1)(a) of SIMA. The complainant provided information to support these allegations concerning the Chinese wire rod sector, which includes GSW, such as evidence of export controls and state-ownership. The complainant also cited specific GOC policies such as the National Steel Policy and China’s Five-Year Plan.

[83] At the initiation of the investigation, the CBSA had sufficient evidence, supplied by the complainant, from its own research and from past investigations, to support the initiation of a section 20 inquiry to examine the extent of GOC involvement in pricing in the wire rod sector, which includes GSW. The information indicated that Chinese prices in this sector have been influenced by various GOC industrial policies. Consequently, the CBSA sent section 20 RFIs to the GOC, all known wire rod producers and producers and exporters of GSW in China to obtain information on the matter.

Results of the Section 20 Inquiry

[84] The CBSA received one response to the section 20 RFI from a producer and three responses from exporters that are not producers. Although the CBSA did receive a number of pertinent documents, all of the documents provided were already in the CBSA’s possession and formed part of the CBSA’s decision to investigate section 20 conditions at initiation. Furthermore, none of the documents provided contained an update to the version in the CBSA’s possession. The GOC did not provide a response to the section 20 RFI.

[85] The following is the CBSA’s analysis of the relevant factors that are present in the Chinese steel industry which affect the wire rod sector, which includes GSW.

Industrial Policies

[86] As cited in previous section 20 inquiries,[17] The Development Policies for the Iron and Steel Industry – Order of the National Development and Reform Commission (No. 35), (National Steel Policy - NSP)[18] was promulgated on July 8, 2005, and outlines the GOC’s future plans for the Chinese domestic steel industry. The major objectives of the NSP are:

• the structural adjustment of the Chinese domestic steel industry;
• industry consolidations through mergers and acquisitions;
• the regulation of technological upgrading with new standards for the steel industry;
• measures to reduce material and energy consumption and enhance environmental protection; and
• government supervision and management in the steel industry.

[87] On March 20, 2009, the GOC promulgated the Blueprint for the Adjustment and Revitalization of the Steel Industry (2009 Steel Revitalization/Rescue Plan),[19] issued by the General Office of the State Council. This macro-economic policy was the GOC’s response to the international financial crisis and is also the action plan for the steel industry for the period between 2009 and 2011. This plan includes the following major tasks:

• maintain the stability of the domestic market and improve the export environment;
• strictly control the total output of steel and accelerate the process of eliminating what is backward (obsolete);
• enhance enterprise reorganization and improve the industrial concentration level;
• spend more on technical transformation and promote technical progress;
• optimize the layout of the steel industry and overall arrangements of its development;
• adjust the steel product mix and improve the product quality;
• maintain stable import of iron ore resources and rectify the market order; and
• develop domestic and overseas resources and guarantee the safety of the industry.

[88] There are common measures between the two GOC policies but, in addition, the 2009 Steel Revitalization/Rescue Plan is an acceleration of some major objectives of the NSP, in that there continues to be the strict control of new additions to steel production capacity, more stipulated mergers and acquisitions to consolidate the Chinese steel industry into larger conglomerates and also a focus on product quality.

[89] Further support that the domestic prices are substantially determined by the GOC and are not substantially the same as they would be in a competitive market in the Chinese steel industry can be found in the GOC’s new macro-economic policy entitled, 12th Five-Year Plan: Iron and Steel (Development Plan for the Steel Industry).[20]

[90] The 12th Five-Year Plan: Iron and Steel (Development Plan for the Steel Industry) is a relatively new policy document that was released by the GOC’s Ministry of Industry and Information Technology on November 7, 2011. It serves as the guiding document for the development of the Chinese steel industry for the 2011-2015 period and its directives include:

• increased mergers and acquisitions to create larger, more efficient steel companies;
• GOC restrictions on steel capacity expansion;
• upgrading of steel industry technology;
• greater GOC emphasis on high-end steel products; and
• GOC directed relocation of iron and steel companies to coastal areas.

[91] Also included in this plan are minimum requirements for steel production in order to eliminate smaller players in the market. Through this plan, the GOC is continuing its reform and restructuring of the Chinese steel industry. The GOC’s target is that by 2015, China’s top 10 steel producers will represent 60% of the country’s total steel output. According to the NSP (2005), the long-range GOC target for mergers and acquisitions is to have the top 10 Chinese steel producers account for 70% of total national steel production by 2020. This plan is the next development stage of GOC directives aimed at achieving this long-range 2020 target.

[92] The 12th Five-Year Plan: Iron and Steel (Development Plan for the Steel Industry) also addresses existing issues in the steel industry with the directive to strictly control expansion of steel production capacity, accelerate the development of new material for steel and producer service and to continue to advance mergers and restructuring.

GOC Ownership and Control of Suppliers

[93] Evidence on the record establishes that eight of the top ten steel companies in China are state-owned.[21] As per the 2010 China Steel Yearbook, a GOC publication, all of these eight steel producers make wire rod.[22] Furthermore, the complaint provides supporting documents that demonstrate that at least six also produce steel wire and/or GSW themselves or through subsidiaries.[23] These producers represent roughly 50% of total Chinese steel production and, as per the 12th Five-Year Plan, these companies are expected to reach 60% by 2015 and 70% by 2020.

[94] Furthermore, the 2010 China Steel Yearbook also states that 66% of wire rod production in China, 55% of steel wire and 73% of GSW come from what the GOC has defined as “key enterprises”.[24] The fact that the GOC not only tracks wire rod and GSW, but also identifies production from what it calls key enterprises further demonstrates its vested interest in these goods.

[95] In addition, there is information on the record indicating that the GOC has continuously pressured state-owned steel mills to avoid cutbacks in bids to maintain economic growth and employment, which in turn has been a contributing factor behind plummeting Chinese steel prices.[25] This is further proof that the GOC exerts control over the Chinese steel industry, which encompasses the wire rod sector, including GSW.

GOC Export Controls

[96] There is evidence that the GOC maintains export controls on raw materials used in the production of steel.

[97] The GOC export controls include export quotas, export duties and other export related administrative measures and costs. These GOC measures limit or prevent the export of the raw material resulting in an increasing supply in the Chinese domestic market causing downward pressure on domestic prices, while at the same time, increasing world market prices for these materials.

[98] With respect to input material in the steel making process, Chinese producers of coking coal are subject to a 40% export tax and an export quota of 18 million metric tonnes in 2012. The export quotas are down from 46 million metric tonnes in 2005, indicating that the downward trend of China’s coal exports will continue in the future.[26] This has resulted in pushing up export prices for Chinese coke and keeping down domestic prices of coke paid for by steel producers. In July 2011, the WTO ruled that these export restrictions and quotas were a violation of China’s WTO obligations.[27]

[99] The GOC imposes an export tax of 25% on steel billets, the main input material in making wire rod.[28] With respect to wire rod, the GOC imposes an export tax of 15%.[29] However, for GSW, the GOC does not impose any export tax. This results in inciting producers to further manufacture steel into more finished products such as GSW. It also increases supply of billets and wire rod in the Chinese domestic market causing downward pressure on domestic prices, while at the same time, increasing world market prices for these goods. Chinese GSW producers, therefore, have access to cheaper wire rod than producers outside of China.

Value-Added Tax Rebates

[100] In general terms, China’s value added tax (VAT) system is similar to a consumption tax, with the ultimate burden borne by the consumer. A manufacturer in China pays 17% VAT on its purchases of raw materials, processes the goods, and then sells the end-products, collecting 17% VAT in the process. The manufacturer then remits the difference between the VAT collected and the VAT paid on the purchases of the raw materials. In this manner, a manufacturer does not incur any VAT related costs on his production materials. However, VAT on export sales is treated differently.

[101] With exports, the exporter still pays the same 17% VAT on their purchases of raw materials, however, when they export the goods, they only receive a VAT refund of a fixed percentage, which is established by the GOC. In addition, the VAT refund cannot exceed the VAT paid on raw materials. Consequently, the VAT refund on exports would offset the VAT paid on the raw materials.

[102] Since 2007, China has eliminated VAT export rebates on some, but not all steel products, resulting in a shift in production towards products that still qualified for this rebate. This has the effect of promoting certain types of production while at the same time reducing the level of exports of other steel products, ultimately affecting pricing of these goods.

[103] An important effect of these tax changes is that it increases the cost of exports and reduces their profitability, which in turn reduces the volume of material that is exported and leaves additional capacity to serve the domestic market. While the GOC has stated that many of these policies are intended to address environmental and resource efficiency issues, these measures are changing the demand and supply balance in the domestic market and affecting the domestic prices of affected products.

[104] The VAT rebate on GSW currently stands at 9%. However, the GOC does not provide any rebate for steel billets or wire rod. The absence of VAT rebates on exports of steel billets and wire rod further demonstrates the GOC’s objective of increasing the domestic supply of unfinished steel products by discouraging their export. A higher supply of steel products such as billets and wire rod in the domestic market causes a downward pressure on domestic prices of these goods. Since wire rod comprises a large percentage of the cost of GSW, the low cost of wire rod in China clearly impacts the prices of GSW in China.

Chinese Domestic Wire Rod Price Analysis

[105] The CBSA requested wire rod pricing from the GOC, producers of GSW in China and wire rod producers in China. The GOC did not respond to the RFIs, nor did any wire rod producers. However, the CBSA received wire rod purchase prices from two GSW producers in China.

[106] The complaint provided information from the Steel Business Briefing (SBB), a global independent source of steel pricing information, comparing worldwide wire rod prices for 2011 and the first four months of 2012. Prices of wire rod in 2011 were between 16.9% and 59.7% lower in China than the rest of the world. In early 2012, prices were between 21.8% and 56.2% lower in China.[30]

[107] Wire rod purchases by the two GSW producers that provided the information were in line with the SBB information. Both GSW producers in China have access to wire rod at well below world prices which is one indication that domestic prices are substantially determined by the GOC and there is sufficient reason to believe that they are not substantially the same as they would be if they were determined in a competitive market.

[108] The CBSA was also able to obtain information from the Metal Bulletin comparing worldwide wire rod prices. The Metal Bulletin is an independent source of steel product benchmark prices used by steel buyers and sellers around the world. The prices were in line with what the SBB reported. Between the fourth quarter of 2011 and the fourth quarter of 2012, prices of wire rod varied between 14.0% and 72.6% lower in China than the rest of the world.[31]

[109] As with the SBB information, wire rod purchases by the two GSW producers that provided the information were also in line with the Metal Bulletin information reaffirming that both GSW producers have access to wire rod at well below world prices.

[110] Given that wire rod is a commodity product freely traded on the world market this discrepancy further indicates that domestic prices of wire rod in China are not being determined under competitive market conditions. Since wire rod comprises a large percentage of the cost of GSW, the low cost of wire rod in China clearly impacts the prices of GSW in China, such that they are not substantially the same as they would be in a competitive market.

Chinese Domestic GSW Price Analysis

[111] The CBSA conducted a price analysis on domestic prices of GSW. Although domestic price data for GSW is not publicly available, since this case involves multiple countries, the CBSA was able to obtain domestic sales information from all three subject countries. The analysis shows that prices of GSW in 2012 were significantly lower in China than in the other two subject countries.[32]

[112] This price discrepancy further indicates that, as with wire rod, domestic prices of GSW in China are not being determined under competitive market conditions.

Summary of the Results of the Section 20 Inquiry

[113] The wide range and material nature of the GOC measures have resulted in significant influence on the Chinese steel industry including the wire rod sector, which includes GSW. Based on the preceding, the President is of the opinion that:

• domestic prices 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 in a competitive market.

[114] Based on the above analysis, for the purposes of the final determination, the President affirmed the opinion rendered at the preliminary determination that the conditions described in paragraph 20(1)(a) apply in the wire rod sector in China, which includes GSW.[33]

Normal Values – Section 20

[115] Normal values of goods sold to importers in Canada are generally based on the domestic selling prices of like goods in the country of export or based on the cost of production of the goods, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits.

[116] However, normal values could not be determined on the basis of domestic selling prices in China or on the full cost of goods plus profits, as the President has formed the opinion that the conditions of paragraph 20(1)(a) of SIMA exist in the wire rod sector, which includes GSW, in China.

[117] Where section 20 conditions exist, the CBSA may determine normal values using the selling price, or the total cost and profits, of like goods sold by producers in a surrogate country designated by the President pursuant to paragraph 20(1)(c) of SIMA. However, sufficient surrogate country data respecting domestic pricing and costing information relating to the like goods was not provided to the CBSA. The CBSA could not use information obtained from the cooperative exporters located in Israel and Spain as the models of GSW sold domestically in those countries did not match the models of GSW exported from China during the POI.

[118] Where normal values cannot be determined under paragraph 20(1)(c), SIMA provides an alternative methodology to calculate normal values under paragraph 20(1)(d), using re-sales in Canada of like goods imported from a third country. The CBSA determined that this provision could also not be used given that the importers did not provide sufficient re-sale information.

[119] Accordingly, the CBSA has used an alternative method to determine normal values for the purposes of the final determination, pursuant to a ministerial specification under subsection 29(1) of SIMA.

[120] For the purpose of the ministerial specification, a methodology was used to calculate normal values that closely resembles the methodology set out in subparagraph 20(1)(c)(ii), that is, the aggregate of the cost of production, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits, in a surrogate country.

[121] The production of GSW involves the conversion of wire rod by drawing, annealing and galvanizing, and finishing and testing the product. The cost of steel wire rod accounts for approximately 86% of the total cost of production of GSW.[34]

[122] The CBSA has concluded that an appropriate method to determine the normal values involves using the Metal Bulletin worldwide prices of wire rod as the benchmark, plus a conversion factor (i.e., the conversion costs account for the additional costs incurred by the manufacturer to convert the wire rod into GSW), plus an amount for administrative, selling and all other costs and an amount for profits, as further explained in the following sections.

Metal Bulletin Wire Rod Prices

[123] To establish a benchmark price of wire rod reflective of competitive market conditions the CBSA used data collected from the Metal Bulletin during the dumping POI. Specifically, the Metal Bulletin average 60-day period world price for wire rod, excluding Chinese domestic prices, throughout the POI.

Conversion Factors, Amount for Administrative, Selling and All Other Costs and Amount for Profits

[124] Based on the verified cost information provided by both cooperative exporters in China, the CBSA was able to construct conversion factors based on each company’s material cost, labor cost and factory overhead for each 60-day period during the POI.

[125] As the conversion factors are based on verified cost information and are specific to the production process of the respective exporter, these factors provide an accurate method for determining the additional costs incurred to convert wire rod into the GSW shipped to Canada.

[126] As section 20 market conditions affect domestic selling prices in China, the CBSA could not use domestic sales in China to determine an amount for administrative, selling, all other costs and an amount for profits. As such, the CBSA calculated the weighted averages of the administrative, selling and all other costs and the amount for profits from verified information of the cooperating exporters from Israel and Spain.

Times Metal

[127] Tianjin Huayuan Times Metal Products Co., Ltd. (Times Metal) is a producer and exporter of subject goods. Times Metal is a privately owned company established in 2008.

[128] Times Metal provided a full response to the dumping RFI, including a database of export sales and a database of the cost of subject goods.

[129] The export price of the subject goods was determined in accordance with section 24 of SIMA as being an amount equal to the lesser of the exporter’s sale price for the goods and the price at which the importer has purchased or agreed to purchase the goods adjusted by deducting all costs, charges, expenses, and duties and taxes resulting from the exportation of the goods.

[130] The total export price of those subject goods was compared to the total normal value of those goods, calculated using the methodology described above. The margin of dumping for Times Metal is 16.6%, expressed as a percentage of the export price.

Sunny Loan / King Power

[131] Sunny Loan Top Co., Ltd. (Sunny Loan) is an exporter of subject goods produced by Qin Huangdao King Power Metal Wire Co., Ltd. (King Power). This exporter, founded in 1992, provided a complete response to the dumping RFI. King Power, the producer of the subject goods exported by Sunny Loan, provided a complete response to the dumping RFI, including a database of domestic sales of like goods.

[132] The export price of the subject goods was determined in accordance with section 24 of SIMA as being an amount equal to the lesser of the exporter’s sale price for the goods and the price at which the importer has purchased or agreed to purchase the goods adjusted by deducting all costs, charges, expenses, and duties and taxes resulting from the exportation of the goods.

[133] The total export price of those subject goods was compared to the total normal value of those goods, calculated using the methodology described above. The margin of dumping for Sunny Loan is 36.6%, expressed as a percentage of the export price.

Israel

Yehuda

[134] Yehuda Welded Mesh Ltd. (Yehuda) is a producer and exporter of subject goods. Yehuda is a privately held company and is part of the Yehuda Group. Yehuda provided a complete response to the dumping RFI.

[135] Yehuda did not have domestic sales of identical goods or similar goods. As such, it was not possible to determine normal values pursuant to section 15 of SIMA based on domestic sales of like goods. Normal values were, however, determined pursuant to paragraph 19(b) of SIMA based on an aggregate of the cost of production, administrative, selling and other costs, and an amount for profit. The full cost of production was determined in accordance with paragraph 11(1)(a) of the Special Import Measures Regulations (SIMR), based on Yehuda’s verified cost data associated with the subject goods shipped to Canada. A reasonable amount for administrative, selling and all other costs was determined pursuant to subparagraph 11(1)(c)(ii) of the SIMR. The amount for profit was determined in accordance with subparagraph 11(1)(b)(ii) of the SIMR, based on Yehuda’s profitable sales of GSW in their domestic market, during the PAP, within the same general category as the subject goods sold to the importer in Canada.

[136] The export price of the subject goods was determined in accordance with section 24 of SIMA as being an amount equal to the lesser of the exporter’s sale price for the goods and the price at which the importer has purchased or agreed to purchase the goods adjusted by deducting all costs, charges, expenses, and duties and taxes resulting from the exportation of the goods.

[137] The total normal value was compared with the total export price for the subject goods imported into Canada during the dumping POI from Yehuda. The margin of dumping for Yehuda is 10.2%, expressed as a percentage of the export price.

Spain

MRT

[138] Moreda-Riviere Trefilerías (MRT) is a producer and exporter of subject goods. MRT was established as a joint venture of two independent steel wire products manufacturers: Riviere S.A. and Moreda S.A., both of which were acquired by Celsa Group. MRT is part of the Global Steel Wire Group, which is owned by the Celsa Group.

[139] MRT provided a complete response to the dumping RFI, including a database of domestic sales of like goods. As such, domestic sales were used, when warranted, for purposes of determining normal values pursuant to section 15 of SIMA. In situations in which there were no domestic sales, or domestic sales were not made at a profit, normal values were determined pursuant to paragraph 19(b) of SIMA, as the aggregate of the cost of production of the goods, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits. The full cost of production was determined in accordance with paragraph 11(1)(a) of the SIMR, based on MRT’s verified cost data associated with the subject goods shipped to Canada. A reasonable amount for administrative, selling and all other costs was determined pursuant to subparagraph 11(1)(c)(ii) of the SIMR. The amount for profits was determined in accordance with subparagraph 11(1)(b)(ii) of the SIMR, based on MRT’s profitable sales of GSW in the domestic market, during the PAP, within the same general category as the subject goods sold to the importer in Canada.

[140] The export price of the subject goods was determined in accordance with section 24 of SIMA as being an amount equal to the lesser of the exporter’s sale price for the goods and the price at which the importer has purchased or agreed to purchase the goods adjusted by deducting all costs, charges, expenses, and duties and taxes resulting from the exportation of the goods.

[141] The total normal value was compared with the total export price for the subject goods imported into Canada during the dumping POI from MRT. The margin of dumping for MRT is 14.2%, expressed as a percentage of the export price.

All Other Exporters - Margin of Dumping

[142] For all other exporters that did not provide the requested information during the course of the dumping investigation, normal values were determined in accordance with subsection 29(1) of SIMA, as in the opinion of the President, sufficient information has not been furnished or is not available to enable the determination of normal values as provided in sections 15 to 23 of SIMA. In accordance with the ministerial specification, the normal values of the goods sold to the importer in Canada were determined by advancing the export prices of the goods as determined under section 24 or section 29 of SIMA by the highest amount by which the normal value exceeded the export price on an individual transaction (153%) for a cooperative exporter.

[143] For all of the other exporters, import pricing information available from the CBSA’s internal information systems was used for the purposes of determining export price.

[144] The subject goods exported to Canada by all other exporters during the POI were found to be dumped by a margin of dumping of 153%, expressed as a percentage of export price.

Summary of Results - Dumping

[145] The following table summarizes the results of the dumping investigation respecting all subject goods released into Canada during the POI.

Representations Concerning the Dumping Investigation

[146] Following the June 7, 2013 close of the record, case arguments with respect to the dumping investigation were received from counsel representing the complainant and the exporters, Yehuda and MRT. Reply submissions were filed on behalf of the complainant and Yehuda.

[147] The issues raised by participants through the case arguments and reply submissions pertaining to the dumping investigation, as well as the CBSA’s response to these issues, are provided in Appendix 3.

Subsidy Investigation

[148] In accordance with section 2 of SIMA, a subsidy exists if there is a financial contribution by a government of a country other than Canada that confers a benefit on persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of goods. A subsidy also exists in respect of any form of income or price support within the meaning of Article XVI of the General Agreement on Tariffs and Trade, 1994, being part of Annex 1A to the WTO Agreement that confers a benefit.

[149] Pursuant to subsection 2(1.6) of SIMA, there is a financial contribution by a government of a country other than Canada 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) 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.

[150] Where subsidies exist they may be subject to countervailing measures if they are specific in nature. According to subsection 2(7.2) of SIMA, a subsidy is considered to be specific when it is limited, in a legislative, regulatory or administrative instrument, or other public document, to a particular enterprise within the jurisdiction of the authority that is granting the subsidy; or is a prohibited subsidy.

[151] The following terms are defined in section 2 of SIMA. A “prohibited subsidy” is either an export subsidy or a subsidy or portion of subsidy that is contingent, in whole or in part, on the use of goods that are produced or that originate in the country of export. An “export subsidy” is a subsidy or portion of a subsidy contingent, in whole or in part, on export performance. An “enterprise” is defined as including a group of enterprises, an industry and a group of industries.

[152] Notwithstanding that a subsidy is not specific in law, under subsection 2(7.3) of SIMA a subsidy may also be considered specific 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/or
4. the manner in which discretion is exercised by the granting authority indicates that the subsidy is not generally available.

[153] For purposes of a subsidy investigation, the CBSA refers to a subsidy that has been found to be specific as an “actionable subsidy”, meaning that it is subject to countervailing measures if the persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of goods under investigation have benefited from the subsidy.

[154] Financial contributions provided by state-owned enterprises (SOEs) may also be considered to be provided by the GOC for purposes of this investigation. An 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.

[155] At initiation, the CBSA identified 144 potential subsidy programs in the following eight categories:

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

[156] Details regarding potential subsidies were provided in the Statement of Reasons[35] issued for the initiation of this investigation. A further review during the preliminary phase of the investigation resulted in the removal of 25 subsidy programs. The 25 programs were found by the CBSA to not be relevant to the GSW investigation as none of the exporters identified are located in regions which would allow them to qualify for these subsidies. The preliminary and final phases of the investigation also resulted in the addition of nine new programs to the investigation. As a result, there are 128 programs being investigated. These programs can be found in Appendix 2.

Results of the Subsidy Investigation

[157] In conducting its investigation, the CBSA sent a subsidy RFI to the GOC, as well as to potential exporters of GSW located in China that had been identified through CBSA import entry documentation. Information was requested in order to establish whether there had been financial contributions made by any level of government including SOEs possessing, exercising or vested with government authority, and, if so, to establish if a benefit has been conferred on persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of certain GSW; and whether any resulting subsidy was specific in nature. The GOC was also requested to forward the RFIs to all subordinate levels of government that had jurisdiction over the exporters. The exporters were requested to forward a portion of the RFI to their input suppliers, who were asked to respond to questions pertaining to their legal characterization as SOEs.

[158] The CBSA received complete responses to the exporter subsidy RFI from the following companies: Times Metal,[36] Sunny Loan,[37] and King Power.[38]

[159] The CBSA also received responses to the exporter subsidy RFI from two exporters, Hebei Minmetals and Sewintar. Both of these companies are exporters of subject goods, however, they do not produce the subject goods. The CBSA did not receive a response to the exporter subsidy RFI from the producers of the subject goods. As such, the RFI responses from Hebei Minmetals and Sewintar did not contain sufficient information to enable the determination of company-specific amounts of subsidy.

[160] The GOC did not provide a response to the subsidy RFI. Due to the lack of response from the GOC, subsidy amounts for all exporters have been determined under a ministerial specification pursuant to subsection 30.4(2) of SIMA. However, in consideration of the level of cooperation received from the exporters who provided complete responses to the subsidy RFI, individual amounts of subsidy have been determined for those exporters where sufficient information had been furnished to enable the necessary calculations.

[161] For the final determination, the CBSA determined an amount of subsidy for two exporters in China who provided complete responses to the subsidy RFI, Times Metal and Sunny Loan, based on the information provided in their responses to the subsidy RFI. The CBSA was unable to determine a company-specific amount of subsidy for the remaining exporters as there was insufficient information on the record to do so.

[162] The CBSA attributed the subsidies received by King Power and by Sunny Loan to the goods exported to Canada by the latter because of the business relationship between these two parties. The CBSA has concluded that a subsidy pass-through test is not required given the highly integrated involvement of both the producer and the exporter in the same export transactions involving the goods sold to Canada. To this extent, the export functions are being shared between the producer and the exporter.

[163] Consequently, the two companies will effectively be treated as a single entity for the purposes of determining an amount of subsidy in respect of the exporter. As such, any actionable subsidies received by the producer, King Power, which are attributable to the goods under investigation and exported to Canada, can be aggregated with those directly received by the exporter.

[164] A summary of the findings for the named subsidy programs can be found in Appendix 2.

[165] For purposes of the final determination, the total amount of subsidy calculated for Times Metal is equal to 0.00 RMB per metric tonne, or 0.0%, when expressed as a percentage of the export price. The total amount of subsidy calculated for Sunny Loan is equal to 907.79 RMB per metric tonne, or 15.0%, when expressed as a percentage of the export price.

[166] A summary of the amounts of subsidy for exporters who provided a complete response to the subsidy RFI are provided in Appendix 1.

[167] For all other exporters, the amount of subsidy has been determined under a ministerial specification, pursuant to subsection 30.4(2) of SIMA, based on:

1. the highest amount of subsidy for each of the 10 subsidy programs, as found at the final determination to have conferred benefits to any exporter located in China; plus,
2. the subsidy amount for the actionable subsidy program in (i) which had the lowest allocation per metric tonne, applied to each of the remaining 118 potentially actionable subsidy programs for which information is not available or has not been provided.

[168] Using the above methodology for all other exporters, the result is an amount of subsidy of 910.33 RMB per metric tonne.

[169] In summary, 91.5% of the subject goods from China are subsidized and the amount of subsidy is 14.9%, expressed as a percentage of the export price.

Summary of Results – Subsidy

Table 3
Amount of Subsidy and Volume of Subsidized Goods
(January 1, 2011 to December 31, 2012)

Country	Volume of Subsidized Goods as Percentage of Country Imports	Amount of Subsidy*	Volume of Country Imports as Percentage of Total Imports	Volume of Subsidized Goods as Percentage of Total Imports
China	91.5%	14.9%	28.3%	25.9%

* as a percentage of export price

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

[171] 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 product from 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.

[172] 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.[39] As China is included in the listing, the CBSA will extend developing country status to China for purposes of this investigation. As the preceding table illustrates, the amount of subsidy found during this investigation is not insignificant.

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

Undertaking Proposals

[174] After a preliminary determination of dumping, exporters may give a written undertaking to revise selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated.

[175] Acceptable undertakings must account for all, or substantially all, of the exports to Canada of the dumped goods. Furthermore, the President must be of the opinion that the observance of the undertaking or undertakings, as the case may be, will eliminate the margin of dumping of or the subsidy on the goods if they are sold by the exporter to importers in Canada, or any injury, retardation or threat of injury that is being caused by the dumping or subsidizing, pursuant to paragraphs 49(1)(a) and 49(1)(b) of SIMA.

[176] In the event that an undertaking is accepted, the required payment of provisional duty on the goods would be suspended. Furthermore, the investigation would be suspended, unless a request for continuation is made, as provided for under subsection 49(3) of SIMA.

[177] On June 21, 2013, the sixtieth day after the preliminary determination, the CBSA received a formal undertaking proposal from an exporter of GSW originating in or exported from China. Upon receipt of the undertaking proposal, the CBSA posted a notice on its Web site and contacted all interested parties, which were invited to submit representations regarding the acceptability of undertakings. Interested parties were given until July 2, 2013, to provide their representations, which is consistent with the prescribed nine days for such consultations.

[178] Pursuant to subsection 2(1) of SIMA, an undertaking, or undertakings given individually by exporters, must account for all or substantially all of the dumped goods. The undertaking proposal received on June 21, 2013, did not account for all or substantially all of the dumped goods and therefore was not accepted by the CBSA.

[179] On July 1, 2013, the CBSA received a second undertaking proposal from an exporter of GSW originating in or exported from China. This undertaking proposal was not filed in the prescribed time specified in section 57 of the SIMR, namely no later than 60 days after the preliminary determination of dumping. Since this exporter did not file its undertaking proposal with the CBSA in accordance with the prescribed time specified in the SIMR, the proposal was not accepted by the CBSA.

Decisions

[180] On the basis of the results of the dumping investigation, the President is satisfied that certain GSW originating in or exported from China, Israel and Spain have been dumped and that the margins of dumping are not insignificant. Consequently, on July 22, 2013, the President made a final determination of dumping pursuant to paragraph 41(l)(a) of SIMA.

[181] On the basis of the results of the subsidy investigation, the President is satisfied that certain GSW originating in or exported from China has been subsidized and that the amounts of subsidy are not insignificant. As a result, on July 22, 2013, the President made a final determination of subsidizing pursuant to paragraph 41(1)(a) of SIMA.

[182] Appendix 1 contains a summary of the margins of dumping and amounts of subsidy relating to the final determinations.

Future Action

[183] The provisional period began on April 22, 2013, and will end on the date the Tribunal issues its finding. The Tribunal is expected to issue its decision by August 20, 2013. Subject goods imported during the provisional period will continue to be assessed provisional duties as determined at the time of the preliminary determinations. For further details on the application of provisional duties, refer to the Statement of Reasons issued for the preliminary determinations, which is available on the CBSA’s Web site at www.cbsa-asfc.gc.ca/sima-lmsi/menu-eng.html.

[184] If the Tribunal finds that the dumped and subsidized goods have not caused injury and do not threaten to cause injury, all proceedings relating to these investigations concerning the named countries will be terminated. In this situation, all provisional duties paid or security posted by importers will be returned.

[185] If the Tribunal finds that the dumped and subsidized goods have caused injury, the anti‑dumping and/or countervailing duties payable on subject goods released by the CBSA during the provisional period will be finalized pursuant to section 55 of SIMA. Imports released by the CBSA after the date of the Tribunal’s finding will be subject to anti-dumping duty equal to the margin of dumping and countervailing duty equal to the amount of subsidy.

[186] The importer in Canada shall pay all applicable duties. If the importers of such goods do not indicate the required SIMA code or do not correctly describe the goods in the customs documents, an administrative monetary penalty could be imposed. The provisions of the Customs Act[40] apply with respect to the payment, collection or refund of any duty collected under SIMA. As a result, failure to pay duty within the prescribed time will result in the application of interest.

[187] In the event of an injury finding by the Tribunal, normal values and amounts of subsidy have been provided to the co-operating exporters for future shipments to Canada and these normal values and amounts of subsidy would come into effect the day after an injury finding. Information regarding normal values of the subject goods should be obtained from the exporter.

[188] Exporters of subject goods who did not provide sufficient information in the dumping investigation will have normal values established by advancing the export price by 153% based on a ministerial specification pursuant to section 29 of SIMA. Anti-dumping duty will apply based on the amount by which the normal value exceeds the export price of the subject goods. Similarly, exporters of subject goods who did not provide sufficient information in the subsidy investigation will be subject to a countervailing duty amount of 910.33 RMB per metric tonne, based on a ministerial specification pursuant to subsection 30.4(2) of SIMA.

Retroactive Duty on Massive Importations

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

[190] In respect of importations of subsidized goods that have caused injury, 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. In such a case, the amount of countervailing duty applied on a retroactive basis will equal the amount of subsidy on the goods that is a prohibited subsidy. An export subsidy is a prohibited subsidy according to subsection 2(1) of SIMA.

Publication

[191] A notice of these final determinations of dumping and subsidizing will be published in the Canada Gazette pursuant to paragraph 41(3)(a) of SIMA.

Information

[192] 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:

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