CRS 2018 IN
Cold-Rolled Steel
Statement of Reasons

[8] ArcelorMittal Dofasco G.P was founded as the Dominion Steel Casting Company in 1912 in Hamilton, ON. In 2006 Dofasco was acquired by Arcelor S.A. Later that year, Arcelor S.A merged with Mittal Steel.

[9] ArcelorMittal Dofasco G.P produces CRS at its facility in Hamilton, ON. The company is the largest of three producers of CRS in Canada.

[10] The contact information of the complainant is as follows:

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

[11] The other manufacturers of like goods in Canada are:

Essar Steel Algoma Inc.
105 West Street
Sault Ste. Marie, Ontario

Stelco Inc.
386 Wilcox Street
Hamilton, Ontario

[12] The CBSA identified 284 potential 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 Request for Information (RFI). Potential exporters in China, South Korea and Vietnam were also asked to respond to the CBSA’s Subsidy RFI. Finally, potential exporters located in China and Vietnam were asked to respond to the CBSA’s Section 20 RFI.

[13] The CBSA identified 62 potential 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.

[14] Upon initiation of the investigations, the governments of China, South Korea and Vietnam were sent the CBSA’s Government Subsidy RFI requesting information concerning subsidy programs available in each respective country. In addition, the Governments of China and Vietnam were sent the CBSA’s Government Section 20 RFI.

[15] For the purposes of these investigations, “Government of China (GOC)”, “Government of South Korea (GOK)”, 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.

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

[17] For greater certainty, where the nominal and actual measurements vary, a product is considered to be subject goods if either the actual or nominal measurement (being plus or minus allowable tolerances in the applicable standards), meets the definition set forth above.

[18] The product definition covers both annealed and “full-hard” (unannealed) CRS as well as rectangular and non-rectangular cross-section products.

[19] The maximum widths and thicknesses that apply to non-rectangular CRS are the same as those that apply to rectangular CRS, i.e., thicknesses up to 0.142 inches (3.61 mm) and widths up to 73 inches (1854 mm) inclusive.

[20] The product definition includes carbon steel, whether alloyed or non-alloyed. Alloying elements may include boron, titanium, manganese, silicon, copper, aluminum chromium, cobalt, lead, nickel, tungsten, molybdenum, niobium, vanadium, and zirconium.

[21] The product definition includes cold-rolled steels generally described as interstitial free (IF) steels, high-strength-low-alloy (HSLA) steels, motor lamination steels and advanced high-strength steels (AHSS). IF steel is a common term for a low carbon steel with low levels of elements like titanium or niobium. HSLA steels contain low levels of elements like copper, titanium, chromium, niobium, vanadium and/or molybdenum. Motor lamination steels contain low levels of elements like silicon and aluminium, but are commercially and metallurgically distinct from silicon-electrical steel. AHSS is a term used to describe steel with high tensile strength.

[22] CRS includes “black plate”, which is an industry term used to describe light gauge, low carbon, cold-reduced steel intended for use in the production of tin mill products or for use in its untinned state. It is supplied either dry or oiled. CRS for use in the production of tin mill products is included in the product definition (as it is black plate), but the finished product, tin plate, is excluded from the product definition.

[23] CRS is manufactured to meet certain Canadian Standards Association (CSA) and/or ASTM specifications, or equivalent specifications. ASTM specifications for cold-rolled steel meeting the product definition include, but are not limited to A568/A568A, A606/A606M, A424, A1008/A1008M, A726, A625/A625M, and A650/A650M. CRS that does not meet a specification is generally referred to as “non-prime” or “seconds”. Both prime and non-prime CRS for non-automotive uses are included in the product definition.

[24] The product definition excludes CRS with organic and metallic coatings. Coating methods include spraying, laminating, plating and hot-dip treatments.

[25] The product definition excludes cold-rolled steel for use in automobiles and automobile parts, hereafter referred to as “automotive”. Automotive producers include Original Equipment Manufacturers (OEMs) and part producers.

[26] The product definition excludes perforated cold-rolled steel. Perforated steel is steel sheet that has a pattern of punched or stamped holes throughout the length and width of the steel sheet.

[27] The product definition excludes stainless cold-rolled steel. The Customs Tariff currently defines stainless steel as steel containing no more than 1.2% carbon and 10.5% or more of chromium by weight. This is the same definition that will apply to the subject goods definition. Stainless steel may also include other alloying elements. Stainless steel is commercially and metallurgically distinct from carbon steel, including alloyed carbon steel. Alloyed carbon steel (or alloy carbon steel) is included in the product definition.

[28] The product definition excludes silicon-electrical steel. Silicon-electrical steels include both grain-oriented electrical steel (commonly known as GOES) and non-oriented electrical steel (NOES). At present, the notes to Chapter 72 of Canada’s Customs Tariff schedule defines silicon-electrical steel as:

Alloy steels containing by weight at least 0.6% but not more than 6% of silicon and not more than 0.08% of carbon. They may also contain by weight not more than 1% of aluminum but no other element in a proportion that would give the steel the characteristics of another alloy steel.

[29] The above definition of silicon-electrical steel will apply to the subject goods definition.

[30] The product definition excludes tool steel. Tool steel is a variety of steel with distinct characteristics, such as hardness, that make it suitable for hand tools and dies. Tool steel will meet CSA or ATSM standards, such as ASTM 681 or ASTM 686. The Custom Tariff has specific tariff classification numbers for cold-rolled tool steel, such as such as 7225.50.00.11 and 7225.50.00.21.

[31] More specifically, tool steel is defined as steel which contains the following combinations of elements in the quantity by weight respectively indicated: (i) more than 1.2 percent carbon and more than 10.5 percent chromium; or (ii) not less than 0.3 percent carbon and 1.25 percent or more but less than 10.5 percent chromium; or (iii) not less than 0.85 percent carbon and 1 percent to 1.8 percent, inclusive, manganese; or (iv) 0.9 percent to 1.2 percent, inclusive, chromium and 0.9 percent to 1.4 percent, inclusive, molybdenum; or (v) not less than 0.5 percent carbon and not less than 3.5 percent molybdenum; or (vi) not less than 0.5 percent carbon and not less than 5.5 percent tungsten.

[32] CRS falling within the product definition is commonly used in the production and manufacture of other goods, including household appliances, drums, tubing, furniture and strapping.

[33] The primary input for CRS is hot-rolled steel sheet (HRS). While details may vary from mill to mill, the process by which HRS is produced is essentially the same for all domestic producers.

[34] HRS is rolled on a continuous strip mill at temperatures above 1600°F (870°C) from an incoming hot slab up to 9" (229 mm) thick. The slab is made of steel produced in a basic oxygen furnace or an electric arc furnace. The slab is progressively reduced to a sheet of the required thickness, 0.625" (15.875 mm) or less. Processing in the mill may include slitting or shearing to remove tongues and tails from the sheet. During hot-rolling, surface oxide (scale) forms, which is not acceptable for cold-rolling. This scale may be removed at a separate pickle line mill or at a continuous pickling cold-rolling mill. After pickling, rinsing and drying, oil may be applied as a temporary protection against rust.

[35] HRS is transformed into CRS through a cold-rolling process. The HRS is reduced in thickness by a cold reduction rolling process on a continuous or reversing cold-rolling mill. The process produces a steel that is referred to as “full-hard”. Full-hard steel has minimal ductility (i.e., it is not pliable) and it can be sold in the merchant market or further processed as an annealed product. “Full hard” sheet may go through further internal processing into non-like goods, such as conversion to corrosion-resistant steel sheet or tin-plate.

[36] Annealing is the process of heating and cooling the steel to recover ductility. After annealing, a sheet may go through a temper rolling process that results in improved sheet shape, surface and performance during steel fabrication.

[37] The subject goods are typically used in the production and manufacture of other goods, including household appliances, drums, tubing, furniture and strapping.

[38] Prior to January 1, 2017, the allegedly dumped and subsidized goods were normally classified under the following tariff classification numbers:

• 7209.15.00.10
• 7209.15.00.40
• 7209.16.00.10
• 7209.16.00.20
• 7209.17.00.10
• 7209.17.00.20
• 7209.18.00.10
• 7209.18.00.20
• 7209.25.00.10
• 7209.25.00.20
• 7209.26.00.10
• 7209.26.00.20
• 7209.27.00.10
• 7209.27.00.20
• 7209.28.00.10
• 7209.28.00.20
• 7209.90.00.90
• 7211.23.00.00
• 7211.29.00.00
• 7211.90.00.90
• 7225.50.00.19
• 7225.50.00.29

[39] Beginning January 1, 2017, under the revised customs tariff schedule, subject goods are normally classified under the following tariff classification numbers:

• 7209.15.00.00
• 7209.16.00.00
• 7209.17.00.00
• 7209.18.00.00
• 7209.25.00.00
• 7209.26.00.00
• 7209.27.00.00
• 7209.28.00.00
• 7209.90.00.00
• 7211.23.00.00
• 7211.29.00.00
• 7211.90.00.00
• 7225.50.00.00

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

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

1. the complaint is supported by domestic producers whose production represents more than 50% of the total production of like goods by those domestic producers who express either support for or opposition to the complaint; and
2. the production of the domestic producers who support the complaint represents 25% or more of the total production of like goods by the domestic industry.

[48] As the complaint is supported by all known producers of like goods in Canada, the CBSA is satisfied that the standing requirements pursuant to subsection 31(2) of SIMA have been met.

Complainant’s Estimates

[62] The complainant did not estimate the normal values for CRS from China using the methodology of section 15 of SIMA. The complainant provided information from the publicly available annual reports from a number of Chinese producers of CRS as well as price information reported in the CRU International Limited (CRU) and MEPS International Ltd (MEPS) publications. However, the complainant concluded that this information could not be used as it does not meet the criteria of section 15 of SIMA. Specifically, the complainant stated that the price information was based on both like goods and goods that are not like goods in relation to subject CRS. As such, these goods would not permit a proper comparison to the subject goods.

[63] With respect to South Korea, the complainant provided domestic price information as reported in the MEPS publication. However, the complainant did not estimate the normal values for CRS from South Korea using the methodology of section 15 of SIMA. The complainant again concluded that this information could not be used as it does not meet the criteria of section 15 of SIMA for the same reason as noted above.

[64] The complainant stated that they were unable to locate domestic price information for Vietnam and as such they were unable to estimate normal values using the methodology of section 15 of SIMA.

[65] Due to the fact that the domestic price information provided for China and South Korea does not meet the criteria of section 15 of SIMA, and due to the fact that domestic price information was unavailable for Vietnam, the complainant estimated normal values using a constructed cost approach to reflect the methodology defined under paragraph 19(b) of SIMA. The complainant based these estimates on their own costs of production for all domestically produced CRS that falls within the product definition, during the period Q4 2016 through Q3 2017, as well as public information from the named countries for the same period. This information was used to estimate normal values for goods imported into Canada during the period January 1, 2017 to December 31, 2017. The complainant submitted that it is appropriate to use cost information for this period due to the lag time between the production and shipment of the goods.

[66] One normal value was estimated for each named country by aggregating the estimated costs of producing the goods (materials, direct labour and overhead), a reasonable amount for selling, general and administrative (SG&A) costs and other costs, and a reasonable amount for profits.

[67] Material costs were estimated based on the complainant’s own data and adjusted based on HRS pricing in the named country or region. HRS is the primary material used in the production of CRS.

[68] For China, the complainant used the cost of HRS in China as reported by CRU. For South Korea, the complainant used the cost of HRS in South Korea as reported by MEPS. For Vietnam, the complainant used the average price of HRS for the Asia region (China, Japan, and South East Asia) as reported by CRU. The complainant was unable to locate Vietnam specific HRS pricing.^{Footnote 3}

[69] Labour costs were estimated based on the complainant’s labour costs and adjusted to reflect labour cost differences between Canada and each of the named countries. A downward adjustment was applied to these costs based on productivity adjusted cost of labour comparisons reported by the Boston Consulting Group and by Trading Economics.

[70] The wage adjustment factors were as follows:

China – downward adjustment of 50.6%^{Footnote 4}
South Korea – downward adjustment of 37.6%^{Footnote 5}
Vietnam – downward adjustment of 91.2%^{Footnote 6}

[71] Overhead costs were based on the complainant’s unadjusted factory overhead costs. According to the complainant they are an efficient and technologically advanced producer of CRS and as such, no downward adjustment to overhead costs is required.

[72] The complainant estimated the amounts for SG&A and financial expenses, as well as the amounts for profits, based on the publicly available financial statements of CRS producers in the named countries. For China, the complainant used amounts reported by Maanshan Iron and Steel Company in their annual financial statements. For South Korea and Vietnam, the complainant used amounts from POSCO and the Hoa Sen Group, respectively. These amounts for SG&A and financial expenses, as well as the amounts for profits, are reported as a percent of the cost of goods manufactured and are provided below.^{Footnote 7}

Item	China	South Korea	Vietnam
SG&A	3.7%	7.3%	10.7%
Financial Expenses	1.5%	0.1%	2.5%
Profit	7.3%	6.3%	7.6%

[73] The complainant provided information supporting the initiation of section 20 inquiries respecting the allegedly dumped goods from China and Vietnam. The complainant submitted that domestic selling prices in China and Vietnam are substantially influenced by government policies and should not be used in the calculation of normal values since the prices are not reflective of competitive market conditions. As a result, the complainant also estimated normal values for China and Vietnam using the methodology of section 20 based on surrogate country information.^{Footnote 8}

[74] The complainant submits that South Korea is an appropriate surrogate country as the cost of steel materials used by CRS producers in South Korea are based on international market pricing.

[75] The complainant estimated normal values for CRS from China and Vietnam based on the aggregate of the estimated cost of production in South Korea, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits, as per the methodology of subparagraph 20(1)(c)(ii) of SIMA. The normal values estimated by the complainant were calculated in the same manner as the South Korean paragraph 19(b) normal values discussed above.^{Footnote 9}

CBSA’s Estimates:

[76] The CBSA found the complainant’s section 19 and section 20 normal value estimates to be reasonable and representative.

[77] The CBSA acknowledges that the complainant’s estimated normal values lack specificity. The complainant did not estimate normal values for multiple specific products and instead provided one normal value based on the average total cost of production of all like CRS it produced during the period of Q4 2016 to Q3 2017, as adjusted, and other publicly available information.

[78] While the CBSA recognizes that there may be differences in the costs of production of the various types of like and subject goods, the CBSA finds this approach to be reasonable based on the export price information that was available to the complainant. As the complainant did not have information to estimate the export prices of specific CRS products imported from each country, they estimated one export price for each country based on publicly available import data obtained from Statistics Canada. This will be explained further in the “Export Price” section that follows. In order to make a comparison to the export price, the complainant estimated one normal value for each country. The CBSA finds that it is reasonable for the complainant to assume that the subject goods imported during 2017 would reflect a product mix similar to their production for the period of Q4 2016 to Q3 2017.

[79] In analyzing the evidence provided by the complainant, the CBSA noted an error in a formula contained in the complainant’s normal value calculations. The complainant indicated that the amount for profits for each named country was calculated as a percentage of the cost of goods manufactured, however, in the complainant’s normal value calculations, the amount for profits was multiplied by the total cost. The CBSA has adjusted the complainant’s normal value calculations accordingly.

[80] Based on the information available, the CBSA finds the complainant’s constructed cost methodology and constructed surrogate methodology are reasonable. As such, only the adjustments discussed above were made to the complainant’s estimates of normal values.

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

[82] As detailed in the “Section 20 Inquiries” section of this Statement of Reasons, the CBSA has information which demonstrates that the prices of CRS in China and Vietnam may be significantly affected by government policies in the respective countries and that prices of CRS in China and Vietnam may not be substantially the same as they would be if they were determined in a competitive market. As a result, normal values for China and Vietnam were estimated in accordance with the methodology of section 20 of SIMA.

[83] In summary, the CBSA has estimated normal values for China and Vietnam based on the methodology of subparagraph 20(1)(c)(ii) of SIMA, using surrogate information from South Korea. The CBSA has estimated normal values for South Korea using a constructed cost approach based on the methodology of paragraph 19(b) of SIMA.

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

[85] The export prices estimated by the complainant are based on publicly available import data obtained from Statistics Canada for the period of January 1, 2017 to December 31, 2017. As the Statistics Canada data includes both subject and non-subject goods, the complainant made a number of adjustments to remove non-subject goods. Based on the information available to the complainant, the CBSA finds these adjustments to be reasonable.

[86] The complainant estimated an average export price for each named country based on the weighted average declared value for 2017.^{Footnote 10}

[87] The CBSA estimated an export price for each named country based on the value for duty as declared on the customs entry documentation and reports generated through the Facility for Information Retrieval Management (FIRM) for each individual shipment imported from January 1, 2017 to December 31, 2017. The CBSA reviewed customs entry documentation for CRS entering Canada and adjusted the FIRM data to correct any errors respecting the quantity and value for duty.

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

Table 2
Estimated Margins of Dumping

Country	Estimated Margin of Dumping as % Export Price
China	25.0%
South Korea	14.8%
Vietnam	61.0%

[93] With respect to China, the complainant provided evidence supporting its claim that the GOC substantially determines domestic prices of CRS. This included evidence of export and import controls as well as state-ownership in the steel industry and flat-rolled steel sector. The complainant also cited specific GOC policies such as the National Steel Policy and the Steel Revitalization/Rescue Plan, the 12th Five-Year Development Plans for the Steel Industry, and the 13th Five-Year Plan on National Economic and Social Development.^{Footnote 13}

[94] The information currently available to the CBSA indicates that there are numerous GOC industrial policies that have been implemented which influence the steel industry and the flat-rolled steel sector, which includes CRS, in China. In previous section 20 inquiries, the GOC’s industrial plans have been found to strongly influence the decisions of enterprises in China.

[95] With respect to the flat-rolled steel sector, which includes CRS, the CBSA has information which demonstrates that the prices of flat-rolled steel products, including CRS, may be significantly affected by the GOC’s policies and that prices of CRS in China may not be substantially the same as they would be if they were determined in a competitive market.

[96] With respect to Vietnam, the complainant provided evidence supporting its claim that the GOV substantially determines domestic prices of CRS, including evidence of government control of steel projects and investments as well as state-ownership in the flat-rolled steel sector, which includes CRS. The complainant also cited specific GOV policies such as the Steel Master Plan.^{Footnote 14}

[97] The information currently available to the CBSA indicates that there are numerous GOV industrial policies that have been implemented which influence the steel industry and the flat-rolled steel sector, which includes CRS, in Vietnam. Further, the information currently available indicates that prices of CRS in Vietnam may not be substantially the same as they would be if they were determined in a competitive market.

[98] In summary, the CBSA believes that there is sufficient evidence to support inquiries into the allegations that measures taken by the GOC and GOV substantially influence prices in the flat-rolled steel sectors, which includes CRS, of their respective countries, and that the prices are substantially different than they would be in a competitive market.

[99] Consequently, on May 25, 2018, the CBSA included in its investigation, section 20 inquiries 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 CRS, in China and in Vietnam.

[100] As part of this section 20 inquiry, the CBSA sent section 20 questionnaires to all potential producers and exporters of CRS in China and Vietnam, as well as to the GOC and GOV, requesting detailed information related to the flat-rolled steel sector, which includes CRS, in those countries.

[101] To enable the determination of normal values, should paragraph 20(1)(a) of SIMA be applicable, the CBSA requested domestic pricing and costing information from producers of CRS in Italy, South Korea and Sweden. These countries were selected as they are all major exporters of CRS to Canada. The CBSA sent questionnaires to known producers of CRS in these countries.^{Footnote 15} The CBSA also requested information from Canadian importers of CRS regarding their sales of CRS from other countries.

[102] In the event that the CBSA forms the opinion that domestic prices of CRS in China and/or Vietnam are substantially determined by their government, respectively, and there is sufficient reason to believe that the domestic prices are not substantially the same as they would be if they were determined in a competitive market, the normal values of the goods under investigation will be determined, pursuant to paragraph 20(1)(c), where such information is available, on the basis of the domestic selling price or the aggregate of the cost of production, a reasonable amount for SG&A, and a reasonable amount for profits of the like goods sold by producers in any country designated by the CBSA and adjusted for price comparability; or, pursuant to paragraph 20(1)(d), where such information is available, on the basis of the selling price in Canada of like goods imported from any country designated by the CBSA and adjusted for price comparability.

[112] The complainant identified 123 subsidy programs which may have conferred benefits to the producers/exporters of subject goods in China, and in turn resulted in the actionable subsidizing of exports of subject goods to Canada.^{Footnote 16}

[113] In identifying subsidy programs, the complainant primarily relied on the CBSA’s investigations in regards to the subsidizing of Aluminum Extrusions, Silicon Metal, Unitized Wall Modules, Copper Tube, Certain Laminate Flooring, Photovoltaic modules and laminates, Certain Oil Country Tubular Goods I, Carbon Steel Welded Line Pipe I, Large Diameter Line Pipe, Fabricated Industrial Steel Components, Steel Grating, Stainless Steel Sinks, Galvanized Steel Wire, Steel Plate 3 and Rebar I. In addition, they relied on the United States Department of Commerce’s (USDOC) investigation concerning Certain Cold-Rolled Steel Flat Products from China and submissions made to the WTO of New and Full Notification Pursuant to Article XVI: 1 of the GATT 1994 and Article 25 of the SCM Agreement^{Footnote 17} and Request from the UNITED STATES to CHINA Pursuant to Article 25.10 of the Agreement.^{Footnote 18}

[114] Given that the complainant’s principal evidence with respect to the subsidy programs availability and/or use by CRS producers/exporters in China consists of references to past countervailing investigations by either the CBSA or the USDOC, the CBSA reviewed the relevant public reports for these investigations. The CBSA also reviewed the reports for other investigations not relied on by the complainant.^{Footnote 19} Further, the CBSA reviewed China’s most recent subsidy notifications to the WTO.^{Footnote 20}

[115] Based on the information available to the CBSA, the CBSA identified 31 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 China and can be grouped into the following five categories:

1. Preferential Loans and Loan Guarantees;
2. Grants and Grant Equivalents;
3. Preferential Tax Programs;
4. Relief from Duties and Taxes; and
5. Goods/Services Provided by the Government at Less than Fair Market Value.

[116] The CBSA’s analysis revealed that the 31 subsidy programs constitute potential financial contributions by the GOC that may have conferred benefits to producers/exporters of CRS. Some Chinese exporters, namely for example Baoshan Iron & Steel Co Ltd. and Hengyang Valin MPM Co Ltd., found to have benefited from subsidies in above mentioned investigations are large vertically integrated steelmakers which also produce and export CRS. CRS and other steel product manufacturers in China are commonly located in similar geographic areas and all belong to the steel industry, which is highly controlled and supported by the GOC. This indicates that subsidy programs may be available to exporters and producers of the subject goods. 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.

[117] If more information becomes available during the investigation that indicates that some exporters/producers of subject goods may have benefited from any of the remaining alleged programs or any other programs during the period of investigation (POI), the CBSA will request complete information from the GOC and exporters/producers of subject goods to pursue the investigation of the program.

[118] The CBSA concluded that sufficient evidence is available to support the allegations that CRS originating in or exported from China has been subsidized. In investigating the 31 programs, the CBSA has requested information from the GOC, 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.

[119] The complainant identified 45 subsidy programs which may have conferred benefits to the producers/exporters of subject goods in South Korea, and in turn resulted in the actionable subsidizing of exports of subject goods to Canada.^{Footnote 21}

[120] In alleging that actionable subsidies were applicable to the subject goods imported from South Korea, the complainant primarily relied on the USDOC’s recent subsidy investigations involving hot-rolled, cold-rolled and corrosion-resistant steel sheet from South Korea, as well as the CBSA’s previous subsidy investigations Rebar I and OCTG II. The complainant also relied on other publicly available information, including publications issued by the WTO, World Bank and GOK as well as annual reports from South Korean CRS producers.

[121] The vast majority of the 45 subsidy programs listed was included in the USDOC’s recent final determinations of subsidization with respect to hot-rolled^{Footnote 22} and cold-rolled^{Footnote 23} steel sheet from South Korea. Further, six of these programs were also found to be countervailable in the USDOC’s recent final determination of subsidization with respect to corrosion-resistant steel sheet from South Korea.^{Footnote 24}

[122] Given that the complainant’s principal evidence regarding the subsidy programs’ availability and/or use by CRS producers/exporters in South Korea consists of references to past countervailing investigations by either the USDOC or the CBSA, the CBSA reviewed the relevant public reports for these investigations. The CBSA also researched websites of a number of central and state government agencies in efforts to gather up-to-date information on the listed subsidy programs.

[123] Generally speaking, the reference material examined by the CBSA provided support for the complainant’s allegation that the subject goods from South Korea have been subsidized. 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 program to producers of CRS, the program did not appear to constitute a financial contribution or the program appeared to be generally available. Some of these conclusions were based on the analysis that was done in previous CBSA subsidy investigations involving goods from South Korea. Further, the CBSA also found that a number of programs appeared to be either duplicates or were very similar. Finally, some of the program names identified by the complainant were modified by the CBSA.

[124] As a result, the CBSA identified 27 potentially actionable subsidy programs. These programs have been investigated and found to be actionable either in the CBSA’s or USDOC’s previous subsidy investigations involving goods from South Korea and can be grouped into the following six categories:

1. Energy Savings and other Green Programs
2. Preferential Loans and Loan Guarantees;
3. Grants and Grant Equivalents;
4. Preferential Tax Programs;
5. Relief from Duties and Taxes; and
6. Goods/Services Provided by the Government at Less than Fair Market Value.

[125] The CBSA’s analysis revealed that the 27 subsidy programs constitute potential financial contributions by the GOK that may have conferred benefits to producers/exporters of CRS. 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.

[126] Please refer to Appendix 1 for more information.

[127] If more information becomes available during the investigation process that indicates that some exporters/producers of subject goods may have benefited from any of the remaining alleged programs or any other programs during the POI, the CBSA will request complete information from the GOK and exporters/producers of subject goods to pursue the investigation of the program.

[128] The CBSA concluded that sufficient evidence is available to support the allegations that CRS originating in or exported from South Korea has been subsidized. In investigating the 27 programs, the CBSA has requested information from the GOK, 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.

[129] The complainant identified 38 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 25}

[130] In alleging that actionable subsidies were applicable to the subject goods imported from Vietnam, the complainant relied on the most recent New and Full Notification Pursuant to Article XVI: 1 of the GATT 1994 and Article 25 of the WTO Agreement on Subsidies and Countervailing Measures,^{Footnote 26} the CBSA’s subsidy investigation in OCTG II, the USDOC’s most recent investigation concerning Certain Steel Nails from Vietnam^{Footnote 27} and the annual reports of Hoa Sen Steel Manufacturing, a Vietnamese CRS producer.

[131] 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. The CBSA also researched websites of a number of central and state government agencies in order to gather up-to-date information on the subsidy programs.

[132] 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. 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 program to producers of CRS, the program did not appear to constitute a financial contribution or the program appeared to be generally available. Further, the CBSA found additional programs based on its review of Vietnam’s Subsidy Notification to the WTO and the final determination of the CBSA’s most recent subsidy investigation involving goods from Vietnam, Copper Pipe Fittings II. The CBSA also found that a number of programs appeared to be either duplicates or were very similar. Finally, some of the program names identified by the complainant were modified by the CBSA.

[133] As a result, the CBSA identified 12 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. Preferential Loans and Loan Guarantees;
2. Grants and Grant Equivalents;
3. Preferential Tax Programs; and
4. Relief from Duties and Taxes.

[134] The CBSA’s analysis revealed that the 12 subsidy programs constitute potential financial contributions by the GOV that may have conferred benefits to producers/exporters of CRS. 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.

[135] Please refer to Appendix 1 for more information.

[136] If more information becomes available during the investigation process that indicates that some exporters/producers of subject goods may have benefited from any of the remaining alleged programs or any other programs during the POI, the CBSA will request complete information from the GOV and exporters/producers of subject goods to pursue the investigation of the program.

[137] The CBSA concluded that sufficient evidence is available to support the allegations that CRS originating in or exported from Vietnam has been subsidized. In investigating the 12 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.

[138] The complainant was unable to estimate the amounts of subsidy on a program basis for the subject goods imported from China, South Korea and Vietnam. However, the complainant estimated the amounts of subsidy by calculating the difference between the estimated costs of production for the subject goods and their corresponding export prices. The complainant stated that the difference between the export price and the production cost of the subject goods for each country demonstrates that they are being sold to Canada at prices substantially below their cost of production, indicating a significant amount of subsidy.

[139] The CBSA estimated the amounts of subsidy conferred on exporters of the subject goods from China, South Korea and Vietnam by comparing the estimated full costs of the subject goods, which are the costs of producing of the goods plus allocated SG&A, with their weighted average export prices, as estimated above in the evidence of dumping section.

[140] The CBSA’s analysis of the information indicates that subject goods imported into Canada during the period of January 1, 2017 to December 31, 2017 were subsidized. 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.

Table 4
Estimated Amounts of Subsidy

Country	Estimated Amount of Subsidy as a % of Export Price
China	10.2%
South Korea	12.9%
Vietnam	30.4%

[144] The import volumes as estimated by the CBSA are detailed in the “Canadian Market” section of this Statement of Reasons. This information shows a trend of rising imports from China and Vietnam which increased from 40.7% and 0.0% of total imports in 2015, to 53.2% and 9.5% of total imports in 2017, respectively.

[145] With respect to South Korea, the import data shows an overall decrease in subject imports from 2015 to 2016. Imports from South Korea stabilized in 2017 remaining near 2016 levels for that year.

[146] Collectively, imports of subject goods from the three named countries increased by 36.4% from 2015 to the year ended December 31, 2017. During this same time period, imports of subject goods from all other countries decreased by 26.0%. Further, during this period, the total apparent Canadian market decreased by 6.6%.

[147] In summary, based on the CBSA’s estimates and analysis of import volumes, the CBSA finds the complainant’s claim of increased import volumes to be reasonable and well supported.

[148] The Canadian market information provided by the complainant shows a significant overall decrease in the market share of domestically produced CRS from 2015 through 2017.

[149] The complainant provided declarations which detail specific examples of lost sales due to lower pricing from exporters of the subject goods from the named countries.^{Footnote 28} The complainant also provided supporting documentation, including price quotations and internal reports that support the link between the complainant’s lost sales and the allegedly dumped and subsidized subject goods.

[150] In addition to the examples provided by the complainant, the supporting producer Algoma also provided similar examples.^{Footnote 29}

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

[152] The complainant states that the allegedly dumped and subsidized goods have captured sales and market share by undercutting the prices of the domestic industry. To support this allegation the complainant has provided specific examples of lost sales and offers of subject goods at prices well below that of the complainant. The supporting producers, Algoma and Stelco, have provided similar examples.^{Footnote 30}

[153] The complaint contains evidence of price undercutting by subject goods. It also contains documented instances where prices were suppressed or where the complainant, and/or supporting producers, were forced to lower prices or lose sales in response to allegedly dumped and subsidized imports from the named countries.

[154] The complainant submitted evidence showing that the average selling prices from China, South Korea and Vietnam, from 2015 through 2017, are substantially lower than those of the complainant.^{Footnote 31} The CBSA found this information to be consistent with the average import price data estimated by the CBSA.

[155] Based on the information provided by the complainant, the average domestic price of CRS increased year over year during the period of 2015 through 2017. Generally, this trend would not support an allegation of price suppression; however, according to the complainant, this allegation should be viewed in comparison to CRS spot pricing in the United States (US). The complainant argued that the North American CRS market is integrated and that pricing should generally be the same in the North Eastern United States and Central Canada. The complainant has stated that the CRU US Midwest spot price should reflect the spot price of CRS in both of these regions.^{Footnote 32}

[156] The CBSA reviewed this information and found that, as the US Midwest spot price increased from 2015 to 2017, the complainant’s average domestic price of CRS also increased. However, while the complainant’s average domestic selling price did increase during this period, the rate of growth was significantly lower than that of the US Midwest spot price. This has led to an increasing discrepancy between the complainant’s average domestic selling price and the US Midwest spot price. This may indicate that prices in the Canadian market have not increased as they would in absence of the allegedly dumped and subsidized goods.

[157] It is important to note that in July and September 2016 the United States imposed trade remedies against CRS from China and South Korea. The imposition of these trade remedies coincides with a significant increase in the difference between the CRU US Midwest spot price and the complainant’s average pricing.

[158] With respect to changes in the cost of manufacturing, the income statements provided by the complainant do not support the allegation that the complainant was unable to increase pricing to reflect changes in the cost of production. However, the complainant did provide information which demonstrates that this situation did change in the final two quarters of 2017. The CBSA finds this information to be relevant as it is the most recent information provided.

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

[160] While the CBSA does acknowledge that there are account specific examples where price depression has occurred, based on a review of the complainant’s confidential sales and financial data, as well as the consolidated domestic industry data, for the period of 2015 through 2017, the CBSA does not find the claim of price depression to be well supported.

[161] The complainant states that capacity utilization rates with respect to the production of CRS have suffered due to the presence of the dumped and subsidized goods. The complainant noted that they have been forced to alter normal production plans due to reduced demand and lower prices for CRS.^{Footnote 33}

[162] The complainant’s production statement, as well as the consolidated production statement of the domestic industry, demonstrate a decrease in the production of like goods for use in the domestic market. In addition, the consolidated production statement of the domestic industry demonstrates a decrease in the capacity utilization rate for the production of like goods.

[163] Based on the information provided, the CBSA finds the claim of reduced production to be reasonable and well supported. Further, the CBSA also finds the claim of a decrease in capacity utilization for the consolidated domestic industry to be reasonable and well supported. Although the CBSA does not find that there have been significant changes in the capacity utilization rates of the complainant, the CBSA acknowledges that this may be attributable to changes in the production of non-like goods.

[164] The complainant submits that the injurious impact of the dumped and subsidized goods is demonstrated in its financial results. To support this allegation, the complainant has provided its financial statements for 2015 through 2017.^{Footnote 34}

[165] The CBSA has reviewed the complainant’s financial statements and the financial statements of the consolidated domestic industry. Specifically, the product income statements for non-automotive CRS.^{Footnote 35} The CBSA finds that the financial results of the complainant, and the consolidated domestic industry, have improved from 2015 to 2017.

[166] The complainant acknowledged that the non-automotive CRS financial statements do indicate an improved situation from 2015 to 2017. However, the complainant also noted that financial performance decreased over the course of 2017.

[167] The CBSA finds that the information contained in the complaint does not establish a trend of a significantly worsening financial results. However, the CBSA also notes that the baseline for these comparisons, the results of 2015, may not be an appropriate benchmark. While the CBSA finds it reasonable to assume that the presence of the injury factors described above would have some impact on the financial results of the domestic industry, the CBSA also finds that the information in the complaint does not sufficiently link the allegedly dumped and subsidized goods to any significant impact on the complainant’s financial results.

[168] Overall the CBSA finds that there is a reasonable indication that material injury has occurred to the CRS industry in Canada. The nature of the injury incurred by the complainant is well-documented in terms of loss of market share and sales, price undercutting and price suppression, reduced production and underutilization of capacity. The CBSA finds that the injury can be reasonably attributed to the allegedly dumped and subsidized goods from the named countries.

[171] The complainant alleges that the rapid increase in the volume of dumped and subsidized subject goods, at prices that undercut domestically produced like goods, pose a threat of further injury to the Canadian industry. This allegation is supported by import statistics provided by the complainant. The complainant submits that without protection, the trend of rapidly increasing imports is expected to continue.^{Footnote 37}

[172] The CBSA’s analysis of import data supports the allegation of an increase in the importation of the alleged dumped and subsidized goods. From 2015 through 2017, the collective volume of imported goods from three named countries increased by 36.4%. At the same time, imports from all other countries decreased by 26.0%.

[173] The complainant has provided reports and supplementary information to support the allegation of excess and underutilized production capacity in the named countries. Using information from CRU, the complainant provided estimates of the excess production capacity of CRS in the named countries.^{Footnote 38}

[174] The combined capacity and output data reveals that producers in the named countries have massive excess capacity. Based on information provided in the complaint, the utilization rate for CRS production in China is expected to remain stable near 68%. The utilization rates for CRS production in South Korea and Vietnam are expected to increase from 82% and 86% in 2017, to 84% and 91% in 2019, respectively. However, according to the complainant, the remaining excess capacity is still significantly higher than the total demand for CRS in the Canadian market. This is also true of the excess CRS capacity in China, where, according to the complainant, the total excess capacity is more than significantly larger than the entire Canadian CRS market.

[175] Based on the CBSA’s analysis of the information provided in the complaint, the CBSA recognizes the significant excess capacity of CRS producers in the named countries.

[176] The complainant states that CRS producers in the named countries will be encouraged to export products in the next 12-24 months as domestic demand will remain significantly below production capacity. Further, the complainant pointed to conditions in the global steel market and noted issues related to low demand and global excess capacity. These allegations are supported by industry publications which forecast market demand and production.^{Footnote 39}

[177] With respect to the CRS market in Canada, the complainant noted that although prices rose from 2015 to 2017, and domestic profitability improved, the Canadian industry remains vulnerable to subject goods. The complainant noted that the relatively higher prices will attract a growing supply and demand for low priced subject goods.

[178] The CBSA’s analysis of the information contained in the complaint revealed market conditions which the CBSA recognizes may lead CRS producers in the named countries to target certain export markets, including Canada.

[179] The complainant submits 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 recent Section 232 Investigation in the United States, and the potential impact that this decision may have on the Canadian market. The complainant also pointed to other conditions, such as the renegotiation of the South Korean – US free trade agreement, the initiation of a safeguards investigation related to CRS in the European Union, an anti-circumvention investigation against Vietnamese CRS in the United States, and trade remedies imposed by other countries against carbon cold-rolled flat products from China, South Korea and Vietnam.^{Footnote 40}

[180] The CBSA acknowledges the presence of trade remedy actions in the United States, the European Union, and other countries, which may impact the exports of CRS from the named countries. Further, the CBSA recognizes that these restrictions may have a significant impact on the Canadian market.

[181] The complainant states that CRS is a downstream product of HRS. HRS is a standalone good but it is also a primary input for a number of different steel products. As such, the complainant argues, when trade remedies are imposed on the upstream HRS product, or another downstream HRS product, either in Canada or in a third-party country, exporters are likely to focus on shifting production and exports to goods not subject to a trade remedy, such as CRS.^{Footnote 41}

[182] The complainant cites a number of trade remedies in place against HRS, and other downstream HRS products, in a variety of countries.

[183] The complainant states that the dumping and subsidizing of subject goods has supressed the price of like goods in Canada. Further, the complainant states that the subject goods from China, South Korea and Vietnam have undercut the price of like goods and led to lost sales. The complainant alleges that the trend of aggressive pricing of subject goods from the named countries will continue, and that combined with the increasing volume of subject goods from these countries, will have increasingly injurious effects. The complainant has provided account specific information detailing offers of subject goods at prices below that of the complainant.^{Footnote 42}

[184] The complainant also argues that the trend of aggressive pricing of subject goods will increase the spread between the complainant’s average domestic pricing and CRU US Midwest spot prices.

[185] The complaint contains evidence that discloses a reasonable indication that there is a threat of injury due to increasing import volumes of subject goods from China, South Korea and Vietnam. The increasing volumes of imports of subject goods at prices that substantially undercut domestic producer pricing will continue to supress domestic prices and threaten to take further market share from the Canadian producers. The CBSA is of the view that the adverse volume and price effects of the alleged dumped imports threatens to cause domestic producers to suffer further decline in production, capacity utilization, market share and prices.

Analysis of Chinese Subsidies to be Investigated

Category 1: Preferential Loans and Loan Guarantees

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

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

In Canada - Fabricated Industrial Steel Components (FISC), Canada - Carbon and Alloy Steel Line Pipe (Line Pipe), US - Carbon Quality Steel Line Pipe, US – Cold-Rolled Steel Flat Products and US - High Pressure Steel Cylinders,), the authorities countervailed this program.

In the final affirmative determination in the countervailing duty investigation of Cold-Rolled Steel Flat Products from China, the US DOC stated the Policy banks in the PRC and state-owned commercial banks (SOBCs) make loans to cold-rolled steel producers at preferential terms as a matter of government policy. These loans are typically made at low or negative real rates of return. At least two policy banks specifically support the steel industry: the China Development Bank provides loans for key state-directed capital investment projects, while the Export-Import Bank of China (China ExIm Bank) provides policy financial support to promote exports.

The GOC provides preferential loans to PRC steel producers for development and improvement of key steel industry projects and technologies. Further, additional policies that provide preferential loans for key projects and technologies were established in the GOC’s 2006-2010 Five Year Plan. The S&T Development Plan (2006-2020) calls for increasing innovation and invention through “fiscal incentives, soft loan facilities including interest discounts and preferential loan provision, governmental investment measures, schemes for the promotion of ‘re-innovation’ by assimilation of foreign technology…{and} the definition and implementation of PRC industry- and product-standards.”

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

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

In Canada – Large Diameter Carbon and Alloy Steel Line Pipe, Canada – FISC, Canada – Line Pipe and US - Cold-Rolled Steel Flat Products, the authorities countervailed this program.

Financing guarantee companies provide guarantees for borrowers or debt issuers and play an important role in helping small businesses and rural projects secure funds, according to a statement from the Legislative Affairs Office of the State Council and the China Banking Regulatory Commission^{Footnote 43}.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

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

In Canada – Certain Seamless Casing, the CBSA determined one exporter received benefits from this program.

In US - Carbon and Alloy Steel Standard, Line and Pressure Pipe and US – Circular Welded Carbon Quality Steel Pipe, US - Cold Rolled Steel Flat products, the American authority determined that a respondent received benefit as debt forgiveness.

In Australia – Carbon and Alloy Steel Cut-to-Length Plat and Australian – Cold Rolled Steel Flat products, the Australian authority countervailed this program.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

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

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e., amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not collected. The above confers a benefit to the exporter by way of reducing its financial costs upon obtaining loans from a financial institution, and the benefit is equal to the amount of the exemption/deduction. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 2: Grants and Grant Equivalents

Local and Provincial Government Reimbursement Grants on Credit Insurance Fees.

In Canada - Galvanized Steel Wire, Pup Joints, Canada - Stainless Steel Sinks, Canada - Line Pipe, and Canada - Large Diameter Carbon and Alloy Line Pipe, the CBSA determined that exporters received benefits under this program.

In US – Concrete Steel Wire Strand, the American authority countervailed this program as a local and provincial grant.

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

In Canada – Photovoltaic Modules and Laminates, and Canada - OCTG, etc., the CBSA determined that more than one exporter received benefits under this program.

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

In Canada - OCTG, Canada - Carbon Steel Welded Pipe, and Canada - Steel Grating, the CBSA determined that at least one exporter received benefits under this program. As per the OCTG’s SOR issued at the final determination, the program was established in the Circular of the Trial Measures of the Administration of International Market Development Funds for Small and Medium-Sized Enterprises Cai Qi No. 467, 2000, which came into force on October 24, 2000. The program was established to support the development of Small and Medium-sized Enterprises, to encourage SMEs to join in the competition of international markets, to reduce the business risks of the enterprises, and to promote the development of the national economy. The granting authority is the Foreign Trade and Economic Department and the program is administered at the local levels.

In US - Steel Wheels the American authority countervailed this program.

Companies in the PRC receive such grants provided by the GOC to assist in the development of export markets or to recognize export performance. PRC cold-rolled steel producer Angang and BaoSteel likely received subsidies under this program.

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

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

In Canada – Line Pipe, the CBSA countervailed this program.

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 confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

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

As per the SOR issued in Canada - Stainless Steel Sinks, Canada - Unitized Wall Modules and Canada - Certain Photovoltaic Modules and Laminates, exporters benefited from this program.

In US – Galvanised Steel and Aluminium Zinc Coated Steel, US – Hot Rolled Plate Steel, US – Hollow Structural Sections, US – Rod in Coils, and Australia – Hollow Structural Sections, the authorities countervailed this program.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

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

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 confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

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

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 confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

In Canada - Fabricated Industrial Steel Components (FISC), the CBSA has determined that one cooperating exporter received benefits under this program in the form of an award from the municipal government.

Based on the information available, the company located in certain SEZs or Designated Areas may have been provided awards in the form of grants for their tax payments, covering the last one to two years.

For example, this program was referenced on the following website for Jiangsu Qidong SEZ where some exporters/producers of subject goods were located: www.zsw-qd.com/newsifo.asp?id_ixxx=567&A1=502 and http://baike.baidu.com/view/7940866.htm

This award confers a direct benefit equal to the amount of the award provided. Therefore, the program is considered to 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. And the program does not appear to be generally available to all enterprises in China and thus appears to be specific.

This program has been investigated and found to be actionable by the CBSA in previous subsidy investigations/reinvestigations involving China. However, the GOC did not provide sufficient information to the CBSA during the investigations/reinvestigations.

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

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

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

This program has been investigated and found to be actionable by the CBSA in previous subsidy investigations/reinvestigations involving China. However, the GOC did not provide complete information to the CBSA regarding this program during the investigations/reinvestigations.

Based on the information available to the CBSA, this program was administered by local governments, such as Guangdong provincial governments and Jiangsu provincial governments, to provide financial support to some enterprises to award/assist them for the stable growth of foreign trade.

For example, in Guangdong province, the granting authorities responsible for this program were the Department of Finance of Guangdong Province and the Department of Foreign Trade and Economic Cooperation of Guangdong Province.

This program was specifically identified by the CBSA through Baosteel’s 2015 annual report and found to be countervailable by the CBSA in previous subsidy investigation of FISC.

Information available to the CBSA indicates that the benefit from this program may have been passed through to Baosteel’s CRS division.

Based on the information available to the CBSA, the central government provided interest subsidy for the importation of encouraged products and technology.

For example, the GOC document associated with this program may include: “The administrative measures for interest subsidy fund for importations (Cai Qi [2012] 142)”.

The program was found to have benefited one FISC producer in previous CBSA’s subsidy investigation.

This program was specifically identified by the CBSA through Masteel’s 2015 annual report.

Information available to the CBSA indicates that the benefit from this program may have been passed through to CRS producers.

Category 3: Preferential Tax Programs

This program was established under the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, which came into effect on July 1, 1991. The program was allegedly established to absorb investment in special economic zones (SEZs) and designated areas to take the lead in their economic development. The granting authority responsible for this program is allegedly the State Administration of Taxation and the program is administered by local tax authorities. Under this program, it is alleged that an eligible enterprises may receive a reduced corporate income tax rate of 15%.

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

In Canada – Carbon Steel Welded Pipe and Canada - OCTG, one of the companies received a benefit under this program.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. 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.

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

Many cold-rolled steel producers, such as Hunan Valin Lianyuan Iron & Steel Co., Ltd., are designated as HNTEs and likely benefit from this program.

In Canada – FISC and in Canada – Line Pipe, US – Hollow Structural Sections, Australia – Aluminum Extrusions, and Australia – Oil Country Tubular Goods, the authorities countervailed this program.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to enterprises in certain industries.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

In Canada - Stainless Steel Sinks, Canada - Unitized Wall Modules and Canada - Certain Photovoltaic Modules and Laminates, exporters used a program which the CBSA titles “Reduction, Exemption or Refund of Land Use Fees, Land Rental Rates, and Land Purchase/Transfer Prices.”

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

In Canada - Pup Joint, a preferential tax treatment for FIEs was found to have been used. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

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

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

In Canada - Certain Photovoltaic Modules and Laminates, the CBSA determined that two cooperating exporters received benefits under this program. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

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

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 4: Relief from Duties and Taxes

According to the European Union in EU - Organic Steel, the program allows a company to claim tax credits on the purchase of domestic machinery if a project is consistent with the industrial policies of the GOC. A tax credit up to 40% of the purchase price of domestic equipment may apply to the incremental increase in tax liability from the previous year. The legal bases of this program are the Provisional measures on enterprise income tax credit for investment in domestically produced equipment for technology renovation projects of July 1, 1999 and the Notice of the State Administration of Taxation on Stopping the Implementation of the Enterprise Income Tax Deduction and Exemption Policy of the Investments of an Enterprise in Purchasing Home-made Equipment, No. 52 [2008] of the State Administration of Taxation, effective January 1, 2008.

The GOC replied to the EU that this program has been terminated as from January 2008 according to the mentioned Notice No. 52 and that to the best of its knowledge, no program has replaced this program. Nevertheless, with regard to this program, a tax benefit (i.e. a tax credit) accrued in a certain year may actually be used in a different tax year and thus the benefits can extend beyond its period of validity even if the program has in the meantime been terminated. Other "terminated" tax programs have turned out to continue to confer benefits for some years after their official expiry date.

In Canada – Certain aluminum Extrusions and Certain Photovoltaic Modules and Laminates, the CBSA countervailed this program.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

In the OCTG SOR issued at the Final Determination, the CBSA’s description of the program stated that the program was established in the Regulations on Special Economic Zones in Guangdong Province and approved for implementation on August 26, 1980. The CBSA further stated that the program was established to absorb investment in SEZs and encourage districts to take the lead in development. The granting authority responsible for this program is the General Administration of Customs and this program is administered by local customs authorities. Under this program, machinery and equipment, spare parts, raw and semi-processed materials, means of transportation and other capital goods necessary for production that are imported by enterprises in SEZs shall be exempted from import duties. It is noted that the program was not one of the programs used by a cooperating exporter in OCTG, although in Certain Photovoltaic Modules and Laminates, and in Unitized Wall Modules, the CBSA determined that a cooperating exporter received benefits under this program.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

In Canada - Certain Photovoltaic Modules and Laminates, the CBSA determined that one cooperating exporter received benefits under this program.

These subsidies maybe limited to certain domestic enterprises that undertake “encouraged” projects as set forth in the “Catalogue of Industries for Guiding Foreign Investment.” These same subsidies are also available to PRC producers of cold-rolled steel, as the development and application of cold continuous rolling wide band steel is listed as an “encouraged” project.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

The legal bases of this program are the Provisional measures on enterprise income tax credit for investment in domestically produced equipment for technology renovation projects of July 1, 1999 and the Notice of the State Administration of Taxation on Stopping the Implementation of the Enterprise Income Tax Deduction and Exemption Policy of the Investments of an Enterprise in Purchasing Home-made Equipment, No. 52 [2008] of the State Administration of Taxation, effective January 1, 2008.

According to the European Union in EU - Organic Steel, this program allows a company to claim tax credits on the purchase of domestic equipment if a project is consistent with the industrial policies of the GOC. A tax credit up to 40% of the purchase price of domestic equipment may apply to the incremental increase in tax liability from the previous year.

The GOC replied to the EU that this program was terminated effective January 2008 according to Notice No. 52 and that to the best of its knowledge, no program has replaced it.

Nevertheless, it is believed that a tax benefit accrued in one year may be carried forward to future years and thus the benefits can extend beyond its period of validity even if the program has since been terminated.

In Canada – Certain Seamless Casing, Certain Oil Country Tubular Goods and Certain Pup Joints, the CBSA determined that one exporter received benefits from this program.

In EU – Organic Coated Steel, the authority countervailed this program.

In US – Circular Welded Carbon Quality Steel Line Pipe, the American authority countervailed this program.

This financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

The GOC imposes a deed tax on transfers of land and real estate. In the context of an ownership transfer by means of an asset sale, as opposed to a stock sale, a deed tax of three to five percent is levied on the amount of the purchase price, and the purchaser is responsible for paying the tax. The GOC’s “Notice of the Ministry of Finance and the State Administration of Taxation on Several Deed Tax Policies Concerning Enterprise Reorganization and Restructuring,” exempts this deed tax where the transfer of ownership occurs as part of the restructuring or merger of an SOE. Information reasonably available indicates that, for example, state-owned PRC cold-rolled steel producers Baosteel and Wuhan Steel acquired land and real estate as part of mergers of the two giant steelmakers directed by the GOC.

This financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

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

The complainant alleges that numerous exporters have changed their ownership status from that of SOEs to either FIEs or private limited enterprises. During this time, China’s state-owned oil companies shifted their focus toward core businesses and moved to divest themselves of peripheral operations such as production of OCTG. During the privatization process, the majority of the government-owned assets had been distributed to company employees at no cost.

In Canada – OCTG, the CBSA determined that one exporter received benefits under this program. Furthermore, in Canada – Stainless Steel Sinks, Canada – Steel Piling Pipe, and Canada – Large Diameter Carbon and Alloy Steel Line Pipe, this program was countervailed.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA as they involve the provision of goods or services, other than general governmental infrastructure. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

In Canada – Line Pipe, Canada - Large Diameter Carbon and Alloy Steel Line Pipe, and in US – Hot-rolled flat products of iron, non-ally or other alloy steel, the CBSA countervailed this program.

All land in the PRC belongs to the government (i.e., either national or local governments, or through a “collective” at the township or village level), and government land agencies across the PRC control the allocation of land through the granting of land-use rights. The GOC’s steel policies direct government agencies to provide such land-use rights to favored projects and producers, including the cold-rolled steel industry.

This financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

The debt-to-equity swap was a measure used in the financial restructuring of China’s state owned enterprises (SOE) and state-owned banks. Pursuant to the Regulations of Asset Management Companies (promulgated by decree on November 20, 2000), the State Council established four asset management companies (AMCs) that were directed to purchase certain non-performing loans from state-owned banks. The four AMCs were supervised and managed by the People's Bank of China, China's Ministry of Finance and the China Securities Regulatory Commission. One of the authorized business activities available for the management of non-performing loans purchased by the AMCs was the debt-to-equity swap. A debt-to-equity swap is a transaction in which a creditor, in this case an AMC, forgives some or all of a company's debt in exchange for equity in the company.

In Canada – FISC, Canada - Seamless Casing, Canada – OCTG, Canada – Carbon Steel Welded Pipe, Canada – Pip Joints, Canada – Stainless Steel Sinks, EU - Organic Steel, EU – Rod in Coils, Australia – Carbon and Alloy Steel Cut-to-Length Plate, Australia – Cold Rolled Steel Flat Products, the authorities determined that cooperating exporters benefited from this program.

This financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

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

Preferential Loans and Loan Guarantees

Grants and Grant Equivalents

Preferential Tax Programs

Relief from Duties and Taxes

Goods/Services Provided by the Government at Less than Fair Market Value

Analysis of South Korean Subsidies to be Investigated

Energy Savings and other Green Programs

1. Management of Electricity Load Program (this includes eight sub-programs alleged by complainant combined)

The complainant listed a number of incentives that, in general, companies can qualify for by reducing their usage of electricity. The incentives form part of the Management of Electricity Load Program, established through Articles 48 and 49 of the Electric Business Law in 2001. The program is operated under the supervision of the Ministry of Trade, Industry & Energy by the Korean Electric Power Corporation (KEPCO) and/or Korean Power Exchange (KPX) (which is wholly-owned by KEPCO). The funding for the program comes from the Electrical Industry Foundation Fund. KEPCO is majority owned (51.1%) by the Korean Government.

It is possible that this program constitutes a financial contribution within the meaning of section 2(1.6)(b) of SIMA by exempting or deducting from amounts that would otherwise be owing and due to the Government. Evidence suggests that it may be specific within the meaning of paragraph 2(7.3)(a) in that there is exclusive use by a limited number of enterprises.

2. Green Subsidies: GOK Subsidies for “Green Technology R&D” and its Commercialization

The GOK selected 27 core technologies for support in its five-year Green Growth Plan, adopted in January 2009. The Green Technologies R&D program provides for the establishment and enforcement of measures to facilitate research, development and commercialization of green technology. This includes financial support for these activities, in the form of grants to approved applicants. The MKE is tasked with determining whether applicants are eligible under this program and consults with affiliated research institutions where technological evaluation and confirmation are necessary. Applicants must meet eligibility requirements set by law as well as the internal guidelines of the MKE.

It is possible that this program confers a financial contribution under paragraph 2(1.6)(a) as it involves the direct transfer of funds from the Government to a participating large corporation. Evidence suggests that this program is specific under paragraph 2(7.2)(a) of SIMA in that it is limited at law to certain core technologies.

3. Modal Shift Grants

The Modal Shift program aims to decrease greenhouse gas emissions in the transportation and logistics sector by increasing rail and vessel transport, while decreasing motorized vehicle freight, in the hope that this will promote a shift towards a greater use of environment-friendly means of transportation and rebalance the method of transport in the logistics sector. Under this program, the GOK provides grants from the Ministry of Land, Infrastructure and Transport to administering agencies for truck-to-rail “modal shift” entities and grants from the Ministry of Oceans and Fisheries (MOF) to administering agencies for truck-to-marine freight “modal shift” entities. The legal framework for this program is Article 21 of the Sustainable Transportation Logistics Development Act (STLDA), Article 24 of its Enforcement Decree, and Articles 14 through 17 of the Regulation on Modal Shift Agreement as promulgated by the MOF.

Evidence suggests that this program provides a financial contribution through the direct transfer of funds within the meaning of paragraph 2(1.6)(a). It is possible that this program is either de jure specific within the meaning of paragraph 2(7.2)(a) or de facto specific within the meaning of paragraph 2(7.3)(a)-(c).

Preferential Tax Programs

4. RSTA Article 10(1)(2): Research, Supply, or Workforce Development Expense Tax Deductions for “Core Technologies”

This program was first introduced in 2010 for the purpose of facilitating Korean corporations’ investments in their respective R&D activities relating to the Core Technologies program. The statutory basis for this program is Article 10(1)(2) of the restriction of Special Tax Act (RSTA). Paragraph 2 of Article 9 of the Enforcement Decree is the implementing provision of Article 10(1)(2) of the RSTA, and Appendix 8 of the Enforcement Decree sets forth a list of eligible technologies that are covered by the New Growth Engine program. The goal of the Core Technologies program is to boost general national economic activities. RSTA Article 10(1)(2) offers a credit towards taxes payable by a corporation with respect to the costs of researchers and administrative personnel engaged in R&D activities related to “core technologies.”

It is possible that this program provides a financial contribution under paragraph 2(1.6)(b). Evidence suggests that this program may be specific under paragraph 2(7.2)(a) of SIMA in that it is limited at law to certain core technologies.

5. RSTA Article 104(14): Tax Payment for Third-Party Logistics Operations

This tax credit was introduced in 2007, with the purpose of motivating manufacturing companies to outsource logistics business operations to third parties that specialize in logistics by offering a tax incentive for doing so. Administered by the NTS, under the direction of the MOSF, Article 104(14) is the law authorizing the tax incentive, which is implemented through Article 104(14) of the Enforcement Decree of the RSTA.152. According to the Statistical Yearbook for 2014, only 172 companies claimed this credit in 2013, representing only 0.03% of all corporate tax returns filed.

It is possible that this program provides a financial contribution under paragraph 2(1.6)(b). Evidence suggests that the program may be de facto specific pursuant to paragraph 2(7.3)(b) or (c), as there is predominant use of the subsidy by a limited number of companies and/or disproportionately large amounts of the subsidy are granted to a limited number of enterprises.

6. RSTA Article 104(5): Special Tax Credit for Payment Records

Under Article 104(8) of the RSTA, a company will receive a tax deduction when it submits documents directly using the national tax information and communication networks. The GOK states that this program is administered by National Tax Service (NTS), which operates under MOSF, and companies automatically receive the tax deduction under this program if all of the eligibility criteria is met as established by Article 104-5 of the RSTA and Article 104-5 of its Enforcement Decree.

Evidence suggests that this program provides a financial contribution under paragraph 2(1.6)(b). It is possible that this program is de facto specific pursuant to paragraph 2(7.3)(b) or (c), as there is predominant use of the subsidy by a limited number of companies and/or disproportionately large amounts of the subsidy are granted to a limited number of enterprises

7. RSTA Article 120: Acquisition and Property Tax Benefits to Companies Located in Industrial Complexes

US DOC determined that this program was countervailable in the US Hot-Rolled FD Memo and the US Cold-Rolled FD Memo on the basis of all facts available (AFA). RSTA Article 120 was found to provide an exemption from local acquisition taxes for new properties that are acquired. The program is administered by local governments.

It is possible that this program provides a financial contribution under paragraph 2(1.6)(b). This program is potentially de facto specific pursuant to paragraph 2(7.3)(b) or (c), as there may be predominant use of the subsidy by a limited number of companies and/or disproportionately large amounts of the subsidy are granted to a limited number of enterprises.

8. RSTA Article 22: Tax Exemption on Investment in Overseas Resources Development

US DOC determined that this program was countervailable in the US Hot-Rolled FD Memo and the US Cold-Rolled FD Memo on the basis of AFA. Under Article 22 of the RSTA, a domestic corporation whose income included any dividend income from investments in overseas resource development projects, as prescribed by Presidential Decree, was exempt from corporate tax for the portion of such dividend income that is exempted from the tax of the host country where the investment occurred. Article 19 of the Enforcement Decree of the RSTA prescribed the following investment projects as being eligible for this tax exemption: Agricultural products, Livestock products, Fishery products, Forest products, and Mineral products.

Evidence suggests that this program provides a financial contribution under paragraph 2(1.6)(b). It is possible that the program may be de facto specific pursuant to paragraph 2(7.3)(b) or (c), as there is predominant use of the subsidy by a limited number of companies and/or disproportionately large amounts of the subsidy are granted to a limited number of enterprises.

9. RSTA Article 24: Tax Credit for Investment in Productivity Increase Facilities

US DOC determined that this program was countervailable in the US Hot-Rolled FD Memo and the US Cold-Rolled FD Memo on the basis of AFA. Under RSTA Article 24, a domestic corporation could claim a deduction for investments made in: (1) facilities that improve and automize the process; (2) high-technology equipment, as defined by the Presidential Decree; (3) computers and accompanying devices, software, telecommunications facilities, and other facilities used for the management of supply networks; (4) computers and accompanying devices, software, telecommunications facilities and other facilities used for managing customer relations; (5) computers and accompanying devices, software, telecommunications facilities and other facilities used for managing logistics processes; and (6) other systems as prescribed by Presidential decree. The purpose of this program is to promote productivity and automation of processes in facilities in business sectors through a deduction from taxes payable.

Evidence suggests that this program provides a financial contribution under paragraph 2(1.6)(b). This program is potentially de facto specific pursuant to paragraph 2(7.3)(b) or (c), as there is predominant use of the subsidy by a limited number of companies and/or disproportionately large amounts of the subsidy are granted to a limited number of enterprises.

10. RSTA Article 25: Tax Credit for Investment in Facilities for Environment or Safety

US DOC determined that this program was countervailable in the US Hot-Rolled FD Memo and the US Cold-Rolled FD Memo on the basis of AFA. Under Article 25 of the RSTA, a domestic corporation could claim a deduction for investments made in : (l) facilities for a distribution business to be run in accordance with the Distribution Industry Development Act; (2) facilities installed in a trustee company by a trustor company, in accordance with the Act on the Protection of the Business Sphere of Small and Medium Enterprises and Promotion of Their Cooperation; (3) industrial disaster prevention facilities; (4) mining safety facilities; (5) facilities reinforced or expanded by an individual designated as a person under priority management to carry out emergency preparedness duties in accordance with the Emergency Resources Management Act and Government orders; (6) facilities for preventing hazardous elements, in accordance with Article 9 of the Processing of Livestock Products Act or Article 48 of the Food Sanitation Act; (7) facilities installed to prevent illegal transfer of technology; and (8) facilities installed to develop overseas resources, and certain facilities, as prescribed by the Presidential Decree.

Evidence suggests that this program provides a financial contribution under paragraph 2(1.6)(b). This program is potentially de facto specific pursuant to paragraph 2(7.3)(b) or (c), as there is predominant use of the subsidy by a limited number of companies and/or disproportionately large amounts of the subsidy are granted to a limited number of enterprises.

11. RSTA Article 30: Tax Program for Special Depreciation

Under Article 30 of the RSTA, a company that acquired certain fixed assets for use for business purposes was permitted to deduct depreciation costs related to those assets based on useful lives that differ from those used to calculate depreciation for financial accounting reporting purposes. Although Article 30 was revoked in 2010, taxpayers that applied for special deduction prior to 2010 for assets acquired before June 30, 2004 are able to continue applying this special appreciation on these assets in accordance with Article 4 of the Addenda to RSTA. Companies that meet the meet the aforementioned requirements under Article 4 of the addenda to RSTA automatically receive this tax reduction. This program is administered by the NTS, under the direction of MOSF.

Evidence suggests that this program provides a financial contribution through the deduction of amounts that would otherwise be owing within the meaning of paragraph 2(1.6)(b). This program may be de facto specific within the meaning of paragraphs 2(7.3)(a)-(c).

12. RSTA Article 78(4): Tax Reduction and Exemption for Industrial Complexes

The CBSA found this program to be actionable in the OCTG I investigation. The official name of the program is “Developing Industrial Complexes and Maximizing its Utilization”. Its purpose is to promote under-developed areas and pursue innovation within the industries through the provision of industrial sites and an appropriate allocation of the industries nationwide. The program is administered under Article 45 of the Industrial Sites and Development Act, as well as Article 78 of the Restriction of Special Local Taxation Act (RSLTA) and its Enforcement Decree. This program is administered by the municipal governments of the Industrial Complexes. Pursuant to the RSLTA, acquisition tax are exempted or reduced for entities listed in the Appendix 2 of the RSLTA.

Evidence and CBSA precedent suggest that the program provides a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. The program was found to be limited in law to a group of enterprises, and therefore specific pursuant to paragraph 2(7.2)(a).

Preferential Loans and Loan Guarantees

13. KEXIM Export Factoring

KEXIM export factoring is a form of trade finance whereby KEXIM purchases account receivables arising from export transactions. KEXIM will provide financing for up to 80%-100% of the value of the trade bill at a discounted interest rate (LIBOR + spread). The factoring loans are provided by KEXIM on a non-recourse basis, meaning that KEXIM, and not the exporter, assumes the risk of loss with respect to purchaser default. This program is available to Korean exporters for open-account export transactions.

Evidence suggests that this program provides a financial contribution in the form of a contingent transfer of funds and liabilities within the meaning of paragraph 2(1.6)(a) of SIMA. This program appears to constitute an export subsidy in that it is contingent on export performance and therefore is a prohibited subsidy under paragraph 2(7.2)(b) of SIMA.

14. KEXIM Export Loan Guarantees

KEXIM offers general financial guarantee support for export activity, whereby any default by a Korean company on credit extended to it by financial institutions will be assumed by KEXIM with repayment of up to the entire principal and interest on the export-related loans. Loans by both Korean and foreign financial institutions are eligible, as are bonds issues by the applicant.

Evidence suggests that this program provides a financial contribution in the form of a contingent transfer of funds and liabilities within the meaning of paragraph 2(1.6)(a) of SIMA. This program appears to constitute an export subsidy in that it is contingent on export performance and therefore is a prohibited subsidy under paragraph 2(7.2)(b) of SIMA.

15. KEXIM Import Financing

KEXIM provides loans of up to 80% of the transaction value (90% for SMEs) for up to two years for imports of essential goods or natural resources that are considered important to Korea’s economy. This program was introduced in 1976. The repayment term is up to 10 years for capital goods and up to two years for other imports, with repayment made in periodic instalments of at least once per year and a grace period of up to 3 years for capital goods. This program is governed by Article 18(1)2 of the KEXIM Act – Income important to the national economy and Chapter 2 Section (1) of the Loan Extension Regulations.

It is possible that this program provides a financial contribution in the form of a contingent transfer of funds within the meaning of paragraph 2(1.6)(a). Evidence suggests that this program is also specific under paragraph 2(7.2)(a) of SIMA in that it is limited by law to enterprises engaged in importing certain essential goods or natural resources within the jurisdiction of the authority granting the subsidy.

16. KEXIM Overseas Investment Credit Program

Under this program, KEXIM provides loans to Korean companies to purchase foreign mines. This program may involve direct capital contributions, the acquisition of stocks and the provision of long-term funds. To be eligible, the company must have been doing business for over three years in the field of the targeted foreign asset. The interest rate is calculated by amending a base rate to account for delivery cost, administrative fees, credit rates and the expected profit.

Evidence suggests that this program provides a financial contribution within the meaning of paragraph 2(7.2)(a). The program appears to be specific at law in that it is limited to companies investing in foreign mines pursuant to the KEXIM Act, its enforcement decree and KEXIM’s Regulation Governing Financing Operations.

17. KEXIM Short-Term Export Credits

KEXIM extends preferential, low-interest pre-shipment financing to exporters to cover the costs of production and the shipment of exported goods. Companies can borrow up to the full value of the export contract, less any amounts received, in either Korean won or a foreign currency. The discount interest rate payable under the program is either fixed rate (base rate + margin), floating (base rate + margin), or a foreign currency rate (LIBOR (or swap rate) + margin).

It is possible that this program provides a financial contribution in the form of a contingent transfer of funds and liabilities within the meaning of paragraph 2(1.6)(a) of SIMA. This program appears to constitute an export subsidy in that it is contingent on export performance and therefore is a prohibited subsidy under paragraph 2(7.2)(b) of SIMA.

18. KEXIM Trade Bill Rediscounting Program

Under this program, exporters first discount their documents against acceptance or export letter of credit with participant commercial banks. Those banks, in turn, discount promissory notes with KEXIM. The program was introduced to benefit commercial banks by providing them with foreign currency for their short-term export credit. KEXIM, as a result, provides an indirect funding vehicle by which low-cost government loans are provided to exporters.

Evidence suggests that this program provides a financial contribution in the form of a contingent transfer of funds and liabilities within the meaning of paragraph 2(1.6)(a) of SIMA. This program appears to constitute an export subsidy in that it is contingent on export performance and therefore is a prohibited subsidy under paragraph 2(7.2)(b) of SIMA.

19. Korea Development Bank (KDB) Short-Term Discounted Loans for Export Receivables

This program, administered by the Korea Development Bank and the Industrial Bank of Korea, provides short-term loans on export receivables. This allows companies to receive discounted receivables prior to their maturity. The “fee” paid by exporters is essentially a discounted rate of interest for this advance payment. The importer then pays the bank directly, which means that the exporter no longer bears the risk of non-payment.

In the Rebar I investigation, this program was investigated, but was found to be not applicable to the Subject Goods. Evidence suggests that the program may be applicable in this current investigation.

This program provides a financial contribution in the form of a contingent transfer of funds and liabilities within the meaning of paragraph 2(1.6)(a) of SIMA. The program likely constitutes an export subsidy in that it is contingent on export performance and therefore is a prohibited subsidy under paragraph 2(7.2)(b) of SIMA.

20. Korean Trade Insurance Corporation (K-SURE) Export Credit Guarantee

The CBSA found this program to be actionable in the OCTG I investigation. The purpose of this program is to provide export credit guarantees. In order to be eligible for this program, applying companies must have outstanding loans from banks to purchase raw material and to manufacture goods based on L/C. The program is offered as an operational function of K-Sure, but not under any specific legislation.

Evidence and CBSA precedent suggests that this program provides a financial contribution in the form of a contingent transfer of funds and liabilities within the meaning of paragraph 2(1.6)(a) of SIMA. This program appears to constitute an export subsidy in that it is contingent on export performance and therefore is a prohibited subsidy under paragraph 2(7.2)(b) of SIMA.

21. Long-Term Loans from the Korean Resources Corporation (KORES) and the Korea National Oil Corporation (KNOC)

This program was introduced in 1982, with the purpose of enhancing and stabilizing the supply of energy resources in Korea. The laws and regulations relating to this program are Articles 12 and 14 of the Submarine Mineral Resources Development Act; Articles 5 and 11 (clause 1 and 2) of the Overseas Resources Development Business Act; Article 11 (clause 1) of its Enforcement Decree; Article 3 (paragraph 1) of its Ministerial Decree; and Articles 5, 6 (clause 1), 7 (clause 1), 20 (clause 1 and 2), 20-2, and 22-2 (clause 1, 2, and 4) as well as Appendices 1 and 2 of the Ministerial Notice promulgated by MOTIE on the Criteria for Overseas Resources Development Business Fund.

It is possible that this program provides a financial contribution within the meaning of paragraph 2(1.6)(a) through the direct transfer of funds and may provide a benefit in the form of the difference between the interest charged on these loans and the interest charged for a comparable commercial loan. The program is likely specific within the meaning of paragraph 2(7.2)(a) because it is limited by law to companies investing in foreign resource extraction.

22. Dongbu's Debt Restructuring

The US DOC determined that the financial contributions provided to Dongbu Steel in the context of its restructuring were countervailable in the US Galvanized FD.

Dongbu Steel is a producer of Subject Goods in Korea, with hot strip mill production capacity of 3 million MT per year in 2016 and cold-rolling capacity of 2.4 million MT per year. In 2014, after failing in an attempt to raise capital by selling several subsidiaries to POSCO, Dongbu applied for one of the GOK’s financial restructuring programs. Dongbu applied for the “Corporate Voluntary Restructuring” Program under the Creditor Banks’ Committee Arrangement. Nine creditor banks formed the “Dongbu Steel Creditor Banks Committee”, including five majority government-owned banks and five private commercial banks (Nonghyup Bank, Shihan Bank, Hana Bank, Korea Exchange Bank). KDB, a government-owned bank, was the prime creditor. The Committee is tasked with reviewing and voting on the debt restructuring plan for Dongbu, with resolutions and decisions passed by affirmative votes of creditor financial institutions with at least 75% of the outstanding debt obligations.

Evidence suggests that this program may provide a financial contribution in various respects, including but not limited to the direct or contingent transfer of funds and the exemption or deduction of amounts that are owing and due to the government, pursuant to paragraphs 2(1.6)(a) and (b). It is possible that this program may be de facto specific within the meaning of paragraphs 2(7.3)(a)-(c), in light of the fact that the program is used by a limited number of companies.

Goods/Services provided by the Government at Less than Fair Market Value

23. Reductions of Lease Fees and other Financial Support in FEZs

FEZs are areas designated by Korea’s Special Act on Designation and Management of Free Economic Zones (“SADMFEZ”). Companies that are located within an FEZ may be approved for benefits that include tax reductions and exemptions; exemptions and reductions of lease fees; and grants and financial support. Publicly available sources indicate that steel is one of the two main industries, along with petrochemicals, around which the Gwangyang Bay Area Free Economic Zone (“GFEZ”) is based.

Exemptions and reductions of lease fees for companies in FEZs are granted pursuant to subarticles 16(2) and (4) and article 18 of the SADMFEZ. The program appears to provide for 50-100% tax reductions in accordance with local ordinances for foreign invested companies. It is possible that cash grants are also provided to cover factory and research facility construction costs, employment subsidies, employee training subsidies and other costs to a foreign-invested company with a foreign investment ration of 30% or higher, although the legislative basis for this is unclear.

This program appears to provide a financial contribution within the meaning of section 2(1.6)(b) of SIMA by exempting or deducting from amounts that would otherwise be owing and due to the Government, or a financial contribution in the form of a contingent transfer of funds and liabilities within the meaning of paragraph 2(1.6)(a). Evidence suggests that the program is specific within the meaning of paragraph 2(7.2)(a) in that it is geographically limited to a group of enterprises within an area designated as an FEZ under the SADMFEZ.

24. Customs Duties Reduced or Exempted

This program, administered under the Customs Act, was found to be actionable in the CBSA’s Rebar I investigation. Under this program, amounts that would otherwise be owing and due to the Korean government are reduced and/or exempted.

Evidence and CBSA precedent suggests that this program confers a benefit to the recipient in the form of a financial contribution pursuant to paragraph 2(1.6)(b). The CBSA found in Rebar I that there are no programs allowing the customs duties to be exempted for imports of equipment; rather, exemptions are applied on a case-by-case basis. The CBSA therefore found this program to be de facto specific under subsection 2(7.3) based on the manner in which the granting authority exercises discretion.

25. Export Insurance through the Korea Trade Insurance Corporation (K-Sure)

The CBSA found this program to be countervailable in the OCTG I investigation. The purpose of this program is to provide insurance coverage to exporters in case of non-payments with respect to importer risk, letter of credit (L/C) risk, import country risk, etc. The program is offered as an operational function of the K-Sure, but not under any specific legislation.

Evidence and CBSA precedent suggests that this program provides a financial contribution in the form of a contingent transfer of funds and liabilities within the meaning of paragraph 2(1.6)(a) of SIMA. This program appears to constitute an export subsidy in that it is contingent in whole or in part on export performance and therefore is a prohibited subsidy under paragraph 2(7.2)(b) of SIMA.

Grants and Grant Equivalents

26. Sharing of Working Opportunities/Employment Creating Incentives

This program aims to increase job opportunities for individuals through improvement and innovation. The program, managed by the Korea Labor Foundation, forms part of the Ministry of Employment and Labor’s employment promotion policy. Employers that create new employment opportunities receive support for labour costs through this program.

Evidence suggests that this program provides a financial contribution through direct transfer of funds within the meaning of paragraph 2(1.6)(a). It is possible that this program may be de facto specific within the meaning of paragraph 2(7.3)(b), in light of the fact that the program was used by only 69 companies in 2013.

Relief from Duties and Taxes in Inputs, Materials and Machinery

27. GOK Facilities Investment Support under RSTA Article 26

This program encourages companies to invest outside of the overcrowding control region of the Seoul Metropolitan Area in their respective fields of business by providing tax incentives. The area’s boundaries are defined by law in Article 9 and Table 1 of the Enforcement Decree of the Seoul Metropolitan Area Readjustment Planning Act. Eligible investments in facilities can produce a tax credit of up to 10% for eligible companies. If a company is in a tax loss situation for a given year, it may carry the credit forward for the next five years.

Evidence suggests that this program provides a financial contribution within the meaning of section 2(1.6)(b) of SIMA by exempting or deducting from amounts that would otherwise be owing and due to the Government. The program is likely specific within the meaning of paragraph 2(7.2)(a) in that it is geographically limited to a group of enterprises within the jurisdiction of the granting authority.

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

Energy Savings and other Green Programs

Preferential Tax Programs

Preferential Loans and Loan Guarantees

Goods/Services Provided by the Government at Less than Fair Market Value

Grants and Grant Equivalents

Relief from Duties and Taxes in Inputs, Materials and Machinery

Analysis of Vietnamese Subsidies to be Investigated

The complainant alleged the following subsidy programs in Vietnam:

General Information

The programs of import duty exemptions are made available pursuant to the Law No. 107/2016/QH13^{Footnote 44} dated April 6, 2016, on export and import duties (Law No. 107) and Decree No. 134/2016/ND-CP^{Footnote 45} dated September 1, 2016, on guidelines for the law on export and import duties (Decree No. 134). Law No. 107 replaced the Law on Export and Import Tax No. 45/2005/QH11^{Footnote 46} 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 47} 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. 45 and Law No. 107 and specified in Article 12 of Decree No. 87 and Article 5 to 29 of Decree No. 134. These programs were provided by the GOV.

Due to the similarity of the programs, the eight programs will be grouped into one program to be investigated: Exemptions of import duty.

Financial Contribution

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.

Specificity

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 48} dated November 12, 2015, guiding the implementation of a number of articles of the law on investment.

The complainant alleged the following subsidy programs in Vietnam:

General Information

The import duty refund programs are 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). 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. 45 and Law No. 107 and specified in Article 15 of Decree No. 87 and Article 33 to 37 of Decree No. 134. These programs were provided by the GOV.

Due to the similarity of the programs, the two programs will be grouped into one program to be investigated: Refunds of import duty.

Financial Contribution

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.

Specificity

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, constitute a prohibited subsidy as defined in subsection 2(1) of SIMA.

The complainant alleged the following subsidy programs in Vietnam:

General Information

Land used for production and business purposes is governed by Law No. 45/2013/QH13^{Footnote 49} dated June 21, 2013, on Land (Law No. 45); Decree No. 46/2014/ND-CP^{Footnote 50} 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 51} 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. Depending on the size of the benefits, the benefits could potentially be amortized over the following subsequent years.

Due to the similarity of the programs, the five programs will be grouped into one program to be investigated: Exemptions/reductions of land Rent, tax and levy.

Financial Contribution

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.

Specificity

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 complainant alleged the following subsidy programs in Vietnam:

General Information

Investment credit and export credit are made available pursuant to Decree No. 75/2011/ND-CP^{Footnote 52} dated August 30, 2011, on state investment credit and export credit (Decree No. 75) and Decree No. 151/2006/ND-CP^{Footnote 53} dated December 20, 2006, on state investment credit and export credit (Decree No. 151). These programs were provided by the GOV.

The 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 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 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 54} issued by the State Bank of Vietnam.

Financial Contribution

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 or exemptions.

Specificity

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 complainant alleged the following subsidy programs in Vietnam:

General Information

Corporate income tax and tax benefits are governed by Law No. 14/2008/QH12^{Footnote 55} dated June 3, 2008, on Enterprise Income Tax 2008 (Law No. 14); Law No. 32/2013/QH13^{Footnote 56} 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 57} 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 advantaged 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).

These program will be grouped into one program to be investigated under: Enterprise income tax preferences, exemptions and reductions.

Financial Contribution

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.

Specificity

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 complainant alleged the following subsidy programs in Vietnam:

General Information

The complaint listed the two programs and referred to the US DOC’s final determination in Certain Steel Nails.^{Footnote 58}

The programs are made available pursuant to Decree 108/2006/ND-CP of the Government, dated, September 22, 2006.^{Footnote 59} Decree 108 details in which areas the government will support new investments.

The two programs will be grouped into one program to be investigated: Investment support.

Financial Contribution

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.

Specificity

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 complainant didn’t specifically provide details related to the alleged subsidy program and how it would constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. Moreover, the program is more likely to be covered by two previously discussed programs related to subsidy in income tax and import duty. Therefore, the CBSA will not investigate this program separately.

General Information

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.^{Footnote 60}

Financial Contribution

This program where a direct transfer of funds from the Government is considered to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA.

Specificity

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is 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.

The complainant alleged that the Hoa Sen Group has been receiving preferential loans from state-owned banks and other preferential tax deductibles from the State. Since this was not under a specific program and the alleged benefits may fall into other subsidy programs, the CBSA will not initiate the investigation under the program.

General Information

Accelerated depreciation of fixed assets is specified in Circular 45/2013/TT-BTC^{Footnote 61} dated April 25, 2013, on guiding the regime of management, 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.

Financial Contribution

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 confers a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to particular enterprises with fixed assets and specialized technological capabilities.

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.

General Information

This program is made available pursuant to Decree No. 51/1999/ND-CP^{Footnote 62} dated July 8, 1999, detailing the implementation of Law No. 3/1998/QH10 on Domestic Investment Promotion (Amended) (Decree No. 51). Article 15 of Decree No. 51 provides the eligibility criteria for investment preferences. Articles 16 to 27 provides for various types of preferences for eligible investments. This program was provided by the GOV.

The last date that a company could apply for or claim benefits under this program was July 1, 2006, the date which Law No. 59/2005/QH11^{Footnote 63} dated November 29, 2005, on the Law on Investment (Law No. 59) came into effect. Articles 27 to 31 of Law No. 59 provides for the domains and sectors entitled to investment preference, including “labour intensive industries”. Articles 32 to 44 provides for investment preferences and supports.

Financial Contribution

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 confers a benefit to the recipient equal to the amount of the grant.

Specificity

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to particular enterprises with a certain size.

General Information

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 reasons, such as: policy changes in terms of taxation and other dues to the state budget; relocation of enterprises upon request of competent authorities; loss due to natural disaster, etc.

Financial Contribution

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 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.

Specificity

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 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.

The CBSA conducted its own research but no information was found to suggest producers of CRS have acquired assets from the GOV. Therefore, the CBSA will not investigate this program.

Program Incentives on Non-agricultural land use tax

General Information

Although the complainant provided the CBSA with information about the subsidy program, it did not include this program in the list of alleged subsidies.

Based on CBSA research, non-agricultural land use tax is regulated by Law No. 48/2010/QH12 dated June 17, 2010, on non-agricultural land use tax (Law No. 48); Decree 53/2011/ND-CP dated July 1, 2011, guiding the implementation of this Law No. 48; and Circular No. 153/2011/TT-BTC 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, areas with socio-economic difficulties eligible for investment preferences.

Financial Contribution

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 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.

Establishments Dealing with Exported Goods

General Information

This program is made available pursuant to Decree No. 164/2003/ND-CP dated December 22, 2003, on detailing the implementation of the Law on Enterprise Income Tax (Decree No. 164). Article 39 of Decree No. 164 provides that business establishments dealing in export goods defined in Section III, List A of the Appendix to this decree shall enjoy certain income tax preferences. This program was provided by the GOV.

The list of sectors and regions eligible for preferences specified in Decree No. 164 was repealed and replaced with the list attached to Decree No. 108/2006/ND-CP dated September 22, 2006, detailing and guiding the implementation of a number of articles of the Investment Law (Decree No. 108).

Decree No. 164 is replaced by Decree No. 24/2007/ND-CP dated February 14, 2007 detailing the implementation of the Law on Enterprise Income Tax (Decree No. 24). Article 46.3 of Decree No. 24 provides that business establishments currently enjoying income tax preferences under Decree No. 164 which is issued before effective date of this decree continue to enjoy the relief until the end of the duration of the preferences.

This program was terminated on October 25, 2006 with the implementation of Decree No. 108 and Decree No. 24, except for situations provided for in Article 46.3.

Financial Contribution

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 confers a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to investment projects within certain eligible sectors as specified in Section III, List A of the Appendix to Decree No. 164.

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

*Note – Programs are re-numbered and re-named