CC 2021 IN: Container chassis
Statement of Reasons—preliminary determinations

Decision

Ottawa, November 5, 2021

Pursuant to subsection 38(1) of the Special Import Measures Act, the Canada Border Services Agency made preliminary determinations on October 21, 2021 respecting the dumping and subsidizing of certain container chassis originating in or exported from China.

Summary of events

[1] On April 20, 2021, the Canada Border Services Agency (CBSA) received a written complaint from Max-Atlas Equipment International Inc. (Max Atlas) (hereinafter, the complainant), alleging that imports of certain container chassis from the People’s Republic of China (China) are being dumped and subsidized. The complainant alleged that the dumping and subsidizing have caused injury and are threatening to cause injury to the Canadian industry producing like goods.

[2] On May 11, 2021, pursuant to paragraph 32(1)(a) of the Special Import Measures Act (SIMA), the CBSA informed the complainant that the complaint was properly documented. The CBSA also notified the Government of China (GOC) that a properly documented complaint had been received. The GOC was provided with the non-confidential version of the subsidy complaint and was invited for consultations prior to the initiation of the subsidy investigation, pursuant to Article 13.1 of the Agreement on Subsidies and Countervailing Measures. A request for consultations was not received by the CBSA.

[3] The complainant provided evidence to support the allegations that container chassis from China have been dumped and subsidized. The evidence also disclosed a reasonable indication that the dumping and subsidizing have caused injury and/or are threatening to cause injury to the Canadian industry producing like goods.

[4] On June 10, 2021, pursuant to subsection 31(1) of SIMA, the CBSA initiated investigations respecting the dumping and subsidizing of container chassis from China.

[5] Upon receiving notice of the initiation of the investigations, the Canadian International Trade Tribunal (CITT) commenced a preliminary injury inquiry, pursuant to subsection 34(2) of SIMA, into whether the evidence discloses a reasonable indication that the dumping and subsidizing of the above-mentioned goods have caused injury or are threatening to cause injury to the Canadian industry producing the like goods.

[6] On August 9, 2021, pursuant to subsection 37.1(1) of SIMA, the CITT made a preliminary determination that there is evidence that discloses a reasonable indication that the dumping and subsidizing of container chassis from China have caused injury to the domestic industry.

[7] On September 1, 2021, in order to help alleviate the pressures brought on by the COVID-19 pandemic to interested parties, the CBSA extended the 90-day period for making the preliminary determinations or terminating all or part of the investigations to 135 days, pursuant to subsection 39(1) of SIMA.

[8] On October 21, 2021, as a result of the CBSA’s preliminary investigations and pursuant to subsection 38(1) of SIMA, the CBSA made preliminary determinations of dumping and subsidizing of container chassis originating in or exported from China.

[9] On the same date, pursuant to subsection 8(1) of SIMA, provisional duty was imposed on imports of dumped and subsidized goods that are of the same description as any goods to which the preliminary determinations apply, and that are released during the period commencing on the day the preliminary determinations were made and ending on the earlier of the day on which the CBSA causes the investigations in respect of any goods to be terminated pursuant to subsection 41(1) of SIMA or the day the CITT makes an order or finding pursuant to subsection 43(1) of SIMA.

Period of investigation

[10] The Dumping Period of Investigation (POI) is May 1, 2020 to April 30, 2021.

[11] The Subsidy POI is January 1, 2020 to April 30, 2021.

Profitability analysis period

[12] The Profitability Analysis Period (PAP) is May 1, 2020 to April 30, 2021.

Interested parties

Product information

Like goods and class of goods

[41] 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 any identical goods, goods the uses and other characteristics of which closely resemble those of the other goods.

[42] In considering the issue of like goods, the CITT typically looks at a number of factors, including the physical characteristics of the goods, their market characteristics and whether the domestic goods fulfill the same customer needs as the subject goods.

[43] With respect to the definition of like goods, the complainant stated that like goods are those goods described in the product definition. That is, domestically produced container chassis, which meet the product definition. Therefore, it does not include domestically produced goods which are specifically excluded from the product definition. The complainant noted CITT decisions in Hot-Rolled Carbon Steel Plate and Seamless Carbon or Alloy Steel Oil and Gas Well Casing, to support this position.^{Footnote 13} The complainant also submits that subject goods and like goods form a single class of goods.

[44] The complainant recognizes that the subject goods are marketed to different industries and applications, including the moving industry, firefighting, construction and utility equipment and the oil and gas industry. The complainant states that such differences in marketing, however, are not illustrative of different classes of goods. The specific models marketed for particular uses are not necessarily the only model which can effectively be used to complete the tasks the customer requires and are interchangeable with other models of chassis. According to the complainant, the fact remains that the function and role of the chassis are identical, namely the hauling of containers and goods.

[45] With respect to physical characteristics, the complainant stated that the subject goods and the like goods are all composed of the same materials, namely primary structures composed of welded steel beams, landing gear assemblies (the legs), running gear assemblies (the wheels) and the lighting and electrical assemblies (brake lights, etc.). The subject goods are substantially similar in appearance, often being effectively longer or shorter versions of each other.^{Footnote 14}

[46] In terms of market characteristics, the complainant stated that the subject goods and like goods are all designed for use in the carriage of containers for road transport. In addition, chassis produced to the same dimensions or specifications are generally interchangeable. All chassis are sold through the same or similar channels of distribution, namely (1) end users (trucking companies, chassis rental companies, etc.) or (2) distributor networks. All chassis covered under the scope of this complaint are manufactured in common facilities, using similar production processes and the same production employees.^{Footnote 15}

[47] After considering questions of use, physical characteristics and all other relevant factors, the CBSA is of the opinion that domestically produced container chassis, that are of the same description as subject goods, are like goods to the subject goods. Further, the CBSA is of the opinion that the subject goods and like goods constitute only one class of goods.

[48] In its preliminary injury inquiry for this investigation, the CITT further reviewed the matter of like goods and classes of goods. On August 24, 2021, the CITT issued its preliminary inquiry Statement of Reasons for this investigation, indicating that it would “[…] conduct its analysis on the basis that domestically produced goods meeting the product definition are like goods to the subject goods, and that there is one class of like goods.”^{Footnote 16}

The Canadian industry

[49] The complaint includes data on domestic production and on domestic sales of container chassis for domestic consumption.^{Footnote 17} The CBSA also contacted all known potential producers of container chassis in Canada to gather further information concerning the domestic production of container chassis for domestic consumption.^{Footnote 18}

[50] The CBSA received letters of support from Di-Mond^{Footnote 19} and Innovative Trailer Design^{Footnote 20}. Raja Trailer expressed a neutral opinion of the complaint.^{Footnote 21} Of the companies contacted by the CBSA, the three identified above were the only confirmed producers of container chassis in Canada.

[51] The complainant and the supporting producers account for the vast majority of the domestic production of like goods.

Imports into Canada

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

[53] The following table presents the CBSA’s analysis of imports of container chassis for purposes of the preliminary determinations:

Representations

[54] The CBSA did not receive any representations from parties to the proceeding during the preliminary phase of the investigations.

Investigation process

[55] Regarding the dumping investigation, information was requested from all known and potential exporters, producers, vendors and importers, concerning shipments of container chassis released into Canada during the POI.

[56] Regarding the section 20 inquiry, information was requested from all known and potential exporters and producers of container chassis in China and from the GOC. The CBSA also sent Surrogate RFIs to all known producers of container chassis in Mexico, Turkey and the US to collect domestic pricing and costing information concerning container chassis to determine normal values under paragraph 20(1)(c) of SIMA. Furthermore, importers were requested to provide information respecting re-sales in Canada of like goods imported from a third country in order to gather information to determine normal values under paragraph 20(1)(d) of SIMA.

[57] Regarding the subsidy investigation, information related to potential actionable subsidies was requested from all known and potential exporters and producers in China. Information was also requested from the GOC concerning financial contributions made to exporters or producers of container chassis released into Canada during the POI. The GOC was also requested to forward the RFIs to all subordinate levels of government that had jurisdiction over the exporters.

[58] The GOC and the exporters/producers were also notified that failure to submit all required information and documentation, including non-confidential versions, failure to comply with all instructions contained in the RFI, failure to permit verification of any information or failure to provide documentation requested during the verification visits or the desk audits may result in the margin of dumping, the amount of subsidy and the assessment of dumping and/or countervailing duties on subject goods being based on facts available to the CBSA. Further, they were notified that a determination on the basis of facts available could be less favorable to them than if complete, verifiable information was made available.

[59] The CBSA received a request for an extension to the deadline for the dumping, subsidy and section 20 RFIs from one exporter/producer located in China. The CBSA reviewed the request and granted the extension as the reasons for making the request constituted unforeseen circumstances or unusual burdens.

[60] Preliminary determinations are based on the information available to the CBSA at the time of the preliminary determinations. During the final phase of the investigations, the CBSA will continue to collect and verify information, the results of which will be incorporated into the CBSA’s final decisions, which must be made by January 19, 2022.

Dumping investigation

Analysis of section 20 conditions

[75] As the GOC did not respond to the section 20 RFI, information with respect to product mix, production volume and market share of semi-trailer manufacturers in the sector is not available at this stage. The CBSA analyzes section 20 factors and conditions in China with a focus on CIMC, whose subsidiary DCVC is the only exporter responding to the section 20 RFI.

Government control analysis

[76] The following is the CBSA’s analysis of the relevant factors that are present in the semi-trailer industry sector in China, which includes container chassis.

• 13th Five-Year National Plan on National Economic and Social Development
• 13th Five-Year Comprehensive Transportation Service Development Plan
• Belt and road initiative and Made-in-China 2025 initiative
• Vehicle Industry Investment Regulations
• GOC’s ownership and control of semi-trailer producers
• GOC’s ownership of suppliers of raw materials and the influence over inputs
• Existence of non-market conditions in sectors of other semi-trailer assemblies
• Subsidization of the semi-trailer and steel industry and
• Preferential tax treatment of semi-trailer purchase

[77] On the level of overall administrative control, the direction of the Chinese economy is governed by a complex system of industrial planning which affects all economic activities within the country. The totality of these plans covers a comprehensive and complex matrix of sectors and crosscutting policies and is present on all levels of government. Two plans and two initiatives discussed below exemplify how individual industrial sectors such as semi-trailer segment and/or its related projects are being singled out as priorities in line with the government priorities and specific development goals are attributed to industrial upgrade and international expansion etc.

13th Five-Year Plan on National Economic and Social Development

[78] Five-Year Plans are an important economic policy tool within the Chinese socialist market economy. Within each plan, the GOC maps out its strategies for economic development, setting growth targets and launching economic reforms with respect to key industries.

[79] The 13th Five-Year Plan on National Economic and Social Development (13th Five-Year Plan), adopted on March 15, 2016 emphasizes the importance of developing the logistics industry in several chapters for the period of 2016-2020, which covers semi-trailer products during the POI.^{Footnote 24} In particular, the 13th Five-Year Plan sets its goal to reduce enterprise logistics costs by improving logistics organization and management^{Footnote 25}, to strengthen the construction of logistics infrastructure^{Footnote 26}, and to increase the overall efficiency of transportation and logistics^{Footnote 27}, which are closely related to the semi-trailer industry.

[80] The 13th Five-Year Plan, which recognizes the staggering impact of over-capacity on the industrial system, calls for reduction in supply in saturated sectors by merging, upgrading, and restructuring underperforming companies; reworking government subsidies that promote unprofitable manufacturing; and, ultimately, bankruptcy and liquidation of unprofitable companies.^{Footnote 28}

[81] Guided in such a direction, CIMC Vehicles has acquired Yangzhou Tonghua Special Vehicle, Jinan Kogel Special Automobile and China's previous largest trailer maker, Huajun Group, which was listed as the 11th largest semi-trailer producer in the world based on the ranking published by Global Trailer in 2015.^{Footnote 29}

[82] On July 4, 2016, the CIMC announced that it has solely taken over the Retlan Manufacturing Limited, the United Kingdom’s leading semi-trailer manufacturer and owners of SDC Trailer and MDF Engineering, at £91.7 million GBP. The mega-merger was the biggest in the global semi-trailer industry in the last ten years, which allowed CIMC to expand its business into Europe, and retain its position as a semi-trailer world leader.^{Footnote 30}

[83] The 13th Five-Year Plan calls for greater involvement of state-owned enterprises (SOEs) in the development of the Chinese economy. Specifically, chapter 11 of the plan states:

“We will remain firmly committed to ensuring that SOEs grow stronger, better, and bigger and work to see that a number of such enterprises develop their capacity for innovation and become internationally competitive, thereby injecting greater life into the state-owned sector, helping it exercise a greater level of influence and control over the economy, increasing its resilience against risk, and enabling it to contribute more effectively to accomplishing national strategic objectives.”^{Footnote 31}

[84] The plan expressly reiterated the GOC’s intention to use SOE to proactively interfere with market dynamics and exercise control over its economy and CIMC is found to be an SOE as discussed in the section of “GOC’s Ownership and Control of Semi-trailer Producers”.

13th Five-Year Comprehensive Transportation Service Development Plan

[85] To further specify the policies to achieve the 13th Five-Year Plan goals, the Chinese Ministry of Transport published the 13th Five-Year’ Comprehensive Transportation Service Development Plan in July 2016. One of the 11 main goals of this development plan is to build an intensive and efficient freight logistics system.^{Footnote 32} This is to be achieved by promoting the comprehensive development of drop-and-pull transport. The development plan further elaborates:

Encourage the development of standard van semi-trailers, and promote the improvement of relevant laws, policies and technical standards. Improve the facilities of standardized drop-and-pull transport stations and support the construction of large-scale public zero-load drop-and-pull dedicated stations. Encourage the innovation of "trailer pool" and other emerging logistics services, support the development of long-distance feeder drop-and-pull transportation, encourage the development of trailer leasing, trailer, trailer interchange and other businesses, and improve the related systems and regulations of trailer management.

[86] Drop-and-pull transport, also known as drop-and-hook or drop-and-pick, is a system of freight transport whereby a truck driver drops off a container (“drop”) and picks up another container (“pick” or “hook” or “pull”).

[87] The promotion of drop-and-pull transport also serves as a means to further other policy objectives, such as improvement in energy efficiency. In 2017, the State Council issued State Council on further promoting lower-cost higher-efficiency logistics, which once again puts emphasis on the promotion of multimodal transportation and drop-and-pull transportation related to the semi-trailer industry.^{Footnote 33}

[88] The wide adoption of semi-trailer/container chassis is crucial for the promotion of drop-and-pull transport. In this regard, it is evident that the Chinese government has implemented a number of specific policies to promote the development and use of semi-trailers/container chassis.

Belt and Road Initiative and Made-in-China 2025 Initiative

[89] China’s Belt and Road Initiative (BRI), sometimes referred to as the New Silk Road, is one of the most ambitious global infrastructure and logistics development plan made up of a “belt” of overland corridors and a maritime “road” of shipping lanes. Launched in 2013, the vast collection of global trade network of overland routes, rail and ocean transportation, energy pipelines, and streamlined border crossings stretches from East Asia to Europe and Africa, including 71 countries that account for half the world’s population and a quarter of global GDP.

[90] As a manufacturer of containers, semi-trailer and other transportation products that are essential to China’s global trade network, CIMC plays a pivotal role in this policy agenda of the GOC. Reported by Supply and Demand Chain Executive on August 17, 2015, CIMC claimed:^{Footnote 34}

The goal is to have all CIMC divisions supplying the container shipping, trucking, railway and logistics industries with global tracking, monitoring and remote asset management services and equipment. Our immediate target is China’s One Belt One Road initiative.

[91] On May 14, 2017 in the BRI Forum for International Cooperation, Mai Boliang, the CEO and president of CIMC, stated that CIMC is actively involved in the Belt and Road construction and strives to deliver premium and reliable equipment, services and solutions to the countries along the Belt and Road.^{Footnote 35}

[92] On August 27, 2018, the State-owned Assets Supervision and Administration Commission of the State Council (SASACSC) had a news release about how CIMC (as a SOE in the BRI projects) backs logistics service for Belt and Road Initiative.^{Footnote 36}

[93] CIMC has directly benefited from the demand for containers and semi-trailers created by Chinese-led logistics networks BRI. This increase in demand is not limited to only containers, it would also directly benefit CIMC’s sales of ancillary products such as subject container chassis and other semi-trailers as overland trade by road transport brings significant new demand for those products.

[94] Overlapping with the BRI is the Made-in-China Initiative 2025 (“MCI 2025”)^{Footnote 37}, which was released by the State Council in 2015 and targets ten priority industries for promotion and development, among which are Ocean engineering equipment and high-tech shipping and modern rail transport equipment.

[95] As the MCI 2025 supports logistics and transportation companies in China to compete with global players, certain semi-trailers including chassis could benefit from MCI 2025 policies both directly and indirectly. For example, CIMC has benefited from MCI 2025 policies for developing robotics and machine tools with its automated lighthouse plants, which comprehensively realize smart manufacturing with digital modeling and automated production.^{Footnote 38}

[96] The CEO of CIMC Vehicles stated outright in an interview^{Footnote 39} that

with the general trend towards ‘Made in China 2025, the 25 subsidiaries of CIMC Vehicles will transform into lighthouse plants within the next three to five years based on the schedule.

[97] Although global economic activities were severely affected by the global outbreak and spread of COVID-19 in 2020, the total revenue of CIMC Vehicles increased 13% compared to 2019 and hit a record high^{Footnote 40} under the circumstance of all these polices and initiative to encourage transportation producers to remain globally competitive by satisfying domestic demands and serving developed markets.

Vehicle Industry Investment Regulations

[98] The Vehicle Industry Investment Regulations^{Footnote 41}, implemented on January 10, 2019 aim to promote high-quality development of the automotive industry by improving accessibility standards and strengthening regulation for relevant investment projects. Article 28 of the regulations lists requirements for investment projects for trailers, which include various semi-trailers.

[99] These requirements, which impose technical barriers and limit certain new market entrants demonstrate the GOC’s intention to promote and direct investment in certain trailer and semi-trailer products and this may have the effect of distorting market prices in the semi-trailer industry.

[100] With regard to the automotive industry, the Policy on Development of Automotive Industry^{Footnote 42} provided for a foreign shareholding restriction in auto manufacturing joint ventures, which was still in force in the investigation period. Therefore, semi-trailer producers are subject to measures discriminating in favour of domestic producers.

[101] The CBSA reviewed DCVC’s response to the section 20 RFI with respect to the GOC’s economic development plans, policies and initiatives discussed above, but takes the position that even indirect influence and the cumulative impact of the GOC’s macro economic measures could have resulted in an environment where semi-trailer enterprises adhere to the government’s objectives and guidelines. Therefore, domestic prices in the semi-trailer industry in China could be affected as supply and demand are not free from intervention by a government or other authority.

GOC’s Ownership and Control of Semi-trailer Producers

[102] The core principle of Chinese economy is the socialist public ownership of the means of production. The State-owned economy is the leading force of the national economy and the State has the mandate to ensure its consolidation and growth.^{Footnote 43}

[103] The GOC maintains structures and ensures their continued influence over enterprises, and in particular State-owned enterprises (SOEs). The GOC not only actively formulates and oversees the implementation of general economic policies by individual SOEs, but it also claims its rights to participate in operational decision-making in SOEs. In exchange, SOEs enjoy a particular status within the Chinese economy, which entails a number of economic benefits, in particular shielding from competition and preferential access to relevant resources, including financing.^{Footnote 44}

[104] The shareholding structure between CIMC and its substantial shareholders, as presented below, was illustrated in CIMC’s 2020 annual report.^{Footnote 45} The chart directly indicates that the SASACSC, as the largest shareholder, owns 54.2% shares through various intermediate subsidiaries.

[105] In its Public Body Analysis, the United States Department of Commerce (US DoC) explained that the GOC uses “control pyramids” to diversify SOE ownership and to profit from public listings of SOEs without relinquishing meaningful control over SOE decision-making.^{Footnote 46} The government maintains a controlling stake in listed firms, while minority shareholders provide financial liquidity but only achieve limited influence.^{Footnote 47}

[106] Also as mentioned in the previous section, in a news release on August 27, 2018, the SASACSC publicly indicated that CIMC is an SOE.^{Footnote 48}

[107] It is CBSA’s opinion that where a government entity holds a majority equity ownership, either directly or indirectly, this interest in and of itself means that the government exercises or has the potential to exercise control over the company’s operations generally. This may include control over, for example, the selection of board members and management, and the profit distribution. Information on the record reasonably supports the argument that CIMC is an SOE controlled by the GOC through multiple intermediates and ultimately by SASACSC.

GOC’s Ownership of Suppliers of Steel Materials and the Influence over Inputs

[108] The complainant states that steel products account for approximately 75% of the material inputs for container chassis.^{Footnote 49} Direct steel inputs in the production of subject container chassis consist of steel plate, hollow structural steel, bars and beams. Indirect steel inputs also account for a significant portion of material costs in the production of major components for semi-trailers such as wheels, suspension and axles, the prices of which are also affected by distorted steel prices in China’s domestic market.^{Footnote 50}

[109] In the steel sector, a substantial degree of ownership by the GOC persists. The Iron and Steel Industry Adjustment and Upgrade Plan (2016-2020)^{Footnote 51} indicates that the 10 largest Chinese steel companies are to have 60% of China’s crude steel output by 2025, which will likely require further state supervised acquisitions and mergers.

[110] The CBSA conducted its own research on steel production as reported by the World Steel Association. Based on the data, the top ten steel producers by volume accounted for 39% of all steel production in China in 2020.^{Footnote 52} Of these big ten producers, seven are state-owned, and the combined production of steel by these seven SOEs in China represents 74.4% of top 10 steel production in China in 2020. As such, the GOC has already surpassed the objectives set out in the Iron and Steel Industry Adjustment and Upgrade Plan (2016-2020) discussed above.

[111] As a result of GOC steel policies aimed at supply side structural reform, on September 22, 2016, Baosteel Group and Wuhan Steel Group consolidated by merging into BaoWu Steel Group, the largest crude steel producer in the world. The result of the merger has led to a much stronger influential state-owned entity and greater concentration in the steel industry.

[112] The GOC’s extensive ownership and control of the majority of large Chinese steel producers means that these companies likely produce and market steel according to GOC objectives and policies instead of market conditions. These large SOE steelmakers in China all are able to produce the types of steel inputs used for semi-trailer production.^{Footnote 53} Consequently, they can sell various steel products such as steel plate, beams and bars, directly used by semi-trailer producers, at non-market prices.

[113] Given that the state-owned steel groups also produce steel materials for wheel, axle and suspension, all of which are important assemblies to various semi-trailers including container chassis, there is a possibility that prices of semi-trailers including chassis are further affected due to the low priced steel inputs provided by large SOEs to produce various semi-trailer assemblies.

[114] The complainant presents price comparisons showing that the Chinese domestic prices for steel plate and beams, two major material inputs for container chassis, were below other benchmark markets in 2019 and 2020.^{Footnote 54}

[115] The CBSA is able to obtain information from SteelBenchmarker which collects and analyzes ex-mills prices of plate and hot-rolled band (HRB) in China, the US and other regions, during the review period.^{Footnote 55} Steel plate and HRB are two main direct steel inputs in the production of container chassis. The CBSA can reasonably conclude that FOB mill prices of plate and HRB in China in the past were consistently lower than those in the USA or world average prices.

[116] Given that steel plate and HRB are commodity products freely traded on the world market, these disparities further support the allegation in the complaint that domestic prices of steel inputs in China are not the same as they would be in a competitive market.

[117] The GOC’s control and influence over steel production and pricing result in artificially low prices for steel, which likely influence prices of down stream products such as semi-trailer assemblies and semi-trailer itself including container chassis, which would benefit from the low input cost advantage.

Existence of Non-market Conditions in Sectors of other Semi-trailer Assemblies

[118] The price distortions in China of semi-trailer assemblies were recognized by the US and EU trade remedy authorities in the dumping determinations of the existence of non-market economy in Chinese wheels and tires sector.

[119] With respect to the wheels sector in China, the US DoC stated in its Less-Than-Fair-Value investigation of certain steel wheels from China in 2018:^{Footnote 56}

Commerce considers China to be an NME (Non-Market Economy) country. In accordance with section 71(18)(C)(i) of the Act, any determination that a foreign country is an NME country shall remain in effect until revoked by Commerce.

[120] The European Union (EU) made a determination regarding exporters in China involved in certain aluminium road wheels dumping investigation:^{Footnote 57}

The finding that all companies that had requested MET (Market Economy Treatment) should be denied MET, as established in recital (53) of the provisional Regulation is hereby confirmed.^{Footnote 58}

[121] On March 4, 2020, the EU also concluded in its final determination in respect of steel road wheels from China^{Footnote 59} that the steel road wheels market in China was served to a significant extent by enterprises subject to the ownership, control or policy supervision or guidance by the GOC.^{Footnote 60}

[122] The US DoC and EU also confirmed the existence of non market conditions in the truck tire segment in China.

[123] On January 19, 2017, the US DoC continued to treat China as a non-market economy country in the final determination of dumping investigation of truck and bus tires from China.^{Footnote 61} In the final determination of pneumatic tyres used for buses or lorries on October 18, 2018, the EU ruled that the Chinese exporters didn’t meet the criteria for market economy treatment.^{Footnote 62}

[124] The Catalogue of Priority Industries for Foreign Investment in Central and Western China^{Footnote 63} is an example of the GOC’s comprehensive catalogues designed to steer foreign investment flows towards auto parts sector including driving axle and lighting systems, also components for semi-trailer production.

Manufacturing of auto parts and components: automatic transmission with six or more gears, high-power and density driving axles for commercial vehicles, adaptive front-lighting systems, LED front-lighting, application of lightweight materials (high-strength steel, aluminium-magnesium alloy, composite plastics, powder metallurgy, high-strength composite fibers, etc.), clutches, hydraulic shock absorbers, central control panel assembly and seats.

[125] The GOC guides the development of various sectors in accordance with a broad range of policy tools and directives related to market composition and restructuring, raw materials, investment, capacity elimination, product range, relocation and upgrading, etc. Through these and other means, the GOC directs and controls virtually every aspect in the development and functioning of sectors including steel wheels, road tires, axles and lighting systems.

Subsidization of the Semi-trailers, Steel Materials and Other Inputs

[126] The complainant made allegations that the GOC has subsidized chassis production, as well as relevant input materials, most notably steel inputs.

[127] Based on publically available financial statements of CIMC group, CIMC has reported having received large amounts of subsidies. In addition to over 712 million CNY of government grants recognized in profit in 2020^{Footnote 64}, subsidies received by CIMC but to be recognized in future periods amounted to 1,176 million CYN as of December 31, 2020.^{Footnote 65} This represents 15.8% of CIMC’s operation profit 7,439 million CNY in 2020.^{Footnote 66}

[128] Similarly, CIMC Vehicles reported income from government grants of over 242 million CNY in 2020^{Footnote 67} and accumulated over 105 million CNY^{Footnote 68} deferred income to be recognized in future periods as of December 31, 2020.

[129] The subsidization of container chassis production by the GOC is also evidenced by the recent findings made by the US DoC in the chassis subsidy investigation. On April 8, 2021, the US DoC issued its final determination with an increased subsidy amount from the preliminary determination to 44.32% ad valorem, applicable to CIMC and all other chassis producers in China.^{Footnote 69}

[130] In response to the subsidy allegation by the complaint, the CBSA initiated the subsidy investigation of container chassis and made its preliminary determination on October 21, 2021, with an estimated amount of subsidy at 1.7% of export price for DCVC and 20.2% for all other Chinese exporters.

[131] Given that CIMC has been receiving large amounts of subsidies from the GOC through multiple programs, it is reasonable to conclude that similar subsidy programs could be easily available to other container chassis exporters and producers.

[132] As steel is a significant input in the production of container chassis and their steel assemblies, extensive subsidization in various steel sectors causes distorted prices of steel materials and chassis assemblies and the benefits would be both directly and indirectly passed through to container chassis producers in China. The previous positive findings of subsidized steel products in China by the CBSA including steel pipes^{Footnote 70}, coil sheets^{Footnote 71}, steel bars^{Footnote 72} and rods^{Footnote 73} are evidence of the GOC’s influence in the steel industry.

[133] Besides steel inputs, semi-trailer assemblies such as wheels and tires are found by the US DoC and EU to have been heavily subsidized by the GOC.

[134] On January 23, 2017, the US DoC announced its affirmative final determinations in countervailing duty investigation of truck and bus tires from China with a countervailing rate ranging from 38.6% to 68.5%.^{Footnote 74} On March 22, 2019, the US DoC made its final determinations in the countervailing duty investigations of steel wheels from China with a countervailing rate of 457.1% to mandatory respondents and all other Chinese steel wheel exporters.^{Footnote 75}

[135] Similarly on November 13, 2018, the European Commission imposed a definitive countervailing duty on imports of new and retreaded tyres for buses or lorries from China. The rate of duty is between EUR 3.75 and 57.28 per item depending on the exporter.^{Footnote 76}

[136] In conclusion, these direct and indirect subsidies allow Chinese container chassis producers to receive direct financial supports from the GOC and likely benefit from subsidized assemblies, which in turn would allow the chassis producers to sell their products at prices determined by factors other than the market conditions, resulting in prices possibly lower than they would be without government subsidization.

Preferential Tax Treatment

[137] The GOC provides preferential tax treatment to the purchase of container chassis in China. The Ministry of Finance issued a directive on May 25, 2018, which cut the 10% sales tax applicable to purchases of vehicles including semi-trailers by half to 5% for the period of July 1, 2018 up to June 30, 2021. The Ministry recently extended the tax break until December 31, 2023.^{Footnote 77}

[138] The Ministry implemented this preferential tax policy measure with a stated purpose to promote the development of drop-and-pull transport, improve logistics efficiency and reduce logistics costs, guided by the GOC’s various directives and initiatives as discussed previously.

[139] In its response to the section 20 RFI, DCVC provides information about the existence and purpose of the tax reduction policy.

[140] This preferential policy of reducing the sales tax from 10% down to 5% is further evidence that the GOC can regulate the level of profits that semi-trailer companies can earn which will have an impact on domestic prices of various semi-trailers including container chassis.

Analysis of Domestic Price in China

[141] The complainant provided sample offers and prices of container chassis in the Chinese domestic market, retrieved from online marketplaces Alibaba and Diyiqi, to compare prices of similar models that closely resemble each other, sold by the complainant in Canada or sold online in some European countries.

[142] As the legal and regulatory standards for container chassis differ significantly from one jurisdiction to the other, it is difficult to select and compare identical models across the North American, Chinese and European markets. In selecting comparable models that closely resemble each other, the complainant used key characteristics: chassis length, number of axles, tare weight and gross vehicle weight rating to assess likeness of various chassis.

[143] The comparison demonstrates that container chassis prices in China are significantly lower than in Canada and European markets, suggesting the GOC’s involvement in the chassis sector is affecting its domestic prices.

[144] Price information contained in the domestic sales database of DCVC’s submission was also analyzed to assess whether the domestic price of container chassis sold by DCVC is distorted compared to other competitive markets. The result reveals that during the POI, the average price and price range of container chassis sold by DCVC were significant lower than those in the European market.

[145] Information on the record supports the allegation that the domestic prices of container chassis in China are not substantially the same as they would be if they were determined in a competitive market.

Preliminary results of the dumping investigation

Subsidy investigation

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

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

1. practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities
2. amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not collected
3. the government provides goods or services, other than general governmental infrastructure, or purchases goods or
4. the government permits or directs a non-governmental body to do anything referred to in any of paragraphs (a) to (c) where the right or obligation to do the thing is normally vested in the government and the manner in which the non-governmental body does the thing does not differ in a meaningful way from the manner in which the government would do it

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

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

[191] Notwithstanding that a subsidy is not specific in law, under subsection 2(7.3) of SIMA a subsidy may also be considered specific having regard as to whether:

1. there is exclusive use of the subsidy by a limited number of enterprises
2. there is predominant use of the subsidy by a particular enterprise
3. disproportionately large amounts of the subsidy are granted to a limited number of enterprises and
4. the manner in which discretion is exercised by the granting authority indicates that the subsidy is not generally available

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

[193] Financial contributions provided by state-owned enterprises (SOEs) may also be considered to be provided by the government for purposes of this investigation. A SOE may be considered to constitute “government” for the purposes of subsection 2(1.6) of SIMA if it possesses, exercises, or is vested with governmental authority. Without limiting the generality of the foregoing, the CBSA may consider the following factors as indicative of whether the SOE meets this standard: 1) the SOE is granted or vested with authority by statute; 2) the SOE is performing a government function; 3) the SOE is meaningfully controlled by the government; or some combination thereof.

Preliminary results of the subsidy investigation

[194] At the initiation of the investigation, the CBSA sent Subsidy RFIs to the GOC, as well as to all known exporters/producers of container chassis in China.

[195] The GOC was also requested to forward the Subsidy RFI to all subordinate levels of government that had jurisdiction over the exporters. The exporters/producers were requested to forward a portion of the Subsidy RFI to their input suppliers, who were asked to respond to questions pertaining to their legal characterization as SOEs.

[196] The governments and the exporters/producers were also notified that failure to submit all required information and documentation, including non-confidential versions, failure to comply with all instructions contained in the Subsidy RFI, failure to permit verification of any information or failure to provide documentation requested during the verification visits or desk audits may result in the amount of subsidy and the assessment of countervailing duties on subject goods being based on facts available to the CBSA. Further, they were notified that a determination on the basis of facts available could be less favourable than if complete, verifiable information was made available.

[197] For the purposes of the preliminary determination, the CBSA has received sufficient information from a single exporter to estimate amounts of subsidy. The GOC did not respond to the CBSA’s Government Subsidy RFI.

[198] In conducting its investigation, the CBSA requested information respecting various programs, as listed in Appendix 2. During the preliminary phase of the investigation, the CBSA identified additional potential programs.

[199] The CBSA will continue to analyze the submitted information during the final phase of the investigation. The CBSA may also consider any other potential subsidy programs that have not yet been identified.

[200] An account of the subsidies received by the exporter that provided a response to the Subsidy RFI is provided below. The estimated amount of subsidy for the exporter is also presented in a summary table in Appendix 1.

Dongguan CIMC Vehicle Co., Ltd.

[201] DCVC is a producer and exporter of subject goods, located in Dongguan City, China.

[202] DCVC provided a response to the Subsidy RFI.^{Footnote 80} For purposes of the preliminary determination, DCVC was found to have received countervailable benefits from 43 subsidy programs.^{Footnote 81}

[203] Multiple programs were found to have conferred benefits to the exporter by being passed-through from its following related suppliers during the purchase of raw materials:

• Zhumadian CIMC Wanjia Axle Vehicle Co., Ltd.^{Footnote 82}
• CIMC Vehicles (Group) Co., Ltd.^{Footnote 83}
• Shenzhen CIMC Vehicle Co., Ltd.^{Footnote 84}

[204] The CBSA attributed the subsidies received by the suppliers to the goods exported to Canada because of the relationship between the parties. The CBSA has concluded that a subsidy pass-through test is not required given the relation between the exporter and the related suppliers. Consequently, any actionable subsidies received by the related suppliers which are attributable to the goods under investigation and exported to Canada, were aggregated with those directly received by the exporter.

[205] Further to its analysis of the information on the administrative record, the CBSA considers that the subsidy programs constitute a financial contribution that confers a benefit to the exporter. The CBSA also considers these programs to be specific and therefore actionable.

[206] Due to the fact that DCVC is the only participating exporter in this investigation, and the fact that the exporter requested that all information pertaining to the subsidy programs identified in their RFI response be considered confidential, the CBSA is not able to disclose further details regarding the specific programs reported by the exporter at this time. The CBSA will endeavour to collect additional information on the programs during the final phase of the investigation, including more non-confidential details, in order to be able to share more information regarding the individual programs in the event of a final determination of subsidizing.

[207] For purposes of the preliminary determination, the estimated amount of subsidy for DCVC is 1.7%, expressed as a percentage of the export price.

All other exporters—China

[208] Although no evidence was found regarding other exporters who exported subject goods to Canada during the POI, provisional duties are applicable should that change during the final phase of the investigations, or should new exporters begin selling subject goods to Canada.

[209] For all other potential exporters of subject goods from China, the CBSA estimated an amount of subsidy on the basis of the following methodology:

1. the amount of subsidy for each of the 43 programs, as found at the preliminary determination, for the producer/exporter located in China for whom the CBSA has sufficient information to estimate an amount of subsidy, plus
2. the highest amount of subsidy for the 43 programs listed in (1), applied to each of the remaining 24 potentially actionable subsidy programs for which sufficient information is not available or has not been provided at the preliminary determination

[210] In establishing the methodology for estimating the amount of subsidy for all other potential exporters from China, the CBSA considered all of the information on the administrative record, including the complaint filed by the domestic industry, the CBSA’s estimates at the initiation of the investigation, and information submitted by the exporter, as well as their related affiliates in China who responded to the Subsidy RFI.

[211] This methodology relies on information related to potentially actionable subsidies in China, it recognizes that the GOC did not provide a response to the subsidy RFI (thereby impeding the CBSA’s ability to make a fully informed decision), and in general, provides an incentive for exporters to participate by limiting 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.

[212] Using the above methodology, for the preliminary determination, the estimated amount of subsidy for all other exporters in China is 20.2%, expressed as a percentage of the export price.

Decisions

[220] On October 21, 2021, pursuant to subsection 38(1) of SIMA, the CBSA made preliminary determinations of dumping and subsidizing respecting container chassis originating in or exported from China.

Provisional duty

[221] Pursuant to subsection 8(1) of SIMA, provisional duty payable by the importer in Canada will be applied to dumped and subsidized imports of container chassis that are released from the CBSA during the period commencing on the day the preliminary determinations are made and ending on the earlier of the day on which the CBSA causes the investigations in respect of any goods to be terminated, in accordance with subsection 41(1), or the day on which the CITT makes an order or finding. The CBSA considers that the imposition of provisional duty is needed to prevent injury. As noted in the CITT’s preliminary determination, there is evidence that discloses a reasonable indication that the dumping and subsidizing of container chassis have caused injury to the domestic industry.

[222] Imports of container chassis originating in or exported from China, and released by the CBSA on or after October 21, 2021, will be subject to provisional duties equal to the estimated margin of dumping and estimated amount of subsidy, expressed as a percentage of the export price of the goods per exporter. Appendix 1 contains the estimated margins of dumping, estimated amounts of subsidy and the rates of provisional duty.

[223] Importers are required to pay provisional duty in cash or by certified cheque. Alternatively, they may post security equal to the amount payable. Importers should contact their CBSA regional office if they require further information on the payment of provisional duty or the posting of security. If the importers of such goods do not indicate the required SIMA code or do not correctly describe the goods in the import documents, an administrative monetary penalty could be imposed. The imported goods are also subject to the Customs Act. As a result, failure to pay duties within the specified time will result in the application of the provisions of the Customs Act regarding interest.

Future action

Retroactive duty on massive importations

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

[233] In respect of importations of subsidized goods that have caused injury, this provision is only applicable where the CBSA has determined that the whole or any part of the subsidy on the goods is a prohibited subsidy. In such a case, the amount of countervailing duty applied on a retroactive basis will equal the amount of subsidy on the goods that is a prohibited subsidy. An export subsidy is a prohibited subsidy according to subsection 2(1) of SIMA.

Undertakings

[234] After a preliminary determination of dumping by the CBSA, other than a preliminary determination in which a determination was made that the margin of dumping of the goods is insignificant, an exporter may submit a written undertaking to revise selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated. An acceptable undertaking must account for all or substantially all of the exports to Canada of the dumped goods.

[235] Similarly, after a preliminary determination of subsidizing by the CBSA, other than a preliminary determination in which a determination was made that the amount of subsidy on the goods is insignificant, a foreign government may submit a written undertaking to eliminate the subsidy on the goods exported or to eliminate the injurious effect of the subsidy, by limiting the amount of the subsidy or the quantity of goods exported to Canada. Alternatively, exporters with the written consent of their government may undertake to revise their selling prices so that the amount of the subsidy or the injurious effect of the subsidy is eliminated.

[236] In view of the time needed for consideration of undertakings, written undertaking proposals should be made as early as possible, and no later than 60 days after the preliminary determinations of dumping and subsidizing. Further details regarding undertakings can be found in the CBSA’s Memorandum D14-1-9.

[237] Interested parties may provide comments regarding the acceptability of undertakings within nine days of the receipt of an undertaking by the CBSA. The CBSA will maintain a list of parties who wish to be notified should an undertaking proposal be received. Those who are interested in being notified should provide their name, telephone and fax numbers, mailing address and e-mail address to one of the officers identified in the information section of this document.

[238] If undertakings were to be accepted, the investigations and the collection of provisional duties would be suspended. Notwithstanding the acceptance of an undertaking, an exporter may request that the CBSA’s investigations be completed and that the CITT complete its injury inquiry.

Publication

[239] A notice of these preliminary determinations of dumping and subsidizing will be published in the Canada Gazette pursuant to paragraph 38(3)(a) of SIMA.

Information

[240] This Statement of Reasons is posted on the CBSA’s website at the address below. For further information, please contact the officers identified as follows:

SIMA Registry and Disclosure Unit
Trade and Anti-dumping Programs Directorate
Canada Border Services Agency
11-100 Metcalfe St
Ottawa ON  K1A 0L8

• Telephone:
• Jacob Saulnier: 343-553-1412
• Sean Robertson: 343-553-1584

Email: simaregistry-depotlmsi@cbsa-asfc.gc.ca

Doug Band
Director General
Trade and Anti-dumping Programs Directorate

Appendix 1—summary of estimated margin of dumping, estimated amount of subsidy and provisional duty payable

The following table lists the estimated margin of dumping, the estimated amount of subsidy, and the provisional duty by exporter as a result of the decisions mentioned above. Imports of subject goods released from the Canada Border Services Agency on or after October 21, 2021, will be subject to provisional duty at the rate specified below.

Appendix 2—summary of preliminary findings for subsidy programs

As noted in the body of this document, the GOC did not provide a response to the subsidy RFI, which significantly impeded the CBSA’s ability to conduct a proper analysis of the potential subsidy programs for the preliminary determination. However, in recognition of the cooperation and the volume of information provided by the responding exporter and its related affiliates, the CBSA has estimated the amount of subsidy based on the information provided in the responses to the subsidy RFI.

The CBSA included a list of 27 potential subsidy programs at the initiation of the investigation.

For purposes of a preliminary determination, the responding exporter, DCVC, was found to have been receiving benefits from a total of 43 programs. Of these programs, three were considered to be from the initial list of 27, while the remaining 40 were considered as programs not previously identified.

Due to the fact that DCVC is the only participating exporter in this investigation, and the fact that the exporter requested that all information pertaining to the subsidy programs identified in their RFI response be considered confidential, the CBSA is not able to disclose further details regarding the specific programs reported by the exporter at this time. The CBSA will endeavour to collect additional information on the programs during the final phase of the investigation, including more non-confidential details, in order to be able to share more information regarding the individual programs in the event of a final determination of subsidy.

As a result, this appendix is limited to the descriptions of the 27 potentially actionable subsidy programs the CBSA listed at the initiation of the investigation, and is based on the best information available to describe the programs. This includes any applicable non-confidential information provided by the responding exporter and its related suppliers during the preliminary phase of this subsidy investigation, information included in the complaint, as well as information obtained from the CBSA’s research on potentially relevant subsidy programs in China.

Potentially actionable subsidy programs

Category 1: Preferential Loans and Loan Guarantees

Program 1: Loans from State-Owned Banks at Preferential Rates

This program relates to government loans at a preferential rate of interest. The benefit provided in this case is a lower rate of interest than would otherwise be available if the enterprises had to obtain a non-guaranteed commercial loan (i.e. the benchmark non-guaranteed commercial loan). Financial institutions may be considered to constitute “government” if they possess, exercise or are vested with government authority, which may be indicated by the following factors:

• Where a statue or other legal instrument expressly vests government authority in the entity concerned
• Evidence that an entity is, in fact, exercising governmental functions and
• Evidence that a government exercises meaningful control over an entity

The 2019 annual report for Chinese chassis producer CIMC, explicitly states that “for the policy-based preferential interest rate loans received by the Group, the entry value of the borrowings shall be the borrowing amount actually received, and the relevant borrowing costs shall be calculated based on the principal of the borrowings and the policy preferential interest rate. The financial interest subsidy directly received by the Group reduces the relevant borrowing costs.”

The CBSA has previously countervailed this program in Fabricated Industrial Steel Components (FISC), Carbon and Alloy Steel Line Pipe (Line Pipe), Pup Joints, Oil Country Tubular Goods (OCTG), Seamless Casing and Upholstered Domestic Seating (UDS).

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 2: Loan Guarantee through the Government of China/SOE Banks/Public Bodies

Assurance provided by the GOC, a SOE bank or public body (the guarantor) to assume the debt obligation of a borrower if that borrower defaults. A guarantee can be limited or unlimited, making the guarantor liable for only a portion or all of the debt.

The CBSA has previously countervailed this program in Large Diameter Carbon and Alloy Steel Line Pipe (Large Diameter Line Pipe), FISC, Line Pipe and UDS.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 3: Debt and Interest Forgiveness on Loans from State-Owned Banks

To stimulate the economy and support the development of key industries, the state-owned banks write off bad debts or interest owed by SOEs.

The CBSA has previously countervailed this program in Seamless Casing. In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as “Interest Payment Subsidies”.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 4: Preferential Export Financing and Export Credit Guarantee/Insurance

The China Export & Credit Insurance Corporation (Sinosure) is a state-funded policy-oriented insurance company that was established to promote China’s foreign trade and economic cooperation. The China Exim Bank and Sinosure each provide export credit guarantees which, according to information from the Bank, have “played a key role in supporting Chinese companies to go global” and promoted “the export of new and high-tech products”.

The CBSA has previously countervailed this program in UDS.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Category 2: Grants and Grant Equivalents

Program 5: Insurance Grants

Local and Provincial Government Reimbursement Grants on Credit Insurance Fees.

The CBSA has previously countervailed this program in Galvanized Steel Wire, Certain Seamless Casing, OCTG, Pup Joints, Stainless Steel Sinks, Line Pipe, Large Diameter Line Pipe and UDS.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 6: Design, Research and Development Grants

A grant that provides financial aid for enterprises determined to have undertaken expenses in design or research and development.

The CBSA has previously countervailed this program in Sucker Rods, Copper Tube, Photovoltaic Modules and Laminates, OCTG, Unitized Wall Modules, Seamless Casing, Pup Joints, Decorative and Other Non-Structural Plywood (Plywood) and UDS.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 7: Export Development Performance Grants

Companies in China receive such grants provided by the GOC to assist in the development of export markets or to recognize export performance.

The CBSA has previously countervailed this program in Sucker Rods, OCTG, Unitized Wall Modules, Galvanized Steel Wire, Aluminum Extrusions, Carbon Steel Welded Pipe, Steel Grating, Plywood and UDS.

As per the SOR issued at the OCTG final determination, the program was established in the Circular of the Trial Measures of the Administration of International Market Development Funds for Small and Medium-Sized Enterprises Cai Qi No. 467, 2000, which came into force on October 24, 2000. The program was established to support the development of small and medium-sized enterprises, to encourage SMEs to join in the competition of international markets, to reduce the business risks of the enterprises, and to promote the development of the national economy. The granting authority is the Foreign Trade and Economic Department and the program is administered at the local levels.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they may have countervailed this program as “Export Seller’s Credit” and “Export Buyer’s Credit”.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 8: Performance Award Grants

A grant that provides financial aid for enterprises with excellent performance.

The CBSA has previously countervailed this program in Seamless Casing, Aluminum Extrusions, OCTG, Pup Joints, Copper Tube, Line Pipe and UDS.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 9: Reductions in Land Use and/or Rental Fees

This program provides for the reduction in land use fees and rental rates for a certain number of years. Examples of this program in action include: a document titled '[2003] No. 8 Preferential Supply of Land', in order to offset costs for industrial companies in the Ninghai Economic Development Zone; or similar initiatives in the Tianjin Binhai New Area and the Tianjin Economic and Technological Development Area.

The CBSA has previously countervailed this program in Stainless Steel Sinks, Unitized Wall Modules, Photovoltaic Modules and Laminates, Seamless Casing, OCTG, Pup Joints, Line Pipe, Plywood and UDS.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as “Provision of Land Use Rights to SOEs for LTAR”.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 10: Grants for the Retirement of Capacity

The GOC’s 12th Five-Year Plan for Energy Conservation and Emission Reduction calls for accelerating and eliminating “backward production capacity” in certain industrial sectors, including the elimination of 48 million metric tonnes of steel production. In 2013, the State Council issued the “Guiding Opinion on Resolving the Problem of Severe Excess Capacity,” which called for establishing special funds to accelerate the elimination of backwards capacity and to also support industries with excess production capacity.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 11: Grants for Relocating Production Facilities

As part of the GOC’s 12th Five-Year Steel Development Plan, the GOC has been locating urban based steel producers to locations outside of their current city. The GOC’s 12th Five-Year Plan for Energy Conservation and Emission Reduction calls for the relocation for “heavy polluting enterprises” and for measures to optimize the “regional spatial layout” of “key industries,” including the steel industry.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they may have countervailed this program as “Other Payments from the State Capital Operating Budget”.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 12: Grant - Patent Assistance/Award

Based on the information available to the CBSA, this program was provided in several provinces, such as Guangdong, Shanghai and Jiangsu.

For example, the GOC document associated with this program for Guangdong province may include: “Administrative Measures of Patent Award of Guangdong Province”. In Guangdong province, this program was administered by the Intellectual Property Office of Guangdong, the Bureau of Personnel of Guangdong Province and municipal level authorities. The program was established to support improvement in technology innovation and to promote intellectual property.

In addition, the GOC document associated with this program for Shanghai may include: “The administrative measures regarding the financial support/subsidy for Patents by Shanghai”. In Jiangsu province, this program was administrated by Jiangsu Intellectual Property Office.

The CBSA has previously countervailed this program in Plywood and UDS.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 13. Environment Protection Grant

These are grants provided by the GOC for the purposes of improving environmental performance, for example, monitoring and cleaning pollutants, improving energy efficiency, upgrading facilities to be more environmentally efficient, and waste water treatment.

The CBSA has previously countervailed this program in Copper Tube and UDS.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 14. Subsidies Related to Employment, Training and Recruitment

Available information indicates that the GOC has introduced several grants and incentives designed to support job stabilization by assisting companies with unemployment insurance payments as well as supporting the recruitment, training and subsequent job security of their staff.

The CBSA has previously countervailed this program in Plywood and UDS.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 15: Subsidies Related to Pandemic Support

Available information indicates that the GOC has introduced several grants and incentives designed to support job stabilization and weather economic hardships experienced by exporters during the COVID-19 pandemic.

The CBSA has previously countervailed this program in UDS.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Category 3: Preferential Tax Programs

Program 16. Corporate Income Tax Exemption and/or Reduction in Special Economic Zones (SEZs) and Other Designated Areas

This program was established under the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, which came into effect on July 1, 1991. The program was allegedly established to absorb investment in special economic zones (SEZs) and designated areas to take the lead in their economic development. The granting authority responsible for this program is allegedly the State Administration of Taxation and the program is administered by local tax authorities.

Under this program, it is alleged that eligible enterprises may receive a reduced corporate income tax rate of 15%.

Under Article 57 of the Enterprise Income Tax Law in China and the “notification of the State Council on Providing Transitional Preferential Tax Treatments to High-Tech Enterprises Newly Set Up in Special Economic Zones and in the Pudong New District of Shanghai,” the GOC exempts HNTEs from income taxes for the first two years after earning a profit from production, and pay only half of the standard tax rate for the next three years if located in a special economic zone (i.e., the Hainan, Shantou, Shenzhen, Xiamen, Zhuhai) or the Pudong New District of Shanghai. Certain container chassis producers are located in some of these special economic zones and, thus, are eligible for this subsidy.

The CBSA has previously countervailed this program in Aluminum Extrusions, Carbon Steel Welded Pipe, OCTG, Seamless Casing, Line Pipe and UDS.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 17. Corporate Income Tax Reduction for New High Tech Enterprises

Under Article 28.2 of the Enterprise Income Tax Law in China, companies designated as high- or new-technology enterprises are entitled to a reduced income tax rate of 10 percent instead of the normal national corporate tax rate of 25 percent. The granting authority responsible for this program is alleged to be the State Administration of Taxation and the program is administered by local tax authorities. In its notification of subsidy programs to the WTO, the GOC listed this program.

Available financial information for Chinese chassis producers shows that they have benefitted from this tax program. Specifically, CIMC Vehicles 2019 Annual Report reveals that it has received a “reduced preferential corporate income tax rate of 15%” for certain subsidiaries in China that are approved as “high and new technology enterprises”.

The CBSA has previously countervailed this program in FISC, Line Pipe, Seamless Casing, OCTG, Pup Joints, Plywood and UDS.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as “Income Tax Deduction for High-and New-Technology Enterprises”.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 18. Municipal/Local Income or Property Tax Reductions

The CBSA has previously countervailed this program in Stainless Steel Sinks, Unitized Wall Modules, Photovoltaic Modules and Laminates, Line Pipe under the title “Reduction, Exemption or Refund of Land Use Fees, Land Rental Rates, and Land Purchase/Transfer Prices.”

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 19. Preferential Tax Policies for Foreign-Invested Enterprises (FIEs)

Despite the implementation of the new Enterprise Income Tax Law (EITL) in 2008, which officially superseded the old FIE Tax Law, FIEs have likely continued to benefit from various incentives that were provided under the older Foreign-Invested Enterprise Tax Law (FIE Tax Law). Specifically, Article 9 of the FIE Tax Law delegates to China’s provincial and local governments the authority to provide exemptions and reductions of local income taxes for “productive” FIEs. Eligibility criteria vary by province and the relevant governmental authorities administer the application process.

The CBSA has previously countervailed this program in Pup Joints and Seamless Casing. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 20. Preferential Tax Policies Related to Research and Investment

Under this program based on the 2008 corporate tax law, high- or new-technology enterprises may deduct 50 percent of their total R&D expenses from their taxable income. Eligible expenses include design costs, expenses for materials and fuel consumed through R&D activities, wages, salaries, and benefits for personnel engaged in R&D activities, depreciation expenses on instruments and equipment, and many other expenses.

The CBSA has previously countervailed this program in Photovoltaic Modules and Laminates, Seamless Casing, OCTG, Pup Joints, Plywood and UDS. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as “Tax Offsets for Research and Development under the Enterprise Income Tax Law of the People’s Republic of China (EIT)”.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 21. Tax Incentives to Develop the Qianhai Cooperation Zone

It is alleged that Chinese chassis producers have benefitted extensively from this tax program. In 2012, Shenzhen launched a plan to create “one of the world’s largest logistics centres” and aimed to lure companies with “tax incentives, bank loans and other preferential policies.” Shenzhen has tax incentives in place to develop the Qianhai Cooperation Zone to include a “modern logistics” zone as it considers the logistics industry to be a pillar industry.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they may have countervailed this program as “Other Payments from the State Capital Operating Budget”.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Category 4: Relief from Duties and Taxes

Program 22. Offsets to Taxable Income Related to Purchases of Domestic Machinery

Under this program, a tax credit up to 40% of the purchase price of domestic equipment may apply to the incremental increase in tax liability from the previous year. The legal bases of this program are the provisional measures on enterprise income tax credit for investment in domestically produced equipment for technology renovation projects of July 1, 1999 and the Notice of the State Administration of Taxation on Stopping the Implementation of the Enterprise Income Tax Deduction and Exemption Policy of the Investments of an Enterprise in Purchasing Home-made Equipment, No. 52 [2008] of the State Administration of Taxation, effective January 1, 2008.

The CBSA has previously countervailed this program in Aluminum Extrusions, Photovoltaic Modules and Laminates, Seamless Casing, OCTG, and Pup Joints.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

The non-confidential version of DCVC’s Subsidy RFI response indicates that the Chinese regulation mentioned in this question was abolished by the Ministry of Finance of the GOC in 2011. 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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 23. Exemption or Refund of Tariff and Import Value-Added Tax (VAT) for Imported Technologies and Equipment

The program was established to absorb investment in SEZs and encourage districts to take the lead in development. The granting authority responsible for this program is the General Administration of Customs and this program is administered by local customs authorities. Under this program, machinery and equipment, spare parts, raw and semi-processed materials, means of transportation and other capital goods necessary for production that are imported by enterprises in SEZs shall be exempted from import duties.

The CBSA has previously countervailed this program in Photovoltaic Modules and Laminates, Unitized Wall Modules, Seamless Casing, Pup Joints, and Line Pipe.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 24. Relief from Duties and Taxes on Imported Material and Other Manufacturing Inputs

Under a duty drawback program, a subsidy may exist where the amount of duties and taxes relieved or refunded on inputs incorporated into exported goods is found to be in excess of the actual liability that existed on those imports.

The CBSA has previously countervailed this program in Photovoltaic Modules and Laminates, Seamless Casing, OCTG and Pup Joints.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 25. Deed Tax Exemption for SOEs Undergoing Mergers or Restructuring

The GOC imposes a deed tax on transfers of land and real estate. In the context of an ownership transfer by means of an asset sale, as opposed to a stock sale, a deed tax of three to five percent is levied on the amount of the purchase price, and the purchaser is responsible for paying the tax. The GOC’s “Notice of the Ministry of Finance and the State Administration of Taxation on Several Deed Tax Policies Concerning Enterprise Reorganization and Restructuring,” exempts this deed tax where the transfer of ownership occurs as part of the restructuring or merger of an SOE.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as “Government-Directed Debt Restructuring”.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Category 5: Good / Services Provided by the Government at Less Than Fair Market Value

Program 26. Acquisition of Government Inputs/Utilities for Less than Adequate Remuneration

The complainant alleges that exporters purchase input materials or utilities from SOEs at prices which are below fair market value. They have identified the following inputs as just some that are provided to chassis manufacturers at less than fair market value:

• Steel plate
• Steel sheet
• Steel bars
• H-Beams
• Electricity

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as follows:

• Provision of Hot‐Rolled Steel Sheet and Plate for LTAR
• Provision of Galvanized Steel for LTAR
• Provision of Steel Bar for LTAR
• Provision of Steel Beams for LTAR
• Provision of Steel Channels for LTAR
• Provision of Steel Angles for LTAR
• Provision of Hollow Structural Shapes for LTAR
• Provision of Electricity for LTAR

The CBSA has previously countervailed this program in Seamless Casing, OCTG, Stainless Steel Sinks, Steel Piling Pipe, Large Diameter Line Pipe, Pup Joints and UDS.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA. That is, the government provides goods or services, other than general infrastructure, or purchases goods.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 27. Provision of Land for Less than Adequate Remuneration by Government

All land in China belongs to the government (i.e., either national or local governments, or through a “collective” at the township or village level), and government land agencies across China control the allocation of land through the granting of land-use rights.

The CBSA has previously countervailed this program in Line Pipe and Large Diameter Line Pipe.

For the purposes of the preliminary determination, this program constitutes a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

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 the subsidy 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 and thus appears to be specific. This will be further analyzed in the final phase of the investigation.