Certain Carbon and Alloy Steel Line Pipe
Archived - Statement of Reasons

[16] The complainants account for a major proportion of the domestic production of like goods in Canada, as defined in subsection 2(1) of SIMA. The complainants’ goods are produced at manufacturing facilities at various locations in Canada.

[17] Evraz Inc. NA Canada operates electric resistance weld (ERW) and submerged arc weld (SAW) line pipe manufacturing facilities in Regina, Saskatchewan, and in Red Deer, Alberta. The EVRAZ North America group of companies also owns Canadian National Steel Corporation, which operates ERW and SAW line pipe manufacturing facilities in Camrose, Alberta.

[18] Tenaris Canada manufactures line pipe in Canada at its Algoma Tubes Inc. facility in Sault Ste. Marie, Ontario using the seamless process and at its Prudential Steel Inc. facility in Calgary using the ERW process. Tenaris Global Services Inc. acts as commercial agent for Tenaris’ sales in Canada.^{Footnote 1}

[19] At the initiation of the investigations, the CBSA identified 67 potential importers of the subject goods based on both information provided by the complainants and CBSA import entry documentation.

[20] The CBSA sent an importer Request for Information (RFI) to all potential importers of the goods. The CBSA received 16 responses to the importer RFI.

[21] At the initiation of the investigations, the CBSA identified 68 potential exporters of the subject goods from information provided by the complainants and CBSA import entry documentation. The CBSA sent dumping, subsidy and section 20 RFIs to each of these potential exporters.

[22] The CBSA received nine responses to the exporter dumping RFI, six responses to the exporter section 20 RFI, and 25 responses to the exporter subsidy RFI.

[23] As part of the inquiry to examine the extent of the GOC’s involvement in pricing in the steel pipe sector (section 20 inquiry), the CBSA requested that producers in other countries (specifically Japan, the Republic of Korea, the Republic of the Philippines and the United States of America (USA)) provide domestic pricing and costing information concerning line pipe. These countries were selected as they are all major exporters of line pipe to Canada.

[24] The CBSA did not receive any responses to the surrogate producer RFIs.

[25] 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.

[26] The CBSA sent a government subsidy RFI and government section 20 RFI to the GOC. The CBSA did not receive a response to either RFI from the GOC.

[27] At the initiation of the investigations the subject goods were defined as:

[28] On October 27, 2015, the CITT terminated its inquiry with respect to a subset of the above-mentioned goods because it concluded that the evidence does not disclose a reasonable indication that the dumping and subsidizing of the subset of goods have caused injury or are threatening to cause injury to the domestic industry. The CITT concluded that the evidence does not disclose a reasonable indication that the dumping and subsidizing of goods that are covered by its order in Expiry Review No. RR-2012-003 have caused injury or are threatening to cause injury to the domestic industry.^{Footnote 2} As a result of the CITT’s decision, the CBSA’s investigations with respect to these specific products were terminated.

[29] On October 27, 2015, the CITT also determined that there is evidence that discloses a reasonable indication that the dumping and subsidizing of carbon and alloy steel line pipe, in respect of which the preliminary injury inquiry has not been terminated, have caused injury or are threatening to cause injury to the domestic industry. The CBSA’s final determinations made on February 24, 2016 are with respect to those goods. The subject goods are defined as follows:

[30] For greater certainty, the product definition includes:

• a) unfinished line pipe (including pipe that may or may not already be tested, inspected, and/or certified to line pipe specifications) originating in China and imported for use in the production or finishing of line pipe meeting final specifications, including outside diameter, grade, wall-thickness, length, end finish, or surface finish; and
• b) non-prime and secondary pipes (“limited service products”).

[31] Pipe that is being sold for oil and gas transmission purposes or process piping purposes is line pipe. The subject goods are used by the oil and gas industry in pipelines for the gathering and distribution of oil and gas or as process pipe used in steam generation facilities for steam assisted gravity drainage, petrochemical plants, upgraders, gas transmission facilities, and fabrication of modules.

[32] The Canadian market for oil and gas line pipe is governed by two main design codes depending on whether the line pipe is for pipelines or for process piping. Each code specifies the standards and grades of pipe that are acceptable for use. Together, the complainants manufacture or have the capability to manufacture line pipe under both design codes, in all grades. Pipelines must conform or be equivalent to CSA Z662 (oil and gas pipeline systems), and process piping must conform or be equivalent to ASME B31.1. These systems standards cover multiple pipe standards and can cover multiple grades of pipe. Examples of pipe standards include:

• CSA Z245.1;
• API 5L;
• ISO 3183;
• ASTM A333;
• ASTM A53-B; and
• ASTM A106.

[33] Pipe manufactured to a particular standard may be compatible with the requirements of another standard. This means that a particular pipe may be certified as complying with multiple standards (if all the requirements of each standard/grade are met for that particular pipe). For example, CSA Z245.1 Grade 448 pipe is considered to be equivalent to API 5L Grade X65. The API 5L X grade numbers define the minimum yield strength required of the grade in kilopounds per square inch. Process piping is generally supplied with multiple stencils including API 5L, CSA Z245.1 and ASTM A106.

[34] Equivalent grades of pipe specified under each design code represent products that are equivalent regardless of manufacturing process. As a result, any grade of pipe is considered to be substitutable by a similar grade of pipe designed with a different standard. It is common practice to certify multiple grades of pipe on a mill test report. It is also common practice to substitute grades other than that initially requested by a customer with an equivalent grade. Mill test reports are provided to show that the properties of the supplied pipe meet the requirements of the actual grade supplied.

[35] Line pipe is normally marked or stenciled in paint on the external surface with the API, ASME, or equivalent specifications to which it has been manufactured and tested. The subject goods cover all line pipe meeting or supplied to meet the above specifications, regardless of whether the pipe has been multiple stenciled to indicate that it meets or is supplied to meet additional end use specifications. Line pipe that is manufactured and tested to meet higher API specifications (or equivalent CSA and ISO specifications) is automatically in conformity with lower specifications and may therefore have multiple stencils identifying additional end uses, such as American Society for Testing and Materials (ASTM), and equivalent specifications for end use as standard pipe (for low-pressure conveyance of steam, water, natural gas, air and other liquids in plumbing and heating applications), piling pipe, and other such end uses. Seamless line pipe conforming to API 5L may also be marked as conforming to pressure pipe applications under ASME B31.3. Additionally and for the same reasons, line pipe that is single-stencilled as API 5L may be used in lower specifications absent stencilling identifying that lower specification. All line pipe that is marked as meeting or that is supplied to meet API 5L (or equivalent specifications) for use as oil and gas pipelines or as ASME B31.3 for use as pressure pipe are covered in this investigation as subject goods regardless of whether the pipe is marked as meeting any other end-uses or is supplied to meet any other end-uses.

[36] The subject goods may be manufactured by the seamless or welded process. The typical end finish is a beveled end to allow for welding in the field, although line pipe may also be supplied as plain end (square cut), threaded, and threaded and coupled.

[37] According to the complainants and the producers that support the complaint, since November 12, 2012, the date of the CITT Finding in Inquiry No. NQ-2012-002, steel piling pipe originating in or exported from China (steel piling pipe), the subject goods have been increasingly used in the Canadian market as piling pipe to form deep foundations where soil and ground conditions are not suitable or strong enough to support the structure load, particularly in drilling platforms and other energy installations in Western Canada.

[38] Line pipe is made on the same production equipment as oil country tubular goods (OCTG) and other tubular products such as standard pipe and piling pipe. Production may involve either the seamless or the welded process.

[39] ERW line pipe is produced by slitting flat hot-rolled steel in coil form of apre-determined thickness (called “skelp”) to the proper width required to produce the desired diameter of pipe. The skelp is then sent through a series of forming rolls that bend it into a tubular shape. As the edges of the skelp come together under pressure in the final forming rolls, an electric current is passed between them. The resistance to the current heats the edges of the skelp to the welding temperature, and the weld is formed as the two edges are pressed together.

[40] ERW line pipe can also be produced by the stretch-reduction method, where the key difference is that outside diameter and wall thickness is achieved after the tube is formed. Specifically, a formed tube is heated to approximately 1850 degrees Fahrenheit and passed through a series of stretch reduction roll stands until the final outside diameter and wall thickness is achieved.

[41] Seamless pipe production begins with the formation of a central cavity in a solid steel billet to create a shell. The shell is then rolled on a retained mandrel and reduced in a stretch reduction mill to produce the finished size before cooling on a walking beam cooling bed. Once the hot rolling mill has transformed the billet into a tube and the stretch reduction/sizing mill has produced the final dimensions, the pipe is put into inventory where it waits for the next process, either heat treatment, testing, or finishing.

[42] Tube formed by either the seamless or the ERW methods is then cut to length. The product is sent to the finishing line where it is usually beveled on both ends. Finishing operations also include cooling, straightening, facing, testing, coating, or bundling and could include threading and coupling.

[43] Large diameter line pipe (line pipe with an outside diameter of 26 inches and above) is a separate product with wholly different costs, production processes, and sales considerations. Large diameter line pipe is typically produced using a SAW or double SAW process (DSAW), which is much different from the ERW process used for smaller diameter line pipe and encompasses both helical/spiral submerged arc welding (HSAW) and longitudinal submerged arc welding (LSAW).

[44] The subject goods are normally classified under the following Harmonized System (HS) classification numbers:

• 7304.19.00.11
• 7304.19.00.12
• 7304.19.00.21
• 7304.19.00.22
• 7305.11.00.11
• 7305.11.00.19
• 7305.12.00.11
• 7305.12.00.19
• 7305.19.00.11
• 7305.19.00.19
• 7306.19.00.10
• 7306.19.00.90

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

[60] 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 CBSA, 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.^{Footnote 5}

[61] For purposes of a dumping investigation, 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 CBSA 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.

[62] 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 CBSA to have reason to believe that the resulting domestic prices are not substantially the same as they would be in a competitive market.

[63] The complainants alleged that the conditions described in section 20 prevail in the steel pipe sector, which includes carbon and alloy steel line pipe, in China. That is, the complainants allege that this industry sector in China does not operate under competitive market conditions and consequently, prices established in the Chinese domestic market for line pipe are not reliable for determining normal values.

[64] The complainants provided information to support these allegations concerning the steel pipe sector, which includes line pipe. This included evidence of export controls and state-ownership in the steel industry and steel pipe sector. The complainants also cited specific GOC policies such as the National Steel Policy, the 12th Five-Year Development Plans for the Steel Industry, and the 12th Five-Year Plan for the Steel Pipe Industry.^{Footnote 6}

[65] At the initiation of the investigation, the CBSA had sufficient evidence, supplied by the complainants and from its own research and past investigation findings, to support the initiation of a section 20 inquiry to examine the extent of GOC involvement in pricing in the steel pipe sector, which includes carbon and alloy steel line pipe. The information indicated that prices in China in this sector have been influenced by various GOC industrial policies. Consequently, the CBSA sent section 20 RFIs to producers and exporters of carbon and alloy steel line pipe in China, as well as to the GOC, to obtain information on the extent to which the GOC is involved with the determination of domestic prices in the steel pipe sector, which includes carbon and alloy steel line pipe.

Summary of Chinese Exporter Responses

[66] The CBSA received six responses to the exporter section 20 RFI from producers, suppliers and exporters of subject goods. In general, the parties attempted to address each question. However, most responses did not include all of the information requested by the CBSA, such as certain documents specifically requested in the RFI. No exporters provided significant information with respect to the GOC’s involvement in the steel pipe sector.

Government of China Response

[67] An RFI was sent to the GOC requesting information for the purposes of the section 20 inquiry. No response was received from the GOC.

Surrogate Producer Responses

[68] As part of the section 20 inquiry, surrogate producer RFIs were sent to all known producers of carbon and alloy steel line pipe in Japan, the Republic of Korea, the Republic of the Philippines and the USA. No producers located in these countries responded to the RFI.

Results of the Section 20 Inquiry

[69] The following is the CBSA’s analysis of the relevant factors that are present in the steel pipe sector in China, which includes carbon and alloy steel line pipe.

GOC Industrial Policies

[70] As part of its section 20 analysis, the CBSA examined:

• The National Steel Policy and the Steel Revitalization/Rescue Plan,
• The 12th Five-Year Development Plans for the Steel Industry, and
• The 12th Five-Year Plan for the Steel Pipe Industry.

National Steel Policy & Steel Revitalization/Rescue Plan

[71] As cited in previous section 20 inquiries on steel products, The Development Policies for the Iron and Steel Industry – Order of the National Development and Reform Commission [No. 35] (National Steel Policy), was promulgated on July 8, 2005 and outlines the GOC’s future plans for the Chinese domestic steel industry.^{Footnote 7} The major objectives of the National Steel Policy 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;
• Government supervision and management in the steel industry.

[72] On March 20, 2009, the GOC promulgated the Blueprint for the Adjustment and Revitalization of the Steel Industry issued by the General Office of the State Council (Steel Revitalization/Rescue Plan).^{Footnote 8} This macro-economic policy was the GOC’s response to the global financial crisis and is also the action plan for the steel industry for the 2009 through 2011 period. 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;
• Develop domestic and overseas resources and guarantee the safety of the industry.

[73] There are common measures between these two GOC policies, as the Steel Revitalization/Rescue Plan is an acceleration of the major objectives of the National Steel Policy. In the Steel Revitalization/Rescue Plan, the GOC asserts its strict control over new or additional steel production capacity, promotes new GOC directed mergers and acquisitions to reform the Chinese steel industry into larger conglomerates, along with an increased emphasis on steel product quality. These measures and reforms affect all of the steel industry in China, including the steel pipe sector which includes carbon and alloy steel line pipe.

12th Five-Year Development Plans for the Steel Industry

[74] The 12th Five-Year Development Plans for the Steel Industry^{Footnote 9} is a 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;
• GOC directed relocation of iron and steel companies to coastal areas.

[75] 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 was that by 2015, China’s top 10 steel producers would represent 60% of the country’s total steel output. According to the National Steel Policy, 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.

[76] The 12th Five-Year Development Plans for the Steel Industry 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.

[77] According to the plan, the more highly concentrated steel industry will reduce overcapacity, decrease pollution and will improve Chinese steel producers’ bargaining power when negotiating prices on iron ore imports. In addition, through the 12th Five-Year Development Plans for the Steel Industry, the GOC is progressing with its initiative in the Steel Revitalization/Rescue Plan to move Chinese steel production facilities to China’s coast. As stated in a China Daily article titled “Steel industry plan forged”, by the end of this GOC directed plan, in 2015, 40% of China’s steel production will be relocated to the coast.^{Footnote 10}

[78] In this 12th Five-Year Development Plans for the Steel Industry, the GOC’s policies and measures include:

• Improve the industry management system;
• Create an environment for fair competition, strengthen and improve macro adjustment and control;
• Regulate the production and operation of the steel industry;
• Standardize the operation of the industry;
• Strengthen the macro guidance of the policy;
• Promote international exchange and co-operation;
• Improve industry information flow, capital flow and material flow. Support enterprise groups to establish and improve the information system in different regions;
• Improve planning by regional authorities of industries to develop the steel industry, combine the regional mergers and reconstruction and eliminate obsolete construction. Related enterprises should put forward the planning scheme corresponding to the foregoing plan. The China Iron and Steel Industry should assist and put forward advice on the policy.

[79] The GOC’s direction of the steel industry includes enabling regional or provincial governments to combine enterprises across boundaries. Furthermore, as a result of the GOC’s administration of steel production capacity, the Chinese steel industry is very much under the purview of the GOC.

[80] Together with the GOC’s legislation: Criterion for the Production and Operation of Steel Industry – GY [2010] No. 105^{Footnote 11} and Several Observations of the General Office of the State Council on Further Strengthening Energy-saving and Emission Reduction Efforts as well as Accelerating of Restructuring of Steel Industry – GBF (2010) No. 34^{Footnote 12}, these plans set out the detailed requirements for existing production and operations of steel enterprises in China. For construction and renovation projects in the steel industry, the GOC’s development policies for the steel industry apply (i.e. the 12th Five-Year Plan Development Plans for the Steel Industry and Steel Revitalization/Rescue Plan).

[81] Control of new or additional steel production capacity by the GOC is further confirmed by the above mentioned document Several Observations of the General Office of the State Council on Further Strengthening Energy-saving and emission Reduction Efforts as well as Accelerating of Restructuring of Steel Industry. The intent of this legislation is to further support and carry out the Steel Revitalization/Rescue Plan, to achieve the energy-saving and emission targets, in addition to the restructuring of the steel industry in China as approved by the State Council. One main objective of the State Council is to “resolutely suppress the excessive growth of steel production capacity” and “strictly implement the approval and review process of steel projects.”^{Footnote 13}

[82] Should steel enterprises not acquiesce to the GOC’s requirements, laws and industrial policies, there are repercussions which include the withdrawal of steel production licenses and credit support. In respect of new construction or renovation of Chinese steel enterprises, the GOC’s steel development policies also apply.^{Footnote 14}

12th Five-Year Plan for the Steel Pipe Industry

[83] On June 23, 2011, the Steel Pipe Branch Association (Steel Pipe Branch) of the China Steel Construction Society, released the 12th Five-Year Plan for the Steel Pipe Industry covering the period 2011-2015.^{Footnote 15} The Steel Pipe Branch is supervised by the State-owned Assets Supervision and Administration Commission^{Footnote 16} (SASAC) of the State Council.^{Footnote 17} The CBSA considers the China Steel Construction Society and the Steel Pipe Branch to be “Government” as it is under the administration of SASAC as per its Articles of Association.^{Footnote 18}

[84] The 12th Five-Year Plan for the Steel Pipe Industry is the second five-year plan for the steel pipe industry. In the previous five-year period (2006-2010), the steel pipe industry experienced rapid growth and numerous modern pipe facilities were constructed. The construction of the new facilities allowed the industry to shift production to higher value pipe products, such as submerged arc welded (SAW) pipe, high frequency resistance welded pipe, OCTG and line pipe.^{Footnote 19} However, at the end of the 11th five-year period the steel pipe industry was experiencing excess production capacity, intensified market competition, continued backward production and low industry concentration.^{Footnote 20} These issues were addressed in the 12th Five-Year Plan for the Steel Pipe Industry.

[85] The 12th Five-Year Plan for the Steel Pipe Industry directs that the output of steel pipe should be controlled at 67-75 million metric tonnes (MT). In addition to controlling the capacity of the steel pipe production, the plan also addresses the issue of overcapacity which was estimated to be 15 million MT, of which 8 million MT is surplus seamless pipe and 7 million MT is surplus welded pipe.^{Footnote 21}

[86] One of the main tasks of the 12th Five-Year Plan for the Steel Pipe Industry is to control total volume by eliminating obsolete (backward production) and controlling new production capacity.^{Footnote 22}

[87] The plan also states that the top 20 Chinese steel enterprises are to be responsible for more than 60% of the aggregate steel pipe output with the top 10 seamless steel pipe producers accounting for 70% of the seamless production and the top 10 welded pipe producers accounting for 50% of the welded production. These industry concentration targets are largely to be obtained through mergers and acquisitions by the end of 2015.^{Footnote 23} These GOC objectives are likely to conflict with the commercial interests of steel pipe producers by affecting production volumes, competition and ultimately prices.

GOC Ownership of Suppliers/Producers

[88] The complaint provides evidence that eight of the top 10 steel companies in China are state-owned. According to the complainants, these eight state-owned enterprises (SOEs) produce flat steel products and billets, and in turn provide these inputs to line pipe producers in China.^{Footnote 24} As per the 12th Five-Year Development Plans for the Steel Industry, these companies were expected to reach 60% of total Chinese steel production by 2015 and are expected to reach 70% by 2020.^{Footnote 25}

[89] The complaint referenced information on the record in the CBSA’s Galvanized Steel Wire investigation which indicated 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.^{Footnote 26} This indicates that the GOC exerts control over the Chinese steel industry, which includes the steel pipe sector including carbon and alloy steel line pipe.

[90] At the initiation of the investigations, the complainants provided evidence of SOEs which produce line pipe and cited reports which estimated that up to 50% of line pipe producers in China are state-owned.^{Footnote 27}

[91] Four exporters have provided responses to the CBSA’s dumping RFI indicating that they are SOEs. These companies are: Baoshan Iron & Steel Co., Ltd., Jiangsu Valin Xigang Special Steel Co., Ltd., Hengyang Valin Steel Tube Co., Ltd. and Hengyang Valin MPM Co., Ltd.

[92] The CBSA did not receive responses to the dumping or section 20 RFI from all producers of carbon and alloy steel line pipe. As such, the CBSA does not have sufficient information to determine the proportion of carbon and alloy steel line pipe producers in China that are SOEs. However, during the POI, a significant portion of subject goods imported into Canada from China were sold by the SOEs identified above.

[93] The information provided by the complainants, as well as information collected by the CBSA during the investigation, supports the assertion that there is substantial state ownership in the steel pipe sector in China, which includes carbon and alloy steel line pipe.

Summary of Government Influence on Domestic Prices

[94] Based on the information on the record, the scope of the GOC’s macro-economic policies and measures indicates that the GOC is influencing the Chinese steel industry, which encompasses the steel pipe sector including carbon and alloy steel line pipe. The use of such policies and measures can dramatically change the demand and supply balance in the domestic market and could influence the domestic prices of steel products such as steel pipe, including line pipe.

[95] In addition to the GOC’s actions to eliminate obsolete steel production and reduce energy-emissions, the GOC has clearly identified its plans for mergers and acquisitions. The GOC called for provincial, autonomous regional and municipal governments to focus on formulating and reporting 2010-2011 iron and steel enterprise merger and restructuring plans to be organized, upon approval by the Ministry of Industry and Information Technology. The GOC directs that the implementation/improvement of policies for promoting mergers and restructuring be improved. These are compelling facts that the GOC is firmly in charge of the reform of the Chinese steel industry which encompasses the steel pipe sector including carbon and alloy steel line pipe.

[96] The cumulative impact of the GOC’s numerous macro-economic policies and measures, including the National Steel Policy, the Steel Revitalization/Rescue Plan, the 12th Five-Year Development Plans for the Steel Industry and the 12th Five-Year Plan for the Steel Pipe Industry, has resulted in an environment where enterprises have conflicting objectives. The GOC objectives are likely to conflict with the commercial objectives of steel pipe producers, affecting products produced, production volumes and ultimately prices.

[97] The cumulative impact of these GOC measures and control indicate that prices of line pipe in China are being indirectly determined by the GOC.

Chinese Domestic Price Analysis

[98] At initiation, the CBSA did not have access to domestic price data for carbon and alloy steel line pipe in China. Given the absence of publicly available domestic price data, the CBSA relied on information provided by the complainants. This information consisted of publications which included price data for welded and seamless line pipe products in various grades for China as well as other countries and regions. The information provided by the complainants represented the domestic prices of these goods in the respective home markets. Prices were provided by grade and expressed in USD per metric tonne. Specific price information by diameter is not publicly available.

[99] At initiation the CBSA requested specific data regarding the domestic prices of carbon and alloy steel line pipe in China from producers and exporters in that country. The CBSA received several responses to the dumping and section 20 RFIs from producers and exporters of carbon and alloy steel line pipe in China. These responses included information regarding the domestic prices of these goods in China.

[100] The CBSA also sent RFIs to producers in surrogate countries requesting domestic price information in their respective countries. The CBSA did not receive any responses from producers of carbon and alloy steel line pipe in the surrogate countries. As such, other than the publications identified above, the CBSA has limited information regarding the domestic prices of carbon and alloy steel line pipe in countries other than China.

[101] The complainants provided information from Metal Expert which includes prices for certain grades of seamless and welded line pipe for the months of November and December 2014, and January 2015.^{Footnote 28} Based on this information, prices of line pipe in these months were significantly higher in the comparison countries when compared to prices in China.

[102] The CBSA calculated the average monthly domestic price of seamless and welded line pipe in China, based on information provided in the RFI responses of exporters that provided sufficient information. These average monthly prices were then used to calculate the quarterly average domestic prices for Q3 and Q4 2014, and Q1 and Q2 2015.

[103] The CBSA then compared the quarterly average domestic price of seamless and welded line pipe in China, to the Metal Expert price information. This comparison demonstrated a significant difference in the domestic price of line pipe in China compared to the other countries and/or regions. For example, the average domestic price of welded line pipe in the comparison countries was 31.1% to 38.4% higher than the domestic price of welded line pipe in China, during Q4 2014.

[104] The CBSA acknowledges certain limitations in the price analysis contained above. Specifically, the price information contained in the RFI responses of certain exporters does not contain average price information by grade or diameter. Average price information is only available for the categories of seamless and welded line pipe. As such, the price information may include certain grades of line pipe which are of higher or lower quality than the Metal Expert comparison products.

[105] In addition to the Metal Expert publication, the complainants provided price data from the publication Pipe Logix. The Pipe Logix information represents the domestic selling prices of the line pipe as sold by distributors in the USA. The complainants have provided this price information for the dumping POI (July 1, 2014 to June 30, 2015).

[106] For the purposes of the section 20 domestic price analysis, the CBSA calculated a quarterly average price for seamless and welded line pipe, based on the price information from the publication Pipe Logix. This quarterly average was calculated for the purposes of a comparison with the domestic price information contained in the RFI responses of certain exporters.

[107] To allow for a proper comparison with the domestic price information contained in the exporter responses, the CBSA calculated the Pipe Logix averages based on all available diameters. As the Pipe Logix data represents the price of goods from distributors to end users, the price information was adjusted downwards to account for a distributor margin.

[108] The CBSA compared the adjusted Pipe Logix quarterly average price data with the quarterly average price data from the RFI responses of certain exporters. The results of this comparison are found in the table below:

[109] The results summarized in the table above further demonstrate a significant difference in the price of carbon and alloy steel line pipe in China when compared to the adjusted Pipe Logix price. The adjusted price of welded carbon and alloy steel line pipe in the USA, as reported by the publication Pipe Logix, was 123% to 142% higher than the price of goods in China during the POI.

[110] The results of the comparison for seamless carbon and alloy steel line pipe are even more significant. The adjusted price of seamless carbon and alloy steel line pipe in the USA, as reported by the publication Pipe Logix, was 225% to 261% higher than the price of goods in China during the POI.

[111] Given that line pipe is a commodity product freely traded on the world market this discrepancy further supports that the domestic prices of line pipe in China are not being determined under competitive market conditions. Further, the information discussed above supports the conclusion that the domestic prices of carbon and alloy steel line pipe in China are not substantially the same as they would be if they were determined in a competitive market.

Summary of the Results of the Section 20 Inquiry

[112] The wide range and material nature of the GOC measures have resulted in significant influence on the steel pipe sector in China, which includes carbon and alloy steel line pipe. Based on the preceding, the CBSA 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.

[113] Based on the above analysis, for the purposes of the final determination, the CBSA affirmed the opinion rendered at the preliminary determination that the conditions described in paragraph 20(1)(a) apply in the steel pipe sector in China, which includes carbon and alloy steel line pipe.^{Footnote 29}

[114] The CBSA received substantially complete responses to the dumping RFI from nine exporters and producers of the subject goods.

[115] With respect to the exporters that provided substantially complete responses to the RFI, to the extent possible, company-specific information was used for the final determination in determining the export prices for goods shipped to Canada.

[116] For those exporters where sufficient information was not provided, the normal values of the goods were determined by advancing the export prices by the highest amount by which the normal value exceeded the export price on an individual transaction for an exporter that provided a substantially complete response to the RFI.

[117] Details relating to the margin of dumping for each of the exporters that provided a response to the RFI are presented in a summary table in Appendix 1 while margin of dumping details for China can be found in a summary table at the end of this section.

Normal Values

[118] Normal values are generally based on the domestic selling prices of like goods in the country of export, in accordance with 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, plus a reasonable amount for profits, in accordance with paragraph 19(b) of SIMA.

[119] In the case of a prescribed country such as China, if, in the opinion of the CBSA, 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, the normal values are determined on the basis of section 20 of SIMA using either the selling prices or costs of like goods in a “surrogate” country.

[120] Normal values could not be determined on the basis of domestic selling prices in China or on the full cost of the goods plus a reasonable amount for profits, because the CBSA formed the opinion that the conditions of paragraph 20(1)(a) of SIMA exist in the steel pipe sector, which includes carbon and alloy steel line pipe, in China.

[121] Where section 20 conditions exist, the CBSA may determine normal values using the selling price, or the total cost and profit, of like goods sold by producers in a surrogate country designated by the CBSA pursuant to paragraph 20(1)(c) of SIMA. However, sufficient surrogate country data respecting domestic prices and costs relating to the like goods was not provided to the CBSA.

[122] 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. However, the importers did not provide sufficient re-sale information to enable the CBSA to determine normal values in accordance with this provision.

[123] 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.

[124] The CBSA examined all information on the record, including information provided by the complainants, information provided by the exporters and publically available information. The CBSA considered that the price data from the publication Pipe Logix, as provided by the complainants, was the best information on which to base the methodology for determining normal values. Pipe Logix is a trade publication based in the USA which tracks OCTG and line pipe prices. The CBSA is satisfied that pricing data from this source is an appropriate basis to be used in the calculation of normal values when considering the similarities between the USA and Chinese industries. The CBSA finds Pipe Logix to be a reliable source of pricing information in this investigation; this is consistent with previous investigations involving tubular products in the oil and gas sector.

[125] The CBSA determined normal values for all goods exported to Canada based on the domestic selling price of the goods as sold by distributors in the USA and reported by the publication Pipe Logix. The CBSA determined normal values based on 23 benchmark products reported in Pipe Logix for each month of the period reviewed (July 1, 2014 – June 30, 2015). Normal values were determined for the subject goods exported to Canada during the POI by matching the type (Seamless or ERW) and outside diameter of the goods to the corresponding Pipe Logix benchmark price. Where an exact match was not possible, the best match was made based on the closest outside diameter of the same type of line pipe found in Pipe Logix. Where the outside diameter was exactly half way between that of two products reported, the normal value was based on the larger of the two closest outside diameters.

[126] The Pipe Logix data represents the price of goods from distributors to end users. As such, the Pipe Logix prices were adjusted to account for a distributor margin. At the preliminary determination, the CBSA found the complainants’ estimate of a 10% distributor margin to be reasonable. During the final phase of the investigation, the CBSA examined all information on the record, including new information submitted after the preliminary determination, in order to calculate a distributor margin.

[127] For the final determination, the CBSA calculated a distributor margin equal to the weighted average percentage difference between the import prices paid by Canadian distributors on imported line pipe during the period of investigation and their re-sale prices in Canada of the same products during the same period. This resulted in a distributor margin of 8.2%.

Export Prices

[128] The export price of the goods sold to the importers in Canada is generally based on the lesser of the adjusted exporter’s selling price or the adjusted importer’s purchase price. 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.

[129] Where there are sales between associated persons or a compensatory arrangement exists, the export price may be determined based on the importer’s resale price of the imported goods in Canada to non-associated purchasers, less deductions for all costs incurred in preparing, shipping and exporting the goods to Canada that are additional to those incurred on the sales of like goods for use in the country of export, all costs that are incurred in reselling the goods (including duties and taxes) or associated with the assembly of the goods in Canada and an amount representative of the average industry profit in Canada, pursuant to paragraphs 25(1)(c) and 25(1)(d) of SIMA. Where, in any cases not provided for under paragraphs 25(1)(c) and 25(1)(d) of SIMA, the export price is determined in such a manner as the Minister specifies, pursuant to paragraph 25(1)(e).

[130] Where, in the opinion of the CBSA, sufficient information has not been furnished or is not available, export prices are determined pursuant to a ministerial specification under subsection 29(1) of SIMA.

Margin of Dumping

[131] The CBSA determined a margin of dumping for each of the exporters by comparing the total normal value with the total export price of the goods. When the total export price was less than the total normal value, the difference was the margin of dumping for that specific exporter.

[132] The determination of the volume of dumped goods was calculated by taking into consideration each exporter’s net aggregate dumping results. If it was determined that an exporter was dumping on an overall or net basis, then the total quantity of exports attributable to that exporter (i.e. 100%) was considered to have been dumped. Similarly, if an exporter’s net aggregate dumping results were zero, then the total quantity of exports considered to have been dumped by that exporter was zero.

[133] In determining the margin of dumping for the country, the margin of dumping found in respect of each exporter was weighted according to each exporter’s volume of subject goods released into Canada during the POI.

[134] Based on the preceding, 100% of carbon and alloy steel line pipe released into Canada during the POI from China were dumped by a margin of dumping of 243.1%, expressed as a percentage of the export price.

[135] A summary of the margin of dumping determined for each exporter is found in Appendix 1.

Baoshan Iron & Steel Co., Ltd. / Baosteel America Inc.

[136] Baoshan Iron & Steel Co., Ltd. (Baoshan) is a producer and exporter of the subject goods. Baoshan is part of a large group of companies under the holding company Shanghai Baosteel Group Corporation Ltd. (Baosteel Group). During the POI, Baoshan exported subject goods to Canada through the related trading company Baosteel America Inc. (Baosteel America).

[137] Baoshan provided a substantially complete response to the dumping RFI. Baoshan also provided a response to the section 20 RFI.

[138] For the subject goods exported by Baoshan and released into Canada during the POI, normal values were determined using the methodology described in the “Normal Values” section of this document and export prices were determined in accordance with section 24 of SIMA, based on the exporter’s selling price less all costs, charges and expenses resulting from the exportation of the goods.

[139] The total normal value compared with the total export price results in a margin of dumping of 74.0%, expressed as a percentage of export price, for Baoshan.

Hengyang Steel Tube Group International Trading Inc. / Hengyang Valin Steel Tube Co., Ltd. / Hengyang Valin MPM Co., Ltd.

[140] Hengyang Steel Tube Group International Trading Inc., Hengyang Valin Steel Tube Co., Ltd., and Hengyang Valin MPM Co., Ltd. (collectively referred to as HYST), are related companies producing and exporting the subject goods to Canada.

[141] Hengyang Valin Steel Tube Co., Ltd. and Hengyang Valin MPM Co., Ltd. are the producers of the subject goods and Hengyang Steel Tube Group International Trading Inc. is responsible for exporting the goods to Canada. HYST is part of a large group of companies under the holding company Valin Holdings which is majority owned and controlled by the State-owned Assets Supervision and Administration Commission of Hunan Province. Another company of this group, Jiangsu Valin Xigang Special Steel Co., Ltd., produced subject goods that were exported and released into Canada during the POI. Details with respect to this company are discussed later in this document.

[142] HYST provided a substantially complete response to the dumping RFI. No response to the section 20 RFI was provided.

[143] For the subject goods exported by HYST and released into Canada during the POI, normal values were determined using the methodology described in the “Normal Values” section of this document and export prices were determined in accordance with section 24 of SIMA, based on the exporter’s selling price less all costs, charges and expenses resulting from the exportation of the goods.

[144] The total normal value compared with the total export price results in a margin of dumping of 168.9%, expressed as a percentage of export price, for HYST.

Huludao City Steel Pipe Industrial Co., Ltd.

[145] Huludao City Steel Pipe Industrial Co., Ltd. (Huludao City) is a producer and exporter of the subject goods. Huludao City owns Huludao Bohai Oil Steel Pipe Co., Ltd. (Bohai). Bohai produced the subject goods that were exported to Canada by Huludao City.

[146] Huludao City provided a substantially complete response to the dumping RFI. The sales and cost information of Bohai was included in the response provided by Huludao City. Neither Huludao City nor its subsidiary Bohai had domestic sales of like goods during the POI. A substantially complete response to the section 20 RFI was provided by Huludao City.

[147] For the subject goods exported by Huludao City and released into Canada during the POI, normal values were determined using the methodology described in the “Normal Values” section of this document and export prices were determined in accordance with section 24 of SIMA, based on the exporter’s selling price less all costs, charges and expenses resulting from the exportation of the goods.

[148] The total normal value compared with the total export price results in a margin of dumping of 148.2%, expressed as a percentage of export price, for Huludao City.

Jiangsu Changbao Steel Tube Co., Ltd.

[149] Jiangsu Changbao Steel Tube Co., Ltd. (Changbao) is a producer and exporter of the subject goods. Changbao is a publicly traded company listed on the Shenzhen Stock Exchange.

[150] For the purposes of the preliminary determination, the response to the dumping RFI provided by Changbao was considered incomplete. At that time the company had not provided the requested information with respect to domestic sales. A substantially complete response to the section 20 RFI was provided by Changbao.

[151] During the final phase of the investigation, Changbao provided the requested information with respect to domestic sales. As such, for the purposes of the final determination, the response to the dumping RFI provided by Changbao is considered substantially complete. Therefore, the normal values for the subject goods exported by Changbao were determined based on the methodology described in the “Normal Values” section of this document and export prices were determined in accordance with section 24 of SIMA, based on the exporter’s selling price less all costs, charges and expenses resulting from the exportation of the goods.

[152] The total normal value compared with the total export price results in a margin of dumping of 156.5%, expressed as a percentage of export price, for Changbao.

Jiangsu Valin Xigang Special Steel Co., Ltd.

[153] Jiangsu Valin Xigang Special Steel Co., Ltd. (Jiangsu Valin) is a producer and exporter of the subject goods. Jiangsu Valin is part of a large group of companies under the holding company Valin Holdings which is majority owned and controlled by the State-owned Assets Supervision and Administration Commission of Hunan Province. As previously mentioned, another company of this group, HYST produced subject goods that were exported and released into Canada during the POI.

[154] Jiangsu Valin provided a substantially complete response to the dumping RFI. No response to the section 20 RFI was provided.

[155] For the subject goods exported by Jiangsu Valin to Canada during the POI, normal values were determined using the methodology described in the “Normal Values” section of this document and export prices were determined in accordance with section 24 of SIMA, based on the exporter’s selling price less all costs, charges and expenses resulting from the exportation of the goods.

[156] The total normal value compared with the total export price results in a margin of dumping of 319.6%, expressed as a percentage of export price, for Jiangsu Valin.

Tianjin Huilitong Steel Tube Co., Ltd./ Tianjin Longshenghua Import & Export Trade Co., Ltd.

[157] Tianjin Huilitong Steel Tube Co., Ltd. (Huilitong) is a producer and exporter of the subject goods. Tianjin Longshenghua Import & Export Trade Co., Ltd. (Longshenghua) is the exporting arm of Huilitong that is used for the vast majority of export transactions during the POI and located at the same address as Huilitong. All of these exports were sold through an unrelated Hong Kong based trading company.

[158] Huilitong and Longshenghua (Tianjin Huilitong Group) each provided separate substantially complete responses to the dumping RFI. In addition, a response to the section 20 RFI was provided for Tianjin Huilitong Group.

[159] For the subject goods exported by Tianjin Huilitong Group and released into Canada during the POI, normal values were determined using the methodology described in the “Normal Values” section of this document and export prices were determined in accordance with section 24 of SIMA, based on the exporter’s selling price less all costs, charges and expenses resulting from the exportation of the goods.

[160] The total normal value compared with the total export price results in a margin of dumping of 113.0%, expressed as a percentage of export price.

Wuxi Huayou Special Steel Co., Ltd./ Wuxi Sp.steel Tube Manufacturing Co., Ltd.

[161] Wuxi Huayou Special Steel Co., Ltd (Wuxi Huayou) is a trading company and shipped the subject goods to Canada. The goods shipped to Canada by Wuxi Huayou are produced by its related manufacturing company, Wuxi Sp.steel Tube Manufacturing Co., Ltd. (Wuxi Sp. Steel) as well as several non-associated manufacturers.

[162] Wuxi Huayou and Wuxi Sp. Steel provided substantially complete responses to the dumping and section 20 RFIs for the subject goods produced by Wuxi Sp. Steel. However, for the subject goods produced by non-associated manufacturers, the CBSA did not receive a response to the RFI from any of those manufacturers.

[163] For the purposes of the final determination, the normal values for the subject goods produced by Wuxi Sp. Steel were determined based on the methodology described in the “Normal Values” section of this document. For shipments of subject goods produced by non-associated manufacturers, the normal values were determined by advancing the export price by 351.4%, pursuant to a ministerial specification under subsection 29(1) of SIMA based on the methodology explained in the section below entitled “All Other Exporters”.

[164] For the subject goods sold by Wuxi Huayou, export prices were determined in accordance with section 24 based on the exporter’s selling price less all adjusted costs, charges and expenses resulting from the exportation of the goods, where applicable.

[165] The total normal value compared with the total export price results in a margin of dumping of 351.1%, expressed as a percentage of export price, for Wuxi Huayou.

Yangzhou Lontrin Steel Tube Co., Ltd.

[166] Yangzhou Lontrin Steel Tube Co., Ltd. (Lontrin) is a producer and exporter of the subject goods to Canada. The goods exported to Canada by Lontrin were either produced by Lontrin on its premises or are purchased from several non-associated manufacturers

[167] Lontrin provided substantially complete responses to the dumping and section 20 RFIs. However, for the subject goods produced by non-associated manufacturers, the CBSA could not verify which company manufactured the subject goods for each sale to Canada.

[168] For the purposes of the final determination, the normal values for the subject goods produced by Lontrin were determined based on the methodology described in the “Normal Values” section of this document. For shipments of subject goods produced by non-associated manufacturers, the normal values were determined by advancing the export price by 351.4%, pursuant to a ministerial specification under subsection 29(1) of SIMA based on the methodology explained in the section below entitled “All Other Exporters”.

[169] Export prices were determined in accordance with section 24 of SIMA, based on the exporter’s selling price less all costs, charges and expenses resulting from the exportation of the goods.

[170] The total normal value compared with the total export price results in a margin of dumping of 253.9%, expressed as a percentage of export price, for Lontrin.

All Other Exporters

[171] At the initiation of the investigation, all known and potential exporters were sent exporter dumping and section 20 RFIs in order to solicit information required for purposes of determining normal values and export prices of subject goods in accordance with the provisions of SIMA. Exporters who were not the manufacturer of the goods were asked to forward a copy of the RFI to each of the manufacturers concerned. As such, all exporters were given the opportunity to participate in the investigation. In the RFIs, the exporters were notified that failure to submit all required information and documentation, including non-confidential versions, or failure to permit verification of any information, would result in the normal values of the subject goods exported by their company being based on the facts available. It was further stated that such a decision may be less favourable to their company than if full and verifiable information was made available.

[172] Where, in the opinion of the CBSA, sufficient information regarding the subject goods was not provided, normal values and export prices were determined under a ministerial specification pursuant to subsection 29(1) of SIMA on the basis of facts available. In establishing the methodology for determining normal values and export prices under the ministerial specification, the CBSA examined all information on the record, including information from the complaint, information provided by exporters, publicly available information and customs documentation.

[173] The CBSA considered that the normal values and export prices determined for the exporters where sufficient information was provided, rather than the information provided in the complaint, was the best information on which to base the methodology for determining normal values since it reflects exporters’ trading practices during the POI. The CBSA examined the difference between the normal value and export price of each individual transaction for the exporters where sufficient information was provided in order to obtain an appropriate amount for the normal value methodology. The transactions were also examined to eliminate anomalies from being considered; such anomalies can include low volume shipments, very low value sales, effects of seasonality or other business or environmental factors.

[174] The CBSA considers that the highest amount by which the normal value exceeded the export price found on an individual transaction (expressed as a percentage of the export price), is an appropriate basis for determining normal values. This method of determining normal values is based on information on the record and limits the advantage that an exporter may gain from not providing necessary information requested in a dumping investigation as compared to an exporter that did provide the necessary information. Therefore, the normal values were determined under a ministerial specification pursuant to subsection 29(1) of SIMA, based on the export price as determined under section 24, 25 or 29 of SIMA, plus an amount equal to 351.4% of that export price.

[175] The CBSA considered that the information submitted on the CBSA customs entry documentation was the best information on which to determine the export price of the goods as it reflects actual import data. This information is more comprehensive than what was available in the complaint.

[176] Based on the above methodologies, the subject goods exported to Canada by all other exporters were found to be dumped by a margin of dumping of 351.4%, expressed as a percentage of the export price.

[177] A summary of the results of the dumping investigation respecting all subject goods released into Canada during the POI follows:

*Expressed as a percentage of the export price.

[178] Under paragraph 41(1)(a) of SIMA, the CBSA shall make a final determination of dumping when it 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.

[179] The margin of dumping of certain carbon and alloy steel line pipe from China is above 2% of the export price of the goods and is, therefore, not insignificant.

[187] In conducting its investigation, the CBSA sent a subsidy RFI to the GOC as well as to potential exporters of certain carbon and alloy steel line pipe located in China that had been identified through CBSA import entry documentation. Exporters who were not the manufacturer of the goods were asked to forward a copy of the RFI to each of the manufacturers concerned. 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 had been conferred on persons engaged in the production, manufacture, processing, purchase, distribution, transportation, sale, export or import of carbon and alloy steel line pipe; 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 directed 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. As such, the GOC and all exporters were given the opportunity to participate in the investigation. They were also notified that failure to submit all required information and documentation, including non-confidential versions, or failure to permit verification of any information, would result in the amount of subsidy on the subject goods exported by their company being based on the facts available to the CBSA. It was further stated that such a decision may be less favourable to their company than if full and verifiable information was made available.

[188] The CBSA received responses to the subsidy RFI from 25 exporters, producers and related suppliers.

[189] The GOC did not submit a response to the subsidy RFI, which limited the CBSA’s ability to determine the amount of subsidy in the prescribed manner as the required information relating to financial contribution, benefit and specificity was not provided. It also limited the CBSA’s ability to determine whether producers, or other suppliers of goods and services, are public bodies.

[190] Due to a lack of government response, subsidy amounts for all exporters were determined pursuant to subsection 30.4(2) of SIMA, based on a ministerial specification.

[191] For each of the exporters that provided sufficient information in response to the subsidy RFI, an individual amount of subsidy was determined under ministerial specification, based on the information provided in response to the RFI and obtained during the on-site verification or desk audit.

[192] For exporters that did not provide sufficient information in response to the RFI, amounts of subsidy were determined under a ministerial specification on the basis of facts available.

[193] At the initiation of the subsidy investigation, the CBSA identified 135 potential subsidy programs in the following seven categories:

1. Special Economic Zones (SEZ) and other Designated Areas Incentives;
2. Preferential Loans and Loan Guarantees;
3. Grants and Grant Equivalents;
4. Preferential Tax Programs;
5. Relief from Duties and Taxes on Inputs, Materials and Machinery;
6. Goods/Services Provided by the Government at Less than Fair Market Value; and
7. Equity Programs.

[194] Details regarding these potential subsidies were provided in the Statement of Reasons issued for the initiation and preliminary determination of this investigation. This document is available through the CBSA’s website at the following address: www.cbsa-asfc.gc.ca/sima-lmsi.

[195] During the preliminary phase of the investigation, the CBSA identified 24 additional programs. A further review during the final phase of the investigation resulted in 18 additional programs being identified. These programs were identified in the exporters’ responses to the RFIs as well as through verification visits or desk audits.

[196] In total, 177 programs were investigated for purposes of this investigation. In the final phase of this investigation, 16 of these programs were removed from the investigation. Information concerning these 177 programs is provided in Appendix 2.

Baoshan Iron & Steel Co., Ltd. / Baosteel America Inc.

[197] Baoshan Iron & Steel Co., Ltd. (Baoshan) is a producer and exporter of the subject goods and provided a substantially complete response to the subsidy RFI. In addition, six related suppliers provided substantially complete responses to the subsidy RFI.

[198] Baoshan was found to have benefited from 22 subsidy programs. The amount of subsidy for Baoshan is 31.35 RMB/MT, or 0.63%, expressed as a percentage of the export price.

Hengyang Steel Tube Group International Trading Inc./ Hengyang Valin Steel Tube Co., Ltd. / Hengyang Valin MPM Co., Ltd.

[199] Hengyang Steel Tube Group International Trading Inc., Hengyang Valin Steel Tube Co., Ltd., and Hengyang Valin MPM Co., Ltd. (collectively referred to as HYST), are related companies producing and exporting the subject goods to Canada. HYST provided a substantially complete response to the subsidy RFI. Five related suppliers, Hunan Valin Xiangtan Iron & Steel Co., Ltd., Hunan Valin Lianyuan Iron & Steel Co., Ltd., Hunan Valin Steel Co., Ltd., Yueyang Xingang Logistics Co., Ltd. and Xianggang Xiangtan Industry and Trading Co., Ltd. also provided substantially complete responses to the subsidy RFI.

[200] HYST was found to have benefited from 18 subsidy programs. The amount of subsidy for HYST is 34.51 RMB/MT, or 0.64%, expressed as a percentage of the export price.

Huludao City Steel Pipe Industrial Co., Ltd.

[201] Huludao City Steel Pipe Industrial Co., Ltd. (Huludao City) is a producer and exporter of the subject goods and provided a substantially complete response to the subsidy RFI. One related supplier, Huludao Bohai Oil Steel Pipe Co., Ltd. (Bohai), also provided a substantially complete response to the subsidy RFI.

[202] Huludao City was found to have benefitted from three subsidy programs. The amount of subsidy for Huludao City is 12.10 RMB/MT, or 0.38%, expressed as a percentage of the export price.

Jiangsu Changbao Steel Tube Co., Ltd.

[203] Jiangsu Changbao Steel Tube Co., Ltd. (Changbao) is a producer and exporter of the subject goods and provided a substantially complete response to the subsidy RFI.

[204] Changbao was found to have benefitted from 18 subsidy programs. The amount of subsidy for Changbao is 267.30 RMB/MT, or 4.51%, expressed as a percentage of the export price.

Jiangsu Valin Xigang Special Steel Co., Ltd.

[205] Jiangsu Valin Xigang Special Steel Co., Ltd. (Jiangsu Valin) is a producer and exporter of the subject goods and provided a substantially complete response to the subsidy RFI. Five related suppliers; Hunan Valin Xiangtan Iron & Steel Co., Ltd., Hunan Valin Lianyuan Iron & Steel Co., Ltd., Hunan Valin Steel Co., Ltd., Yueyang Xingang Logistics Co., Ltd. and Xianggang Xiangtan Industry and Trading Co., Ltd. also provided substantially complete responses to the subsidy RFI.

[206] Jiangsu Valin was found to have benefited from seven subsidy programs. The amount of subsidy for Jiangsu Valin is 289.93 RMB/MT, or 7.97%, expressed as a percentage of the export price.

Tianjin Huilitong Steel Tube Co., Ltd./ Tianjin Longshenghua Import & Export Trade Co., Ltd.

[207] Tianjin Huilitong Steel Tube Co., Ltd. (Huilitong) is a producer of subject goods. Tianjin Longshenghua Import & Export Trade Co., Ltd. (Longshenghua) is the exporting arm of Huilitong that is used for the vast majority of export transactions during the POI. Both companies provided substantially complete responses to the subsidy RFI.

[208] Tianjin Huilitong Group was found to have benefitted from three subsidy programs. The amount of subsidy for Tianjin Huilitong Group is 51.85 RMB/MT, or 1.48%, expressed as a percentage of the export price.

Wuxi Huayou Special Steel Co., Ltd.

[209] Wuxi Huayou Special Steel Co., Ltd (Wuxi Huayou) is a trading company and shipped subject goods to Canada. The subject goods shipped to Canada by Wuxi Huayou were produced by its related manufacturing company, Wuxi Sp. Steel Tube Manufacturing Co., Ltd. (Wuxi Sp. Steel), as well as several non-associated manufacturers.

[210] Wuxi Huayou and Wuxi Sp.Steel provided substantially complete responses to the subsidy RFI. Three related companies, including Wuxi Huamo Steel Pipe Co., Ltd., Wuxi Longtai Steel Pipe Co., Ltd., and Wuxi Huashi Steel Pipe Co., Ltd. also provided substantially complete responses to the subsidy RFI. However, for the subject goods produced by the non-associated manufacturers, the CBSA did not receive a response to the subsidy RFI from any of those manufacturers.

[211] An individual amount of subsidy was determined for the subject goods produced by Wuxi Sp. Steel and shipped to Canada by Wuxi Huayou. For goods purchased by Wuxi Huayou and shipped to Canada, the amount of subsidy was determined in accordance with the methodology set out in the “All Other Exporters” section below.

[212] The goods produced by Wuxi Sp. Steel and exported by Wuxi Huayou were found to have benefitted from eight subsidy programs with an amount of subsidy equal to 287.31 RMB/MT.

[213] The goods exported by Wuxi Huayou that were purchased from other producers were found to have an amount of subsidy equal to 989.97 RMB/MT.

[214] All subject goods shipped by Wuxi Huayou were found to have a weighted average amount of subsidy of 986.85 RMB/MT, or 15.50%, expressed as a percentage of the export price.

Yangzhou Lontrin Steel Tube Co., Ltd.

[215] Yangzhou Lontrin Steel Tube Co., Ltd. (Lontrin) is a producer and exporter of the subject goods to Canada. The subject goods shipped to Canada by Lontrin were produced by Lontrin and several non-associated manufacturers.

[216] Lontrin provided a substantially complete response to the subsidy RFI. However, for the goods produced by other manufacturers, the CBSA could not verify which goods were purchased from which manufacturers.

[217] An individual amount of subsidy was determined for the subject goods produced and exported to Canada by Lontrin. For the subject goods purchased from non-associated manufacturers and exported to Canada by Lontrin, the amount of subsidy was determined in accordance with the methodology set out in the “All Other Exporters” section below.

[218] The goods produced and exported by Lontrin were found to have benefitted from 12 subsidy programs with an amount of subsidy equal to 52.67 RMB/MT.

[219] The goods exported by Lontrin and purchased from other producers were found to have an amount of subsidy equal to 989.97 RMB/MT.

[220] All subject goods exported by Lontrin were found to have a weighted average amount of subsidy of 260.44 RMB/MT, or 6.01%, expressed as a percentage of the export price.

All Other Exporters

[221] For all other exporters in China where, in the opinion of the CBSA, sufficient information was not provided, the amount of subsidy was determined under a ministerial specification pursuant to subsection 30.4(2) of SIMA on the basis of facts available.

[222] In establishing the methodology for determining amounts of subsidy for all other exporters, the CBSA examined all information on the record, including information from the complaint, information provided by exporters and publicly available information. The CBSA considered that the information provided by the exporters who provided sufficient information in response to the CBSA’s subsidy RFI, as well as the information on the potentially actionable subsidy programs that were identified in the investigation was the best information on which to base the methodology for determining amounts of subsidy for all other exporters.

[223] The amounts of subsidy were determined under a ministerial specification pursuant to subsection 30.4(2) of SIMA, on the basis of the following methodology:

• i) the highest amount of subsidy for each of the 72 programs, as found at the final determination for the responding exporters, plus;
• ii) the simple average of the amounts of subsidy for the 72 programs referenced in (i), applied to each of the remaining 89 potentially actionable subsidy programs for which sufficient information was not available or had not been provided at the final determination.

[224] The CBSA considers that this is an appropriate basis for determining the amounts of subsidy since the information available supports that the potentially actionable subsidy programs outlined in Appendix 2 may be available to exporters and producers of the subject goods located in China. Without a response to the subsidy RFI from the GOC and all known exporters, the CBSA does not have sufficient information to determine that any of these programs should be removed from the investigation for purposes of the final determination. Furthermore, the amount of subsidy applied to each of these potentially actionable subsidy programs is based on the benefits received by the responding exporters. This method of determination of amounts of subsidy is based on information on the record and limits the advantage that an exporter may gain from not providing necessary information requested in a subsidy investigation as compared to an exporter that did provide the necessary information.

[225] Using the above methodology, the amount of subsidy for all other exporters is 989.97 RMB/MT, or 17.32%, expressed as a percentage of the total export price.

[226] The overall weighted average amount of subsidy for China is equal to 7.6%, when expressed as a percentage of the total export price of the subject goods.

[227] Based on the preceding, 100% of certain carbon and alloy steel line pipe originating in or exported from China were subsidized. A summary of the amount of subsidy applicable to all named exporters is provided in Appendix 1.

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

* expressed as a percentage of the export price.

[229] In making a final determination of subsidizing under paragraph 41(1)(a) of SIMA, the CBSA 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.

[230] The amount of subsidy of certain carbon and alloy steel line pipe originating in or exported from China is above 1% and is, therefore, not insignificant.

Mother Tube

Counsel for Wuxi Huayou submitted in its representation that mother tube are not goods subject to this investigation as they are not like goods nor are they unfinished pipe and that there is no domestic industry for mother tube. Mother tube undergo a thermal expansion process and they do not become unfinished line pipe until after this process is complete. Wuxi Huayou further argued that unfinished line pipe should not have been included in the product definition as these goods are not like products to line pipe.^{Footnote 61}

Counsel for Tenaris submitted in its case brief that mother tube are subject goods and that unfinished goods are, and should be, subject to this investigation. Counsel for Tenaris pointed out that the CBSA often extends findings to unfinished goods in order to prevent circumvention. Tenaris also submitted that documents related to Bri-Steel’s imports found in Bri-Steel’s RFI response are determinative of this issue.^{Footnote 62}

Counsel for Wuxi Huayou submitted in its case brief the same arguments regarding the subjectivity of mother tube that it provided in its previously mentioned representation.^{Footnote 63}

Counsel for Bri-Steel submitted in its case brief that mother tube are not subject goods as they are not finished or even unfinished line pipe and cannot be used for line pipe applications. Counsel also argued that Bri-Steel is a Canadian producer of line pipe and mother tube is the raw material used in its manufacturing process and that they do not become unfinished line pipe until after substantial transformation, such as heating and expansion.^{Footnote 64}

Counsel for Tenaris submitted in its reply submission that there is confidential evidence on the record that conclusively indicates whether or not these goods are subject.^{Footnote 65}

Counsel for Bri-Steel submitted in its reply submission that finished and unfinished line pipe need to meet the specifications in the product definition to be considered subject and the outside diameter and wall thickness combinations of mother tube do not appear on a standard ASME pipe schedule. Bri-Steel again stated that mother tube are a raw materials and if they are considered unfinished line pipe by virtue that they will one day become line pipe, then billet and hot-rolled coil should also be considered unfinished line pipe. Counsel for Bri-Steel also argued that the evidence Tenaris claimed is determinative in its case brief is merely a description on the commercial sales documents used so that all parties involved in the transaction would know what specifications the line pipe produced from the mother tube would be made to.^{Footnote 66}

CBSA’s Response

The CBSA considered the information provided by the parties and the definition of the subject goods. The inclusion of the term “for use in the production” in the product definition indicates that “unfinished line pipe” also covers tubular inputs at earlier stages of the line pipe production process. It is the CBSA’s opinion that mother tubes are unfinished line pipe and are therefore subject to this investigation.

Section 20 Conditions Exist

Counsel for Evraz submitted in its case brief that section 20 conditions exist in China’s steel pipe sector and that there is evidence to suggest that China maintains a non-market economy in the steel sector and that the GOC has a number of industrial policies that determine domestic prices.^{Footnote 67}

Counsel for Tenaris also submitted in its case brief that section 20 conditions exist in China’s steel pipe sector and pointed to evidence on the record supporting this.^{Footnote 68}

CBSA’s Response

As stated in the Section 20 section of this SOR, the CBSA 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. Therefore the CBSA affirmed the opinion rendered at the preliminary determination that the conditions described in paragraph 20(1)(a) apply in the steel pipe sector in China, which includes carbon and alloy steel line pipe.

Use of Pipe Logix

Counsel for Wuxi Huayou and Bri-Steel submitted in their representations that the CBSA should use a different price list published in Pipe Logix than the one used for the preliminary determination.^{Footnote 69}

Counsel for Evraz submitted in its case brief that for the preliminary determination, the CBSA found that the information provided in Pipe Logix was the best information available at the time and that no better information has since been submitted. Additionally, Evraz submitted that Pipe Logix is based on prices in the USA, which is a reasonable surrogate country and that this publication has been used in past investigations by the CBSA as the best information available.^{Footnote 70}

Counsel for Baoshan submitted in its case brief that Pipe Logix should not be used as a basis for normal values as prices reported in Pipe Logix are not accurate and are higher than those reported in other publications. Baoshan pointed to the fact that Pipe Logix is a small publication and relies on monthly surveys for its information. Instead, Baoshan suggested that the CBSA use prices provided by Global Trade Information Services, Inc. (GTIS) or Metal Bulletin Review (MBR). Baoshan submits that GTIS data is more reliable than Pipe Logix as it collects worldwide data from government agencies and MBR is more reliable than Pipe Logix as it is comparable to Baoshan’s selling prices.^{Footnote 71}

Counsel for Evraz submitted in its reply submission that Pipe Logix is the best information available to the CBSA, contrary to Baoshan’s assertions. Evraz submitted that although Baoshan argued that Pipe Logix is unreliable for a number of reasons, it did not provide evidence to support them. Evraz also pointed out that one of Baoshan’s arguments for using MBR data, that it is closer to Baoshan’s actual sales prices, is irrelevant as the reason for using an out of country normal value is because prices within the country of export are considered unreliable.^{Footnote 72}

Counsel for Tenaris submitted in its reply submission that the Pipe Logix information used by the CBSA at the preliminary determination is an appropriate basis for normal values as the CBSA should use domestic sales data as the basis for normal value and not import sales data as domestic sales data is what is required first under section 20 of SIMA.^{Footnote 73}

Counsel for Bri-Steel submitted in its reply submission that the publications mentioned in Baoshan’s case brief warrant serious consideration. Bri-Steel also submitted that, while section 20 requires the CBSA to first look at domestic sales when determining normal value, the normal values for the case will likely be determined under section 29, which contains no such requirement, instead the CBSA should use the selling prices that provide a proper comparison as the basis for determining normal values. Bri-Steel submitted that Pipe Logix spot market prices based on imports of line pipe in a certain market segment of the USA are an appropriate basis.^{Footnote 74}

CBSA’s Response

For the purposes of the final determination, the CBSA has formed the opinion that the conditions of paragraph 20(1)(a) of SIMA exist in the steel pipe sector, which includes carbon and alloy steel line pipe, in China.

The CBSA did not receive sufficient information to allow for normal values to be determined pursuant to paragraph 20(1)(c) or paragraph 20(1)(d) of SIMA. Therefore, since sufficient information is not available to the CBSA to determine normal values using either of these two methods, normal values were determined under subsection 29(1) of SIMA.

The CBSA has considered the representations made by interested parties and is of the opinion that the sales information as provided by the publication Pipe Logix, constitutes the best available information for the purposes of determining normal values.

Further explanation with respect to the CBSA’s determination of normal values, export prices and margin of dumping can be found in the “Dumping Investigation” section of this document.

Adjustments to Normal Value

Counsel for Wuxi Huayou and Bri-Steel submitted in their representation that the CBSA should make adjustments to the normal value pursuant to section 5 of the SIMR to take into account the difference in quality between mother tube and finished line pipe and pursuant to section 7 of the SIMR to take into account the difference in delivery costs.^{Footnote 75} Bri-Steel’s representation also included several factors that it believes should be applied when converting Pipe Logix prices for comparability purposes with mother tube.^{Footnote 76}

Counsel for Evraz submitted in its case brief that the 10% adjustment used at the preliminary determination was a conservative estimate and that the CBSA should use certain evidence on the record to recalculate this amount. In this case brief, Evraz also included a distributor margin it had calculated based on evidence on the record.^{Footnote 77}

Counsel for Baoshan submitted in its case brief that if Pipe Logix prices are used as a basis for normal values, then the 10% adjustment used at the preliminary determination to take into account differences in trade levels is insufficient and a further downward adjustment is needed.^{Footnote 78}

Counsel for Evraz submitted in its reply submission that the 10% distributor margin used for the preliminary determination is not insufficient as Baoshan claims. Counsel also submitted that the CBSA should use a distributor margin calculated using information on the record from actual distributors.^{Footnote 79}

Counsel for Bri-Steel submitted in its reply submission that if the CBSA uses the same normal value methodology for the final determination as it did for the preliminary determination, then certain adjustments should be made. Specifically: an adjustment under section 5 of the SIMR should be made to take into account the difference in quality and conditions of sale between mother tube and line pipe; an adjustment under section 7 of the SIMR should be made to take into account the cost of delivery from the factory in Wuxi, China to the domestic market in the USA; an adjustment under section 9 of the SIMR should be made to take into account the difference in trade levels between the importer in Canada and the purchasers in the sales detailed in Pipe Logix; and an adjustment under section 10 of the SIMR should be made to take into account any taxes included on domestic sales as reported in Pipe Logix. With regard to the trade level adjustment, Bri-Steel submits that the CBSA should deduct profits made by trading companies, national distributors and regional distributors and that the amount calculated by Evraz in its case brief should have included the trading company profits of two international companies, not just their distributor profits. Bri-Steel provided a distributor margin it had calculated based on evidence on the record.^{Footnote 80}

CBSA’s Response

The CBSA considered the information provided by all parties and adjusted the prices found in Pipe Logix to arrive at normal values that reflect the producer level price. This adjustment was based upon the information contained on the record for actual distributors and trading companies. The CBSA considered all information on the record and determined that this methodology is based on the best information available.

Non-produced Subject Goods

Counsel for Wuxi Huayou submitted in its representation that it should not be penalized for the fact that its suppliers did not provide the information required by the CBSA as this is beyond the control of Wuxi Huayou and Wuxi Huayou did endeavour to provide all information that it could. Additionally, counsel argued that information from the supplier will not be needed if normal values are determined under section 20 of SIMA. Wuxi Huayou submitted that it should be issued two sets of normal values, one for goods it produces and one for goods it purchases.^{Footnote 81}

CBSA’s Response

Where exporters were not the producers of the subject goods, the CBSA requested information from the actual producer of the goods. For subject goods that were produced by the exporter or where the CBSA received complete information relating to those goods sold to Canada, the CBSA determined normal values under subsection 29(1) using the methodology described in the “Normal Values” section of this SOR. For subject goods that were purchased by the exporter and where the CBSA did not receive complete information relating to those goods sold to Canada, the CBSA determined normal values under subsection 29(1) using the methodology described in the “All Other Exporters” section of this SOR.

The exporter, Wuxi Huayou, submitted representations on a number of exporter specific issues that are addressed below.

Information Submitted at Verification

Counsel for Wuxi Huayou submitted in its representation that corrections submitted during verification should be used in the final determination, regardless of whether the CBSA verified this information or not. Additionally, counsel submitted that the CBSA requested information that is not normally kept in Wuxi Huayou’s accounting system so the CBSA should accept the information that Wuxi Huayou was able to provide.^{Footnote 82}

CBSA’s Response

The CBSA considered the information provided by Wuxi Huayou at verification to the extent possible for the final determination, considering that this information could not be verified.

Export Price Deductions

Counsel for Wuxi Huayou submitted in its representation that certain confidential expenses are not export price deductions under section 24 of SIMA and therefore should not be deducted from the export price.^{Footnote 83}

CBSA’s Response

When determining export prices under section 24 of SIMA, the CBSA must deduct from the exporter’s sales price: the costs, charges and expenses incurred in preparing the goods for shipment to Canada; any duty or tax imposed on the goods by a law of Canada; and all other costs, charges and expenses resulting from the exportation of the goods to Canada. The CBSA deducted the relevant expenses.

Financial Support for Foreign Trade – Wuxi

Counsel for Wuxi Huayou submitted in its representation that a subsidy Wuxi Huayou benefited from regarding a trade exhibition in Brazil should not have been applied to all exported goods as it is not applicable to goods sold to Canada.^{Footnote 84}

CBSA’s Response

The CBSA considered the information provided by Wuxi Huayou in its submissions and found that program 140-2 did provide a benefit to the goods sold to Canada.

Exemption of Flood-Proofing Fund Payment

Counsel for Wuxi Huayou submitted in its representation that the exemption of flood-proofing fund should not be considered a subsidy program as it is a fund set up by the government that private enterprises contribute to and is therefore not funded by the GOC.^{Footnote 85}

CBSA’s Response

Based on the information available to the CBSA, program 158 appears to be provided by a government as defined in section 2 of SIMA.

Subsidy Program for Disabled Employees

Counsel for Wuxi Huayou submitted in its representation that the subsidy program for employing disabled persons is generally available to all enterprises and is therefore not specific.^{Footnote 86}

CBSA’s Response

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that this program is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information this program does not appear to be generally available to all enterprises in China.

Export Credit Insurance Supporting Fund

Counsel for Wuxi Huayou submitted in its representation that this subsidy program is not a prohibited subsidy under section 2 of SIMA and is simply an insurance program. Therefore counsel argues that it is not a prohibited subsidy and its benefits are not countervailable.^{Footnote 87}

CBSA’s Response to Representations

This subsidy program found by the CBSA is not an insurance program, but rather a program where enterprises are reimbursed their insurance fees, receive a lower insurance rate, or receive free insurance.