Dumping: AD1408 / 4214-47
Subsidy: CVD143 / 4218-44
Large diameter carbon and alloy steel line pipe
Statement of Reasons

[The complainant accounts for all domestic production of like goods in Canada, as defined in subsection 2(1) of SIMA. The complainant’s goods are produced at manufacturing facilities at two locations in Canada

[6] The names and addresses of the complainants are as follows:

[7] Evraz Inc. NA Canada operates large line pipe manufacturing facilities in Regina, Saskatchewan. The EVRAZ North America group of companies also owns Canadian National Steel Corporation, which operates large line pipe manufacturing facilities in Camrose, Alberta.

[8] According to the complainant, there are no other producers of large line pipe in Canada. The CBSA conducted research to determine if there are other Canadian producers of like goods. According to available information, the complainant is the sole producer of like goods in Canada.

[9] The CBSA has identified 56 potential exporters of the subject goods from CBSA import documentation and from information submitted in the complaint.

[10] The CBSA has identified 34 potential importers of the subject goods from CBSA import documentation and from information submitted in the complaint.

[11] For the purpose of these investigations, “GOC” 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.

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

For greater certainty, the product definition includes:

a) line pipe produced to American Petroleum Institute (“API”) specification 5L, in Grades A25, A, B and X grades up to and including X100, or equivalent specifications and grades, including specification CSA Z245.1 up to and including Grade 690.

b) 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 Japan, 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

c) non-prime and secondary pipes (“limited service products”).

[13] Large line pipe is used in the oil and gas sector primarily in pipelines for the transmission of oil and natural gas products over long distances, but also in a variety of mining applications, including as slurry pipe in oil sands operations.

[14] The Canadian market for large line pipe is governed by applicable line pipe specifications including Canadian Standards Association (CSA) specification Z245.1 for line pipe used in pipeline applications. Oil and gas transmission pipelines must, in turn, for example, conform to CSA Z662 (Oil and Gas Pipeline Systems). That said, international trade in line pipe is governed primarily by API specification 5L. 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. This equivalency applies to other specifications, including International Organization for Standardization (ISO), which means that a particular line pipe may be certified and stenciled as complying with multiple standards if all the requirements of each standard/grade are met (leading to dual-, triple-, and further multiple stenciled line pipe). Indeed, 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 ordered.

[15] The complainant manufactures or is capable of manufacturing line pipe to API 5L specifications in grades up to and including X100 and to all equivalent grades under CSA Z245.1, and in all outside diameter sizes covered by the product definition.

[16] The product definition covers all large line pipe meeting or supplied to meet the above specifications and grades, as well as equivalent specifications and grades, regardless of whether the line pipe has been multiple stenciled to indicate that it meets or is supplied to meet additional end use specifications. For purposes of greater clarity, all large line pipe stenciled or otherwise marked as meeting or supplied to meet API 5L (or equivalent specifications) for use as oil and gas pipelines are included in the product definition regardless of whether the pipe is marked as meeting any other end-uses or is supplied to meet any other end-uses. Line pipe that is manufactured and tested to meet higher API specifications (or equivalent CSA and ISO specifications) automatically conforms to 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.

[17] The complaint states that large line pipe has notable product characteristics that distinguish it from other pipe products. These include being more resistant to highly corrosive (“sour”) environments, which is accomplished by a secondary refining process in the production of the steel to increase the purity of the steel, thereby making it more resistant to corrosion from sour gas. The grain size of the steel plate used as an input into the production of large line pipe is also more refined, which affects the low temperature toughness of the steel. Large line pipe also typically is sold in API grades of X70 or greater, which speaks to higher strengths of steel. Finally, large line pipe is characterized by higher deformability and higher pressure–crushing properties.

[18] Submerged arc welded (SAW) large line pipe derives its name from the stage in the production process wherein the welding arc is submerged in flux while the welding occurs. The flux protects the steel in the weld area from impurities found in the air when heated to welding temperatures. Double submerged arc welded (DSAW) large line pipe requires both inside and outside welds, which are accomplished in separate processes, hence the “double” prefix. DSAW encompasses both longitudinally welded SAW (LSAW) and helical (or spiral) welded SAW (HSAW).

[19] LSAW large line pipe is most often produced using either the pyramid rolls method (also known as the rolled and welded method) or the U&O method (also known as the “U O-E” method). The difference between these two processes exists only in the method of forming the steel cylinder. The pyramid rolls method begins with three rolls arranged in a pyramidal structure, between which the steel plate is pressed until it is formed into a cylinder – the time required depends on the grade and thickness of the plate. In the U&O method, the cylinder is first formed into a U shape using a “U” press, then curled into an O shape (i.e., a cylinder) using an “O” press. Under this method, the “E” in the U-O-E descriptor signifies the press process in which the pipe is trade (or “stitch”) welded until further SAW welding is performed.

[20] Once formed, the cylinder is then welded both from the inside and the outside longitudinally along the length of the cylinder using the SAW process, with up to five welding wires, which in the end results in a welded pipe.

[21] Stages in the LSAW production process typically include: cutting and baiting the steel into strips (“skelp”); pre-bending; forming; stitch and pre-welding; internal and external SAW processing; finishing; straightening; cold expanding (for yield strength); demagnetization; seam removal, and bevelling (depending on the order in question).

[22] HSAW (or “spiralweld”) large line pipe is characterized as a steel pipe having a DSAW seam the entire length of the pipe in a spiral form. HSAW is produced using hot-rolled coil that is formed into a hollow cylinder by twisting the skelp as it is unrolled (in the same manner that the cardboard core in a roll of paper towel is formed) and then welded as the edges come together using an automated SAW process both inside the cylinder and outside the cylinder. The end product is a welded pipe.

[23] Stages in the HSAW production process typically include: de-coiling and leveling; skelp end welding for continuous rolling; edge trimming and bevelling; forming and tack welding; cutting to length; skelp and repair welding; inside cleaning of pipe; internal and external SAW; further inside cleaning; weld seam removal at pipe ends; and beveling of pipe ends (depending on the order in question).

[24] Both LSAW and HSAW large line pipe production processes also comprise a number of quality control steps including, but not limited to, the following: skelp and edge ultrasonic testing; sampling and destructive testing; inspection of SAW; tack weld inspection; hydrostatic testing; ultrasonic testing; x-ray weld inspection/filmless radiography; final inspection; and generation of certificates. The complainant employs both the LSAW process and the HSAW process for its production of large line pipe.

[25] Using the U&O method, large line pipe is generally produced in 40-foot lengths (commonly known as “double random lengths” or “DRL”). Using the pyramid roll method, however, large line pipe is most often produced in 20-foot lengths (“single random lengths” or “SRL”) or shorter; this may require producers to girth weld multiple sections together to achieve greater lengths, as needed. Using the spiral weld method, large line pipe can be rolled into exact lengths up to approximately 115 feet (including “triple random lengths”/“TRL” of 60 feet and “quadruple random lengths”/”QRL” of 80 feet).

[26] Small diameter line pipe (i.e., line pipe with an outside diameter of up to 24 inches) is a separate product, with wholly different costs, production processes and sales considerations. Among other characteristics of distinction, the DSAW, HSAW and LSAW processes used to produce large line pipe are different and distinct from the electric resistance weld (“ERW”) process used to produce small diameter line pipe. Moreover, a significant proportion of small diameter line pipe is sold through distributors, while large diameter line pipe is almost entirely sold directly to end users.

[27] The allegedly dumped and subsidized goods are normally classified under the following Harmonized System (HS) classification numbers:

• 7305.11.00.21
• 7305.11.00.29
• 7305.12.00.20
• 7305.19.00.21
• 7305.19.00.29

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

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

[30] According to the complainant, with respect to subject goods, like goods consist of all domestically produced large line pipe

[31] After considering questions of use, physical characteristics and all other relevant factors, the CBSA is of the opinion that domestically produced large line pipe are like goods to the subject goods. Further, the CBSA is of the opinion that subject goods and like goods constitute only one class of goods.

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

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

[34] Following the complainant’s allegation that they are the only producer of large line pipe in Canada, the CBSA further researched the matter and is satisfied that the standing requirements of subsection 31(2) of SIMA have been met.

[49] The complainant indicated that they do not have access to the domestic selling prices of large line pipe in China or Japan. As such, they were unable to estimate normal values using the methodology of section 15 of SIMA.

[50] As a result, the complainant estimated normal values for the subject goods using the methodology set out in paragraph 19(b) of SIMA. Under this methodology normal values are determined as the aggregate of the cost of production of the goods, a reasonable amount for SG&A, and a reasonable amount for profits.

[51] The complainant estimated normal values for both longitudinally welded (LSAW) and helically welded (HSAW) large line pipe. Normal values were calculated for five benchmark products in various outer diameters, which account for a material proportion of their sales in Canada.^{Footnote 2}

[52] Normal values for the benchmark products were estimated based on the aggregate of the costs of producing the goods, a reasonable amount for SG&A, and a reasonable amount for profits. The complainant used costing data from their factories with adjustments to reflect cost differences between Canada and the named countries.

[53] Material costs were estimated by the complainant based on their own material costs. No adjustments were made to material costs as the complainant has stated that the material inputs for large line pipe produced in Canada and the named countries are similar and that these inputs are globally available and traded.

[54] Labour costs were estimated based on the complainant’s labour costs and adjusted to reflect cost differences between Canada relative to China and Japan. Labour costs were separately identified for direct labour and the labour component of SG&A expenses. A downward adjustment was applied to these costs based on comparative wage statistics from the International Labour Organization, to account for differences in wage rates between Canada, China and Japan.^{Footnote 3}

[55] The complainant estimated that 50% of SG&A expenses were labour related costs. As such, a downward adjustment was made to 50% of SG&A expenses to account for the difference in labour costs between the named countries and Canada. SG&A costs were estimated using the SG&A costs incurred by Evraz on a per tonne basis in 2015. In order to be conservative, the complainant did not include an estimate for financial costs in the cost build up.

[56] The amount for profits for the normal values of the goods from China was estimated based on publically available 2014 financial data of two known Chinese exporters of the subject goods. Public profit information was not available for eight other known exporters. The complainant therefore calculated a weighted average profit rate based on the financial data of two companies, namely Baoshan Iron & Steel Co., Ltd. and Yulong Steel Pipe Co., Ltd.

[57] The amount for profits for the normal values of the goods from Japan was estimated based on publically available 2014 financial data of three known Japanese exporters of the subject goods. Public profit information was not available for two other known exporters. The complainant therefore calculated a weighted average profit rate based on the financial data of three companies, namely JFE Steel Corporation, Steel and Sumitomo Metal Corporation, and Maruichi Steel Tube Ltd.^{Footnote 4}

[58] The complainant provided information supporting the initiation of a section 20 inquiry respecting the allegedly dumped goods from China and is of the opinion that domestic selling prices in China are substantially influenced by government policies and should not be used in the calculation of normal values since the prices are not reflective of competitive market conditions. As a result, the complainant also estimated normal values for China using the methodology of section 20 based on surrogate country information.

[59] The complainant submits that the United States (US), Russia and the European Union (EU) are appropriate “surrogate countries”, and as such relied on average pricing from the three “surrogate countries”. To support this assertion, the complainant pointed to the CBSA’s use of the US as a source of surrogate pricing information in past investigations involving tubular products used in the oil and gas sector.^{Footnote 5} Further, it identified similarities in the size of the markets for large line pipe in the US, EU and Russia as compared to the Chinese market. In order to be conservative, the complainant used an average of the three, as opposed to using only US pricing data, which is higher than the prices in the EU and Russia.

[60] The surrogate pricing information provided by the complainant is based on data from the publication Metal Bulletin Research (MBR). MBR is widely accepted as a reliable steel publication that the CBSA has found to be an acceptable data source in previous investigations.

[61] The MBR data provide quarterly pricing for longitudinally welded line pipe (LSAW) in the US, EU and Russian markets, and also helically welded line pipe (HSAW) in the US and EU market. As such, the MBR data allowed for sufficiently specific estimated normal values. Moreover, given that the MBR data represents ex-mill sales prices, no adjustments to the published price were necessary.

[62] The CBSA found the normal value estimates provided by the complainant using the methodologies of paragraph 19(b) and section 20 of SIMA, to be reasonable and representative. The amount for profits included in the normal values estimated using the methodology of paragraph 19(b) was also found to be reasonable.

[63] As discussed above, if there is sufficient reason to believe that conditions described in section 20 of SIMA exist in the sector under investigation, normal values will be determined pursuant to section 20 of SIMA on the basis of the domestic selling price or cost of production of the goods plus a reasonable amount for SG&A, plus a reasonable amount for profits of the like goods sold by producers in any country designated by the CBSA and adjusted for price comparability; or on the basis of the selling price in Canada of like goods imported from any country designated by the CBSA and adjusted for price comparability.

[64] As detailed in the “Section 20 Inquiry” section of this Statement of Reasons, the CBSA has information which demonstrates that the prices of large line pipe may be significantly affected by the GOC’s policies and that prices of large line pipe in China may not be substantially the same as they would be if they were determined in a competitive market. As a result, normal values for China were estimated in accordance with the methodology of section 20 of SIMA.

[65] The CBSA is of the opinion that the MBR data represents the best available information at this time. Further, the CBSA finds the complainant’s selection of the US, Russia and the EU as “surrogate countries” to be reasonable.

[66] Given the above, the CBSA has estimated normal values for China using the methodology of section 20 of SIMA based on the average of the applicable quarterly large line pipe prices in the US, Russia and the EU as published by MBR.

[67] The CBSA has estimated normal values for Japan based on a constructed cost approach using the methodology of paragraph 19(b) of SIMA, as estimated by the complainant. As such, no adjustments were made to the complainant’s estimates of normal values. However, due to limited information available to the CBSA at this stage concerning the outer diameter of the subject goods imported from Japan during the period July 1, 2014 to December 31, 2015, the paragraph 19(b) normal values were applied as an average of the benchmark outer diameter, separated by LSAW vs HSAW only, rather than using the normal values estimated for the various outer diameters. Furthermore, the CBSA used the Q1-2015 estimated normal values for Q3 and Q4 of 2014 since the complainant did not provide the necessary information for 2014, which will be part of the period of investigation (POI) for this investigation.^{Footnote 6}

[68] In summary, the CBSA has estimated normal values for China with reference to the average of applicable quarterly large line pipe prices as published by MBR in accordance with the methodology of section 20 of SIMA.

[69] In summary, the CBSA has estimated normal values for Japan based on a constructed cost approach in accordance with the methodology of section 19 of SIMA.

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

[71] The complainant’s estimated export prices are based on the quarterly average 2015 pricing for subject goods from Chinese and Japanese publicly available export data.^{Footnote 7} The complainant reported export prices for both HSAW and LSAW large line pipe from China. Since no exports to Canada of HSAW large line pipe were made from Japan during 2015, Japanese export prices were only reported for LSAW large line pipe.

[72] In estimating the export prices, the CBSA relied on actual import data from commercial and customs documentation. Due to the large volume of large line pipe imported into Canada, customs information pertaining to a sample of imports in the period July 1, 2014 to December 31, 2015, was examined. Actual import data was retrieved and refined through a review of CBSA customs entries and consequently, the information used by the CBSA for its estimate is more comprehensive than what was available to the complainant.

[73] The CBSA estimated margins of dumping by comparing the estimated normal values with the estimated export prices of the corresponding LSAW and HSAW export models found in Information Retrieval and Management (FIRM) for the POI. A weighted average margin of dumping was then calculated based on those models. This provides a reasonable estimate of the weighted average margin of dumping of all subject goods from China and Japan.

[74] Based on this analysis, the subject goods from China were dumped by an estimated margin of dumping of 53.6%, expressed as a percentage of the total export price. The subject goods from Japan were dumped by an estimated margin of dumping of 25.4%, expressed as a percentage of total export price.

[96] The complainant alleged that Chinese large line pipe producers and exporters have been receiving largely the same subsidies provided to the Chinese producers and exporters of oil country tubular goods, carbon steel welded pipe, seamless casing, piling pipe, pup joints and (small) carbon and alloy steel line pipe as previously found by the CBSA in investigations concerning those goods.^{Footnote 10}

[97] The complaint identified 150 subsidy programs that Chinese large line pipe producers may be benefiting from. These programs include 56 programs identified from the CBSA’s preliminary determination of subsidizing respecting Certain Carbon and Alloy Steel Line Pipe. ^{Footnote 11}

[98] The complainant identified these programs from CBSA’s Statements of Reasons for various investigations respecting goods from China, with emphasis on the above mentioned steel tubular products, as well as a number of recent US Department of Commerce (USDOC) decisions, including the issues and decision memorandum for the final determination of circular welded carbon quality steel line pipe from China^{Footnote 12} , and decisions from the Australian Antidumping Commission.^{Footnote 13} The complainant also relied upon industry reports^{Footnote 14} , government documents^{Footnote 15} , published annual reports^{Footnote 16} and other information ^{Footnote 17} regarding Chinese line pipe producers, and general news articles and other publications.^{Footnote 18} Based on their research, the complainant identified several programs not previously investigated by the CBSA.

[99] The CBSA reviewed the programs identified in the complaint. Instead of including the 56 programs identified in the CBSA’s preliminary determination respecting Certain Carbon and Alloy Steel Line Pipe, the CBSA included 71 programs that were identified in CBSA investigations respecting various steel tubular products from China, including the final determination respecting Certain Carbon and Alloy Steel Line Pipe.

[100] As part of its own research, the CBSA obtained 2014 Annual Report of Baoshan Iron & Steel Co. (BaoSteel)^{Footnote 19} , one of the largest publicly traded line pipe manufacturers in China. The report indicates that BaoSteel took advantage of several subsidy programs, receiving a total benefit of 637 million Renminbi or approximately 114 million Canadian dollars in 2014. Other large Chinese line pipe manufacturers, namely China Petroleum & Chemical Corporation^{Footnote 20} , Shengli Oil & Gas Pipe Holdings Ltd.^{Footnote 21} and Hunan Valin Iron & Steel Group Co. Ltd., also publicly disclosed in their 2014 and/or 2015 annual reports that they received large amount of subsidies from various levels of the Chinese government. ^{Footnote 22} Three programs used by the above mentioned Chinese producers were added to the subsidy program list.

[101] Of these 168 programs, three were removed as they were found to be listed multiple times in the complaint, one was removed as insufficient evidence was provided by the complainant, and four were removed as it was found in recent investigations that these programs have either expired, were duplicates of other programs, or due to insufficient evidence provided in the complaint.

[102] If more information becomes available during the investigation process, and this information indicates that these removed programs or others not listed may have provided benefits to exporters or producers of subject goods during the POI, the CBSA will request complete information from the GOC and the exporters of subject goods to pursue the investigation of these programs.

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

1. Special Economic Zones (SEZ) and other Designated Areas Incentives;
2. Preferential Loans and Loan Guarantees;
3. Grants and Grant Equivalents;
4. Preferential 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.

[104] A full listing of all 160 programs to be investigated by the CBSA is found in Appendix 1. As explained in more detail therein, there is sufficient reason to believe that these programs may constitute actionable subsidies provided by the GOC and that the exporters and producers of the subject goods benefit from these programs.

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

[106] For those programs where incentives are provided to enterprises operating in Special Economic Zones or Other Designated Areas inside the territory of a granting authority, the CBSA considers that these may constitute actionable subsidies for the reason that eligibility is limited to enterprises operating in such regions or is limited to certain enterprises operating within those regions.

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

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

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

[110] The complainant was not able to estimate an amount of subsidy received by the Chinese exporters of large line pipe as this information was not readily available

[111] For purposes of this initiation, the CBSA estimated the amount of subsidy conferred to exporters of the subject goods in China by calculating the difference between their cost of production, as estimated by the CBSA, and the selling prices reported in customs entry documents of subject goods sold to importers in Canada. The CBSA estimated these costs based on the complainant’s costs, adjusted to reflect the difference in wages between Canada and China. Since the cited programs are believed to significantly lower the cost of production of the subject goods, this calculation is a reasonable estimate of the amount of subsidy

[112] The CBSA’s analysis of the information indicates that subject goods imported into Canada during the period of July 1, 2014 to December 31, 2015, were subsidized and that the estimated amount of subsidy is 30.3% of the estimated export price of the subject goods.

[120] The import volumes as estimated by the CBSA are detailed in the “Canadian Market” section of this Statement of Reasons. This information shows a continuing trend of rising imports from China and Japan, which increased from 11.7% of total imports in 2013, to 80% in 2015. Overall, imports of subject goods from China and Japan have been increasing at a faster pace than imports from all other countries.

[121] The Canadian market information provided by the complainant shows a significant overall decrease in the market share of domestically produced large line pipe from 2013 through 2015^{Footnote 23}

[122] The CBSA’s analysis of import trends shows that imports of subject goods from China and Japan increased by 218.4% from 2013 to 2015. During this period of increasing imports, production of large line pipe in Canada decreased by 65.4%.

[123] With respect to the Canadian market for large line pipe, the CBSA’s apparent market calculations show that the market share for large line pipe produced in Canada, in terms of volume, decreased from 26.8% in 2013 to 21.5% in 2015. In contrast, the market share for large line pipe from China and Japan increased from 8.5% in 2013 to 62.8% in 2015.

[124] Based on the CBSA’s analysis of information contained in the complaint, as well as the CBSA’s estimate of imports, the CBSA finds the complainant’s claim of loss of market share to be reasonable and well supported.

[125] The complainant provided declarations which detail specific examples of lost sales due to lower pricing from exporters of the subject goods from China and Japan^{Footnote 24} The complainant also provided supporting documentation, including price quotations and internal reports.

[126] The complaint contains evidence that supports the link between the complainant’s lost sales and the allegedly dumped and subsidized subject goods. Furthermore, the complainant states that they have lost the business of several major accounts. The complainant indicates that these lost accounts are directly linked to low-priced subject imports from China and Japan.

[127] Based on the CBSA’s analysis of the information contained in the complaint, the CBSA finds the claim of loss of sales to be well supported and sufficiently linked to the allegedly dumped and subsidized goods.

[128] The complainant states that the allegedly dumped and subsidized goods have captured sales and market share by undercutting their prices. Further, the complainant notes that the price of subject goods imported from China and Japan has continued to decline over the period reviewed of 2013 to 2015. As a result, the complainant states that they have been forced to discount prices to compete with the low priced large line pipe and maintain throughput for large line pipe production^{Footnote 25}

[129] As reviewed by the CBSA, the complaint contains evidence of price undercutting by subject goods. It also contains documented instances where prices were suppressed or where the complainant was forced to lower prices or lose sales in response to allegedly dumped and subsidized imports from the named countries^{Footnote 26}

[130] Based on the above, and the CBSA’s analysis of the information contained in the complaint, the CBSA finds the claim of price undercutting and price suppression to be well supported and sufficiently linked to the allegedly dumped and subsidized goods.

[131] While the CBSA does acknowledge that there are some specific examples where price depression may have occurred, based on a review of the complainant’s confidential sales and financial data during the period of 2013 to 2015, the CBSA does not find the claim of price depression to be a relevant injury factor.^{Footnote 27}

[132] The complainant states that capacity utilization rates with respect to production of large line pipe have suffered due to the presence of the allegedly dumped and subsidized goods. The complainant argues that this has led to costly underutilization of installed capacity and an increase in the average cost of producing like goods by the domestic industry. The complainant has provided evidence of this underutilization of capacity in a consolidated production statement.^{Footnote 28}

[133] The complainant’s consolidated production statement demonstrates a decrease in capacity utilization from 2013 to 2015. ^{Footnote 29}

[134] The CBSA notes that the complainant significantly increased its capacity in 2014, and as a result consideration was given to what the utilization ratios would have been in the absence of this increase. The utilization ratios using the original capacity in 2013 yield a similar, albeit less pronounced pattern of declining utilization, which supports the fact that only part of the capacity utilization ratio decreases are attributable to the investment made by Evraz in 2014.^{Footnote 30}

[135] Based on the information provided, the CBSA finds the claim of underutilization of capacity to be reasonable and well supported.

[136] The complainant submits that competition from unfairly priced imports has led to a reduction in employment.^{Footnote 31}

[137] The CBSA recognizes the significance of this injury factor, and finds that this reduction in employment can be reasonably linked to the presence of the allegedly dumped and subsidized goods.

[138] The complainant alleges that the injurious impact of the allegedly dumped and subsidized goods is demonstrated in Evraz’s consolidated financial results. ^{Footnote 32} To support this allegation the complainant has provided consolidated income statements for 2013 through 2015.

[139] The CBSA has reviewed the complainant’s financial statements. Specifically, the product income statement highlights key components of the complainant’s financial results specific to large line pipe sales, and broken down further into domestic and export sales.^{Footnote 33} The CBSA agrees that this income statement demonstrates negative financial performance during the period of 2013 to 2015.

[140] In addition, the complainant made a significant investment in 2014 to improve efficiency and increase the capacity of its large line pipe production at its Regina facility which Evraz hoped would help it compete for new significant pipeline projects on the horizon in Canada. The complainant states that current sales levels are nowhere close to sufficient to sustain the Regina facility’s post-investment production capacity, let alone Evraz’s total Canadian capacity, including Camrose, and that it will not be able to realize a return on this significant investment as a result of the allegedly dumped and subsidized goods.^{Footnote 34}

[141] The CBSA finds that the complainant’s declining financial performance can be linked to lost sales and price suppression resulting from imports of the allegedly dumped and subsidized goods.

[144] The complainant states that the magnitude of alleged dumping and subsidizing of the subject goods demonstrates a real threat to the domestic industry. The complainant argues that the evidence demonstrates that exporters of subject goods are willing to resort to substantial margins of dumping in order to secure sales in the Canadian market^{Footnote 35}

[145] As noted previously, the estimated margin of dumping and the estimated amount of subsidy are not insignificant. The CBSA recognizes that dumping and subsidization could significantly impact the trade of large line pipe.

[146] The complainant alleges that the rapid increase in the volume of allegedly dumped and subsidized subject goods, at prices that undercut domestically produced like goods, pose a threat of further injury to the Canadian industry. This allegation is supported by import statistics provided by the complainant. The complainant submits that without protection, the trend of rapidly increasing imports is expected to continue.^{Footnote 36}

[147] The CBSA’s analysis of import data supports the allegation of an increase in the importation of the alleged dumped and subsidized goods. From 2013 through 2015, the volume of imported goods from China and Japan increased by 213% and 223%, respectively. At the same time, imports from all other countries decreased by 89%. Based on the CBSA’s analysis of import data, the CBSA finds the complainant’s allegation of threat of injury posed by an increase in the rate of subject goods imports to be reasonable and well supported.

[148] Based on industry publications, the complainant estimates the production capacity of Chinese and Japanese line pipe producers to be 9.3 million metric tonnes (MT) and 2.7 million MT respectively.^{Footnote 37} When compared to the annual capacity of the complainant, the result demonstrates that a small portion of production from the named countries could overwhelm the Canadian market. The complaint includes details of the production capacity of individual Chinese and Japanese producers as well as comparisons to Canadian market demand.^{Footnote 38}

[149] As reviewed by the CBSA, the evidence provided in the complaint demonstrates the significant capacity of Chinese and Japanese large line pipe producers in relation to Canadian market demand. It also shows that Canada is increasingly an export market of importance to both China and Japan.^{Footnote 39} The CBSA finds the complainant’s allegation of threat of injury posed by the production capacity of producers of large line pipe in China and Japan to be reasonable and well supported.

[150] The complainant has provided a variety of reports and supporting information to support the allegation of excess and underutilized production capacity for large line pipe in China and Japan.^{Footnote 40}

[151] The combined capacity and output data reveals that China and Japan have significant excess capacity. As highlighted in the complaint, Chinese and Japanese large line pipe producers currently operate at less than 60% capacity and utilization is expected to fall by three percentage points by 2017 to 56%. The excess capacity is at 4.9 million MT – and is forecasted to grow to 5.2 million MT by 2017.^{Footnote 41} Excess capacity for 2015 is many times greater than the entire total apparent market for large line pipe in Canada in 2015.

[152] Based on the CBSA’s analysis of the information provided in the complaint, the CBSA recognizes the significant excess capacity of large line pipe producers in China and Japan and the forecasted expansion of capacity. As such, the CBSA finds the complainant’s allegation of threat of injury posed by the excess capacity of producers of large line pipe to be reasonable and well supported.

[153] The complainant states that Chinese and Japanese large line pipe producers will be encouraged to export their products in the next 18-24 months as domestic demand will remain significantly below production capacity. This allegation is supported by industry publications which forecast market demand.

[154] Further, the complainant states that domestic prices of large line pipe in China are at an all-time low^{Footnote 42}, while the domestic market in Japan is essentially non-existent.^{Footnote 43} Indeed, the complainant submits that Japan has very limited oil resources and relies almost solely on imports to meet consumption needs. Limited domestic oil resources have resulted in making Japan the third largest net oil importer in the world. ^{Footnote 44} Therefore, the complainant submits that there is virtually no domestic market for the large line pipe produced in Japan.

[155] The complainant further alleges that the inability for the domestic market in China to absorb domestic production, combined with low domestic prices, will force producers in China to focus on export markets with higher prices, such as Canada.

[156] Additionally, global demand for large line pipe is expected to remain weak in the next 18 to 24 months. For example, MetalBulletin reports that demand for line pipe with an outside diameter of between 22” and 30” will fall from 4.5 million tonnes in 2015, to 4.4 million tonnes in 2016, and further to 4.3 million tonnes in 2017. ^{Footnote 45} This represents a reduction in demand of 4% between 2015 and 2017. Moreover, the recent collapse in oil prices has created concern among end users of large line pipe who will be forced to delay or cancel projects due to the reduced profitability of their pipeline initiatives. ^{Footnote 46} As such, the reduction in demand could be greater than what MetalBulletin previously forecasted.

[157] In light of this decrease in demand, there is little prospect for other markets to absorb any increase in exports of large line pipe from producers in China and Japan, and Canada remains an attractive market for subject goods.^{Footnote 47} To make matters worse, the domestic industry in Canada is particularly vulnerable to imports of subject goods due to the documented struggles in the oil and gas industry.

[158] The CBSA’s analysis of the information contained in the complaint revealed market conditions which may lead Chinese and Japanese producers to target certain export markets, including Canada. The CBSA finds the complainant’s allegations of the threat of injury posed by market conditions in China and Japan to be reasonable and well supported.

[159] Line pipe, as well as seamless and welded tubular product exports from China and Japan, are subject to trade remedy actions in a number of markets, including the United States and the European Union. The complainant submits that these market restrictions will encourage Chinese and Japanese producers to focus on other export markets, such as Canada.^{Footnote 48}

[160] The complainant submits that the absence of anti-dumping and countervailing duty protection in Canada and the presence of existing and potential export barriers on line pipe and other seamless and welded tubular products create a strong incentive for Chinese and Japanese large line pipe producers to direct exports to Canada and exacerbate the injury already sustained by the domestic industry.^{Footnote 49}

[161] The CBSA acknowledges the presence of trade remedy actions in the United States, the European Union, and other countries, which may impact the exports of large line pipe from China and Japan. Further, the CBSA recognizes that these restrictions may have a significant impact on the Canadian market. The CBSA finds the complainant’s allegations of the threat of injury posed by foreign trade remedy actions to be reasonable and well supported.

[162] The complainant states that the dumping and subsidizing of subject goods has supressed the price of like goods in Canada. Further, the complainant states that the subject goods from China and Japan have undercut the price of like goods and led to lost sales.^{Footnote 50}

[163] The complainant alleges that the trend of aggressive pricing of subject goods from China and Japan will continue, and that the increasing volume of subject goods exported from these countries will have increasingly injurious effects on the Canadian production of like goods.^{Footnote 51}

[164] As discussed in the respective sections, the CBSA finds the complainant’s allegations of price suppression and loss of sales to be well documented, well supported and reasonable. Further, the CBSA finds that the continued presence of these conditions threaten to cause further injury to the domestic industry.