Archived Content

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.

Table Of Contents

• Summary
• Interested Parties
  • Complainant
  • Importers
  • Exporters
  • Government Of China
• Product Information
  • Definition
  • Production Process
  • Classification Of Imports
• Like Goods
• The Canadian Industry
• Evidence Of Dumping
  • Normal Value
  • Export Price
  • Estimated Margins Of Dumping
• Margin Of Dumping And Volume Of Dumped Goods
• Section 20 Inquiry
• Evidence Of Subsidizing
  • Programs Being Investigated
  • Conclusion
  • Estimated Amount Of Subsidy
• Amount Of Subsidy And Volume Of Subsidized Goods
• Evidence Of Injury
  • Increased Volume Of Dumped And Subsidized Imports
  • Loss Of Sales
  • Price Undercutting
  • Price Erosion
  • Price Suppression
  • Reduction In Employment
  • Declining Capacity Utilization
  • Declining Revenues, Margins And Profits
• Threat Of Injury
• Causal Link – Dumping/Subsidizing And Injury
• Conclusion
• Scope Of The Investigation
• Future Action
• Retroactive Duty On Massive Importations
• Undertakings
• Publication
• Information
• Appendix 1 - Description Of Identified Programs And Incentives
  • Determinations Of Subsidy And Specificity

Summary

[1] On April 2, 2013, the Canada Border Services Agency (CBSA) received a written complaint from Great Lakes Copper Inc. (GLC) of London, Ontario (the complainant), alleging that imports into Canada of certain copper tube originating in or exported from the Federative Republic of Brazil (Brazil), the Hellenic Republic (Greece), the People’s Republic of China (China), the Republic of Korea (Korea) and the United Mexican States (Mexico) are being injuriously dumped and that imports into Canada of certain copper tube originating in or exported from China are being unfairly subsidized. The complainant alleges that the dumping and subsidizing have caused injury and are threatening to cause injury to the Canadian industry producing like goods.

[2] On April 22, 2013, 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 Brazil, Greece, China, Korea and Mexico 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 copper tube from Brazil, Greece, China, Korea and Mexico has been dumped and that certain copper tube from China has been 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 like goods.

[4] The GOC provided written comments with respect to the complaint on May 15, 2013. In those comments, the GOC expressed its view that the complaint filed with the CBSA was “frivolous” and “unsubstantiated by evidence”. Based on this view, the GOC argued that the investigation concerning the subsidizing of certain copper tube from China should not be initiated.

[5] While the CBSA respects the views expressed by the GOC, based on the CBSA’s analysis of the complaint, it was determined that the complaint was properly documented and the information contained therein was sufficient to meet the requirements of SIMA for initiation.

[6] On May 22, 2013, pursuant to subsection 31(1) of SIMA, the President of the CBSA (President) initiated investigations respecting the dumping of certain copper tube from Brazil, Greece, China, Korea and Mexico and the subsidizing of certain copper tube from China.

Interested Parties

Complainant

[7] The complainant is the sole Canadian producer of like goods in Canada.[1] These goods are produced at a manufacturing facility in London, Ontario.

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

Great Lakes Copper Inc.
1010 Clarke Road
London, Ontario
N5V 3B2

[9] GLC began operations in London, Ontario, on April 21, 1958, as an extension of Wolverine Tube, Inc. based out of Detroit, Michigan. In 1998, it expanded by acquiring assets from Noranda Metal, which included two additional plants, one located in Montreal, Quebec, and the other in New Westminster, British Columbia. The Montreal and New Westminster facilities have since closed, leaving London as the only remaining manufacturing facility of certain copper tube in Canada.

[10] In July of 2008, GLC was bought by private Canadian investors. Since then, the company has invested over $10 million to reduce costs, broaden product line and enhance distribution facilities.

Importers

[11] The CBSA has identified 40 potential importers of the subject goods from CBSA import documentation and from information submitted in the complaint.

Exporters

[12] The CBSA has identified 43 potential exporters of the subject goods from CBSA import documentation and from information submitted in the complaint.[2]

Government Of China

[13] 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.

Product Information

Definition

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

Circular copper tube with an outer diameter of 0.2 inch to 4.25 inches (0.502 centimetres to 10.795 centimeters) excluding industrial and coated or insulated copper tube, originating in or exported from the Federative Republic of Brazil, the Hellenic Republic, the People’s Republic of China, the Republic of Korea and the United Mexican States. Circular copper tube with an outer diameter (OD) of 0.2 inch to 4.25 inches (0.502 centimetres to 10.795 centimeters) excluding industrial and coated or insulated copper tube will hereafter be referred to as Copper Tube.

Additional Product Information[3]

[15] It is important to note that the OD range of Copper Tube includes any diameters that are within the allowable tolerance range under any applicable standard. Copper Tube sold in Canada is manufactured to a variety of standards and grades including:

Canadian Copper Tube Standards and Grades

Tube Type	Standard	Application
Type K	ASTM[4] B88	Domestic water service and distribution, solar, fuel/fuel oil, natural gas, liquefied petroleum gas, snow melting
Type L	ASTM B88	Domestic water service and distribution, solar, fuel/fuel oil, natural gas, liquefied petroleum gas, snow melting
Type M	ASTM B88	Domestic water service and distribution, solar, compressed air
Type DWV	ASTM B306	Drainage waste, vent
Type ACR	ASTM B280, B68	Air conditioning, refrigeration
Type Medical Gas	ASTM B819	Medical gas uses (e.g., hospitals)

[16] There are numerous widely accepted applications of Copper Tube. These include but are not limited to plumbing, heating, cooling and medical (MED) gas use. Copper Tube is produced in straight lengths and in coils, in diameters that correspond with plumbing, air conditioning/ refrigeration (ACR) and MED gas applications.

[17] Plumbing Copper Tube classifications include:

• Type L (ordinarily used in residential and commercial potable water systems);
• Type K (typically used in underground or high pressure applications);
• Type M (ordinarily used in residential potable water systems); and
• Type DWV (drainage, waste and vent).

[18] Type L, K and M Copper Tube is primarily used for potable water applications, water recirculation systems and heating systems (e.g., solar, geothermal, etc.). Applications include above and below ground, indoor and outdoor systems and can be used in residential, commercial and industrial buildings.

[19] DWV Copper Tube is primarily used for above ground vent and drain lines.

[20] Refrigeration Copper Tube classifications include:

• ACR;
• MED-L/ACR; and
• MED-K.

ACR Copper Tube is primarily supplied as soft annealed coils for various refrigeration and air conditioning applications.

[21] The subject goods do not include industrial copper tube and coated or insulated copper tube. Industrial copper tube is a custom-made product made to specific dimensions (e.g., OD, inside diameter, wall thickness and length), tolerances and temper as specified by the customer and is normally made in sizes that differ from those in which Copper Tube is offered. Coated or insulated copper tube has a polyethylene/polyvinylchloride or foam coating.

Production Process[5]

[22] Copper Tube production process begins with the raw material, which may be either copper scrap, newly refined copper (copper cathode) or copper ingots. The choice of which raw material that is used depends on economic factors, such as cost and availability, and on the technical capabilities of the plant’s melting furnaces. Raw materials may account for 80% to 90% of the total cost of Copper Tube.

[23] Copper scrap is most often in the form of recycled Copper Tube, cable or wire that has been stripped of its insulation and/or baled Copper Tube that has been removed from demolished buildings. Another common form, referred to as “home” or “runaround” scrap, is the scrap that has been generated within the tube mill itself. Copper cathode is one of the purest metals in common usage, containing at least 99.95% copper. It is produced in large electrolytic cells that refine the relatively impure blister copper from smelting and refining furnaces. Copper ingots are cast from re-melted cathode or refined scrap and resemble large bricks. They are used mainly by tube mills that operate small melting furnaces, whose doors are not large enough to accommodate cathodes or large bales of scrap.

[24] The raw material is melted in a furnace, which in a large tube mill may hold up to 20 tons of metal. The furnace’s primary function is to melt the copper and if the raw materials are only in the form of home scrap, cathode or ingots, a simple shaft furnace suffices. This type of furnace cannot be used to refine metal.

[25] In most mills, the molten metal is then transferred into a holding furnace or tundish, either of which acts as a reservoir for the casting process and allows more raw materials to be melted. The holding furnace/tundish is heated just enough to maintain the molten metal at a constant temperature. To protect the copper from oxidation, the liquid metal surface may be covered with a blanket or with graphite powder.

[26] From the holding furnace/tundish, the copper is then cast by either the continuous or semi-continuous casting method. Using the continuous method, the molten metal is poured into a furnace where it travels into water cooled cylindrical graphite molds which force the copper to freeze quickly. As the copper cools it solidifies and is gripped and withdrawn in short steps. At the same time, more molten copper flows into the mold from behind. Slowly a solid log or hollow shell (i.e., hole in the center) of pure copper is formed. As the copper emerges from the casting machine, the log is cut into approximately two-foot sections or the shell is cut into approximately 30 to 60-foot sections. These sections, each weighing approximately 400 to 2,400 pounds, are now known as billets or shells. Using the semi-continuous method, the casting is done vertically and the operation has to be interrupted when the length of the log reaches the depth of the pit beneath the molds. In this process, the water-cooled floor of the mold cavity seals the mold until the first volume of copper freezes. Molten metal is then added to the mold at the same rate as the floor is withdrawn downward. When the resulting log reaches the desired length, the mold is withdrawn upward and the billet is removed from the pit.

[27] In a modification of these processes, some newer Copper Tube facilities utilize a cast and roll method whereby the casting mold containing a central water-cooled core produces a very thick-walled pipe (called a tube round) which is then rolled in a continuous process.

[28] The next step is to reheat the billet to approximately 1,535 degrees Fahrenheit (i.e., 835 degrees Celsius) to make the copper pliable. A rod, called a piercing mandrel, is then driven lengthwise through the center of the billet. This step is not necessary if the billet is cast as a tube round. Piercing can take place either immediately before or concurrently with the extrusion process.

[29] In mills that utilize the extrusion process, the billet heated to the proper hot-working temperature, is then placed in the chamber of an extrusion press. The horizontally mounted chamber contains a die at one end and a hydraulically driven ram at the other. The face of the ram is fitted with a dummy block that is slightly smaller in diameter than the billet. The ram may also be fitted with a piercing mandrel, or if the billet is hollow, with a rod that matches the diameter of the cast hole in the billet but is slightly smaller than the hole in the die at the opposite end of the chamber. As the ram moves forward, the copper is forced over the mandrel and through the hole in the die, causing a long hollow tube to be extruded out of the press. The length can vary depending on the capabilities of each mill. As the extruded tube emerges from the die, rollers carry it along on a run-out table so that it remains straight until it is cooled enough to handle.

[30] In mills that utilize the rolling process, the shell less than 12 inches in diameter is fed into a high reduction rolling mill, either by cylinder or continuous sleds. The rolling mill has a series of rolling heads that press on the outside of the shells causing a reduction in the OD and wall thickness of the shell. Further, a mandrel is present during the rolling process to maintain a specific inside diameter of the shell. The reduced diameter shell travels down the run out table. The nose and tail of the shell are then removed leaving only a good shell. The remaining portion is coiled into a large coil and passed down to the drawing section of the mill.

[31] The drawing process simply involves pulling the hollow tube through a series of hardened steel dies to reduce its diameter. Before each step, the tube is pointed at one end to fit through the next die, whereupon it is gripped by automatic jaws attached to a drawing machine. A mandrel, which is either fixed or floating depending on the process, is placed inside the tube. As the tube is drawn through the drawing machine, the mandrel and die act together to reduce both the tube’s OD as well as its wall thickness. The mandrel also determines the inner surface of the tube. The tube is drawn in several stages until the desired diameter and wall thickness is attained.

[32] As Copper Tube is sold in either a hard drawn condition in straight lengths or in a soft annealed state in coils, the next steps in the manufacturing process depend largely upon the type of product that is being produced. Copper Tube that is being sold in straight lengths will be passed through a series of straightening rolls that are arranged in a slight zigzag pattern. The rolls’ positions are set such that the tube is bent slightly less at each step in the series. The Copper Tube emerges straight and ready to be cut to length. Copper Tube that is being sold in coils is treated in a similar manner, however, the only difference being the position of the rolls. For coils, they are set as to impart a bend of appropriate radius to the Copper Tube as it emerges.

[33] Copper Tube that is to be sold in coils is passed through a continuous annealing furnace or an in-line induction furnace operating at approximately 1,300 degrees Fahrenheit (i.e., 704 degrees Celsius). For continuous annealing, the furnace is essentially a long heated box filled with a protective atmosphere to prevent the copper from oxidizing. For plants without this type of furnace, a bell shape furnace is used. This furnace looks like a large cylindrical church bell, the open bottom of which can be sealed to keep the air out. Coils of tube to be annealed are stacked under the bell and heated in a protective atmosphere. Annealed Copper Tube can be visually distinguished from hard drawn Copper Tube by its matte surface finish. Aside from the appearance and stiffness, however, annealed and hard drawn tubes have the same qualities and in general act identically when in contact with fluids.

Classification Of Imports

[34] Prior to 2012, imports of the subject goods were usually classified in Section XV of the Customs Tariff under the following Harmonized System (HS) classification numbers:

7411.10.00.11
Copper tubes and pipes of refined copper for plumbing, unworked, of an OD not exceeding 105 millimeters (i.e., 4.13 inches)

7411.10.00.20
Copper tubes and pipes of refined copper for ACR, unworked

[35] As of 2012, imports of the subject goods are now usually classified in Section XV of the Customs Tariff under the following HS classification numbers:

7411.10.00.10
Copper tubes and pipes of refined copper for plumbing, unworked

7411.10.00.20
Copper tubes and pipes of refined copper, for ACR, unworked

[36] The HS classification numbers prior to January 1, 2012, are shown as these were the numbers in effect during part of the period covered by the complaint (i.e., 2010 to 2012).

[37] 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

[38] 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.

[39] Copper Tube produced by the domestic industry competes directly with, has the same end uses as, and can be substituted for, the subject goods. Also, both are made from the same input material and are produced in the same general manner. Therefore, the CBSA has concluded that the Copper Tube produced by the Canadian industry constitutes like goods to the subject goods.

[40] 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.

The Canadian Industry

[41] As previously stated, the complainant is the sole producer of like goods in Canada.

Standing

[42] Subsection 31(2) of SIMA requires that the following conditions for standing be met in order to initiate an investigation:

• 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
• 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.

[43] Since GLC is the only producer of Copper Tube in Canada, the CBSA is satisfied that the complaint has standing pursuant to subsection 31(2) of SIMA.

CANADIAN MARKET

[44] The Canadian market for Copper Tube is supplied by the complainant’s domestic production as well as by imports of the subject goods and imports from other countries. All are primarily marketed in Canada through:[6]

• Plumbing and heating wholesalers (e.g., Wolseley, Noble Trade, EMCO and Groupe Deschenes Inc.);
• ACR wholesalers (e.g., Le Groupe Master, Refrigerative Supply Ltd., and United Refrigeration); and
• Retailers (e.g., Home Depot, Rona, Canadian Tire, Home Hardware and Lowe’s).

[45] The complainant estimated the Canadian Copper Tube market based on its own Canadian sales and import statistics from Statistics Canada.

[46] The complainant’s import estimates were based on HS classification numbers 7411.10.00.11 and 7411.10.00.20 prior to 2012 and HS classification numbers 7411.10.00.10 and 7411.10.00.20 for 2012, with a 0.8% deduction for 2012 to exclude non-subject goods over 4.25 inches (10.795 centimetres) in OD.

[47] The CBSA conducted its own analysis of imports of Copper Tube based on actual import data.

[48] The CBSA’s import data demonstrated similar trends and volumes as the information provided by the complainant.

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

Evidence Of Dumping

[50] The complainant alleged that subject goods from Brazil, Greece, China, Korea and Mexico have been injuriously dumped into Canada. Dumping occurs when the normal value of the goods exceeds the export price to importers in Canada.

[51] The complainant provided information to support the allegation that the copper sector, which includes Copper Tube, in China may not be operating under competitive market conditions and as such, normal values should be determined under section 20 of SIMA.

[52] Normal values are generally based on the domestic selling price of like goods in the country of export where competitive market conditions exist or on the full cost of the goods plus a reasonable amount for profits.

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

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

[55] Estimates of normal value and export price by both the complainant and the CBSA are explained as follows.

Normal Value

[56] The complainant indicated that it does not have access to the domestic selling prices of Copper Tube in Brazil, Greece, China, Korea and Mexico. As such, it was unable to estimate normal values using the methodology of section 15 of SIMA.

[57] As a result, the complainant estimated normal values for the subject goods using the methodology set out in paragraph 19(b) of SIMA. Under this methodology, normal values are determined 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.

[58] Using its own costs of production as a starting point, the complainant made certain adjustments to take into account differences in labour costs, overhead and general, selling and administrative expenses in those markets.

[59] Due to the large number of products within the subject goods definition, the complainant selected a range of representative high-volume models to act as benchmarks. Normal values were constructed for these benchmark models.

[60] The complainant provided information supporting the initiation of a section 20 inquiry respecting the allegedly dumped goods from China. It is of the opinion that domestic selling prices in China are substantially influenced by government policies and should not be used in the calculation of normal values since the prices are not reflective of competitive market conditions. The complainant argued that normal values in China should be determined based on information from producers in a surrogate country. Although the complainant was not able to provide information with respect to surrogate countries as this information was not readily available, the complainant’s estimate of normal values for China based on the methodology defined in paragraph 19(b) of SIMA are the lowest in relation to the other named countries. As such, the normal value estimates and methodology are considered reasonable.

[61] Normal values were estimated based on the aggregate of the costs of producing the goods (materials, direct labour and overhead), a reasonable amount for selling, general and administrative costs and all other costs, and a reasonable amount for profit. The complainant used its own costing data for this purpose, with adjustments where necessary to reflect cost differences between Canada and the named countries.

[62] Due to the large volatility of copper prices in recent years and in the interest of providing an estimate for an amount for profits that reasonably reflects a historical industry return for companies operating under competitive conditions, the complainant used the average five-year profit ratio earned by Mueller Industries Inc. (Mueller). Mueller is a significant producer of Copper Tube with operations in North America, Asia and Central America and, as such, represents a reasonable basis for estimating an amount for profits. Using Mueller, the complainant estimated a profit margin of 3.31%. The CBSA considers the amount of profit to be reasonable and accepts the amount of profit estimated by the complainant.

[63] Based on the foregoing, the CBSA found the complainant’s normal value estimates to be reasonable and representative. The CBSA also found that the selected benchmark products were representative of the subject goods.

[64] The CBSA estimated normal values based on the complainant’s information using the methodology of paragraph 19(b) of SIMA. Due to the volatility in the cost of copper and the fact that it represents such a large percentage of the total cost of the goods, an adjustment was made to the complainant’s cost of production to value the cost of copper as per the average London Metal Exchange copper cash rate for the month prior to the invoice date shown on actual import documentation. As a result, the CBSA considers its estimates to be more accurate than those provided by the complainant.

Export Price

[65] The export price of goods sold to an importer in Canada is generally 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.

[66] The complainant estimated export prices in each of the named countries based on supporting documentation, including commercial intelligence and freight estimates from the named countries.

[67] The CBSA estimated export prices based on actual import data from commercial and customs documentation. A sample of subject imports from January 1, 2012 to February 28, 2013, was used for this purpose, due to the large volume of Copper Tube products imported into Canada. Since this analysis was based on actual import data, the CBSA considers its estimates to be more comprehensive and accurate than those provided by the complainant.

Estimated Margins Of Dumping

[68] The CBSA compared the estimated normal values with the estimated export prices for the subject imports that were matched with benchmark products. The estimated margins of dumping were then calculated by deducting the estimated total export price from the estimated total normal value and expressing the result as a percentage of the estimated total export price.

[69] Based on this analysis, it is estimated that the subject goods from Brazil, Greece, China, Korea and Mexico were dumped. The margins of dumping estimated for each named country are shown in the table below.

Margin Of Dumping And Volume Of Dumped Goods

[70] 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.

[71] 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.

[72] On the basis of the estimated margins of dumping and the estimated volumes of dumped imports for the period of January 1, 2012 to February 28, 2013, summarized in the following table, the estimated margins of dumping and the estimated volumes of dumped goods are greater than the thresholds outlined above.

Estimated Margin of Dumping and Volume of Dumped Goods
(January 1, 2012 to February 28, 2013)

Country	Estimated Share of Total Imports by Volume	Estimated Dumped Goods as % of Total Imports by Volume	Estimated Margin of Dumping as % Export Price
Brazil	4.8%	4.8%	7.6%
Greece	3.1%	3.1%	7.1%
China	18.3%	18.3%	7.5%
Korea	25.9%	25.9%	9.2%
Mexico	4.2%	4.2%	5.9%
All Other Countries	43.7%	-	-
Total Imports	100.0%	-	-

Section 20 Inquiry

[73] Section 20 is a provision of SIMA that may be applied to determine the normal value of goods in a dumping investigation where certain conditions prevail in the domestic market of the exporting country. In the case of a prescribed country under paragraph 20(1)(a) of SIMA, it is applied where, in the opinion of the President, the government of that country substantially determines domestic prices and there is sufficient reason to believe that the domestic prices are not substantially the same as they would be in a competitive market.[7]

[74] The complainant alleged that the conditions described in section 20 prevail in the copper sector, which includes Copper Tube, in China. That is, the complainant alleges that this industry sector in China does not operate under competitive market conditions and consequently, prices established in the Chinese domestic market for Copper Tube are not reliable for determining normal values.

[75] The CBSA recognizes that governments can both directly and indirectly determine domestic prices through a variety of mechanisms. These can include influencing the supply or price of the inputs used in the production of subject goods or manipulating the supply or price of the goods themselves. In this regard, the complainant presented evidence that the GOC strongly influences the supply and price of the major inputs of the subject goods, those being copper scrap, copper cathode and electricity.[8]

[76] The complainant provided a variety of evidence supporting its claim that the GOC substantially determines domestic prices of Copper Tube, such as evidence of state-ownership. The complainant also cited specific GOC policies such as the Admittance Qualification of Chinese Copper Smelting Industry, Chinese Support Plan for Nonferrous Metals Industry and China’s Five-Year Plan.[9]

[77] The information currently available to the CBSA indicates that there are numerous GOC industrial policies and measures including import and export restrictions and subsidization that have been implemented which influence the copper sector, which includes Copper Tube, in China.

[78] With respect to the copper sector, the CBSA has information which demonstrates that the prices of copper may be significantly affected by the GOC’s policies and as a result, prices of Copper Tube in China may not be substantially the same as they would be if they were determined in a competitive market.

[79] Consequently, on May 22, 2013, the CBSA initiated a section 20 inquiry based on the information available in order to determine whether the conditions set forth in paragraph 20(1)(a) of SIMA prevail in the copper sector, which includes Copper Tube, in China. A section 20 inquiry refers to the process whereby the CBSA collects information from various sources so that the President may, on the basis of this information, form an opinion regarding the presence of the conditions described under section 20 of SIMA, in the sector under investigation.

[80] As part of this section 20 inquiry, the CBSA sent section 20 questionnaires to copper producers and producers and exporters of Copper Tube in China, as well as to the GOC requesting detailed information related to the copper sector, which includes Copper Tube, in China.

[81] To enable the determination of normal values should paragraph 20(1)(a) be applicable, the CBSA requested domestic pricing and costing information from 79 producers of Copper Tube in the Commonwealth of Australia (Australia), the Republic of Chile (Chile), the Republic of India (India), the Kingdom of Thailand (Thailand), the United Kingdom (UK) and the United States of America (US). Information from these parties was requested on a courtesy basis as there was no requirement for compliance. The CBSA also requested information from Canadian importers of Copper Tube regarding their sales from other countries.

[82] In the event that the President forms the opinion that domestic prices of Copper Tube in China are substantially determined by the GOC and there is sufficient reason to believe that the domestic prices are not substantially the same as they would be if they were determined in a competitive market, the normal values of the goods under investigation from China will be determined, pursuant to paragraph 20(1)(c), where such information is available, on the basis of the domestic selling price or full cost plus a reasonable amount for profits of the like goods sold by producers in any country designated by the President and adjusted for price comparability; or on the basis of the selling price in Canada of like goods imported from any country designated by the President and adjusted for price comparability, pursuant to paragraph 20(1)(d).

Evidence Of Subsidizing

[83] 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.

[84] 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.

[85] 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 or in fact, 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, specific according to subsection 2(7.2) of SIMA for the purposes of a subsidy investigation.

[86] 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.

[87] 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.

[88] 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.

[89] The complainant alleged that the exporters of 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 the governments of the respective municipalities in which the exporters are located.

[90] In support of its allegations, the complainant focused on various subsidy programs that were found to exist in several recently completed subsidy investigations, namely, Certain Steel Grating, Oil Country Tubular Goods, Carbon Steel Welded Pipe, Seamless Oil and Gas Well Casing, and Copper Pipe Fittings.[10] In addition, the complainant identified the relevant programs listed in China’s WTO notification (i.e., New and Full Notification Pursuant to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing Measures).[11] In reasonable level of detail, the complainant discussed the nature of the alleged subsidy programs and their availability to exporters of Copper Tube.

Programs Being Investigated

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

1. Special Economic Zones (SEZ) and other Designated Areas Incentives;
2. Preferential Loans and Loan Guarantees;
3. Grants and Grant-equivalents;
4. Preferential Income Tax Programs;
5. Relief from Duties and Taxes on Inputs, 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.

[92] The CBSA considered the programs listed in the complaint as well as those included in two current CBSA Chinese subsidy investigations, those being Certain Unitized Wall Modules (CV/135)[12] and Certain Galvanized Steel Wire (CV/133)[13].

[93] Of the 180 subsidy programs identified by the CBSA in the Certain Unitized Wall Modules investigation, the CBSA identified 123 programs that may be available to Chinese Copper Tube producers/exporters.

[94] Of the 144 programs identified in the Certain Galvanized Steel Wire investigation, the CBSA identified 14 additional programs that may be available to Chinese Copper Tube producers/exporters. It should be noted that 113 of the programs were already included as part of the 123 programs identified in Certain Unitized Wall Modules.

[95] As part of its own research, the CBSA obtained the 2011 Annual Report for Zhejiang Hailiang Co. Ltd. (Hailiang).[14] Hailiang is a producer of Copper Tube in China and is listed on the Shanghai Stock Exchange. According to the report, copper tube sales account for approximately 93% of its total revenue. A review of this report indicates that Hailiang took advantage of 33 subsidy programs receiving a total benefit of 23.3 million Renminbi or approximately 3.6 million Canadian dollars in 2011.[15]

[96] In total, the CBSA identified 170 subsidy programs that may be applicable to Chinese Copper Tube producers/exporters. Of these, 126 programs were investigated by the CBSA in previous subsidy investigations involving China. Since the GOC did not provide complete responses during these investigations to permit a proper analysis, these programs require further investigation by the CBSA to confirm whether they are actionable and countervailable. Of the 44 remaining programs, although 11 are new and little information is known of them at this point,[16] 33 were received by Hailiang in 2011 as disclosed by the CBSA’s research. Since the evidence shows that Hailiang, a Copper Tube producer, received benefit from these programs, the CBSA has reason to believe that other Copper Tube producers in China may have also benefited from these same programs.

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

[98] 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.

[99] 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 or is limited to certain enterprises operating within those regions.

[100] 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 and grant-equivalents, preferential loans, relief from duties or taxes, and provision of goods and services, which provide a benefit and that are not generally granted to all companies in China.

[101] The CBSA will investigate whether exporters of subject goods received benefits under these programs and whether such programs constitute actionable subsidies.

Conclusion

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

Estimated Amount Of Subsidy

[103] The complainant stated that it does not have access to publicly available information upon which to base an estimate of the amount of subsidy that may be conferred as a result of the various subsidy programs. Nevertheless, it noted that recent subsidy investigations revealed that these amounts were not insignificant.

[104] For purposes of this initiation, the CBSA estimated the amount of subsidy conferred to exporters of the subject goods in China by calculating the difference between their cost of production, as estimated by the CBSA, and the selling prices reported in customs entry documents of subject goods sold to importers in Canada.

[105] In this regard, it is assumed that these costs of production reflect what the costs in China would be if not distorted by government subsidies. It is further assumed that the export price of the Chinese goods to Canada is at least equal to the subsidized costs of the Chinese exporter. The difference between the export price of the goods, being the estimated subsidized cost of the Chinese exporter and the average cost of production as estimated by the CBSA reflects the amount of subsidy embedded in the cost of the subject goods.

[106] The CBSA’s analysis of the information indicates that subject goods imported into Canada during the period of January 1, 2012 to February 28, 2013, were subsidized and that the estimated amount of subsidy is 4% of the export price of the subject goods.

Amount Of Subsidy And Volume Of Subsidized Goods

[107] 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 the goods of that country. Under subsection 2(1) of SIMA, an amount of subsidy of less than 1% of the export price of the goods is defined as insignificant and a volume of subsidized 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 subsidized goods, the same threshold for the volume of dumped goods.

[108] 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.

[109] 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.[17] As China is included in the listing, the CBSA extends developing country status to China for purposes of this investigation.

[110] The CBSA used actual import data for all countries for the period of January 1, 2012 to February 28, 2013. On the basis of this information, the volume of subsidized goods as a percentage of the volume of total imports is estimated as follows:

[111] The volume of subsidized goods, estimated to be 15.4% 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 4% of the export price, is greater than the threshold of 2% and is therefore, not considered insignificant.

Evidence Of Injury

[112] The complainant alleged that the subject goods have been dumped and subsidized and that such dumping and subsidizing have caused or are threatening to cause material injury to the Copper Tube industry in Canada.

[113] SIMA refers to material injury caused to the domestic producers of like goods in Canada. The CBSA has accepted that the Copper Tube produced by the complainant are like goods to those imported from Brazil, Greece, China, Korea and Mexico.

[114] In support of its allegations, the complainant provided evidence of an increase in the volume of dumped and subsidized imports, loss of sales, price undercutting, price erosion, price suppression, reduction in employment, declining capacity utilization and declining revenues, margins and profit.

Increased Volume Of Dumped And Subsidized Imports

[115] The data, as submitted by the complaint, illustrates that from 2010 to 2012, imports of subject goods increased by 144%, from approximately 4.5 million pounds to 11 million pounds, while the complainant’s sales of like goods decreased by 13%, imports from non-named countries decreased and the overall Canadian market contracted.[18]

[116] The import volumes provided by the complainant along with the CBSA’s own estimates are detailed in the “Canadian Market” section of this Statement of Reasons. The data indicates a significant increase in the share of imports of Copper Tube from the named countries. From 2010 to the first four months of 2013, the share of subject imports increased from 22.6% to 57.3% of total imports. During the same period, the share of imports from non-named countries decreased from 77.4% to 42.7%.

Loss Of Sales

[117] The complainant detailed that, from January 1, 2010 to December 31, 2012, its overall total sales of Copper Tube in terms of volume and value declined significantly as a result of low-priced subject imports.[19]

[118] The complainant submitted that it lost numerous sales to a number of accounts from 2010 to 2012. Overall, based on its top 20 customers, the complainant suffered a 17% decline in sales volume during this time period. On a customer-specific basis, the complainant provided several internal reports and emails that illustrated individual lost sales as a result of low-priced imports from the named countries. The complainant also noted that specific major customers are now importing directly from the named countries.

[119] The CBSA finds that the complainant’s claims of lost sales are well supported and sufficiently linked to the imports of the allegedly dumped and subsidized goods. More specifically, the complainant’s allegations show that its sales were lost to low-priced subject imports.

Price Undercutting

[120] The complainant explained that the low-priced subject imports undercut its sales of Copper Tube from January 1, 2010 to December 31, 2012.[20]

[121] The complainant documented numerous specific instances where the prices of subject goods undercut its selling prices of like goods. The complainant pointed out that this is of particular importance because Copper Tube is a commodity product and purchasing decisions are made primarily on the basis of price.

[122] The complainant noted that although Statistics Canada data for Copper Tube is not a good indicator of price undercutting because the information is not presented on the basis of the Copper Tube diameter and does not take into account the volatility in copper costs, the landed import prices as shown in the Statistics Canada data consistently and significantly undercut the complainant’s selling prices.

[123] Since Copper Tube is sold in a variety of configurations, the CBSA’s import data did not reveal the degree of price undercutting on an individual importation basis. Price undercutting was however substantiated by the CBSA, where possible, by comparing the complainant’s benchmark product prices to the prices of the imported goods. In many instances, the import prices were at levels that undercut the complainant’s selling prices.

Price Erosion

[124] The complainant demonstrated that low-priced subject imports adversely affected its sales volume and value of Copper Tube through price erosion from January 1, 2010 to December 31, 2012.[21]

[125] The complainant provided the volume, value and selling prices for 20 benchmark products, representing the major proportion of the company’s annual sales volume. The information disclosed that although selling prices increased slightly from 2010 to 2011, they did so at the expense of a decline in sales volume and gross margin. And, as selling prices decreased slightly from 2011 to 2012, sales volume and gross margin also declined.

[126] Based on the evidence, the CBSA finds that the complainant’s claims of price erosion are well supported and sufficiently linked to imports of the allegedly dumped and subsidized goods.

Price Suppression

[127] The complainant submitted that, from January 1, 2010 to December 31, 2012, low-priced subject imports suppressed Copper Tube selling prices on the Canadian market.[22]

[128] The complainant noted that the traditional method for illustrating price suppression (i.e., comparing unit cost of goods to unit selling prices over time) cannot be used for Copper Tube since the cost of the copper, which makes up the largest percentage of the total cost and selling price of the goods, is simply passed through to the customer. In other words, Copper Tube producers have no control over the copper cost or its price volatility and the only real measure of its performance is the amount it is able to charge the customer for the cost to fabricate the copper into Copper Tube (i.e., the fabrication charge). Thus, to the extent that price suppression exists, it will only be on the fabrication charge, which needs to cover all production costs (i.e., excluding the copper cost) plus an amount for profit.

[129] With this in mind, the complainant measured price suppression in terms of the difference between the gross spread (i.e., net sales less the cost of the copper) and production costs (i.e., also less the costs of the copper). The data showed a significant decline from January 1, 2010 to December 31, 2012.

[130] The CBSA accepts the complainant’s approach to measuring price suppression. As the cost of copper is simply passed through to the customer, removing its cost from the selling prices and production costs allows a more accurate analysis of the impact price suppression has had on just the fabrication charges. Based on this approach, the CBSA finds that the price suppression experienced by the complainant as a result of the alleged dumped and subsidized goods was significant.

Reduction In Employment

[131] The complainant submitted that it was necessary to lay off 45 employees from January 1, 2010 to December 31, 2012, as a result of the of low-priced Copper Tube imports from the named countries. Of these, 34 were directly involved in the production of Copper Tube.[23]

[132] The CBSA acknowledges that the complainant has experienced a reduction in its staff and that this reduction can be reasonably linked to imports of the allegedly dumped and subsidized goods.

Declining Capacity Utilization

[133] The complainant stated that it has taken extraordinary measures in the past few years to reduce costs and increase production efficiencies to combat low-priced imports of Copper Tube from the named countries. Over the past three years, the complainant made significant capital expenditures, which resulted in modest increases to its production capacity. Despite its efforts, the complainant experienced declining capacity utilization throughout this period.[24]

[134] The CBSA finds that the declining capacity utilization experienced by the complainant can be reasonably linked to the increased volume of the allegedly dumped and subsidized imports.

Declining Revenues, Margins And Profits

[135] The complainant submitted that, from January 1, 2010 to December 31, 2012, it experienced declining revenues, margins and profits of Copper Tube as a result of low-priced subject imports.[25]

[136] The complainant provided its financial statements for Copper Tube from 2010 to 2012. These statements detailed a significant deterioration in the company’s financial performance in Canada.

[137] The CBSA’s review of these statements indicates that the complainant’s declining financial performance is likely due to lost sales, price undercutting, price erosion and price suppression resulting from imports of the allegedly dumped and subsidized goods.

Threat Of Injury

[138] The complainant indicated that the rapid increase in the volume of allegedly dumped and subsidized imports from January 1, 2010 to December 31, 2012 at prices that undercut domestically produced like goods, pose a threat of further injury to the Canadian industry. The complainant believes that this increase in imports indicates that their producers have an aggressive exporting agenda for Canada and that this trend is likely to continue to increase in the near future.

[139] More current evidence available to the CBSA supports that import volumes from the named countries are continuing to increase at an even more rapid pace which, in all likelihood, will continue into the near future. Imports from the named countries captured 57.3% of the Canadian market during the period, January to April of 2013. Compared to the same period in 2012, imports from the named countries accounted for 49% of the total volume of imports in the Canadian market.

[140] The complainant estimated that the named countries have a combined annual Copper Tube capacity of over three billion pounds and that their excess capacity will, in all likelihood, cause injury to the Canadian production of like goods.[26] The CBSA acknowledges that exporters from the named countries have excess capacities and should they seek export markets, such as Canada, to increase their capacity utilization, this would lead to further injury to the Canadian industry. The complainant provided additional evidence indicating that copper futures have recently declined as a result of a slowing in the demand for Copper Tube.[27] This fact, in combination with the huge capacities in each of the named countries suggests that the producers in these countries will, in all likelihood, be seeking export markets to absorb their excess capacity.

[141] The complainant provided evidence that substantiates the fact that the subject goods are entering the Canadian market at prices that are likely to have a significant depressing or suppressing effect on the price of like goods and that they are likely to increase the demand for further imports. The complaint demonstrates that subject imports were offered in the Canadian market at prices that forced the complainant to lower its prices or lose sales. Several of these allegations pertain to sales during the latter part of 2012 and early part of 2013. In fact, low-priced import offers resulted in a significant decline in the complainant’s gross margin from 2011 to 2012.[28]

[142] The complainant provided current evidence of anti-dumping measures issued on November 22, 2010, by the United States Department of Commerce on copper pipe and tube from Mexico and China. The complainant also provided evidence of anti-dumping measures issued on April 1, 2001, by the Australian Customs Service on Copper Tube from Korea. [29] Although the measure against Korea was revoked in 2006, the CBSA finds that exporters from China, Korea, and Mexico have a propensity to dump in foreign markets.

Causal Link – Dumping/Subsidizing And Injury

[143] The CBSA finds that the complainant has provided sufficient evidence that there is a reasonable indication that they have suffered injury due to the alleged dumping and subsidizing of subject goods imported into Canada. The information provided indicates an increase in the volume of imports of allegedly dumped and subsidized goods, as described above, posing a threat to the Canadian industry. There is a reasonable indication that the injury the complainant has suffered in terms of loss of sales, price undercutting, price erosion, price suppression, declining revenues, margins and profit, reduction in employment and declining capacity utilization is related to the price advantage the alleged dumping and subsidizing has produced between the imported subject goods and the Canadian produced goods.

[144] The CBSA also finds that the complainant has provided sufficient evidence that there is a reasonable indication that continued alleged dumping and subsidizing of subject goods imported into Canada threaten to cause injury to the Canadian industry producing these goods.

Conclusion

[145] Based on information provided in the complaint, other available information, and the CBSA’s internal import documentation, the President is of the opinion that there is evidence that certain copper tube originating in or exported from Brazil, Greece, China, Korea and Mexico has been dumped and that certain copper tube originating in or exported from China has been 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 May 22, 2013.

Scope Of The Investigation

[146] The CBSA is conducting investigations to determine whether the subject goods have been dumped and/or subsidized.

[147] The CBSA requested information from all potential exporters and importers to determine whether or not subject goods imported into Canada, during the period of investigation of May 1, 2012 to April 30, 2013, were dumped. The information requested will be used to determine the normal values, export prices and margins of dumping, if any.

[148] The CBSA requested information from producers of copper and producers and exporters of Copper Tube in China, as well as the GOC, to determine whether the conditions of section 20 exist in the copper sector, including Copper Tube. The CBSA also requested costing and sales information from producers of Copper Tube in Australia, Chile, India, Thailand, the UK and the US. Where sufficiently available, this information may be used to determine normal values of the goods in China in the event that the President of the CBSA forms an opinion that the evidence in this investigation demonstrates that section 20 conditions apply in the copper sector, which includes Copper Tube, in China.

[149] The CBSA also requested information from the GOC and all potential Chinese exporters to determine whether or not subject goods imported into Canada, during the period of investigation of January 1, 2012 to April 30, 2013, were subsidized. The information requested will be used to determine the amounts of subsidy.

[150] All parties have been clearly advised of the CBSA’s information requirements and the time frames for providing their responses.

Future Action

[151] The Canadian International Trade Tribunal (Tribunal) will conduct preliminary inquiries to determine whether the evidence discloses a reasonable indication that the alleged dumping and subsidizing of the goods have caused or are threatening to cause injury to the Canadian industry. The Tribunal must make its decisions 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.

[152] If the Tribunal finds that the evidence discloses a reasonable indication of injury to the Canadian industry and the CBSA investigations preliminarily reveal that the goods have been dumped and/or subsidized, the CBSA will make a preliminary determination of dumping and/or a preliminary determination of subsidizing within 90 days after the date of the initiation of the investigations, by August 20, 2013. Where circumstances warrant, this period may be extended to 135 days from the date of the initiation of the investigations.

[153] If, in respect of a named country, the CBSA investigation(s) reveal that imports of the subject goods have not been dumped and/or subsidized, that the margin of dumping and/or amount of subsidy is insignificant or that the actual and potential volume of dumped or subsidized goods is negligible, the investigation(s) will be terminated.

[154] Imports of subject goods released by the CBSA on and after the date of preliminary determinations 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.

[155] Should the CBSA make preliminary determinations of dumping and/or subsidizing, the investigations will be continued for the purpose of making final determinations within 90 days after the date of the preliminary determinations.

[156] If final determinations of dumping and/or subsidizing are made, the Tribunal will continue its inquiries and hold public hearings into the question of material injury to the Canadian industry. The Tribunal is required to make findings with respect to the goods to which the final determinations of dumping and/or subsidizing apply, not later than 120 days after the CBSA’s preliminary determinations.

[157] In the event of injury findings 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 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

[158] When the Tribunal conducts its inquiries 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.

[159] Should the Tribunal issue such findings, 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 preliminary determinations of dumping and/or subsidizing.

[160] 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, as explained in the previous “Evidence of Subsidizing” section. 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

[161] 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.

[162] 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.

[163] 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 to one of the officers identified in the “Information” section of this document.

[164] If an undertaking were to be accepted, the investigations and the collection of provisional duties 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 inquiries.

Publication

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

Information

[166] 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.

[167] To be given consideration in this phase of these investigations, all information should be received by the CBSA by June 28, 2013.

[168] Any information submitted to the CBSA by interested parties concerning these investigations is considered 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.

[169] 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.

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

[171] 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:

Caterina Ardito-Toffolo

Acting Director General

Anti-dumping and Countervailing Directorate

Attachment

Appendix 1 - Description Of Identified Programs And Incentives

Evidence provided by the complainant suggests that the Government of China (GOC) may have provided support to manufacturers of subject goods in the following manner. For purposes of this investigation, the 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 Zones (SEZ) and Other Designated Areas Incentives

Program 1: Preferential Tax Policies for Enterprises with Foreign Investment (FIEs) Established in Special Economic Zones (SEZs) (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 in Guangdong

Program 9: Income Tax Refunds where Profits are Re-invested in SEZs and other Designated Areas

Program 10: Preferential Tax Program for FIEs Recognized as HNTEs (High and New Technology Enterprises)

Program 11: Preferential Tax Policies for FIEs which are Technology Intensive and Knowledge Intensive

Program 12: Services or Goods provided by Government or public bodies at the preferential prices to enterprises located in SEZs and other designated areas

Program 13: VAT Exemptions for the Central Region

Program 14: Tax over-refunds or over-exemptions for the water, electricity and gas consumed in the Export Processing Zone

Program 15: Custom Duty Exemption and VAT Exemption for machinery, equipment, construction materials imported into the Export Processing Zone for the construction of production facilities (such as factory and warehouse) in the zone

Program 16: Custom Duty Exemption and VAT Exemption for machinery, equipment, moulds/dies and the corresponding repairing parts imported into the Export Processing Zone and used for the production by Enterprises in the zone

Program 17: Custom Duty over-refund or over-exemption and VAT over-refund or over-exemption for raw materials, parts, packaging materials and consumable materials imported into the Export Processing Zone and used for the production of exported goods in the zone

Program 18: Export Duty Refund or Exemption for the exported goods produced in the Export Processing Zone and exported from the zone

Program 19: VAT Refunds or Exemptions for the domestically purchased machinery, equipment and construction materials used for the production of exported goods and the construction of production facilities in the Export Processing Zone

II Preferential Loans and Loan Guarantees

Program 20: Loans and Interest Subsidies Provided Under the Northeast Revitalization Program

Program 21: Export Seller’s Credit for High- and New-Technology Products by China EMIX Bank

Program 22: Preferential Loan for the National/Provincial keyScience & Technology Industrialization Projects, High Technology Industrialization Projects, Science & Technology Achievements Commercialization Projects, Modern Equipment Manufacturing Industry and key Information Technology Industrialization Projects by Liaoning Governments

III Grants and Grant-equivalents

Program 23: Innovation Fund for Medium and Small Business

Program 24: Special fund for developing trade through science and technology of Guangdong Province

Program 25: Special Funds for Foreign Economic and Technical Cooperation

Program 26: Innovative Experimental Enterprise Grant

Program 27: Superstar Enterprise Grant

Program 28: Awards to Enterprises whose Products Qualify for ”Well-Known Trademarks of China“ or ”Famous Brands of China”

Program 29: Export Brand Development Fund

Program 30: Provincial Scientific Development Plan Fund

Program 31: Technical Renovation Loan Interest Discount Fund

Program 32: National Innovation Fund for Technology Based Firms

Program 33: Guangdong - Hong Kong Technology Cooperation Funding Scheme

Program 34: Grants for Encouraging the Establishment of Headquarters and Regional Headquarters with Foreign Investment

Program 35: Innovative Small and Medium-Sized Enterprise Grants

Program 36: Product Quality Grant

Program 37 2009 Energy-Saving Fund

Program 38: Grants for Export Activities

Program 39: Grants for International Certification

Program 40: Emission Reduction and Energy-Saving Award

Program 41: Grant for Market Promotion and Trade Development (Shandong)

Program 42: Grant - Assistance for Exhibition Booth Fees (Shandong)

Program 43: Grant - Patent Application Assistance

Program 44: Grant - State Service Industry Development Fund

Program 45: Grant - Cleaning-production Qualified Enterprise Reward

Program 46: Grant - Provisional Industry Promotion Special Fund

Program 47: Grant – Financial Subsidies from Wei Hai City Gao Cun Town Government

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 - Special Supporting Fund for Commercialization of Technological Innovation and Research Findings

Program 51: Grant - Resources Conservation and Environment Protection Grant

Program 52: Grant - Wendeng Government (Shandong)

Program 53: Enterprise Technology Centres

Program 54: Allowance to Pay Loan Interest

Program 55: Supporting Fund for Non-Refundable Export Tax Loss

Program 56: International Market Fund for Export Companies

Program 57: International Market Fund for Small and Medium-sized Export Companies

Program 58: Business Development Overseas Support Fund

Program 59: Refund from Government for Participating in Trade Fair

Program 60: Grant - Special Fund for Fostering Stable Growth of Foreign Trade

Program 61: Reimbursement of Anti-dumping and/or Countervailing Legal Expenses by the Local Governments

Program 62: Financial Special Fund for Supporting High and New Technology Industry Development Project

Program 63: Subsidy for Promoting Energy-Saving Buildings

Program 64: Subsidy for the Technology Development ­­

Program 65: Awards for the Contributions to Local Economy and Industry Development

Program 66: Beijing Industrial Development Fund

Program 67: Grants, Loans, and Other Incentives for Development of Famous Brands, China Top World Brands or other well-known Brands

Program 68: Shunde Famous Brands

Program 69: Guangdong Supporting Fund

Program 70: Zhabei District “Save Energy Reduce Emission Team” Award

Program 71: “Five Points, One Line” Program of Liaoning Province

Program 72: State Special Fund for Promoting Key Industries and Innovation Technologies

Program 73: Fund for SME (small and medium size enterprises) Bank-Enterprise Cooperation Projects by Guangdong Governments

Program 74: Special Fund for Significant Science and Technology by Guangdong Governments

Program 75: Fund for Economic, Scientific and Technology Development by the Government of Foshan City

Program 76: Provincial Fund for Fiscal and Technological Innovation by Guangdong Governments

Program 77: Provincial Loan Discount Special Fund for SMEs by Guangdong Governments

Program 78: “Large and Excellent” Enterprises Grant

Program 79: Advanced Science/Technology Enterprise Grant

Program 80: Award for Excellent Enterprise

Program 81: Foshan City Government Technology Renovation and Technology Innovation Special Fund Grants

Program 82: Nanhai District Grants to State and Provincial Enterprise Technology Centers and Engineering Technology R&D Centers

Program 83: Supporting Fund for the Projects Used to Resolve the Important Technological Issues for Enterprises’ Production and R&D by Liaoning Governments

Program 84: Technology Innovation Fund for Science & Technology Type SMEs by Liaoning Governments

Program 85: Supporting Fund for the Application Technology Research in the Overseas R&D Institution/Branch by Liaoning Governments

Program 86: Special Supporting Fund and Special Loan Assistance by Chinese Ministry of Science & Technology for revitalizing the Northeast old industrial base

Program 87: Special Supporting Fund for Key Projects of “500 Strong Enterprises in Contemporary Industries” by Guangdong Governments

Program 88: Fund for Supporting Strategic Emerging Industries by Guangdong Governments

Program 89: Medium Size and Small Size Enterprises Development Special Fund

Program 90: Medium Size and Small Size Trading Enterprises Development Special Fund

Program 91: Special Fund for Export Credit Insurance by Guangdong Governments

Program 92: Supporting Fund for Converting the Industry Technology Achievements/Findings by Beijing Governments

Program 93: Special Development Fund for Beijing Cultural Innovation Industry

Program 94: Supporting Fund for Becoming Publicly Listed Company

Program 95: Supporting Fund for the “Working Capital” Loan Interest

Program 96: Award for Maintaining the Growth by Beijing Governments

Program 97: Award by Beijing Technology Trading Encouraging Centre

Program 98: Award by Shanghai Songjiang Economic Committee

Program 99: Supporting Fund for the Development from Guangzhou Local Governments

Program 100: Interest Assistance for Technology Renovation Projects by Liaoning Governments

Program 101: Interest Assistance for the Application of Information Technology by Liaoning Governments

Program 102: Loan Guarantee Fund for Science & Technology Enterprises by Liaoning Governments

Program 103: Fund for Optimizing Import and Export Structure of Mechanical Electronics and High and New Technology Products

Program 104: Special Fund for Pollution Control of Three Rivers, Three Lakes, and the Songhua River

Program 105: Repaying Foreign Currency Loan by Refunded VAT

Program 106: Government Export Subsidy and Product Innovation Subsidy in Shandong Province

Program 107: Export Assistance Grant

Program 108: Research & Development (R&D) Assistance Grant

Program 109: Foreign Trade Promotion Award

Program 110: Financial Assistance for an Overseas Market Survey

Program 111: Supporting fund provided to Service Outsourcing Enterprises for the Establishment of their Brands and the Acquisition of their International Qualification Accreditations.

Program 112: Liaoning High-tech Products & Equipment Exports Interest Assistance

Program 113: Grant for Developing International Markets for SMEs in Zhejiang

Program 114: Grant for Developing International Markets and Capital Clearing Fund for SMEs in Zhejiang

Program 115: Export Credit for Insurance Premium in Zhejiang

Program 116: Property Tax Reduction of Urban Land Use for Companies Who Provide Employment to People with Disabilities in Zhejiang

Program 117: Support for the Development of Welfare Enterprises and Promoting the Employment of Persons with Disabilities in Zhuji City.

Program 118: Subsidy for Certification of Clean and Green Production in Zhejiang

Program 119: Subsidy for Construction Projects in the Developmental and Experimental Zone in Zhuji City

Program 120: Policy to Promote Industrial Restructuring and Upgrading, and Enhance the Level of Economic Development in Dianko Township

Program 121: Grant for Standardizing Industrial Systems in the Nonferrous Metals Industry

Program 122: Award for Science and Technology in Shaoxin City

Program 123: Policy to Accelerate the Development of Modern Logistics Industry in Zhuji City

Program 124: Grant for Industrial Transformation and Upgrading of Major Science and Technology Projects in Zhuji City

Program 125: Science and Technology Award of Zhejiang Province

Program 126: Award to Science and Technology Enterprises in Zhuji City

Program 127: Science and Technology Award of Zhuji City

Program 128: Grant to Encourage Patent in Zhuji City

Program 129: Grant for Key Innovation Team in Zhejiang

Program 130: Special Fund for Fair Trade in Import and Export Zhejiang

Program 131: Grant for Standardizing Industrial Systems in the Nonferrous Metals Industry

Program 132: Grant for Implementation of Full-time Environmental Monitoring Officer in Key Enterprises in Zhuji City

Program 133: Grant for Research and Development Centers in the Provincial-level High-Tech Enterprises in Zhejiang

Program 134: Special Financial Fund for Industrial Transformation and Upgrading in Zhejiang (Brand Awards)

Program 135: Award for Outstanding Industrial Products and New Technologies in Zhejiang

Program 136: Grant for the Implementation of Quality and Technical Inspection in Zhejiang

Program 137: Award for Advanced Companies and Individuals in the Recognition of Key Projects and Investment in Tonglin City

Program 138: Grant to Promote and Accelerate the Economic Development in the Copper Industry in Tonglin City

Program 139: Financial Incentives to Promote Economic Development in Tonglin City

Program 140: One-Time Financial Support to Hailiang Copper Co., Ltd.

Program 141: Special Funds for Use in the Open Economy in Zhuji City

Program 142: Grant to Promote Economic Innovation and Enhance Development in Zhuji City

Program 143: Special Grant for High-Tech Industry and Scientific and Technological Cooperation in Zhuji City

Program 144: Grant for Scientific and Technological Projects Which Passed Appraisal and Certification in Zhuji City

Program 145: Support for the Development of Welfare Enterprises to Promote the Employment of Persons with Disabilities in Zhuji City

IV Preferential Income Tax Programs

Program 146: Preferential Tax Policies for Advanced Technology Enterprises with Foreign Investment

Program 147: Reduced Tax Rate for Productive FIEs Scheduled to Operate for a Period Not Less Than 10 Years

Program 148: Tax Preference Available to Companies that Operate at a Small Profit.

Program 149: Preferential Tax Policies for Foreign Invested Export Enterprises

Program 150: Preferential Tax Policies for the Research and Development of FIEs

Program 151: 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 Equipment

Program 152: Preferential Tax Policies for Domestic Enterprises Purchasing Domestically Produced Equipment for Technology Upgrading Purpose

Program 153: Income Tax Refund for Re-investment of FIE Profits by Foreign Investors

Program 154: VAT and Income Tax Exemption/Reduction for Enterprises Adopting Debt-to-Equity Swaps

Program 155: Corporate Income Tax Reduction for New High-Technology Enterprises

Program 156: Income Tax Credits on Purchases of Domestically Produced Equipment

Program 157: Preferential Tax Programs for Encouraged Industries or Projects

Program 158: Exemption from City Maintenance and Construction Taxes and Education Fee Surcharges for FIEs

Program 159: Tax Offset for R&D Expenses in Guangdong Province

Program 160: Accelerated Depreciation on Fixed Assets

Program 161: Preferential Tax Treatment for the Technology Development Expenses by Liaoning Governments

Program 162: Accelerated Depreciation on Intangible Assets for Industrial Enterprises in Northeast Region

V Relief from Duties and Taxes on Inputs, Materials and Machinery

Program 163: Exemption of Tariff and Import VAT for the Imported Technologies and Equipment

Program 164: Relief from Duties and Taxes on Imported Material and Other Manufacturing Inputs

VI Reduction in Land Use Fees

Program 165: Reduction, Exemption or Refund of Land Use Fees, Land Rental Rates and Land Purchase/Transfer Prices

Program 166: Deed Tax Exemptions for Land Transferred through Merger or Restructuring

VII Goods/Services provided by the Government at Less Than Fair Market Value

Program 167: Raw Materials Provided by the Government at Less than Fair Market Value

Program 168: Utilities Provided by the Government at Less than Fair Market Value

VIII Equity Programs

Program 169: Debt to Equity Swaps

Program 170: Exemptions for SOEs from Distributing Dividends to the State

Determinations Of Subsidy And Specificity

Available information indicates that the programs identified under SEZ and Other Designated Areas Incentives; Preferential Loans and Loan Guarantees; Preferential Income Tax Programs; Relief from Duties and Taxes on Inputs, Materials and Machinery; and Reduction in Land Use Fees, may 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 or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.

Grants and Grant-equivalents and Equity Programs may 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 may 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 and Loan Guarantees; Preferential Income Tax Programs; Relief from Duties and Taxes on Inputs, Materials and Machinery; and Reduction in Land Use Fees, may be considered specific pursuant to paragraph 2(7.2)(a) of SIMA.

As well, Grants and Grant-equivalents, Equity Programs and Goods/Services Provided by Government at Less than Fair Market Value may 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.