COR2 2019 IN
Certain Corrosion-Resistant Steel Sheet
Statement of Reasons

[7] AMD was founded as the Dominion Steel Casting Company in 1912 in Hamilton, Ontario. In 2006 Dofasco was acquired by Arcelor S.A. Later that year, Arcelor S.A. merged with Mittal Steel.^{Footnote 1}

[8] AMD is a manufacturer of COR which it produces at its facility in Hamilton, Ontario. The company is the largest of the three known producers of COR in Canada and accounts for a major proportion of the total domestic production of like goods.

[9] The name and address of the complainant is as follows:

ArcelorMittal Dofasco G.P.
1330 Burlington St E,
Hamilton, Ontario L8N 3J5

[10] The other two known manufacturers of like goods in Canada are:

Stelco Inc. (Stelco)
386 Wilcox Street
Hamilton, Ontario L8L 8K5

Continuous Colour Coated Limited (CCCL)^{Footnote 2}
1430 Martin Grove Road
Rexdale, Ontario M9W 4Y1

[11] The complaint identified the following trade union as representing persons employed in the production of COR in Canada^{Footnote 3}:

United Steel Workers
234 Eglinton Avenue East, 8^th floor
Toronto, Ontario M4P 1K7

[12] The complainant provided a list of suppliers that produce the subject goods in the named countries or exported the subject goods to Canada during the period reviewed (July 1, 2018 to June 30, 2019).^{Footnote 4} The CBSA has identified 55 exporters of the subject goods from CBSA import documentation and from information submitted in the complaint. All of the potential exporters were asked to respond to the CBSA’s Dumping and Subsidy Request for Information (RFI).

[13] With respect to Vietnam, the complainant alleged that the conditions of section 20 of SIMA exist and that the CBSA should conduct a section 20 inquiry. Based on its own analysis, the CBSA included in its investigation, a section 20 inquiry in order to determine whether the conditions set forth in paragraph 20(1)(a) of SIMA prevail in the flat-rolled steel sector, which includes COR, in Vietnam. Potential exporters located in Vietnam were therefore also asked to respond to the CBSA’s Section 20 RFI.

[14] The CBSA has identified 64 importers of the subject goods from CBSA import documentation and from information submitted in the complaint. All of the potential importers were asked to respond to the CBSA’s Importer RFI.

[15] Upon initiation of the investigations, the Governments of Turkey, the UAE and Vietnam were sent the CBSA’s Government Subsidy RFI requesting information concerning subsidy programs available in each respective country. In addition, the Government of Vietnam was sent the CBSA’s Government Section 20 RFI. The CBSA also requested information from the GOT with respect to the possibility of a particular market situation.

[16] For the purposes of these investigations, “Government of Turkey (GOT)”, “Government of United Arab Emirates (GOU)”, and “Government of Vietnam (GOV)” refer to all levels of government, i.e., federal, central, provincial/state, regional, municipal, city, township, village, local, legislative, administrative or judicial, singular, collective, elected or appointed. It also includes any person, agency, enterprise, or institution acting for, on behalf of, or under the authority of, or under the authority of any law passed by, the government of that country or that provincial, state or municipal or other local or regional government.

[17] For the purpose of this investigation, subject goods are defined as:^{Footnote 5}

[18] The product definition includes corrosion-resistant steel sheet where the substrate is coated with a corrosion-resistant material such as zinc, aluminum, and other alloys. The coating may be applied by a variety of processes including hot-dip galvanizing or electro-galvanizing.

[19] The product definition includes galvannealed steel. Galvannealed steel is produced by passing the steel through an annealing furnace after it completes the hot-dip galvanizing process and while the zinc is still liquid. This causes the iron and zinc layers to diffuse into each other, creating a zinc-alloy layer at the surface.

[20] Passivation refers to a material becoming “passive”, that is, less affected or corroded by the environment of future use. Passivation involves creation of an outer layer of shield material that is applied as a micro-coating, created by chemical reaction with the base material, or allowed to build from spontaneous oxidation in the air. As a technique, passivation is the use of a light coat of a protective material, to create a shell against corrosion.

[21] Corrosion-resistant steel with anti-fingerprint coatings (whether as part of a passivation treatment or separate) are also included within the product definition.

[22] Corrosion-resistant steel sheet is usually produced from cold-rolled carbon steel sheet (CRS) and sometimes from hot-rolled carbon steel sheet (HRS). However, additions of certain elements, such as titanium, vanadium, niobium or boron, during the steel-making process enable the steel to be classified as alloy steel. Therefore, corrosion-resistant steel produced from either carbon steel or alloy steel is included in the definition of the subject goods.

[23] The subject goods (and like goods produced by the domestic industry) are manufactured to meet certain American Society for Testing and Materials (ASTM), Society of Automotive Engineering (SAE) or equivalent specifications, including, but not limited to:

• ASTM A653/653M
• ASTM A792/A792M
• SAE J403
• SAE J1392
• SAE J2329
• SAE J1562

[24] The product definition includes “seconds”. Seconds are goods that do not meet some aspect of the original specification. This could include dimensions, grade, or coating. It could also include a coil that has been damaged. Seconds are sold at a discount. Seconds may meet ASTM, SAE or other specifications or may be re-certified to meet a standard. For example, a coil that is damaged along the edge may be a “second”. However, if the damaged edge is slit and the damage is removed the coil could be classified as a primary coil produced to the new width. Seconds are graded and sold on a scale of five.^{Footnote 7}

For greater clarity, the product definition does not cover^{Footnote 8}:

• Corrosion-resistant steel for use in automobiles and automobile parts, hereafter referred to as “Automotive”. Automotive end users include Original Equipment Manufacturers (“OEMs”) and auto part producers. Such excluded goods may fall under Customs Tariff item 9959.00.00.
• Pre-painted steel and steel permanently coated in plastic. Pre-painted steel is steel on which paint has been applied by coil coating at the manufacturing facility. The paint may be applied to one or both sides. The paint may be applied as a liquid, paste, powder, varnish or lacquer. Paints may include, but are not limited to, primers, finishing coats, polyesters polymers, plastisol paints, polyurethanes, polyvinylidene fluorides, and epoxy. Steel permanently coated in plastic is steel to which plastics, including films or laminates, are permanently attached.

[25] The subject goods are usually produced from CRS and sometimes from HRS sheet. The steel sheet to be coated is commonly referred to as steel substrate. Hot-dip galvanizing and electro-galvanizing are the two processes that can be used to coat the substrate steel sheet with zinc, aluminum, or other alloys. AMD uses hot-dip galvanizing.

[26] In the hot-dip galvanizing process, the first step is to clean the surfaces to improve the adhesion of the coating. After cleaning, the substrate enters a continuous annealing furnace. The furnace heats the substrate to the temperature necessary to develop the desired metallurgical properties of the final product. The substrate is then placed in a molten coating bath and, as it emerges from the bath, an air, nitrogen or steam wipe is used to control the thickness of the coating. The galvanized steel sheet is then cooled in a cooling tower.

[27] In the electro-galvanizing process charged steel passes through a plating bath and opposite electrical charges cause the zinc solution to coat the steel. Cold-rolled steel coils are batch annealed in multi-stack furnaces or in off-line continuous annealing process, often skin passing on a temper mill, before being electro-galvanized with a thin coating of zinc on a continuous processing line.

[28] Common applications for COR falling within the product definition include, but are not limited to, production of farm buildings, grain bins, culverts, garden sheds, roofing material, siding, floor decks, roof decks, wall studs, drywall corner beads, doors, door frames, ducting (and other heating and cooling applications), flashing, hardware products and appliance components.

[29] The allegedly dumped and subsidized goods are normally classified under the following tariff classification numbers^{Footnote 12}:

• 7210.30.00.00
• 7210.49.00.10
• 7210.49.00.20
• 7210.49.00.30
• 7210.61.00.00
• 7210.69.00.10
• 7210.69.00.20
• 7212.20.00.00
• 7212.30.00.00
• 7212.50.00.00
• 7225.91.00.00
• 7225.92.00.00
• 7226.99.00.10

[30] The listing of tariff classification numbers is for convenience of reference only. The tariff numbers include non-subject goods. Also, subject goods may fall under tariff numbers that are not listed. Refer to the product definition for authoritative details regarding the subject goods.

Complainant’s Estimates

[52] The complainant submitted that they are unable to estimate the normal values on the basis of domestic prices, using the methodology of section 15 of SIMA because the domestic prices available are published third party pricing. The complainant contends that this would not be appropriate for estimating section 15 normal values because these prices are average COR prices that are inclusive of steel for automotive applications and tool steel which are excluded from the definition of subject goods. As such, the complainant did not provide estimated normal values using the methodology of section 15.^{Footnote 19}

[53] Accordingly, the complainant estimated the normal values for the named countries on the basis of the constructed cost methodology of paragraph 19(b) of SIMA. For each quarter of the POI, July 1, 2018 to June 30, 2019, based on information from the preceding quarter, the complainant estimated one weighted average normal value for each named country, by estimating the aggregate costs of production of the goods, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits. The complainant’s methodology was based on its estimates of the following:

1. Cost of production:
   1. Substrate: Cold-rolled steel (CRS) prices in the named country were based on third-party publications;
   2. Other materials: the complainant used their own “other material costs” for the conversion of CRS into COR consisting particularly of coating, and also additional inputs such as fuel, utilities, consumables, auxiliaries, etc. AMD’s assumption is that the requirement for other materials is consistent across all production of COR;
   3. Labour: the complainant used their own labour cost to convert CRS to COR which they adjusted to better reflect labour cost in the named country based on third-party data; and
   4. Overhead: the complainant used their own overhead to reflect costs of converting CRS to COR.
2. Administrative, selling and all other costs: the complainant used annual reports available from a producer operating in each of the named countries (or a proxy country if no information from a producer in a named country was available) in order to determine a ratio of these expenses relative to the cost of production in each country. The ratio was applied to the estimated cost of production for the country.
3. Profit: the complainant used annual reports available from a producer operating in each of the named countries (or a proxy country if no information from a producer in a named country is available) in order to determine a ratio for the profit to the cost of production in each country. The ratio was applied to the estimated cost of production for the country.

Turkey:

[54] For Turkey^{Footnote 20}, the complainant maintains that a PMS may exist because the price of the input (i.e. CRS as the substrate) does not reflect the actual cost of the input. Accordingly, the complainant provided both the Turkish and the Southern European prices of CRS, as published by Metal Bulletin. The complainant maintained that the Southern European prices of CRS are reflective of normal market forces and that the difference between the two sets of prices is reflective of the differences caused by the PMS. The complainant suggested that the CBSA may adjust the Turkish substrate price in accordance with paragraph 11.2(2)(e) of the Special Import Measures Regulations (SIMR). The complainant stated that it was unable to locate information on Turkey’s productivity adjusted manufacturing wage; as such, it used the productivity adjusted manufacturing wage of Poland as a proxy, which was based on a Wall Street Journal article.^{Footnote 21} This resulted in a 42% downward adjustment to the labour cost. The amount for selling, general and administrative expense (SG&A), financial expenses and profit was estimated on the basis of confidential financial information from ArcelorMittal Belgium (a sister company of the Complainant) for corrosion-resistant steel sheets.

UAE:

[55] For the UAE^{Footnote 22}, the complainant used Metal Bulletin’s reported, “UAE import cold-rolled coil cfr Jebal Ali”, to estimate the substrate cost in absence of availability of domestic pricing for CRS. The complainant stated that it was unable to locate information on the UAE’s productivity adjusted manufacturing wage; as such, it used the productivity adjusted manufacturing wage of Poland as a proxy, which was based on a Wall Street Journal article. This resulted in a 42% downward adjustment to the complainant’s labour cost. Further, the complainant alleges that subject goods from the UAE consist of thinner, light gauge steel sheet, which is more expensive to produce and to coat. For this reason, the complainant added an extra cost based on half of the extra costs they report in their price list for light gauge coil. As the complainant was unable to find publically available financial information for a flat-rolled steel producer in the UAE or a neighbouring country, the amount for SG&A, financial expenses and profit was estimated on the basis of confidential financial information from ArcelorMittal Belgium for corrosion-resistant steel sheets.

Vietnam:

[56] For Vietnam, the complainant used the reported CRU “Asia” price for CRS, as an estimate of the Vietnamese substrate cost.^{Footnote 23} The complainant stated that it was unable to locate information on Vietnam’s productivity adjusted manufacturing wage; as such, it used the productivity adjusted manufacturing wage of Thailand as a proxy, which was based on a Wall Street Journal article. This resulted in an 80% downward adjustment to the labour cost. The amount for SG&A, financial expenses and profit was estimated on the basis of financial information from Vietnamese producer Hoa Sen Group. The resulting ratios for SG&A and financial expenses were 2% and 3% of cost of goods manufactured, respectively, and the ratio for the amount for profit was 8%.

[57] As mentioned, the complainant argued that the CBSA should apply the provisions of section 20 of SIMA to the determination of normal values for Vietnam. The complainant submits that South Korea (Korea) would be an appropriate surrogate country. To support this assertion, the complainant noted that producers in Korea export substantial volumes of COR and that just like Vietnam, Korean producers pay wages that are substantially lower than Canada, although the cost of steel material used by COR producers in Korea is based on international market-based prices.

[58] Accordingly, the complainant provided estimated quarterly normal values using a constructed cost approach to reflect the methodology defined under subparagraph 20(1)(c)(ii) of SIMA, on the basis of the aggregate of a) the cost of production of the goods, b) a reasonable amount for administrative, selling and all other costs, and c) a reasonable amount for profits, as estimated for Korea. The complainant used the same methodology as described above for estimating normal values under paragraph 19(b) of SIMA.^{Footnote 24} For estimating the substrate cost, the complainant used MEP’s average reported price for Korean CRS. The complainant adjusted labour cost downward by about 40% to reflect lower wage cost in Korea, based on information from a Wall Street Journal article. The amount for SG&A, financial expenses and profit was estimated on the basis of financial information from Korean producer POSCO. The resulting ratios for SG&A and financial expenses were 4% and 0% of cost of goods manufactured, respectively, and the ratio for the amount for profit was 15%.

CBSA’s Estimate:

[59] Based on the information available, the CBSA finds the complainant’s proposed constructed cost methodology and constructed surrogate methodology to be reasonable, although the CBSA has made some modifications to the complainant’s normal value estimates.

Turkey:

[60] While there is sufficient evidence that a PMS may exist in Turkey to warrant further investigation, for the purpose of initiation, the CBSA has not formed an opinion that a PMS exists in Turkey. Accordingly, normal values for Turkey were estimated for the purposes of initiation based on the constructed cost methodology of paragraph 19(b) of SIMA, using estimated costs in Turkey.

[61] As such, the CBSA modified the complainant’s methodology by using the Turkish domestic price of CRS as published by Metal Bulletin, as an estimate of the substrate cost, and used the publically available 2018 Annual Report of Turkish steel producer Erdemir to estimate a reasonable amount for administrative, selling and all other costs, including net financial expenses (estimated at 5.1%), and a reasonable amount for profits (estimated at 9.4%). The other estimated cost components were consistent with the complainant’s methodology. Using the complainant’s methodology, the CBSA estimated a normal value for each quarter of the POI based on costs in the preceding quarter^{Footnote 25}.

UAE:

[62] Evidence available to the CBSA supported the complainant’s allegations that subject goods from the UAE consist of light gauge COR (i.e. less than 0.02 in. inch thickness, and generally between .009 and 0.012 inch in thickness, which is at the costlier end of the spectrum according to the complainant). On the basis of the sample reviewed, the CBSA accepted the complainant’s proposed methodology with respect to adding an amount to account for the additional costs incurred to produce lighter gauge COR. The amount was based on half of the extra costs reported by the complainant in their price list for light gauge coil. Rather than using ArcelorMittal Belgium’s financial data, however, the CBSA used the publically available 2018 Annual Report of Turkish steel producer Erdemir to estimate a reasonable amount for administrative, selling and all other costs (estimated at 5.1%), and a reasonable amount for profits (estimated at 9.4%).^{Footnote 26} The other estimated cost components were the consistent with the complainant’s methodology. Using the complainant’s methodology, the CBSA estimated costs for each quarter of the POI (based on the preceding quarter).

Vietnam:

[63] For the purposes of initiation, the CBSA estimated the normal values for Vietnam under the methodology of subparagraph 20(1)(c)(ii) of SIMA, on the basis of the aggregate of a) the cost of production of the goods, b) a reasonable amount for administrative, selling and all other costs, and c) a reasonable amount for profits, as estimated for a surrogate country. The CBSA accepted the complainant’s methodology of using Korea as the surrogate, considering that Korea is a major producer and exporter of COR located in Asia, is believed to be operating under normal market conditions and also in light of Korean cost information that was readily available. The CBSA estimated the normal value based on Korean data using the same methodology and sources as used by the complainant in its estimate, as described above. However, using the same 2018 financial statements from a Korean producer, POSCO, the CBSA estimated a different amount for administrative, selling and all other costs (estimated by the CBSA at 11.2%), and a different amount for profits (estimated by the CBSA at 8.7%).

[64] The complainant estimated export prices based on customs data available from Statistics Canada for the period of July 1, 2018 to June 30, 2019, under the tariff classification numbers listed above. This data was adjusted to exclude automotive end-uses.

[65] The complainant calculated quarterly weighted average prices on the basis of the total declared value for duty during a quarter and the total declared quantity during the same quarter, to determine weighted average export prices for each named country during each quarter of the POI.^{Footnote 27}

[66] In estimating the export prices, the CBSA relied on the CBSA’s Facility for Information Retrieval Management (FIRM). Some data was adjusted by the CBSA after reviewing the import entry documentation to account for non-subject goods and to correct any inaccurate quantities and value for duty as necessary. The CBSA estimated quarterly export prices on the basis of the total declared value for duty during a quarter and the total declared quantity during the same quarter, to determine weighted average export prices for each named country during each quarter of the POI.

[67] The CBSA estimated the margin of dumping for the named countries by comparing the total estimated normal values with the total weighted average estimated export prices. Based on this analysis, it is estimated that the subject goods imported into Canada from each of the named countries were dumped. The estimated margin of dumping for each country is listed in the table below.

[99] The complaint provided evidence on 35 different programs which may have conferred benefits to the producers/exporters of subject goods in Turkey, and in turn resulted in the actionable subsidizing of exports of subject goods to Canada.

[100] In alleging that actionable subsidies were applicable to the subject goods imported from Turkey, the complainant relied extensively on the following sources: a research report on the Turkish flat steel industry and government subsidies, Turkey’s most recent notification of active subsidy programs to the WTO, other publicly available information related to government subsidies and previous CBSA and United States Department of Commerce (US DOC) subsidy investigations.

[101] The complainant’s allegations largely relied on a research report on the Turkish flat steel industry and government subsidies^{Footnote 34}. In addition to providing an overview of the Turkish economy and an analysis of the Turkish flat steel industry, the report provides an extensive description of most of the subsidy programs listed in Appendix 1 for Turkey, including the legal basis for the alleged programs, and is specifically focused on programs available to flat-rolled steel producers. The report also includes extensive supporting documentations, including copies of laws and decrees to support the allegations. As mentioned in the report, “These support mechanisms take the form of preferential tax policies, tariff exemptions, export financing via preferential loans, and direct funds. The programs covered have two main characteristics: they are either exclusively for exporting activities or are region/location/company specific, giving these subsidies eligibility to be assessed under a CVD investigation.”^{Footnote 35}

[102] The CBSA reviewed the extensive information provided by the complainant with respect to Turkish subsidy programs and compiled a list of 35 programs to be investigated as shown in Appendix 1.^{Footnote 36} The subsidy programs were grouped into the following seven categories:

1. Export financing / preferential loans (Eximbank Programs)
2. Regional based; Organized Industrial Zone (OIZ) and Free Zone Programs
3. Preferential Tax Policies / Tariffs and VAT exemptions
4. Export-oriented Direct Funds
5. Goods provided by the Government of Turkey at Less than Adequate Remuneration
6. R&D Programs
7. Others

[103] The CBSA’s analysis revealed that the 35 alleged subsidy programs constitute potential financial contributions by the GOT that may have conferred benefits to producers/exporters of COR. In addition, the programs were further examined and were considered to be potentially specific either in law or in fact within the meaning of subsections 2(7.2) and 2(7.3) of SIMA. Please refer to Appendix 1 for more information.

[104] The CBSA concluded that sufficient evidence is available to support the allegations that COR originating in or exported from Turkey has been subsidized. In investigating the 35 programs, the CBSA has requested information from the GOT, exporters and producers to determine whether exporters/producers of subject goods received benefits under these programs and whether these programs, or any other programs, are actionable subsidies and, therefore, countervailable under SIMA.

[105] The complainant identified one subsidy program for the UAE. The complainant alleged that COR producers located in free-trade zones in the UAE are exempt from paying a 5% import duty and 5% VAT on the importation of machinery, equipment and other capital used in their production of COR. The allegation is based on online publications by the UAE government and by a consulting firm. The complainant also alleged that at least two of the four known COR producers in the UAE are located in a Free-Trade Zone.^{Footnote 37}

[106] The complainant maintains that this relief provides a beneficial financial contribution in the form of revenue foregone by government and that the benefit is specific because it is only available to enterprises located in such free-trade zones.^{Footnote 38}

[107] Based on additional research, the CBSA has determined that exporters of COR may have also benefited from preferential export financing or export credit insurance from the GOU, in particular from the Etihad Credit Insurance (ECI). The ECI is a Public Joint Stock Company owned by the United Arab Emirates Federal Government and the Government of the Emirate of Abu Dhabi, the Government of the Emirate of Dubai, the Government of the Emirate of Ajman, the Government of the Emirate of Ras Al Khaimah and the Government of the Emirate of Fujairah.^{Footnote 39} Its website says it is a “specialized state institution to support the export and re-export of United Arab Emirates goods, works, services, and the foreign investments of United Arab Emirates companies, through the provision of a range of export credit, financing and investment insurance products.” Services offered also include “Post-shipment financing of exports through bills discounting with the commercial banks at concessional interest rates [emphasis added]; and Pre-shipment financing facilities for exporters through commercial banks against guarantees issued by ECI for working capital requirements, so as to meet and enhance the opportunity for their export sales”.

[108] The CBSA has also identified an “Export Assistance Program” offered by the Dubai Export Development Corporation (Dubai Exports), believed to be the export promotion agency of the government of Dubai.^{Footnote 40} Under the program, according to the agency’s website, “companies can apply for reimbursement on the eligible export promotion activities such as market visits and participation in exhibitions.” Its website also refers to the program as “…an invaluable means to access funding for their export operations.”

[109] The CBSA’s analysis revealed that the three alleged subsidy programs constitute potential financial contributions by the GOU that may have conferred benefits to producers/exporters of COR. In addition, the programs were further examined and were considered to be potentially specific either in law or in fact within the meaning of subsections 2(7.2) and 2(7.3) of SIMA. Please refer to Appendix 1 for more information.

[110] The CBSA concluded that sufficient evidence is available to support the allegations that COR originating in or exported from the UAE has been subsidized. In investigating the three programs, the CBSA has requested information from the GOU, exporters and producers to determine whether exporters/producers of subject goods received benefits under these programs and whether these programs, or any other programs, are actionable subsidies and, therefore, countervailable under SIMA.

[111] The complainant alleged that subject goods originating in or exported from Vietnam have been subsidized and that exporters of subject goods from Vietnam have benefitted from actionable subsidies provided by the GOV.

[112] The complainant identified 34 subsidy programs which may have conferred benefits to the producers/exporters of subject goods in Vietnam, and in turn resulted in the actionable subsidizing of exports of subject goods to Canada.^{Footnote 41}

[113] In alleging that actionable subsidies were applicable to the subject goods imported from Vietnam, the complainant relied extensively on Vietnam’s most recent notification of active subsidy programs to the WTO pursuant to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing Measures for the years of 2013 and 2014^{Footnote 42}, on two CBSA subsidy investigations with respect to Vietnamese steel products (Oil Country Tubular Goods II, and Cold-Rolled Steel), a US DOC subsidy investigation regarding Certain Steel Nails from Vietnam^{Footnote 43}, as well as on other publically available information on GOV subsidies.

[114] The CBSA reviewed the public reports for the relevant investigations referred to by the complainant and other documentation submitted in the complaint including the latest subsidy notification to the WTO.

[115] Generally speaking, the reference material examined by the CBSA provided support for the complainant’s allegation that the subject goods from Vietnam have been subsidized. However, on the basis of its analysis, the CBSA determined that in respect of certain programs identified by the complainant there was not sufficient evidence regarding the applicability of the subsidy programs to producers of COR, as the programs appeared to be generally available.

[116] Further, the CBSA found that a number of programs appeared to be either duplicates or they were very similar. Finally, some of the program names identified by the complainant were modified by the CBSA for consolidation purposes.

[117] As a result, the CBSA reorganized the 34 subsidy programs listed by the complainant into 10 potentially actionable subsidy programs. These programs have been investigated and found to be actionable in the CBSA’s or the USDOC’s previous subsidy investigations involving goods from Vietnam and can be grouped into the following four categories:

1. Relief from Duties and Taxes;
2. Preferential Loans and Loan Guarantees;
3. Preferential Tax Programs; and
4. Grants and Grant Equivalents.

[118] The CBSA’s analysis revealed that the alleged subsidy programs constitute potential financial contributions by the GOV that may have conferred benefits to producers/exporters of COR. In addition, the programs were further examined and were considered to be potentially specific either in law or in fact within the meaning of subsections 2(7.2) and 2(7.3) of SIMA.

[119] Please refer to Appendix 1 for a list of the alleged subsidy programs to be investigated by the CBSA.

[120] If more information becomes available during the investigation process that indicates that some exporters/producers of subject goods may have benefited from any other programs during the POI that are not included in the list, CBSA will request complete information from the GOV and exporters/producers of subject goods to pursue the investigation of these program.

[121] The CBSA concluded that sufficient evidence is available to support the allegations that COR originating in or exported from Vietnam has been subsidized. In investigating the 10 programs, the CBSA has requested information from the GOV, exporters and producers to determine whether exporters/producers of subject goods received benefits under these programs and whether these programs, or any other programs, are actionable subsidies and, therefore, countervailable under SIMA.

[122] The complainant was unable to estimate the amounts of subsidy on a program basis for the subject goods imported from Turkey, the UAE and Vietnam.

[123] Alternatively, for Turkey, the complainant estimated the amount of subsidy on the basis of the CBSA’s finding in Dry Wheat Pasta from Turkey, concluded on June 26, 2018^{Footnote 44}. In this regard, the complainant stated that in Dry Wheat Pasta, the CBSA determined that three programs provided a countervailable subsidy of 4.2%, or 1.4% per program.^{Footnote 45} Accordingly, the complainant estimated a subsidy margin of 29.4% by applying the rate of 1.4% per program to the 21 programs that it identified (based on six Exim Bank programs and producers/exporters only benefiting from one of the two Investment Zone programs).

[124] The CBSA notes that the complainant appears to have erred in its methodology, as it miscalculated the CBSA’s average amount of subsidy per program in Dry Wheat Pasta. In that case, the CBSA determined a subsidy rate of 1.4% for the cooperative exporter on the basis of the total benefits received from three programs, an average of 0.467% of the export price per program. For all other exporters, the CBSA determined a total amount of subsidy equal to 4.2% on the basis of 11 potentially actionable subsidy programs, an average of 0.382% of the export price per program.^{Footnote 46Footnote 47} Accordingly, a correction to the complainant’s proposed methodology consisting of multiplying the average amount of subsidy as a percentage of the export price in Dry Wheat Pasta by 21 available programs, should result in the complainant’s estimated amount of subsidy being either 9.8% or 8%, depending on whether the average of the cooperative exporter is used, or the average of the all other exporter is used.

[125] For the UAE, the complainant estimated the amount of subsidy as being equal to the difference between the estimated full cost of production (see dumping section) and sale and the estimated export price. Using this methodology, the complainant estimated an amount of subsidy equal to 9% of the export price.

[126] For Vietnam, the complainant estimated the amount of subsidy on the basis of the amount of subsidy determined by the CBSA for Vietnamese producers in the Cold-rolled investigation. Using this methodology, the complainant estimated an amount of subsidy equal to 6.5% of the export price.

Turkey:

[127] For Turkey, the CBSA estimated the amount of subsidy on the basis of a comparison of the average of the CBSA’s estimated constructed cost-plus-profit for Turkey (as described in the normal value section) and the average of the published domestic price of corrosion-resistant steel in Turkey during the POI. The difference between the “constructed domestic price” and the published price may reflect the amount of subsidies received by the Turkish producers on the production of subject and like goods, which allows the producers to reduce the selling price of those goods. On this basis, the CBSA estimated an amount of subsidy equal to 21.3% of the export price for Turkey.

UAE:

[128] For the UAE, the CBSA estimated the amount of subsidy conferred on the producers of the subject goods from the UAE by comparing the estimated full costs of the subject goods with their total estimated export prices, as estimated above in the evidence of dumping section. It is the CBSA’s understanding that subsidies have the effect of lowering the full cost of the goods, including the cost of production and GS&A, which allows exporters to reduce the selling price of those goods to Canada. Therefore, the CBSA is satisfied that the exporter’s ability to sell subject goods to Canada at prices substantially below their estimated full costs supports the complainant’s allegations that subsidies are being conferred on the imported goods. On this basis, the CBSA estimated a weighted average amount of subsidy equal to 12.1% of the export price for the UAE.

Vietnam:

[129] For Vietnam, considering that cold-rolled steel represents a substantial proportion of the total cost of production of COR, and knowing that some producers, such as Hoa Sen Group, are integrated producers that are known to produce cold-rolled steel and corrosion-resistant steel, the CBSA applied the 6.5% Vietnam subsidy rate found in the CBSA’s CRS Subsidy investigation for Vietnam^{Footnote 48} to the estimated average cost of the cold-rolled substrate in Vietnam using the complainant’s estimated Section 19 methodology for Vietnam. This results in an estimated amount of benefit of approximately C$ 52/MT. Dividing this estimated amount of benefit by the estimated weighted average export price for Vietnam provides an estimated amount of benefit of 4.7%, when expressed as a percentage of the export price. On this basis, the CBSA estimated that the amount of subsidy for Vietnam is 4.7%.

[130] The estimated amounts of subsidy, as a percentage of the export price, found for each of the named countries are summarized in the table below.

[134] As noted in the “Canadian Market” section of this Statement of Reasons, detailed information regarding the volume and value of imports of COR and domestic production cannot be divulged for confidentiality reasons.

[135] The confidential information estimated by the CBSA demonstrates that total volume of imports of COR from the named countries collectively increased by 1,319% from 2016 to 2018 and by 1,497% in the first half of 2019 when compared to the same period a year earlier. There has been a significant increase in the volume of imports of subject goods from the named countries in Q4 2018 following the CBSA’s positive preliminary findings on corrosion-resistant steel sheet against China, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei), India and Korea (COR1) and the imposition of provisional duties in October 2018.

[136] The import volumes provided by the complainant showed an increase of subject goods since 2016 in both absolute and relative terms. Based on volume, evidence provided by the complainant indicated that its share of the apparent Canadian market has decreased since 2016. The complainant stated that the imposition of anti-dumping and countervailing duties in Q4 2018 resulted in a decrease of market share held by the COR1 countries. However, subject goods from the named countries quickly replaced the COR1 imports as the low-price leaders in the market and have captured and expanded the market share previously held by the COR1 countries.

[137] The CBSA’s estimates of import volumes are based on import data reported in its FIRM database. This information available to the CBSA does correspond with evidence provided by the complainant, but cannot be divulged due to confidentiality reasons.

[138] The CBSA’s data indicates a decrease in domestic sales between 2016 and 2018, despite an increase in the size of the Canadian market for COR of just under 2% over that period. In the first half of 2019, Canadian producers’ sales continued to decline, with an additional decline compared to the same period a year earlier, despite a slight increase of 0.6% in the size of the Canadian market for COR . Similarly, between 2016 and 2018, the Canadian producers’ share of the Canadian market for COR declined. This loss of market share may be attributable to imports of subject goods from the named countries as they collectively gained part of the market from 2016 to 2018 continuing into the first half of 2019.

[139] The CBSA finds the claim of lost market share to be reasonable and well supported and sufficiently linked to the allegedly dumped and subsidized goods.

[140] Due to the low prices offered by exporters of COR from the named countries, the complainant submitted that it suffered lost sales. The complainant submitted evidence of an account-specific sale that was lost to allegedly dumped and subsidized goods from Vietnam.

[141] Based on the information provided in the complaint, the CBSA finds that the claim of lost sales with respect to Vietnam is supported and sufficiently linked to the allegedly dumped and subsidized imports of the subject goods.

[142] The complaint alleges that imports of subject goods from the named countries have caused price depression in the Canadian market. This was achieved by following the low prices established by the COR1 countries in order to gain market acceptance, and then steadily increasing import volumes and market share at prices that substantially undercut Canadian producers.

[143] The complainant provided significant evidence of instances during the POI where the complainant was forced to lower prices in response to allegedly dumped and subsidized imports from Turkey and Vietnam.

[144] In addition to the examples provided by the complainant, the supporting domestic producer, Stelco, also provided evidence of instances showing that it has competed directly with low-priced imports from Turkey and Vietnam. The low-priced offers of subject goods from Turkey and Vietnam have resulted in lower selling prices for domestic producers and lost sales, which has caused them to realize lost revenue and has reduced their profitability.

[145] With respect to the UAE, neither the complainant nor the supporting domestic producer has provided specific examples of price depression.

[146] Based on the information provided in the complaint, the CBSA finds that the claim of price depression with respect to Turkey and Vietnam is supported and sufficiently linked to the allegedly dumped and subsidized imports of the subject goods.

[147] The complainant states that the allegedly dumped and subsidized goods have captured market share at the expense of the domestic industry by undercutting the prices of the domestic producers. To support this allegation the complainant has provided specific examples of lost revenue due to price reduction and offers of subject goods at prices well below that of the complainant.

[148] Further, based on the import data provided by the complainant, it is evident that import pricing of subject goods from the named countries has consistently been below the complainant’s pricing between 2018 and first-half of 2019. This trend is similar between the subject goods and goods imported from all other countries. The complainant states that the three named countries have leveraged the low pricing established by the COR1 countries, and entered the Canadian market in increasing volumes and falling prices in the absence of competition from the COR1 countries following the imposition of provisional duties against COR1 countries in Q4 2018.

[149] With respect to imports of subject goods from the UAE, the complainant states the average import price from the UAE and the complainant’s average price is not an appropriate comparison. This is because the complainant’s price includes a broad mix of COR products whereas the average import price from the UAE is believed to be largely composed of the light-gauge COR which costs more to produce and are sold at higher prices.^{Footnote 54}

[150] The CBSA has verified the complainant’s allegation that subject imports from the UAE are mostly light-gauge COR by reviewing CBSA’s FIRM database. Additionally, the CBSA estimated the complainant’s price of light-gauge COR by using the pricing information provided in the complaint. The estimated price of the complainant’s light-gauge COR was higher than the average price of the complainant’s broad mix of COR.

[151] The CBSA is of the opinion that using the complainant’s pricing information of the material used in the production of light-gauge COR to estimate the price difference as reasonable as the material used is at the lower end of the price spectrum for light-gauge material according to the complainant.

[152] Using the methodology above, the average import price from the UAE has consistently been undercutting the complainant’s average price of light-gauge COR, between 2016 and the first-half of 2019, as well as during the POI.

[153] As a result of these significant price differences, particularly during the POI, the complainant states that it has been forced to discount prices to compete with the low priced COR, which led to a significant amount of lost revenue.

[154] Further, the complaint contains evidence, particularly account-specific examples from the complainant and Stelco, of price undercutting by subject goods. It also contains documented instances where prices were suppressed or where the complainant was forced to lower prices in response to allegedly dumped and subsidized imports.

[155] The average unit prices of subject goods estimated by the CBSA reveal a trend similar to that described by the complainant. Specifically, from 2018 to the first-half of 2019 and during the POI, the average prices of subject goods from the named countries have been less than the complainant’s average selling prices. Based on the CBSA’s estimate, the average prices of subject goods from the named countries have been between 4.8% and 22.6% lower, except for imports from Turkey in 2016, when the prices were slightly higher than the complainant’s price.

[156] The CBSA notes that the analyses above used the complainant’s average selling prices in calculating the price difference. The CBSA used financial information of both the complainant and the supporting domestic producer provided in the complaint to manually calculate the average selling prices of the domestic industry.

[157] The average unit price of the domestic industry reveals a similar trend to that described by the complainant. For example, the average selling prices of subject imports from Turkey have been consistently lower than the domestic industry’s average selling prices since 2018. Specifically, the average selling prices of imports from Turkey during the POI have been lower than the domestic industry’s average selling prices by 7.7%. During the POI, the average selling prices of subject imports from the UAE and Vietnam have been lower by 9.3% and 10.4%, respectively. They have been undercutting Canadian prices by 4.0% and 22.0% on average since 2016. Based on CBSA’s estimates, the volume of subject imports from Vietnam has been relatively low until Q1 2019 when it increased significantly by 1,637% over the same period in 2018. In absolute terms, the volume of subject imports from Vietnam in Q1 2018 was 2,418 MT and increased to 41,990 MT in Q1 2019.

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

[159] The complainant states that capacity utilization rates with respect to the production of COR have declined due to the presence of the dumped and subsidized goods. To support this allegation, the complainant provided domestic industry data outlining production capacity and production quantity for both the complainant and the supporting domestic producer for the period of 2016 through the first-half of 2019.

[160] Based on the information provided in the complaint, the CBSA finds that there is a reasonable link between the allegedly dumped and subsidized goods from the named countries and the complaint’s underutilization of production capacity.

[161] The complainant alleges that the injurious impact of the dumped and subsidized goods is demonstrated by the financial results of the complainant and the supporting domestic producer. To support this allegation the complainant has provided financial results for the complainant and the supporting domestic producer for 2016 through the first-half of 2019.

[162] Detailed information regarding the revenue and profitability cannot be divulged for confidentiality reasons. However, the CBSA has reviewed this information and found that there has been a trend to the impact of the financial results during the POI which supports the link to the allegedly dumped and subsidized goods and financial injury.

[163] The complainant claims that its ability to continue investing in their production facilities is at risk due to the continuation of unfairly traded imports from the named countries.

[164] The CBSA finds that the allegation, as described in the complaint, does not appear to be an indicator of injury, as no evidence was provided to suggest that the complainant has suffered injury in this regard. As such, the CBSA instead reviewed this information as a factor to be considered in assessing the threat of injury posed by subject goods from the named countries, as explained further below.

[165] Based on the evidence provided in the complaint, and supplementary data available to the CBSA through its own research and customs documentation, the CBSA is satisfied that the evidence discloses a reasonable indication that the dumping and subsidizing of the subject goods from the named countries has caused injury. The injury factors specifically suffered by the domestic industry include increase in the volume of dumped and subsidized imports, loss of market share and revenue, price depression, price undercutting, underutilization of production capacity, and impacted financial results.

[168] The complainant alleges that there has been a trend of rising import volumes from the named countries, and a significant increase following the positive finding against COR1 countries. The complainant alleges that the low-prices and prices that undercut domestically produced like goods will continue the trend of rising import volumes from the named countries and that will have a financial impact on the domestic industry in the foreseeable future.

[169] In support of this allegation, the complainant provided import statistics from the named countries for a period of 2016 through the first-half of 2019.^{Footnote 60}

[170] The complainant submits that the volume of subject goods imports has increased significantly from 2016 to the first-half of 2019. As stated in the complaint, the volume of subject good imports has steadily risen from 6,233 MT in 2016; to 28,798 MT in 2017; to 90,302 MT in 2018, and 161,905 MT in the first half of 2019. The complaint submits that there has been a clear trend of rising import volumes into Canada from the named countries, which it characterized as a massive increase. It was submitted that such trend will continue and pose a threat of further injury.

[171] The CBSA’s analysis of the import data provided in the complaint, which is based on the period of 2016 to the first-half of 2019, supports the allegation of an increase in the importation of the allegedly dumped and subsidized goods from the named countries. At the same time, imports from all other countries decreased. Further, the CBSA’s analysis of the import data on a quarterly basis shows that the rate of increase in the volume of imports from the three named countries increased significantly in Q4 2018.

[172] The complainant submitted that there is a global excess capacity in the steel industry in general, including in the production of COR in the named countries. In support of this allegation, the complainant provided a number of industry reports and publications.^{Footnote 62}

[173] Using information from an steel industry publication (CRU), the complainant estimated the COR excess capacity in the named countries by using the data pertaining to hot-dipped galvanized and electrogalvanized steel. The complainant acknowledges that this data is not exclusive to COR but that it is the best information available and is directly related to COR production capacity as it includes production equipment capable of producing COR.

[174] Based on the CBSA’s analysis of the information provided in the complaint, the capacity and output data reveals that producers in Turkey and the UAE have significant excess capacity. With respect to Vietnam, its gross production is higher than its production capacity as per information from the industry publication. The complainant believes that the publication’s current capacity data for Vietnam is outdated and not reflective of Vietnam’s actual capacity given it suggests that capacity is lower than production. As such, the complaint excluded Vietnam’s excess capacity figures from the named country total.

[175] While the CBSA recognizes the significant excess capacity of COR in Turkey and the UAE, the CBSA is not satisfied with the supporting evidence provided in the complaint with respect to this threat of injury factor in relation to Vietnam. However, the CBSA further notes that the combined excess capacity from Turkey and the UAE, in relation to the size of the Canadian market, even if only a small percentage of the excess was directed to Canada, would result in a significant increase of subject imports, and pose a significant threat to the domestic industry.

[176] The complainant states that while there has recently been some improvements in the global steel market, it remains vulnerable. The complainant states that COR producers in the named countries will be encouraged to export products in the next 12-24 months as their domestic demand is decreasing while their production capacity is increasing. Further, the complainant pointed to conditions in the named countries such as the European Union and United States’ trade measures^{Footnote 64} against Turkish COR and planned capacity increases in Vietnam and the UAE which may increase exports of subject goods to Canada. These allegations are supported by industry publications which forecast market demand and production.

[177] With respect to the COR market in Canada, the complainant noted that the gross consumption of galvanized sheet in Canada is forecasted to contract in 2019 and 2020. As such, the complainant states that, notwithstanding the recent improvements, the Canadian industry is still vulnerable given the market contraction as well as a decreased market share due to rising imports of subject goods.

[178] The CBSA’s analysis of the information contained in the complaint revealed market conditions which the CBSA recognizes may lead COR producers in the named countries to target certain export markets, including Canada, which may cause further injury to the complainant and Canadian industry.

[179] The complainant alleges that aggressive pricing on subject imports from the named countries has had a depressing effect on the price of like goods in the Canadian market. Furthermore, as a result of the higher price of COR in North America and the lower price in other markets, Canada becomes an attractive market for subject goods, which provides the named countries an opportunity to export dumped and subsidized goods but still acquire a better price than what is available in other major markets.

[180] Based on an analysis of the information provided in the complaint, the CBSA recognizes that the high volume of imports from the named countries at allegedly dumped and subsidized prices may have a further depressive effect on the price of like goods causing further injury to the complainant.

[181] The complainant states that there are a number of foreign trade remedy actions in place that are likely to lead to diversion of subject goods into the Canadian market. Specifically, the complainant has pointed to the US Section 232 measures in the United States, and the corresponding impact on the Canadian Market. The CBSA notes that the United States recent increase of the US Section 232 measures on Turkish steel imports from 25% to 50%, announced on October 14, 2019, may result in further diversion of Turkish COR from the United States to Canada.

[182] The complainant also pointed to other conditions as causes for the potential diversion of subject goods into Canada, such as a number of trade remedies imposed by other countries, anti-circumvention investigations against Vietnam and China in the US, and the implementation of safeguard measures by the European Union.

[183] The complainant states that these market restrictions will encourage the named countries to focus on Canada as a prime target for low-priced COR given the relatively higher North American price for COR. The complainant further states that the European Union safeguard and United States Section 232 measures will increase COR imports from non-named countries which may intensify competition in the domestic industry and thus result in even greater injury on the domestic producers.

[184] The CBSA acknowledges the presence of trade remedy actions in the United States, the European Union, and other countries, which may further increase the volume of exports to Canada from the named countries. Furthermore, the CBSA recognizes that these trade remedy actions may have a significant adverse impact on the Canadian market for COR.

[185] The complainant states that part of product shifting is diverting an input used to produce one good covered by a trade remedy to another good not covered by a trade remedy. CRS and sometimes HRS, are input for COR. HRS is a stand-alone good, but also the primary input for other steel goods such as piping and tubular goods, and CRS. HRS may also be manufactured using the same equipment used to produce steel plate.

[186] The complainant further argues that the imposition of trade remedies on either HRS, other downstream HRS products as well as CRS will likely encourage exports of goods not subject to a trade remedy and cited a number of such trade remedies. The trade remedies against steel products used as COR input from the named countries demonstrate the propensity to dump by each country and that they have a narrowing list of products and export markets for goods related to COR production.

[187] The CBSA notes that product shifting as a result of the restrictions described above could increase production capacity of the named countries with respect to COR. The CBSA further recognizes that this, in turn, could lead to increased volumes of subject goods being exported to the Canadian market.

[188] The complainant stated its plan to invest in the COR production facilities. The complainant further states that despite the positive finding from the COR1 case in early 2019, this investment remains at risk of not happening if a trade remedy is not imposed given the continuation of low-priced imports of COR from the named countries.

[189] The CBSA recognizes that the continuation of imports of subject goods may pose a risk to the complainant’s planned investment.

[190] The CBSA is of the view that the evidence discloses a reasonable indication that imports of allegedly dumped and subsidized goods from Turkey, the UAE and Vietnam are posing a threat of injury to the COR industry in Canada.

Summary of the Turkish Subsidies to be Investigated

Category 1: Export Financing / Preferential Loans (Eximbank Programs)^{Footnote 69}

The complainant alleged that the Export Credit Bank Inc. of Turkey (Eximbank), Turkey’s official export credit agency, provides credit and insurance-type programs, some of which have been found to be countervailable by the CBSA and by the United States Department of Commerce (US DOC). It is argued that the credits and facilities granted under the Eximbank program are on more favourable terms than the market offers. A report provided in the complaint suggests that the bank provides favorable credit rates to exporters with at least a 20% to 30% margin.^{Footnote 70} The report also alleges that Canada is currently considered a “new market country” by the Eximbank, which is eligible for the specific favourable rates.^{Footnote 71}

The complainant provided information suggesting that the Eximbank, which is under the authority of the Ministry of Trade, is a public body. Turkey’s WTO Notification^{Footnote 72} also describes the Eximbank as a “...wholly state-owned bank, acting as the government’s major export incentive instrument in Turkey’s sustainable export strategy …” which “…maintains close co-operation with the related entities of the government.” The CBSA preliminarily agrees that the Eximbank is a public body.

According to the GOT’s WTO Notification, the Eximbank provided a total export financing support of US$ 33 billion in terms of financing support and pure cover, which accounted for over 23% of Turkey’s exports in 2016.^{Footnote 73}

The complainant provided information on the following Eximbank programs, which it understands are the most utilized:

1. Rediscount Credit Program
2. Investment Credit for Export and Export-Oriented Working Capital Credit
3. Pre-shipment Export Credit Program
4. Post-shipment Rediscount Program
5. Export Credit Insurance Program
6. Specific Export Credit Program

The complainant also provided documents describing the Eximbank programs, including Turkey’s WTO notification,^{Footnote 74} as well as a report on the Turkish flat steel industry and government subsidies.^{Footnote 75}

The rediscount program provides pre-shipping financial support to Turkish exporters, manufacturer-exporters and manufacturers supplying exporters. These loans are contingent upon an export commitment, and are allegedly made on preferential terms.

A report estimates that all major flat steel producer-exporters have received financial benefits under this program.^{Footnote 76} The complainant also argues that the US DOC has countervailed this program in Welded Line Pipe.

The program is reportedly administered mainly by the Eximbank, by commercial banks approved by the CBRT, and by the CBRT (funding). The program is reportedly governed by the “Eximbank’s Implementation Principles for Rediscount Programme” as well as the Eximbank’s Law, Principles and Articles of Associations.^{Footnote 77}

Turkey’s WTO Notification lists this program as a short-term export credit program where credits are provided using the sources of the Central Bank of Turkey.^{Footnote 78}

The potential benefit under this program is equal to the difference between the cost of the credit in the open market and the preferential rate provided by the Eximbank. The program appears to be specific as it is contingent on export and therefore considered a prohibited subsidy.

According to the complainant, this program provides short-term export credit to manufacturers, for the purposes of supporting exporters and manufacturers, and to “develop their export trades…to find new markets for the export of goods…”.^{Footnote 79} This program reportedly covers both “Pre-shipment Turkish Lira Export Credits (PSEC-ZTL)” and “Pre-shipment Foreign Currency Export Credits (PSEC-FX)”.^{Footnote 80} According to Turkey’s WTO Notification, 79% of the total credits were provided in foreign currency in 2016.^{Footnote 81} Per the WTO Notification, short-term export credit is provided in the early states of production in all sectors.^{Footnote 82}

The program is reportedly administered by the Eximbank and implemented through selected commercial banks as intermediaries.^{Footnote 83} The program is regulated in the Eximbank’s Law, Principle and Articles Association.

Turkey’s WTO Notification list this program as a short-term export credit program where credits are extended via commercial banks.^{Footnote 84}

The potential benefit under this program is equal to the difference between the cost of the credit in the open market and the preferential rate provided by the Eximbank. The program appears to be specific as it is contingent on export and therefore considered a prohibited subsidy.

This export contingent program allegedly provides loans against export receivables. The program is reportedly administered by the Eximbank and made available through the Eximbank’s Law, Principle and Articles Association.^{Footnote 85}

In addition to having preferential rates overall, the program reportedly provides loans at even more discounted rates for exports to new market countries including Canada. For example, while the current cost of the credit for 0-360 days is Libor/Eurobor + 1.5, the posted rate is Libor/Eurobor + 0.75 for exports to Canada.^{Footnote 86}

The potential benefit under this program is equal to the difference between the cost of the credit in the open market and the preferential rate provided by the Eximbank. The program appears to be specific as it is contingent on export and therefore considered a prohibited subsidy.

The Pre-export Credit Program is a short-term credit facility provided to export-oriented manufacturers, manufacturers-exporters and exporters in the preparatory phase of exports. It aims to increase the competitiveness of exporters in international markets and support export projects in the preparatory stage. The credits has Turkish lira and foreign currency options. Turkey’s WTO Notification list this program as a short-term export credit program where credits are extended directly by Eximbank.^{Footnote 87}

The potential benefit under this program is equal to the difference between the cost of the credit in the open market and the preferential rate provided by the Eximbank. The program appears to be specific as it is contingent on export and therefore considered a prohibited subsidy.

According to the complainant and as detailed in the provided report, the Export Oriented Working Capital Credit Program provides Turkish manufacturers of export products with preferential financing, with a three-year term, for raw materials, intermediate products, final products and final product purchasing transactions. The credit is provided to companies that intend to develop their export operations. Loans under this program are contingent on export.

The program is administered by the Eximbank and governed by Eximbank’s Law, Principle and Articles Association and the Implementation Principle for Export-Oriented Working Capital Credit Programme.^{Footnote 88}

The potential benefit under this program is equal to the difference between the cost of the credit in the open market and the preferential rate provided by the Eximbank. The program appears to be specific as it is contingent on export and therefore considered a prohibited subsidy.

According to the complainant and as detailed in the provided report, the Investment Credit for Export provides preferential loans, with a five year term, to finance machinery, equipment and other capital for exporters. The credit is provided to companies that intend to develop their export operations. Loans under this program are contingent on export.

The program is administered by the Eximbank and governed by Eximbank’s Law, Principle and Articles Association and the Implementation Principle for Export-Oriented Working Capital Credit Programme.^{Footnote 89}

The potential benefit under this program is equal to the difference between the cost of the credit in the open market and the preferential rate provided by the Eximbank. The program appears to be specific as it is contingent on export and therefore considered a prohibited subsidy.

The Specific Export Credit Program is reportedly a financing program for manufacturers of export products and exporters which are approved by the Eximbank but cannot be financed under other credit programs of the Bank.^{Footnote 90} The program is reportedly administered by the Eximbank and made available through the Eximbank’s Law, Principle and Articles Association.^{Footnote 91} The scope of the program is reportedly to support exporters for their financing needs arising from longer term production periods or sales conditions of export products in specific export projects, such as new product exports to new markets.

Turkey’s WTO Notification describes the program as a “…short and medium-term pre-shipment financing facility provided to manufacturers-exporters and oversea contractors for projects that generate foreign currency. It aims to meet the specific requirements of Turkish manufacturers/exporters through medium-term financing and thus encourage the export of new products to new markets.^{Footnote 92}

The potential benefit under this program is equal to the difference between the cost of the credit in the open market and the preferential rate provided by the Eximbank. The program appears to be specific as it is contingent on export and therefore considered a prohibited subsidy.

The Export Credit Insurance Program provides insurance for commercial and political risks arising from cross-border sales. The program includes three sub-programs: the Short-Term Export Credit Insurance, the Post-Shipment Export Credit Insurance and the Pre-Shipment Export Credit Insurance. The program is governed by the Implementation Principles for Short Term Export Credit Insurance by the Eximbank.^{Footnote 93} The complainant claims that a financial benefit may arise if the insurance costs less than the insurance available at market rates.

The potential benefit under this program is equal to the difference between the cost of insurance in the open market and the preferential terms provided by the Eximbank. The program appears to be specific as it is contingent on export and therefore considered a prohibited subsidy.

In addition to benefiting from preferential terms under the Rediscount Credit Program (i.e. Program 1 above), financial benefits may also have been received by way of the application, by the Central Bank of Turkey (CBRT), of a fixed or retrospective foreign exchange rate under the program so as to reduce the exporters’ exposure to increasing foreign exchange rates in specified periods and certain rediscount export credits. It is suggested that “[s]ince the Turkish Lira experienced significant deterioration against the reserve currencies in 2017 and 2018, this policy move by the CBRT created substantial financial gains for the exporters”.Footnote 94 It is also reported that the fixed exchange rate of repayments was lower than the rates in the actual market.

The potential benefit under this program is equal to the difference in the cost of the credit that is attributable to the difference in the exchange rate applied in the actual market, and the preferential terms applied by the GOT. The program appears to be specific as it is contingent on export and therefore considered a prohibited subsidy.

This scheme is alleged to cover all credit programs provided by Eximbank. It is alleged that the Eximbank provides credit to the manufacturers of export products and exporters with Credit Guarantee Fund (KGF) guarantees, to ensure that they have easy access to the Bank’s credit programs at more favorable rates. Under the program, the Turkish Treasury acts as the collateral guarantor.^{Footnote 95}

The potential benefit under this program is equal to the difference between the cost of the credit in the open market and the preferential rate provided by the Eximbank. The program appears to be specific as it is contingent on export and therefore considered a prohibited subsidy.

Category 2: Regional-Based; Organized Industrial Zone (Oiz) And Free Zone Programs

The complainant alleges that two of the various types of special investment zones in Turkey apply to producers of subject goods and that countervailable subsidies are available to them as a result. These zones are the Organized Industrial Zone (OIZ), and Free Zone Programs (FZs).^{Footnote 96} It is alleged that these areas are region specific and that the operators in these areas are entitled to access to differential treatment, which can take the form of preferential tax applications, additional employment benefits, duty exemptions, land allocation, high-quality infrastructure, low-cost access to utilities, environmental waivers, preferential access to loans, etc. It is also alleged that Turkey’s flat steel industry mostly operates under OIZs.^{Footnote 97}

The OIZs are allegedly regulated by the Organized Industrial Zones Law 4562, and related to the Ministry of Science, Industry and Technology – DG of Industrial Zones.

The following producers are believed to be operating mainly in an OIZ^{Footnote 98}:

• Tosçelik (Osmaniye OIZ)
• Tosyali Toyo (Osmaniye OIZ)
• Çolakoglu (Dilovasi OIZ)
• MMK Metalurji (Makina OIZ)
• MMK Atakas (Istanbul Beylikduzu OIZ)
• Tat Metal (Zonguldak Eregli OIZ)
• Demirsac AS (Kocaeli Gebze OIZ)
• Tezcan Galvaniz AS ((Kocaeli Gebze OIZ)

Free Zones are special sites deemed outside the customs area, although physically located within the political borders of the country. These zones are designed to boost the number of export-focused investments. Legal and administrative regulations in the commercial, financial and economic domains that are applicable within the customs area are either not implemented or partially implemented in FZs.^{Footnote 99}

The following producers were listed by the complainant as operating in Free Zones:

• Demirsac AS (Tubitak Mam Technological Free Zone)
• MMK Atakas (Istanbul Leather and Industry Free Zone)
• Tosyali Toyo (Adana Yumurtalik Free Zone
• Borcelik Celik (Bursa Free Zone)

The complainant alleges that companies located in OIZs save 0.5% on the cost of natural gas for uses other than electricity generation. The complainant also added that in Rebar, the CBSA determined that this program was a countervailable subsidy. A report provided the July 2019 Natural Gas tariff rates inside and outside OIZs, as published by BOTAS, the government entity providing natural gas to the Turkish market.^{Footnote 100} The rates support the complainant’s allegation.

The complainant also alleged that producers in IOZ may receive a 10%-20% discount on electricity. The legal basis for the alleged preferential rates is the Article 13 of Electricity Market Law No. 6446.^{Footnote 101} According to the provided report, there is no explicit advantage published for OIZs. The main source of the lower rate would be due to the cost advantage of the transmission ownership, as the transmission network of electricity within the OIZ is wholly owned and maintained by the OIZ, with lower costs than the transmission outside OIZs.^{Footnote 102}

The complainant also alleged that the GOT listed low water cost as an advantage of operating in a OIZ.

The alleged benefit for the provision of energy or utilities at less than fair market value is equal to the difference between fair market value and the preferential rate.

A GOT’s investment guide published on the internet lists the exemption of VAT on land acquisition as an advantage of operating in an OIZ.^{Footnote 103} This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

A GOT’s investment guide published on the internet lists the exemption of real estate duty for five years starting from the date of completion of the plant construction, as an advantage of operating in an OIZ.^{Footnote 104} This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

A GOT’s investment guide published on the internet lists the exemption of municipal tax on the construction and usage of the plant, as well as on solid waste, as advantages of operating in an OIZ.^{Footnote 105} This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

A GOT’s investment guide published on the internet lists the exemption from amalgamation and allotment transaction charges as an advantage of operating in an OIZ.^{Footnote 106} This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

It is reported that companies in OIZs are eligible for additional support under the Investment Incentive Program (see Program 27). It is alleged that under the program, differing rates of incentives are provided to six regions defined in the program. The OIZ are allegedly subject to regional incentives one level higher than the region they are located in. This upgraded level is valid for Regional and Large-Scale Investment Incentives Schemes and for the tax reductions and social security premiums.Footnote 107

A GOT’s investment guide published on the internet also lists the availability of the investment incentive scheme as an advantage of operating in an OIZ.^{Footnote 108}

A GOT’s investment guide published on the internet lists the exemption of corporate income tax for manufacturing companies as an advantage of operating in FZs.^{Footnote 109} This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

A GOT’s investment guide published on the internet lists the exemption of stamp duties on applicable documents as an advantage of operating in FZs.^{Footnote 110} This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

A GOT’s investment guide published on the internet lists the exemption from customs duties and other assorted duties as an advantage of operating in FZs.^{Footnote 111} The exemption from customs duties may be countervailable if they are considered excessive, for example, if inputs used in the production of domestically sold goods were exempt from duty. This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

A GOT’s investment guide published on the internet lists the exemption of VAT and special consumption tax as an advantage of operating in FZs.^{Footnote 112} This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

A GOT’s investment guide published on the internet lists the exemption of real estate tax as an advantage of operating in FZs.^{Footnote 113} This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

A GOT’s investment guide published on the internet lists the exemption of income tax on employee’s wages for companies that export at least 85% of the FOB value of the goods they produce in FZs, as an advantage of operating in FZs.^{Footnote 114} This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

Category 3: Preferential Tax Policies / Tariffs and Vat Exemptions

This program allegedly allows Turkish manufacturers to apply for an Inward Processing Certificate (IPC), which permits the acquisition of raw materials and intermediate unfinished products used in the production of exported products without paying customs duty and VAT, and exemption from trade remedy measures in force.^{Footnote 115} This is in essence a duty drawback program.

There are reportedly two types of IPCs under the program; the D-1 certificate and the D-3 certificate. The D-1 certificate provides drawback on imported material. The D-3, on the other hand, provides an exemption for customs duties on inputs sold into the domestic market under certain conditions. While there may not be a commitment required for a D-3 certificate, it is reported that the application for the D-3 certificate required the reporting of export activities and that the Ministry of Trade considers export levels to be a decisive factor. Thus, the complainant argues that the D-3 certificate is de facto contingent on export performance. This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

Under this program, all taxpayers engaged in export activities are eligible for an additional deduction of a lump sum amount from their gross income resulting from exports and other activities abroad. The deduction shall not exceed 0.5% of the proceeds they earned in foreign exchange from such activities.

The program was reportedly established under Addendum 4108 of Article 40 of the Income Tax Law No. 193. The program is managed by the Ministry of Treasury and Finance.

The program was determined to be countervailable by the CBSA in Rebar and in Dry Wheat Pasta as well as by the US DOC in Line Pipe.

This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

Effective from June 17, 2019, foreign exchange sales to the exporters registered to the Turkish Exporters Association are exempt from the Banking and Insurance Transactions Tax (BITT), which would otherwise be payable at 0.1% of total value of foreign exchange sales.^{Footnote 116}

The exemption is provided by the President Resolution No. 1149 of June 16, 2019 and Article 33 of the Expenditure Law No. 6802.^{Footnote 117}

This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

Under this program, landlord entities of a property located in certain areas (industrial zones, technology development zones and industrial sites) are eligible to receive a permanent exemption from property tax on buildings, which would otherwise be payable at 0.2% of the value of the building in non-residential areas.^{Footnote 118}

The exemption is provided under sub-paragraph (m) of Article 4 (“Permanent exemptions) of Property Tax Law No. 1319, as amended on July 1, 2017. The program is managed by the Ministry of Treasury and Finance.

This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

The Investment Incentive Program (IIP) is intended to encourage investment to boost production and employment, to encourage regional, large scale and strategic investments with high R&D content for increased international competitiveness, to increase FDIs, to reduce regional development disparities and to promote investments for clustering, R&D and environment protection for the production and export-oriented growth strategy.^{Footnote 119}

The program is divided into four different incentive schemes and nine different incentive measures^{Footnote 120}:

• General Investment Incentives Scheme
  • Customs duty exemption
  • VAT exemption
  • Income tax withholding support (Region 6 only)
• Regional Investment Incentives Schemes
  • Customs duty exemption
  • VAT exemption
  • Tax deductions
  • Social security premium support (employer’s share)
  • Interest support
  • Land allocation
  • Social security premium support (employee’s share) (Region 6 only)
  • Income tax withholding support (Region 6 only)
• Large-Scale Investment Incentives Scheme
  • Customs duty exemption
  • VAT exemption
  • Tax deduction
  • Social security premium support (employer’s share)
  • Land allocation
  • Social security premium support (employee’s share) (Region 6 only)
  • Income tax withholding support (Region 6 only)
• Strategic Investment Incentive Schemes
  • Customs duty exemption
  • VAT exemption
  • Tax deductions
  • Social security premium support (employer’s share)
  • Interest support
  • Land allocation
  • VAT refund
  • Social security premium support (employee’s share) (Region 6 only)
  • Income tax withholding support (Region 6 only)

The IIP is governed by Cabinet Decree No. 2012/3305 on “State Incentives in Investments”, published on June 15, 2012, and the consequent amendments to this regulations.^{Footnote 121}

This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

This program is alleged to cover the most comprehensive and generous government incentives in Turkey, aiming at attracting investments in high-tech and medium-tech industries (including iron and steel) that are highly dependent on imports and have great export potential.^{Footnote 122} Incentives under this program may include^{Footnote 123}:

• Customs duty exemption
• VAT exemption or refunds
• Corporate tax reductions or exemptions
• Social security premium support
• Income tax withholding support
• Qualified employee support
• Interest support / grant support
• Capital contribution
• Energy support
• Public procurement guarantee
• Land allocation
• Infrastructure support
• Issuance of exemptions for permits, allocations, licenses, etc.

The program is governed by Law No. 6745 on “Supporting Investments on Project Basis and Amending Certain Laws and Decrees Law”, and the Cabinet Decree No. 2016/9495 on “Granting Government Support for the Investment on Project Basis”. The program is said to be managed by the President of Turkey and executed by the Ministry of Science, Industry and Technology.

It is alleged that Tosyali, a steel producer involved in COR production as per the complainant, was announced as one of the main beneficiaries of the program, receiving about 5 billion USD with a greenfield investment project regarding establishing an integrated steel plant in Osmaniye.^{Footnote 124} These funds may not have been received yet.

Category 4: Export-Oriented Direct Funds

According to the complainant, this export-dependent program consists of a grant program that supports Turkish brands in international markets. It is governed by Communique No. 2006/4 on “Overseas Branding of Turkish Products, Promotion of Turkish Product Image and Supporting Turquality”.^{Footnote 125} This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and the program confers a benefit to the recipient equal to the amount of the grant.

According to the complainant, this program is operated by the Turkish Steel Exporters’ Association (TSEA), to provide financial support to its members in connection to trade remedy proceedings. Upon meeting eligibility criteria, companies can receive up to 50% of their legal fees expended in anti-dumping, countervailing and safeguard cases, up to a maximum of $100,000 USD. Despite being a private legal entity, the complainant argues that the TSEA qualifies as a public body. In this regard, the complainant claims that steel exporters are obligated by law to become a member of the TSEA, and that the TSEA carries out government directives. This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and the program confers a benefit to the recipient equal to the amount of the grant.

According to the complainant, there are two types of export freight support. The first is direct funding for freight costs based on export performance. This program is provided under Decree No. 2016/6 on “Provision of Freight Support for Exports Transactions”. This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and the program confers a benefit to the recipient equal to the amount of the grant. The second is an exemption from the Special Consumption Tax and Value Added Tax imposed on diesel consumed in the transportation of export products. It is argued that these taxes together contribute to more than 50% of diesel prices in Turkey. This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

Category 5: Goods Provided By The Government Of Turkey At Less Than Adequate Remuneration

The complainant alleges that the GOT may be providing substrate (hot-rolled steel or cold rolled steel) to Turkish COR producers through Erdemir and Isdemir for less than adequate remuneration. Goods/Services provided by the GOT at Less Than Fair Market Value are potentially actionable as financial contributions pursuant to paragraph 2(1.6)(c) of SIMA as they involve the provision of goods or services, other than general governmental infrastructure. The potential benefit is equal to the difference between the price paid for the goods or services and the price that would be applicable in the open market. Erdemir is a major Turkish flat-rolled producer that produces COR and also substrate used by other COR producers.

The allegation is based on US DOC’s conclusions in Large Diameter Welded Pipe and Circular Welded Carbon Steel Pipe and Tubes from Turkey. The complainant alleged that in these investigations, the US DOC determined that Erdemir and Isdemir were public bodies because the GOT exercised meaningful control over each. In this regard, it is said that the controlling shareholder of these companies is the Turkish military pension fund OYAK, and that the GOT exercised significant control over OYAK. In this regard, the complainant argues that:

1. Erdemir’s performance, policies and aims and goals, as reported in its annual report, specifically align with the GOT’s stated policy in its 2012-2014 Medium Term Programme to improve Turkey’s balance of payments;
2. The Turkish Privatization Administration had veto power over any decisions related to the closedown, sale, de merger, merger, or liquidation of both Erdemir and Isdemir.
3. The Turkish Privatization Administration had veto power over any decisions on reductions in capacity of Erdemir and Isdemir’s integrated steel production facilities and mining facilities; and
4. OYAK and the Turkish Privatization Administration both had members on Erdemir’s Board of Directors.

Further, the complainant also alleged that a Turkish government entity, Turkish Hard Coal Institution (TTK), provides Erdemir, and perhaps other producers, with subsidized coal.^{Footnote 126} The complainant alleged that TTK’s 2018 Hard Coal Industry Report explicitly provides detailed information on pricing to Erdemir. In this regard, Erdemir’s average purchase price of hard coal from TTK was allegedly USD 126/ton in 2018, as compared with the 2018 average international coking coal price of USD 200/ton. It is also alleged that TTK’s average production cost was about USD 360/ton in 2018, while its average price was about USD 80/ton, with the Turkish treasury compensating the loss as TTK is a state economic entity. A report stated, for perspective, that coal represents 25% of Erdemir’s cost of goods sold in the first quarter of 2019.^{Footnote 127}

It is noted that in Certain Oil Country Tubular Goods (OCTG), the complainant in that case also provided comments to the CBSA concerning the alleged provision of hot-rolled coil at less than fair market value by the GOT in respect of sales of hot-rolled sheet through steel producer Erdemir to producers of OCTG in Turkey. In response, the CBSA stated that “[a] review of the information available on the record and the results of verification with Erdemir, OYAK and the Government of Turkey indicate that Erdemir appears to operate and function according to commercial principles, consistent with the behaviour expected of a profit-driven steel company, responsible to its public shareholders. […] The evidence does not disclose that OYAK is exercising any government function or directing Erdemir to operate in any manner inconsistent with normal commercial operations.”^{Footnote 128} In addition, in that case, the CBSA concluded that the cooperative producer did not receive preferential prices though Erdemir/Isdemir.^{Footnote 129}

Subsequently, on December 18, 2018, in DS523 - United States – Countervailing Measures on Certain Pipe and Tube Products from Turkey - Report of the Panel, the WTO panel addressed the US DOC’s determination with respect to the GOT’s control of Erdemir and Isdemir. On this matter, the report noted:

“7.48. Based on our review above, we therefore find that the USDOC failed to establish based on evidence on the record that OYAK is under the meaningful control of the GOT, or that OYAK is part of the GOT in either the broad sense or the narrow sense. We are therefore not persuaded that OYAK's control over Erdemir and Isdemir justifies attributing the actions of those entities to the GOT.”^{Footnote 130}

The complainant, however, argued that the Panel’s finding in Certain Pipe and Tube Products was based on the US DOC’s conclusions not being supported by adequate information on the record. The complainant argued that the subsequent US DOC determination in Large Diameter Welded Pipe from Turkey stands on its own as separate a proceeding.

In Certain Carbon Steel Welded Pipe 3 (CSWP3), on the basis of the information on the record, the CBSA again stated that there was insufficient evidence to determine that Erdemir and Isdemir were state-owned or state-controlled enterprises. The CBSA noted that a public body within the meaning of Article 1.1.(a)(1) of the SCM Agreement must be an entity that possesses, exercises or is vested with governmental authority. Further, based on the hot-rolled coil data on hand in the CSWP3 investigation, the CBSA found no evidence that Turkish producers were benefitting from production inputs or processing services that do not reflect market-based costs.^{Footnote 131} However, considering the evolving economic and political environments in Turkey, the CBSA finds that evidence provided by the complainant justifies re-examining this matter.

Category 6: R&D Programs

According to the complainant, Turkey operates a number of R&D Operations and Investment Programs that support R&D activities by providing a range of tax and premium deductions, including:^{Footnote 132}

• R&D allowance that permit the deduction of R&D expense from income tax
• Exemption of withhold tax from R&D employees
• Social Security Insurance Premium Support, and
• Stamp tax deductions.

The program is governed by Law No. 5746 on Supporting R&D and Design Activities.

This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amount of the reductions and exemptions. The complainant believes that the program is specific due to its discretionary nature.

The complainant alleges that industrial for-profit entities are eligible to receive a direct grant for R&D activities pursuant to Law No. 278 on Technology and Innovation Support Programme. The complainant stated that the program reportedly supports R&D projects with the goal of developing new or improved products, developing new production techniques to lower production costs or raise the quality of products, and developing new production technologies. The grants reportedly covers around 40-50% of the expenses of the approval R&D projects.^{Footnote 133}

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and the program confers a benefit to the recipient equal to the amount of the grant. The complainant believes that the program is specific due to its discretionary nature.

Category 7: Others

According to the complainant, Law No. 6486, the Social Security Premium Incentive, provides eligible companies an exemption from paying the employer’s share of long term social security insurance premiums. In Rebar, the CBSA determined that this program was not specific and therefore not countervailable. However, the complainant requests that the CBSA reconsiders this position. The complainant alleges that the program is specific because it accords benefits based on geographical location.^{Footnote 134} In this regard, a report provided in the complaint suggests that additional support is provided under the program if an employer is operating in specified provinces determined by the President.^{Footnote 135}

The program is governed by Article 81 of the Law No.5510 on Social Security and General Health Insurance and the Law No. 6486 on Social Security Premium Incentives.^{Footnote 136}

This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

Summary of the United Arab Emirates Subsidies to be Investigated

The complainant alleged that COR producers located in free-trade zones in the United Arab Emirates are exempt from paying a 5% import duty and 5% VAT on the importation of machinery, equipment and other capital used in their production of COR. The allegation is based on online publications by the United Arab Emirates government and by Deloitte. The complainant also alleged that at least two of the four known COR producers in the UAE are located in a Free-Trade Zone.^{Footnote 137}

The CBSA notes that with respect to the allegations of VAT exemption in the Free Trade Zone, information from the CBSA’s research indicates that a 5% VAT only became applicable in the UAE starting in 2018 or 2019.^{Footnote 138} Thus, machinery and equipment imported prior to this period would not have benefited from an exemption, while machinery and equipment imported after that period are unlikely to have been used in the production of subject goods. The CBSA acknowledge that an exemption of the 5% customs duty for some exporters may have provided a countervailable subsidy to exporters of COR, if used to import equipment, machinery and other capital used in the production of COR, or input used in the production of goods sold domestically.

The complainant maintains that this relief provides a beneficial financial contribution in the form of revenue foregone by government and that the benefit is specific because it is only available to enterprise located in such free-trade zones.^{Footnote 139}

Exporters of COR in the United Arab Emirates may have benefited from preferential export financing or export credit insurance from the GOU, in particular from the Etihad Credit Insurance (ECI). The ECI is a Public Joint Stock Company owned by the United Arab Emirates Federal Government and the Government of the Emirate of Abu Dhabi, the Government of the Emirate of Dubai, the Government of the Emirate of Ajman, the Government of the Emirate of Ras Al Khaimah and the Government of the Emirate of Fujairah.^{Footnote 140} Its website says it is a “specialized state institution to support the export and re-export of United Arab Emirates goods, works, services, and the foreign investments of United Arab Emirates companies, through the provision of a range of export credit, financing and investment insurance products.” Services offered also include “Post-shipment financing of exports through bills discounting with the commercial banks at concessional interest rates [emphasis added]; and Pre-shipment financing facilities for exporters through commercial banks against guarantees issued by ECI for working capital requirements, so as to meet and enhance the opportunity for their export sales”.

The subsidy provided by this program constitutes a financial contribution pursuant to paragraph 2(1.6)(a) in the form of amounts that involve a direct transfer of funds, and the program confers a benefit equal to the difference between the interest payable on a commercial loan and the interest payable on the preferential loan provided by the government.

The provision of preferential loans is limited to export oriented enterprises, benefits under this program are a prohibited subsidy, as such subsidies are contingent, in whole or in part, on export performance. Prohibited subsidies are specific pursuant to paragraph 2(7.2)(b) of SIMA.

The CBSA has also identified an “Export Assistance Program” offered by the Dubai Export Development Corporation (Dubai Exports), believed to be the export promotion agency of the government of Dubai.^{Footnote 141} Under the program, according to the agency’s website, “companies can apply for reimbursement on the eligible export promotion activities such as market visits and participation in exhibitions.” Its website also refer to the program as “…an invaluable means to access funding for their export operations.”

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e., a practice of government that involves a direct transfer of funds. This grant confers a direct benefit to the recipient in the form of a grant, and the benefit is equal to the amount of the grant provided. Given that the grant appears limited to export oriented enterprises, benefits under this program are a prohibited subsidy, as such subsidies are contingent, in whole or in part, on export performance. Prohibited subsidies are specific pursuant to paragraph 2(7.2)(b) of SIMA.

Summary of the Vietnamese Subsidies to be Investigated

Due to the similarity of the programs, the following seven programs will be grouped into one program to be investigated: Exemptions of Import Duty

The programs of import duty exemptions are made available pursuant to the Law No. 107/2016/QH13^{Footnote 142} dated April 6, 2016, on export and import duties (Law No. 107) and Decree No. 134/2016/ND-CP^{Footnote 143} dated September 1, 2016, on guidelines for the law on export and import duties (Decree No. 134). The complainant notes that Law No. 107 replaced the Law on Export and Import Tax No. 45/2005/QH11^{Footnote 144} dated June 14, 2005, on detailing a number of articles of the law on export and import duties (Law No. 45). Decree 134 replaced Decree No. 87/2010/ND-CP^{Footnote 145} dated August 13, 2010, guiding the implementation of a number of articles of the Law on Export Tax and Import Tax (Decree No. 87).

Duty exemption is stipulated in Article 16 of Law No. 107 and specified in Article 5 to 29 of Decree No. 134. These programs were provided by the GOV.

This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to either enterprises in certain geographic areas or investment projects specified in Appendix 1 and Appendix 2 of Decree No. 118/2015/ND-CP^{Footnote 146} dated November 12, 2015, guiding the implementation of a number of articles of the law on investment.

The import duty refund program is made available pursuant to the Law No. 107/2016/QH13 dated April 6, 2016, on export and import duties (Law No. 107) and Decree No. 134/2016/ND-CP dated September 1, 2016, on guidelines for the law on export and import duties (Decree No. 134). The complainant notes that Law No. 107 replaced the Law on Export and Import Tax No. 45/2005/QH11 dated June 14, 2005, on detailing a number of articles of the law on export and import duties (Law No. 45). Decree 134 replaced Decree No. 87/2010/ND-CP dated August 13, 2010, guiding the implementation of a number of articles of the Law on Export Tax and Import Tax (Decree No. 87). Duty refund is stipulated in Article 19 of Law No. 107 and specified in Article 33 to 37 of Decree No. 134. These programs were provided by the GOV.

This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the refund.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to enterprises located in certain geographic areas or contingent upon export performance and, therefore, constitutes a prohibited subsidy as defined in subsection 2(1) of SIMA.

Based on CBSA research, non-agricultural land use tax is regulated by Law No. 48/2010/QH12^{Footnote 147} dated June 17, 2010, on non-agricultural land use tax (Law No. 48); Decree 53/2011/ND-CP^{Footnote 148} dated July 1, 2011, guiding the implementation of this Law No. 48; and Circular No. 153/2011/TT-BTC^{Footnote 149} dated November 11, 2011, guiding on non-agricultural land use tax (Circular No. 153). Articles 9 and 10 of Law No. 48 provide for tax exemption and reduction for non-agricultural land use. This program was provided by the GOV.

Appendix 1 of Decree No. 118/2015/ND-CP dated November 12, 2015, guiding the implementation of the Law on Investment (Decree No. 118), defines domains eligible for investment promotion and domains eligible for special investment preferences. Appendix 2 of Decree No. 118 defines areas with extreme socio-economic difficulties and areas with socio-economic difficulties eligible for investment preferences.

This program is 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 and/or exempted, and the program confers a benefit to the recipient equal to the amount of the reduction/exemption.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to industries located in the regions prescribed.

Due to the similarity of the programs, the following five programs will be grouped into one program to be investigated: Exemptions/Reductions of Land Rent, Tax and Levy

Land used for production and business purposes is governed by Law No. 45/2013/QH13^{Footnote 150} dated June 21, 2013, on Land (Law No. 45); Decree No. 46/2014/ND-CP^{Footnote 151} dated May 15, 2014, on regulating the collection of land rents and water surface rents (Decree No. 46); Circular No. 77/2014/TT-BTC^{Footnote 152} dated June 16, 2014, guiding Decree No. 46/2014/ND-CP; and Circular No. 333/2016/TT-BTC dated December 26, 2016, amending and supplementing a number of articles of Circular No. 77/2014/TT-BTC. Land rent exemption and reduction in land rent are provided in Articles 19 and 20 of Decree No. 46. These programs were provided by the GOV.

The program land-use levy exemption/reduction was terminated on July 1, 2014, as the effective date of the Law No. 45/2013/QH13 dated June 21, 2013, on Land (Law No. 45), replaced Law No. 13. Although this program was terminated on July 1, 2014, companies that were eligible for the program could have benefited from the subsidy while it was in effect. In particular, those exemptions/reductions could have pertained to land lease in which companies that were eligible under this program appeared to have an option of the lump sum payment for the entire period of land lease term. Depending on the length of the lease term and the timing of exemption on lump sum payments, the benefits could potentially be amortized over the following subsequent years.

This program is considered to be 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 and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to the List of domains entitled to investment incentives and the List of regions entitled to investment incentives as specified in Article 110 of the Law on Land 2013; Section II, Chapter II of Decree No. 46; and Appendix II of Decree 118/2015/ND-CP.

The following five programs will be grouped into one program to be initiated: Export and Import Support in Forms of Preferential Loan, Guarantee and Factoring

Investment credit and export credit are made available pursuant to Decree No. 75/2011/ND-CP^{Footnote 153} dated August 30, 2011, on state investment credit and export credit (Decree No. 75) and Decree No. 151/2006/ND-CP^{Footnote 154} dated December 20, 2006, on state investment credit and export credit (Decree No. 151). These programs were provided by the GOV.

Investment credit is stipulated in Chapter II and Appendix I of Decree No. 75 and in Chapter II and List of Eligible Projects for Investment Credit of Decree No. 151. Export credit is stipulated in Chapter III and Appendix II of Decree No. 75 and in Chapter III and the List of Eligible projects for export credit of Decree No. 151. The regulation of guarantee operation was detailed in the Circular 28/2012/TT-NHNN^{Footnote 155} issued by the State Bank of Vietnam.

This program is considered to be 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 and/or exempted. The potential benefit under this program is equal to the difference between the cost of the credit in the open market and the preferential rate provided by the government.

The program may be considered specific pursuant to paragraph 2(7.2)(b) of SIMA as it is contingent upon export performance and, therefore, constitute a prohibited subsidy as defined in subsection 2(1) of SIMA.

The following seven programs will be grouped into one program to be investigated under: Enterprise Income Tax Preferences, Exemptions and Reductions

Corporate income tax and tax benefits are governed by Law No. 14/2008/QH12^{Footnote 156} dated June 3, 2008, on Enterprise Income Tax 2008 (Law No. 14); Law No. 32/2013/QH13^{Footnote 157} dated June 19, 2013, on amending and supplementing a number of articles of Law on Enterprise Income Tax 2008 (Income Tax 2008 Amending); Law No. 71/2014/QH13^{Footnote 158} dated December 8, 2014, on amending and supplementing a number of articles of the laws on taxes (Law No. 71); Decree No. 218/2013/ND-CP dated December 26, 2013, on detailing and guiding the implementation of law on corporate income tax (Decree No. 218) and Decree No. 12/2015/ND-CP dated February 12, 2015, on elaboration of the law on amendments to tax laws (Decree No. 12). Income tax rate preference is provided in Article 15 of Decree No. 218 and tax exemptions and reductions is provided in Article 16 of Decree No. 218. This program was provided by the GOV.

Article 20.2 of Decree 218 allows the continuation of the application of corporate income tax preferences granted before the Decree’s effective date as of February 15, 2014, if those preferences are more advantageous than those granted under Decree 218.

According to Article 15 of Law No. 67/2014/QH13 dated November 26, 2014, on the Law on Investment (Law No. 67), corporate income tax preferences apply to: (1) Economic zone, high-tech zone established by Decision of the Prime Minister in area with difficult socio-economic conditions; (2) Industrial, processing zone established by Decision of the Prime Minister in areas with special difficult socio-economic conditions specified in Attachment II to Decree No. 118/2015/ND-CP dated November 12, 2015, on guidelines for some articles of the law on Investment (Decree No. 118).

This program is 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 and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to investment projects within certain eligible geographic areas as specified in Article 15 of Law No. 67.

The following two programs will be grouped into one program to be investigated: Investment Support

The complaint listed these two programs which referred to the US DOC’s final determination in Certain Steel Nails.

The programs are made available pursuant to Decree 108/2006/ND-CP^{Footnote 159} dated, September 22, 2006.^{Footnote 160} Decree 108 details in which areas the government will support new investments. Appendix 1 of Decree 108 lists manufacturer of high-quality steel, alloys, special metal, porous iron and steel billet as the domains entitled to investment preferences which COR manufacturers may fall under. This program was provided by the GOV.

This program is a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts confer a benefit to the recipient equal to the amount of the extra support received from the government.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to a list of sectors entitled to investment incentives and a list of geographical areas entitled to investment incentives as specified in Appendix I and II and of the Law.

The National Trade program was established by Decision No. 279/2005/QD-TTg of 3 November 2005. The Decision constituted the framework for state-funded trade promotion activities from 2006 to 2010. The state funding of these activities was derived from the Export Promotion Fund, established pursuant to Prime Minister's Decision No. 195/1999/QD-TTg.

The Decision 279 was amended and supplemented by Prime Minister's Decision No. 80/2009/QD-TTg of 21 May 2009 which made the program more flexible providing local businesses with an ability to seek approval for capital support.^{Footnote 161}

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and the program confers a benefit to the recipient equal to the amount of the grant.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because Article 9 of Decision 279 specifies the types of trade promotion schemes that are eligible for support and Article 10 specifies the level of support that is available for each of the eligible schemes.

Accelerated depreciation of fixed assets is specified in Circular 45/2013/TT-BTC^{Footnote 162} dated April 25, 2013, provides guidance on the management regime, use, and depreciation of fixed assets (Circular 45). According to Article 1, Circular No. 45 applies to enterprises established and operating in Vietnam under regulations of law. Enterprises are permitted to choose their preferred method of depreciation, period of depreciation of fixed assets according to Circular No. 45 and must notify the tax authority before implementation. This program was provided by the GOV.

Article 35 of Law No. 59/2005/QH11 dated November 29, 2005, on the Law on Investment (Law No. 59) provides for investment projects in investment incentive sectors and geographical areas and business projects with high economic efficiency to adopt accelerated depreciation of fixed assets.

This program is 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. While a recipient pays the same amount of tax over time, an earlier deduction of tax liabilities potentially allows the recipient to earn interest on the savings from a deferment of tax. Any amount of interest earned from a deferment of tax liabilities may reduce the total amount of tax payable to the government and hence the program confers a benefit to the recipient.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to a list of sectors, geographical areas and business projects as specified in Article 35 of Law No. 59.

The GOV reported this subsidy program in its New and Full Notifications pursuant to Article 25 of the WTO Agreement on Subsidies and Countervailing Measures, dated, March 13, 2013. This program was provided by the GOV.

According to the GOV response, this program targets companies facing difficulties that arise as the result of unforeseen circumstances, such as: policy changes in terms of taxation; relocation of enterprises upon request of competent authorities; loss due to natural disaster, etc.

Depending on the form of benefit, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and the program confers a benefit to the recipient equal to the amount of the grant. This program may also be considered 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 and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to particular enterprises targeted by the GOV.

The complaint listed this program and referred to the CBSA’s final determination in Oil Country Tubular Goods II (OCTG II). This program was initiated and reviewed in OCTG II, but neither the GOV nor any exporters in Vietnam provided sufficient subsidy information regarding the program. The complainant didn’t provide any updated information about the subsidy program or evidence regarding the applicability of the subsidy program to producers of CRS.

Based on CBSA research, Article 14 of the Law on Enterprise Income Tax, No.14/2008/QH12, states that enterprises incurring losses are allowed to conduct loss carry forward to subsequent years. The amount of loss is used to offset taxable income in the subsequent years. The maximum duration of loss carry forward cannot exceed five years.

On the basis of the information currently available, the program appears to be generally available to all enterprises operating in Vietnam and no information available to the CBSA at this time suggests the specificity of the program. Therefore, the program was removed from the investigation for the initiation purposes.

The complaint listed these two programs and referred to the CBSA’s final determination in OCTG II. These programs were initiated and reviewed in OCTG II, but neither the GOV nor any exporters in Vietnam provided sufficient subsidy information regarding the program. The complainant didn’t provide any updated information about the subsidy program or evidence regarding the applicability of the subsidy program to producers of COR.

Moreover, these programs are more likely to be covered by the previously discussed programs related to subsidy in income tax and import duty. Therefore, the program was removed from the investigation for the initiation purposes.

A summary of Vietnamese subsidy programs to be initiated is as follows:

Relief from Duties and Taxes

Preferential Loans and Loan Guarantees

Preferential Tax Programs

Grants and Grant Equivalents