Statement of reasons—Initiation of investigation: Corrosion-Resistant Steel Sheet 3 (COR3 2024 IN)

Current measures in force: COR and COR2

[4] In recent years there have been two CBSA dumping investigations and one subsidy investigation regarding COR that have resulted in COR exports to Canada being subject to anti-dumping and/or countervailing duties. The current measures are identified as COR and COR2 and have been in force since 2019 and 2020, respectively. COR includes goods from China, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei), India and South Korea; COR2 includes goods from Türkiye and Vietnam.

Domestic industry

[5] The domestic industry is comprised of three producers, ArcelorMittal Dofasco G.P. (AMD), Material Sciences Corporation, and Stelco Inc. (Stelco).

[6] ArcelorMittal Dofasco (AMD) operates a total of six galvanizing lines, four of which are located in Hamilton, Ontario, one in Windsor, Ontario, and one in Coteau-du-Lac, Québec.^{Footnote 1} A seventh line is currently idled. It is the largest of the three producers of COR in Canada.

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

[7] Material Sciences Corporation operates a continuous electro-galvanizing line in Rexdale, Ontario.^{Footnote 2}

Material Sciences Corporation
1430 Martin Grove Road
Rexdale, ON  M9W 4Y1

[8] Stelco’s facilities are located in Hamilton and Nanticoke, Ontario. Together, more than 2,300 employees work to produce up to three million net tons of steel products each year. Stelco’s Hamilton facility is home to its 4-stand tandem mill that produces cold-rolled sheet and COR.^{Footnote 3}

Stelco Inc.
386 Wilcox Street
Hamilton, ON

Exporter

[9] The exporter of the subject goods is Borçelik in Türkiye. The exporter was asked to respond to the CBSA’s dumping request for information (RFI).

Borçelik Sanayi Ticaret A.Ş.
Ata Mh. 125 No’lu Sokak No:1
Gemlik, Bursa, Türkiye, 16601

Importers

[10] The CBSA identified eleven potential importers of the subject goods from CBSA import documentation. All of the potential importers were asked to respond to the CBSA’s importer RFI.

Definition

[11] For the purpose of this investigation, subject goods are defined as:

Additional product information^{Footnote 4}

[12] 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.

[13] 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.

[14] 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.

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

[16] COR 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, COR produced from either carbon steel or alloy steel is included in the definition of the subject goods.

[17] 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

[18] 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.

[19] For greater clarity, the product definition does not cover:

• 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

Product process^{Footnote 5}

[20] 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.

[21] 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.

[22] 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.

Product use^{Footnote 6}

[23] 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.

Classification of imports

[24] Beginning January 1, 2022, under the revised customs tariff schedule, subject goods are normally classified under the following tariff classification numbers:

1. 7210.30.00.00
2. 7210.49.00.40
3. 7210.49.00.50
4. 7210.49.00.60
5. 7210.49.00.70
6. 7210.61.00.10
7. 7210.61.00.20
8. 7210.69.00.10
9. 7210.69.00.20
10. 7212.20.00.10
11. 7212.20.00.20
12. 7212.20.00.30
13. 7212.20.00.40
14. 7212.30.00.10
15. 7212.30.00.20
16. 7212.30.00.30
17. 7212.30.00.40
18. 7212.50.00.30
19. 7212.50.00.40
20. 7212.50.00.50
21. 7212.50.00.60
22. 7225.91.00.10
23. 7225.91.00.20
24. 7225.91.00.30
25. 7225.91.00.40
26. 7225.92.00.10
27. 7225.92.00.20
28. 7225.92.00.30
29. 7225.92.00.40
30. 7226.99.00.11
31. 7226.99.00.12
32. 7226.99.00.13
33. 7226.99.00.19

[25] These tariff classification numbers may also include non-subject goods, and subject goods may also fall under additional tariff classification numbers.

Period of investigation

[26] The CBSA typically selects a period of investigation (POI) that covers a twelve-month period that ends within three months of the date of initiation of an investigation. The CBSA has, therefore, selected a POI of October 1, 2023 to September 30, 2024 for the purposes of this investigation.

Like goods and single class of goods

Like goods

[27] Subsection 2(1) of SIMA defines “like goods” in relation to any other goods as “… (a) goods that are identical in all respects to the other goods, or (b) in the absence of any [such] goods…, goods the uses and other characteristics of which closely resemble those of the other goods”. In considering the issue of like goods, the CITT typically looks at a number of factors, including the physical characteristics of the goods, their market characteristics and whether the domestic goods fulfill the same customer needs as the subject goods.

[28] In its past inquiries involving COR, the CITT determined that domestically produced COR constituted like goods to the goods at issue. In making both the COR^{Footnote 7} and COR2^{Footnote 8} findings, the CITT determined that domestically produced COR were like goods to the goods at issue in those inquires.

[29] For the purposes of this analysis, like goods consist of domestically produced COR as described in the product definition. For additional clarity, like goods do not include COR which is excluded from the subject goods product definition, such as COR for automotive use.

[30] As there has been no substantive change of circumstances with respect to the criteria identified by the CITT in the previous proceedings, the CBSA is satisfied that the like goods and subject goods are commodity goods that compete with one another in the Canadian market place, and are fully interchangeable. After considering questions of use, physical characteristics and all other relevant factors, the CBSA is of the opinion that domestically produced COR is “like goods” to the “subject goods” and forms a single class of goods for the purposes of this dumping investigation.

Normal value

[38] The CBSA does not have actual domestic sales information or actual costing information for Borçelik’s COR products. As a result, the CBSA used the best available information to estimate normal values for subject COR imports from Borçelik.

[39] For purposes of initiation, the CBSA estimated normal values using the normal values for future use issued to cooperative Turkish COR exporters during the most recent COR2 re-investigation. The CBSA considers this to be the best information available as these are actual normal values that were issued pursuant to section 15 or paragraph 19(b) of SIMA and they are currently in place for those cooperative exporters. Additionally, these normal values were in place during the POI. Lastly, COR2 shares the same product definition and the normal values covered a wide variety of subject COR.

[40] The CBSA relied upon the customs declaration information available in the FIRM and ACROSS databases for the import analysis. As the information available in FIRM and ACROSS do not include a complete description for product characteristics, the CBSA is unable to estimate model specific export prices.

[41] The customs declaration information available in FIRM and ACROSS permitted the CBSA to estimate monthly export prices for all subject COR imports from Borçelik. As such, monthly normal values were estimated using the current Turkish COR normal values from cooperative exporters. Based on a review of the statistical distribution of the estimated normal values, the median normal value was considered as the most representative estimate for each month of the POI. This normal value was then converted to the Canadian dollar per metric ton by using the exchange rate information from the Bank of Canada to estimate monthly normal values for the POI.

[42] Based on a lack of any other publically available information, the CBSA finds these estimates to be reasonable for the purposes of estimating normal values for initiation.

Export price

[43] In order to estimate export prices and determine the volume and value of imports of subject goods into Canada from Borçelik, the CBSA relied upon the customs declaration information available in the FIRM and ACROSS databases.

[44] The CBSA used information in ACROSS to correct errors in the FIRM database and remove non-subject imports.

[45] In estimating export prices for subject COR imports from Borçelik, the CBSA used the value for duty data as reported in the FIRM database for each individual shipment imported during the POI.

Estimated margin of dumping

[46] The CBSA estimated the margin of dumping for subject goods from Borçelik by comparing the total estimated normal values with the total estimated export prices for the POI. Based on this analysis, the estimated margin of dumping for Borçelik is listed in the table below.

Background and volume of imports

[58] Based on CBSA’s estimates, subject goods from Borçelik accounted for 11.5% of total imports during the POI.

[59] The CBSA’s data of import volumes shows a trend of rising imports from Borçelik which increased considerably from 2021 to 2024.

[60] Furthermore, imports from Borçelik increased 116% when comparing the period of January to September 2023 to the same period in 2024.

[61] Additionally, while imports from Borçelik have been increasing, overall imports of subject goods have been steadily decreasing. Total imports have decreased 19% from 2021 to 2022 and 3% from 2022 to 2023. This demonstrates that although total imports are decreasing, Borçelik is gaining market share, which can likely be attributed to price undercutting.

[62] The increased imports from Borçelik have also led to a loss of market share for the domestic producers. The market share of domestic producers dropped 11% from 2021 to 2022 and another 4% from 2022 to 2023, in terms of value.

[63] In summary, based on the CBSA’s estimates and analysis of import volumes, the CBSA finds an increase of import volumes from Borçelik. The increase was substantial in both absolute and relative terms.

Lost sales and price depression

[64] The domestic industry provided evidence of instances where they were forced to lower prices or have lost sales in response to allegedly dumped imports from Borçelik.^{Footnote 14}

[65] Imports of subject goods from Borçelik have leveraged low prices in order to gain market acceptance, which has resulted in lower selling prices and lost sales for the domestic industry which in turn causes lost revenue and material injury.

Price undercutting

[66] The allegedly dumped goods have captured market share by undercutting prices. According to the CBSA’s data during the POI, Borçelik represented 11.5% of total imports, and even with the expense of shipping COR long distances, COR from Borçelik is still priced well below the prices offered by the Canadian producers.^{Footnote 15}

[67] Based on the analysis of CBSA’s FIRM data, during the POI, Borçelik’s average price of COR was well below that of the domestic producers’. Likewise, as discussed above, these prices are undercutting the domestic industry to secure sales. This demonstrates that the imports from Borçelik have undercut prices to gain market share.

CBSA’s conclusion: Injury

[68] Overall, based on the CBSA’s analysis through its own research and customs documentation, as well as the information provided by the domestic industry, the CBSA finds that the evidence discloses a reasonable indication that the dumping of the subject goods from Türkiye by Borçelik have caused injury to the COR industry in Canada by way of increase of subject imports and loss of market share, lost sales, price depression and price undercutting.

The rate of increase in the volume of subject goods imports

[70] Following the positive finding against COR2 countries, the volume of imports of COR from Turkish exporters, excluding Borçelik, has been negligible. According to the CBSA’s import data, the total imports of COR from all other Turkish exporters accounted 0.1%, 0.2% and 0% of total imports of COR in 2021, 2022 and 2023, respectively. However, the volume of COR imports from Borçelik have steadily risen from 2021 to 2023. Specifically, imports of COR from Borçelik accounted 4.7%, 5.6% and 8.1% of total imports in 2021, 2022 and 2023, respectively. While the volume of imports from Borçelik declined slightly in 2022 in absolute terms, it maintained an increasing trend in relative terms. Furthermore, imports of COR from Borçelik during January 2023 to September 2023 accounted for 7.7% of total imports. When comparing to the same period in 2024, imports rose significantly, accounting for 12.1% of total imports, demonstrating a continuing increasing trend of Borçelik’s imports.

[71] The statements provided by the domestic producers have also indicated they anticipate two more shipments of COR from Borçelik by the end of 2024.^{Footnote 16}

[72] As stated above, the CBSA’s analysis of import data shows a consistent trend of rising import volumes from Borçelik, with a significant acceleration in the rate of increase observed in 2024. The CBSA believes that the trend of increased volume of imports of subject goods could lead to further increases at prices that substantially undercut domestic producers’ pricing, which will threaten to take further market share from Canadian producers.

International market conditions and the attractiveness of the Canadian market^{Footnote 17}

[73] In the most recent expiry review investigation of COR, which concluded in June 2024, the CBSA noted that the global economic growth is expected to remain low to moderate. Specifically, the IMF forecasted GDP growth rates of 3.1% in 2024 and 3.2% in 2025, impacted by various factors including high global inflation, conflicts, persistent trade disruptions and contraction in China’s real estate sector. The IMF noted that the 2024-2025 forecasts were below the historical average of 3.8%, between 2000 and 2019. Similarly, the World Bank also anticipates a growth rate of 3.0% in 2025 due to persistent high inflation, high interest rates, reduced investments and disruptions due to the Russian-Ukrainian conflict. The CBSA further noted that while high inflation and interest rates have resulted in limited steel demand globally, there are indications that consumption of steel in advanced economies are beginning to recover moderately which could lead to these markets being the target for dumped COR.

[74] With respect to the attractiveness of the Canadian market, the CBSA noted that the Canadian economy is in a period of weak but stable growth as the Bank of Canada reported Canadian GDP growth of 1.0% for 2023 and has forecasted GDP growth rebounding to 2.4% in 2025. The CBSA further noted that despite the weaker economy growth forecast, Canada continues to be an attractive market for steel exporters to export steel products, in particular goods that are produced from flat-rolled steel, at dumped prices into Canada. This can be attributed to relatively higher pricing for steel products in North America than many other markets, as seen commonly across CBSA measures in force involving the steel industry, making it an attractive destination. This can hold true for companies looking to maximize profits, as well as those facing weakening demand in their home markets and those who seek to offload capacity and sell at dumped or subsidized prices.

[75] Based on the above, the CBSA found that various steel sectors, including COR, will continue to be impacted by volatile conditions affecting the global economy and that Canada represents an attractive market for COR producers to eliminate excess production capacity which may result in continued dumping of subject goods into Canada. This poses a threat to the domestic industry, as COR exported from Borçelik is excluded from the current COR2 measure in force for Turkish COR. Borçelik is likely to be motivated to further increase its exports to Canada in an effort to regain market share previously captured by other Turkish exporters. The domestic producers submitted that this will be done by means of price undercutting, price suppression and loss of sales domestically.^{Footnote 18}

Trade measures by Canada and other countries in respect of goods of the same description or in respect of similar goods

[76] Domestically, there are already dumping and subsidy findings against Türkiye with respect to COR, excluding COR exported to Canada from Türkiye by Borçelik. This poses a threat to the domestic industry as Borçelik is able to further increase its exports to Canada in an effort to regain market share previously captured by other Turkish exporters.

[77] With respect to trade remedies by other countries, the United States and European Union have trade measures against a wide range of steel imports including COR from Türkiye through Section 232 tariffs and safeguard measures. The trade measures in place in other countries against COR from Türkiye limit Borçelik’s access to these foreign markets. Furthermore, the United States recently initiated an anti-dumping investigation of COR from many countries including Türkiye, which would presumably include goods from Borçelik as they are a major producer of COR. If the United States places a positive finding against COR from Türkiye, it will likely lead Borçelik to focus more on Canadian market. Borçelik, whose goods are excluded from the current COR2 measure in force for Turkish COR, will have a propensity to take advantage of this exclusion and continue to increase their exports to Canada.

Prices that are likely to have a significant depressing or suppressing effect

[78] The importations of subject goods are entering the Canadian domestic market at prices that are having a depressing or suppressing effect on the price of like goods and are likely to increase demand for further imports of the goods, which will further force the domestic industry to lower their prices, resulting in lost revenue and reduced profitability. The statements provided by the domestic producers included evidence of subject goods prices undercutting the domestic industry prices from 2021 to 2024.

[79] Based on an analysis of CBSA’s import data, the average price of COR from Borçelik in January to September 2024 was the lowest average price since 2021. It was also lower than the same period in 2023, which demonstrates a continued decreasing trend of their pricing. Based on the domestic pricing information provided by the domestic producers, these imports were priced well below the average domestic price during the period from January to September 2024.^{Footnote 19} Furthermore, the domestic producers indicated that one of the anticipated shipments of COR from Borçelik in 2024 will also be priced much below their domestic pricing.^{Footnote 20} In the absence of a finding it is highly likely that Borçelik will continue to export subject goods at prices that will have a depressing or suppressing effect as their import volumes have also increased during the same periods.

Impacted financial results

[80] In the statements provided by the domestic producers, they submitted that their financial results are impacted due to the price depression caused by the low-priced imports from Borçelik. To support this, AMD provided their financial analysis of COR sales from 2018 through to Q3 2024 and Stelco provided theirs from 2021 to Q3 2024.^{Footnote 21}

[81] The CBSA has reviewed this information and has noted that the financial performance of these companies has been impacted since 2021. As stated above, imports of COR from Borçelik are undercutting the domestic pricing and have shown a downward trend of import prices. The trend suggests that the extent of price undercutting is likely to increase, with lower-priced COR imports from Borçelik posing a significant threat of injury to the domestic industry.

Investments

[82] In the statements provided by the domestic producers, they submitted that they have made extensive investments with respect to their COR business and also have planned investments in near future. They stated that these investments are at risk if they have to continue competing with high volumes of low-priced imported COR from Borçelik.^{Footnote 22} Stelco submitted that imports of dumped COR from Borçelik would adversely affect their ability to earn a return on their strategic capital investment plan and put future investment, as well as the employment associated with these investments, at risk. Similarly, AMD submitted that they expect to make substantial investments in COR production and production of inputs for COR over the 2024 to 2026 period.^{Footnote 23} They submitted that the continued dumped imports from Borçelik would negatively impact their financial results.

[83] Upon review of the information provided by the domestic producer, the CBSA determined that the information provided confirms a threat of injury of the investments.

The risk of product shifting^{Footnote 24}

[84] COR is a downstream product of HRS and CRS. While HRS and CRS are standalone goods, they are also primary input materials for a number of different steel products. As such, if a trade measure is imposed on upstream HRS and/or CRS products, either in Canada or another country, the affected foreign producer is likely to shift production and increase the exports of goods that are not subject to the trade measure, such as COR. There is currently a number of trade measures against steel products related to COR, including in the European Union, Morocco, Thailand, the United States, Brazil, Australia, Indonesia and Malaysia.^{Footnote 25} These trade measure that are currently in place against the steel products related to COR from Türkiye will likely encourage Borçelik to focus on exporting of COR to Canada, as they have a narrowing list of products and export markets for goods related to COR production.

[85] The CBSA notes that the product shifting as a result of the restrictions described above could significantly increase the production capacity of Borçelik with respect to COR. The CBSA further recognizes that this, in turn, could lead to increased volumes of subject goods being offered in the Canadian market at low prices to capture market share.

CBSA’s conclusion: Threat of injury

[86] An increasing trend of volume of subject goods imports; volatile international market conditions and the attractiveness of the Canadian market; impacted financial results and investments; further price depression or suppression; risk of product shifting and the propensity to dump steel demonstrate that there is a reasonable indication that subject goods threaten the domestic industry with injury.