FISC 2016 IN
Certain Fabricated Industrial Steel Components
Statement of Reasons

[5] The complainants account for a major proportion of the production of like goods in Canada.

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

Supermetal Structures Inc.
1955, 5e Rue
Lévis, QC
G6W 5M6

Supreme Group LP
10457 – 184 Street NW
Edmonton, AB
T5S 1G1

Waiward Steel LP
10030 – 34 Street NW
Edmonton, AB
T6B 2Y5

Supermetal Structures Inc.

[7] Supermetal is a producer and installer (erector) of FISC, in addition to fabricated structural steel components for bridges and commercial buildings.^{Footnote 1} The company’s main production facility is in Lévis, Québec. In Canada, Supermetal also has production facilities in Sherbrooke, Québec and in Leduc, Alberta. The company operates a plant in South Carolina, in the United States of America. FISC produced in Québec is produced not only for projects in the eastern parts of the country but also for projects in western Canada, as the FISC can be transported by train or truck to western provinces.

Supreme Group LP

[8] Supreme is the parent company of several FISC manufacturing companies in Canada, with its head office in Edmonton, Alberta.^{Footnote 2} Supreme’s fabrication business focuses primarily on the fabricated structural steel sector, which includes FISC. The company estimates that approximately 85% of its steel fabrication was of FISC, namely producing fabricated steel and certain plate-work components for industrial projects, particularly oil and gas and mining projects. The rest of its production was for bridges, commercial projects and industrial uses that are not the subject of the complaint. Among its 12 companies, five core companies manufacturing FISC operate under the Supreme Steel LP banner, and are located in Edmonton, Alberta, Winnipeg, Manitoba, Welland, Ontario and Saskatoon, Saskatchewan. Another company, Canron Western Constructors Ltd., manufactures FISC and is located in Delta, British Columbia. Quality Fabricating and Supply LP, located in Edmonton, Alberta, can also produce FISC when required. Supreme also provides steel structure erection services and produces other steel products, such as pressure piping.

Waiward Steel LP

[9] Waiward, located in Edmonton, Alberta is a large producer and installer (erector) of FISC.^{Footnote 3} The company estimates that 85% of its FISC production is for the oil and gas industry and 13% for the mining industry, with the remaining 2% for other industrial end uses.

[10] The complaint is supported by MacDougall Steel Erectors Inc. of Borden Carleton, Prince Edward Island, MQM Quality Manufacturing Ltd. of Tracadie-Sheila, New Brunswick, Ocean Steel & Construction Ltd. of Saint John, New Brunswick and Walters Inc. of Hamilton, Ontario.^{Footnote 4}

[11] Other known producers in Canada are: ADF Group Inc., of Terrebonne, Québec, Burnco Mfg Inc., of Vaughan, Ontario, Canam Group Inc., of Boucherville, Québec,Coastal Metals Ltd., of Beresford, New Brunswick, Beauce Atlas Steel Fabricators, of Sainte Marie de Beauce, Québec, IWL Steel Fabricators LP, of Saskatoon, Saskatchewan, Proco Constructions Inc., of Saint-Nazaire, Québec, Saskarc Fabrication, of Oxbow, Saskatchewan, and Structures GB Ltée, of Rimouski, Québec.^{Footnote 5}

[12] The CBSA has identified 155 potential exporters of the subject goods from CBSA import documentation and from information submitted in the complaint.

[13] The CBSA has identified 89 potential importers of the subject goods from CBSA import documentation and from information submitted in the complaint.

[14] For the purpose of these investigations, “GOC” refers to all levels of government, i.e. federal, central, provincial/state, regional, municipal, city, township, village, local, legislative, administrative or judicial, singular, collective, elected or appointed. It also includes any person, agency, enterprise, or institution acting for, on behalf of, or under the authority of, or under the authority of any law passed by, the government of that country or that provincial, state or municipal or other local or regional government.

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

Fabricated structural steel and plate-work components of buildings, process equipment, process enclosures, access structures, process structures, and structures for conveyancing and material handling, including steel beams, columns, braces, frames, railings, stairs, trusses, conveyor belt frame structures and galleries, bents, bins, chutes, hoppers, ductwork, process tanks, pipe racks and apron feeders, whether assembled or partially assembled into modules, or unassembled, for use in structures for: 1. oil and gas extraction, conveyance and processing; 2. mining extraction, conveyance, storage, and processing; 3. industrial power generation facilities; 4. petrochemical plants; 5. cement plants; 6. fertilizer plants; and 7. industrial metal smelters; but excluding electrical transmission towers; rolled steel products not further worked; steel beams not further worked; oil pump jacks; solar, wind and tidal power generation structures; power generation facilities with a rated capacity below 100 megawatts; goods classified as “prefabricated buildings” under HS Code 9406.00.90.30; structural steel for use in manufacturing facilities used in applications other than those described above; and products covered by Certain Fasteners (RR-2014-001), Structural Tubing (RR-2013-001), Carbon Steel Plate (III) (RR-2012-001), Carbon Steel Plate (VII) (NQ-2013-005), and Steel Grating (NQ-2010-002); originating in or exported from the People’s Republic of China, the Republic of Korea, the Kingdom of Spain, the United Arab Emirates and the United Kingdom of Great Britain and Northern Ireland.

[16] Goods falling within the product definition are fabricated steel components such as angles, columns, beams, girders, base plates, trusses, kits of fabricated structural shapes and “plate work” components, such as bins, hoppers, chutes and the like, as well as related steel products that have been custom fabricated into articles suitable for erection or assembly into a variety of structures according to specific custom plans.

[17] With regards to fabricated industrial steel components, “industrial” is not a technical term, but a reference to the seven end uses identified in the product definition. FISC is used in the construction industry for support frameworks and integrated basic processing equipment traditionally fabricated by FISC suppliers. FISC are inherently structural. They are components specifically designed to be assembled into a particular structure. In their simplest form, they are custom structural components that form the skeleton of a structure. These components are custom fabricated into pieces that precisely fit together to form support structures. Structures may include an enclosed structure, such as a building, or a structure that is open to the elements. Many of these components will consist of beams and columns. Columns are steel shapes used as vertical supports in a building. Beams which may not be readily distinguished from columns in terms of shape and appearance are steel shapes used horizontally in structures to provide floor support, floor beams, or connect columns girders. FISC includes walkways, ladders and handrails that form part of the steel structure.

[18] In some cases, FISC will include the skeleton framework and integrated structural objects supported by the framework, such as hoppers, chutes and bins. These objects are typically constructed from steel plate and are closely related to the structure or are integrated as part of it. For example, in an oil sands project or similar open pit mining operation, large trucks will dump ore into a very large hopper that funnels the ore to a conveyor or crusher that begins preparing the ore for processing. The FISC fabricator will provide the structural steel components for the hopper structure, which may stand several hundred feet tall. It will also fabricate the hopper components from steel plate. The hopper components are large pieces of steel plate precisely fabricated in a FISC producer’s facility so as to be assembled within the hopper structure. Similarly, FISC producers will supply the structure for surge bins (a process tank which holds crushed ore) and the components that comprise the surge bin. Other examples of plate-work components include ducts, chutes, bins and bents.

[19] Plate-work refers to custom fabricated structural components made from steel plate.

For example, a hopper would consist of a significant amount of plate-work. Some fabricated components will involve plate-work as part of the connection system or to strengthen beams. Some FISC modules also include significant amounts of plate-work depending on the design. Plate-work could also include large ducts or tanks that comprise part of the project.

[20] FISC also includes structural components of heavy equipment, such as conveyance machinery. In mining and oil sands extraction, ore and other raw materials are carried along large, heavy conveyance systems. FISC producers will fabricate the galleries, trusses, and apron feeder components for these pieces of machinery. These FISC are structural frameworks designed to support a particular piece of integrated machinery.

[21] The product definition is based on a specific set of “end uses”. “Oil and gas extraction, conveyance and processing” includes FISC used to fabricate steel frameworks and plate work components to support the processes and facilities used to extract resources and process them into a marketable product. It also includes FISC used to support the facilities that process oil and gas, such as refining.

[22] FISC used in mining applications includes steel framework structures and plate-work components that support the equipment and processes for the extraction, conveyance storage and processing of mining resources. Processing refers to the initial process of mining resources that occurs at the mine or within close proximity and that is completed in order to market the extracted material.

[23] FISC used in industrial power generation facilities includes the structural steel frameworks and plate components designed to support the production and processes in electrical plants, including hydro, coal, gas and nuclear facilities. Cogeneration power plants are included. Excluded from the product definition are FISC for power generation plants with a capacity of less than 100 megawatts, wind and tidal power generation facilities and structures to support solar panels.

[24] FISC used in petrochemical plants includes the structural steel frameworks and plate components designed to support the production and processes of chemicals and material derived from processing oil and natural gas. This includes petrochemical based plastics, kerosene, propane and other similar goods.

[25] FISC used in cement plants includes the structural steel frameworks and plate components designed to support the production and processing of cement. Cement is a hardening compound used in concrete and mortar. Concrete mixing and processing plants are distinct from cement plants.

[26] FISC used in fertilizer plants includes the structural steel frameworks and plate components designed to support the production and processing of chemical fertilizers. Many potash mines also process extracted resources into fertilizers and would fall under both fertilizer plants and mining operations.

[27] FISC used in industrial metal smelters includes the structural steel frameworks and plate components designed to support the production and processing of ores into refined or semi-refined metals, such as aluminum and steel. The term “industrial” refers to large commercial smelting operations, as opposed to artisan or hobby smelters.

[28] FISC may leave the production facility as components (often referred to the industry as “sticks”) or in a semi-assembled modular configuration. Modules consist of FISC that have been partially assembled, erected or constructed into a module prior to being integrated into the finished steel structure.

[29] Material conveyance structures are structures, usually shop assembled (modular), to support moving conveyor belts. They are often built as box trusses. Trusses consist of a series of welded steel sections that are used in place of conventional beams to span large areas.

Goods not Covered by the Subject Goods Definition

[30] Goods that are not covered by the subject goods definition include steel components for electrical transmission towers, pre-fabricated metal buildings falling under HS Code 9406.00.90.30, goods subject to specified existing Canadian International Trade Tribunal orders or findings, power plants with a rated capacity of less than 100 megawatts, and solar, wind and tidal power generation structures. Also excluded are structural steel components for use in structures for manufacturing or processing, other than the seven end uses specified in the product definition.

[31] Structural steel components for use in “commercial” structures, such as warehouses, commercial buildings, high rises, hospitals, and cultural buildings (e.g. arenas, theatres, etc.) are not covered by the product definition.

[32] Note 4 of the Customs Tariff Chapter 94 provides that, “For the purposes of heading 94.06, the expression "prefabricated buildings" means buildings which are finished in the factory or put up as elements, presented together, to be assembled on site, such as housing or worksite accommodation, offices, schools, shops, sheds, garages or similar buildings.” Industrial structural steel frameworks, such as those identified in the product definition, are not “similar buildings” to housing, offices, schools, shops, sheds, garages or similar buildings. Prefabricated buildings are, however, commonly present on the physical sites of the industrial operations enumerated in the production definition. Structural steel components comprising these pre-fabricated buildings are therefore not included in the product definition.

[33] Fabricated reinforcing bars used in concrete structures are not included in the production definition as they are reinforcing steel, not structural steel. Also not included are fabricated structural steel components used in buildings and structures for end uses not specified in the production definition.

Production Process^{Footnote 7}

[34] The primary steel products used as inputs for FISC are structural shapes, which include angles, beams and in some cases hollow structural sections, and steel plate. Other steel inputs that may be used include carbon steel sheet, bar, rod, and fasteners. These input products are purchased directly from either Canadian or foreign steel mills or from service centers.

[35] The structural shapes used in FISC are produced using several different methods. Steel scrap or billet may be melted in a large electric furnace and cast into beam shapes that are then hot-rolled to form a precise shape. Hollow structural sections may be produced from hot-rolled coil. Plate may also be cut or formed into structural steel components or welded or bolted into structural beams or columns.

[36] The overseeing engineer on a project will design the structure and develop detailed engineering specifications of the structures to ensure the structural performance. In large projects, this role would be fulfilled by the firm with the Engineering, Procurement and Construction contract (the “EPC”).

[37] Based on the engineering specifications and plans, the FISC producer will develop detailed drawings for the various components. The FISC producer will also undertake detailed engineering including designing the connections (either welds or fasteners) to resist the required design forces, the position and size of holes in the components, the reinforcements that such holes might require, and assessing the need for and placement of stiffeners on built up members.

[38] The basic fabrication operations for FISC include, but are not limited to, the cutting to length, drilling, punching, bending, connecting and welding of steel, and the finishing of such steel into structural components. Each component is custom manufactured for a specific project. Components can be as simple as a beam cut to length with a few holes punched or drilled into it. Alternatively, a component can be comprised of dozens of beams and plates of different sizes and thicknesses connected and welded into a particular three-dimensional component.

[39] Production involves steel materials progressing through several stages of fabrication to produce finished components. The first stage of fabrication usually involves cutting material to length with a shear, saw or torch. At this stage the steel may also be punched or drilled. Some producers use computerized machinery to ensure precise cuts and holes.

[40] The steel then goes to the layout crew which performs the welding, punching and bending operations. Drilling of structural steel is usually limited to making holes in material too thick for the punching machines, though it may be required to meet specifications in lighter material as well. A press brake is also used to form angular bends in wide sheets and plate.

[41] Various components to be welded together are tacked together and checked for proper placement before welding. The thickness of the welding depends on the particular specifications. In addition to welding, component parts of a member may be fitted with fasteners. Permanent shop bolting of structural connections is accomplished with hand or power wrenches.

[42] Throughout the process the assembly is checked for overall dimensions. Material is inspected again prior to final shop welding to check overall dimensions, proper positioning of all connections, and to ensure that all joints fit properly. After the welding is completed a visual inspection can be followed by the testing of welds. Such tests include magnetic particle inspection, dye penetrant inspection, ultrasonic inspection, and radiography. An independent testing laboratory may be involved in inspection prior to shipment of the FISC.

[43] Steel that needs to be painted or galvanized is thoroughly cleaned of loose mill scale rust and other foreign matter. The cleaning can be done with hand or power driven wire brushes, by flame descaling, by pickling acid treatment, or by sand shot or grit blasting. After painting the shipping mark is placed on each piece and an inspection ensures that proper identification of each structural component is clearly indicated.

[44] FISC encompasses the individual fabricated components, which are sometimes referred to as “sticks”. They can vary from short small beams with minimal processing to large pieces made up of various items welded or bolted together into a single component.

[45] Labour is the variable factor that most affects the unit price for FISC. In general, the cost of material inputs into a metric ton (MT) of FISC is fairly consistent. However, the cost of FISC per MT will vary considerably depending on how many hours it takes to fabricate a ton of FISC. For example, a large heavy beam that is cut, punched and then welded to a base plate involves relatively few hours of labour and thereby has a relatively low cost per MT. However, if a beam of similar weight and size is cut into many small pieces, welded to various gussets with complex connection, reinforced with stiffener plates, and attached to complex braces, the number of hours of labour increases significantly and the cost per MT of FISC will increase significantly.

[46] A typical fabrication project will require between 15 and 20 hours of shop time per MT of fabricated steel. Plate-work can be far more time consuming and costly on a per ton basis as there can be 40 to 80 hours of shop time per MT.

Modularization in yard

[47] It is common in the oil, gas and mining industries for FISC to be partially assembled into modules prior to being shipped to the construction site. Modularization is typically done outside in a module yard, the same environment in which FISC would be assembled into a structure at the construction site. The reasons for off-site modularization are cost and safety. Labour is expensive at many of the remote locations where FISC is installed. Further, it is more efficient and cheaper to have components fitted together in large modules at ground level, than to have individual components individually attached to a structure at great heights.

[48] A module may be very large, weighing dozens of MTs. Modules could include pipe racks, furnace ductwork (e.g. 16′x16′ ducts made from heavy plate), equipment supports or enclosures, walkway components, conveyor systems supports and hopper or chute components (e.g. walls). Further, the modules may then have various components that are not FISC, such as piping, electrical conduits and other utilities, and specialized equipment (e.g. pumps, machinery, etc.) attached to the semi-constructed structure at the modularization yard.

[49] The modules are then shipped to the site and assembled into or connected to a structure. Modules produced in a yard can be up to 36 metres long, 6 metres wide and 6 metres high, and can weigh up to 100 MT. The modules are built in such a way that they can be transported by oversized trucks on a highway to be staged and eventually put together on site to form the complete project or process.

[50] The complainants stated that the modularization process completed in a yard is not the manufacturing or fabrication of FISC, but the construction of modules from FISC. Construction of modules in a yard is the same as the construction of the structure in the field. It is done outside in the elements with portable tools and equipment by individuals specialized in the erection of FISC.

[51] The complainants submit that the assembly of a module in a module yard is not the production of “like goods”. A modular service provider does not produce or fabricate goods, rather it provides construction services. They do not take ownership of the FISC and then turn it into something else. Rather, they semi-erect FISC procured by a purchaser of FISC from a fabricator of FISC in one location and that piece is then transported to its final location for installation.

[52] The CBSA agreed with this conclusion and did not consider the assembly of modules in a module yard to constitute production of like goods in Canada.

Product Use

[53] In industrial settings, FISC is used to construct a variety of structures including buildings and structures that support processing facilities, equipment and systems and parts used for conveyancing and material handling, including but not limited to conveyor belt frame structures and galleries and bents, bins, chutes, hoppers, silos, storage and process tanks, and pipe racks.

[54] FISC for buildings and process structures is used to construct a skeleton that fulfills the load bearing function required for the erection of the building or process. Structures composed of FISC are diverse. They include modest structures requiring several hundred tons of steel to multistory complexes or large support structures such as pipe racks used in oil and gas facilities or giant structures to hold a hopper for processing mining resources and requiring thousands of tons of steel.

[55] Many large structures are beam and column structures that consist of fabricated H and I shapes, i.e. wide flange beams and I-beams, joined in an interlocking fashion to form a rigid steel frame. Significant tonnages of FISC have been used in industrial structures such as oil and gas and mining facilities, including in support structures for large pipes, conveyancing systems used in oil and gas and mineral processing facilities, structural supports for mines, structural supports for processing facilities, and components of processing facilities (e.g. hoppers and storage tanks).

[56] As discussed above, finished FISC is shipped either unassembled or partially assembled from the fabricating facility to construction sites. Delivery of individual components requires coordination between the fabricator and the erector. Erectors are responsible for the placement and connection of the structural components at the construction site. The erector may be either an independent company or an operation related to the fabricator.

[57] Delivery schedules to a project site vary significantly based on the scope and size of the project. Most often delivery begins 16 to 20 weeks from the date of contract, and delivery can occur over a few months or over one or two years, sometimes more.

[58] FISC, whether in stick form or modules, is produced and then delivered to the jobsite in a deliberate sequence by the fabricator in order to allow the erector to proceed efficiently. Upon arrival at a job site, the FISC is checked by the erector’s crew chief who determines from blueprints the order in which the material is to be placed. The crane operator lifts sections to the proper place where ironworkers secure the piece by bolting it to existing sections. Welding may also be required to make connections.

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

• 7216.99.00.10
• 7216.99.00.99
• 7308.40.00.90
• 7308.90.00.92
• 8421.99.00.90
• 8428.39.00.31
• 8428.39.00.90
• 7216.99.00.20
• 7301.20.00.10
• 7308.90.00.60
• 7308.90.00.99
• 8428.32.00.90
• 8428.39.00.34
• 7216.99.00.30
• 7301.20.00.20
• 7308.90.00.81
• 7326.90.90.99
• 8428.33.00.90
• 8428.39.00.39
• 7216.99.00.91
• 7308.40.00.10
• 7308.90.00.89
• 8428.31.00.00
• 8428.39.00.20
• 8428.39.00.80

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

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

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

[76] Based on an analysis of the information provided in the complaint, in letters of support provided by other Canadian producers and by the Canadian Institute of Steel Construction, the CBSA is satisfied that the complaint is supported by domestic producers, who represent more than 50 percent of the total production of those domestic producers expressing an opinion, and who represent more than 25 percent of FISC production in Canada.

[94] The complainants submitted that they are unable to estimate the normal values for projects on the basis of domestic prices, using the methodology of section 15 of SIMA, because not only are domestic prices not readily available, but also because each project is unique and requires made-to-order components.^{Footnote 22} Accordingly, for every country and for each of the ten selected projects, the complainants estimated the normal value on the basis of the methodology of paragraph 19(b) of SIMA, by estimating the costs of production of the goods, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits.

[95] The complainants provided information supporting the initiation of a section 20 inquiry respecting the allegedly dumped goods from China. They alleged that the prices of FISC in the Chinese domestic market are not reliable for determining normal values due to the presence of the conditions of section 20 of SIMA.

[96] As a result, for goods from China, the complainants also estimated the normal values as per the methodology of paragraph 20(1)(c) of SIMA, on the basis of the estimated costs of production, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits in a surrogate country. The Complainants used Korea as the surrogate country.

[97] In order to estimate the cost of production for the sample of projects, the complainants started by estimating their own cost of production to supply the FISC, often based on their bid information, and adjusted these estimates to reflect the estimated differences in costs in the applicable countries.

[98] For all projects, the complainants estimated the cost of material as being equal to their own cost to acquire the required steel components. The complainants reasoned that they purchase these material inputs efficiently and at world prices.^{Footnote 23} The complainants then adjusted the material costs upward, alleging that for a given application, components produced overseas require slightly more material than if the components for the same application were produced domestically.^{Footnote 24} The reason for this discrepancy is due to the necessity for goods produced overseas to fit in 40′ sea containers while goods produced domestically can be fabricated so that they fit on a flatbed transport, which can accommodate longer and taller pieces. Accordingly, the necessity to fit components in a sea container may require that the foreign producer cut longer components in half (i.e. a beam, for example) and fabricate splice plates so the two pieces can be reassembled with fasteners once delivered to the construction site. The additional fabrication and the additional pieces of metal (the plate splice and the fasteners) were not reflected in the complainants material costs given that they do not need to cut the long components. The complainants estimated labour costs by comparing publically available information about manufacturing wages or labour costs in the named countries to Canadian manufacturing wage rates and labour costs, and adjusting their labour costs accordingly.^{Footnote 25} For every country, the complainants made an additional upward adjustment to the labour cost to reflect the additional fabrication, and thus the additional labour costs, necessary to cut long components to fit in sea containers, as discussed above.^{Footnote 26}

[99] In light of the limited availability of financial data for the producers of subject goods, and the variability of general, selling and administrative (GS&A) expenses reporting, the complainants used their own average ratio of GS&A expenses over cost of goods sold, over the period of January 1, 2013 to March 31, 2016, in order to estimate GS&A expenses for each project.^{Footnote 27}

[100] The complainants also estimated an amount of financial expenses, as a percentage of cost, on the basis of publically available information for what they claimed to be a representative producer from China, Korea and the UK. As financial data for Spain and the UAE was not readily available, the complainants used the same ratio that was used for the UK, which was the lowest ratio of financial expenses found for China, Korea and the UK.^{Footnote 28}

[101] For each project, the complainants based the reasonable amount for profits on publically available financial data for a Korean producer. The complainants suggested that the amount of profits that it found for producers in the other named countries were too low to be considered as reasonable.^{Footnote 29}

[102] Generally, the CBSA found that the complainants’ paragraph 19(b) and section 20 normal value estimates were reasonable.

[103] 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.

[104] As detailed in the “Section 20 Inquiry” section of this Statement of Reasons, the CBSA has information which demonstrates that the conditions of section 20 may exist in the sector under investigation. As a result, the CBSA estimated normal values for China in accordance with the methodology of section 20 of SIMA.

[105] The CBSA estimated the normal values, for each project, on the basis of the complainants’ methodologies, except that it applied an amount for profits equal to the profit sought by the relevant domestic producer in their bid or estimated bid for the project.

[106] 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.

[107] Competitors’ bid prices are not readily available in the FISC industry. In respect of nine of the projects selected by the complainants, the export prices were estimated by the complainants using their own losing bid price or the estimated Canadian bid price, adjusted downwards based on commercial intelligence. For the remaining project, the complainants used a specific price, estimated on the basis of commercial intelligence. Where appropriate, the complainants also deducted an amount for estimated export charges. The methodologies used were based on Section 24 of SIMA.

[108] In estimating the export prices, the CBSA relied on actual import data from commercial and customs documentation, in addition to intelligence on specific industrial projects provided by the complainants. For each project selected by the CBSA, the export prices were estimated on the basis of the weighted average value for duty per MT of the aggregate imports of FISC that were believed to be destined for the project.

[109] As previously indicated, the CBSA selected six of the same projects that were selected by the complainants and four other projects that were identified in the complaint. For two of the projects selected by the complainants, the CBSA was unable to identify imports destined for those projects, and thus, was unable to estimate the export prices. For another project, all identified shipments that were believed to be destined for the project were imported prior to the POI. Accordingly, the CBSA did not select this project. Finally, the CBSA was unable to estimate the export price for the remaining project on the basis of actual import data because shipments for the project had not yet started.

[110] For each named country, the CBSA estimated the margin of dumping by comparing the total estimated normal value with the total estimated export price. Based on this analysis, it is estimated that the subject goods from China, Korea, Spain, the UAE and the UK were dumped. The estimated margins of dumping for each country are listed in the table below.

[127] The complainants alleged that subject goods have been subsidized at a significant level and maintained that exporters/producers of subject goods have received countervailable subsidies from various levels of the GOC, including the central government as well as provincial and local government authorities.^{Footnote 31}

[128] The complainants provided evidence/information for 116 specific subsidy programs that they argued exporters/producers of subject goods may have benefited from.^{Footnote 32} The complainants referred primarily to the CBSA’s various investigations^{Footnote 33}, including Certain Aluminum Extrusions, Steel Grating, Copper Tube, Certain Unitized Wall Modules, Galvanized Steel Wire, Rebar, Photovoltaic Modules, Silicon Metal, Certain Laminate Flooring, Oil Country Tubular Goods, Stainless Steel Sinks, and Line Pipe, to identify countervailable subsidy programs that may have been available to exporters/producers of subject goods. The complainants also relied upon a series of studies and reports^{Footnote 34}, three WTO documents^{Footnote 35}, several website publications and articles^{Footnote 36} and annual reports^{Footnote 37} for two identified exporters of subject goods to demonstrate the existence of countervailable subsidy programs in China that may have been available to exporters/producers of subject goods.

[129] In examining the 116 specific subsidy programs identified by the complainants, the CBSA removed 67 programs from the list of programs identified by the complainants. Those programs were removed by the CBSA due to the following considerations:

• a) None of the identified exporters/producers of subject goods was/is located in the regions that would allow them to qualify for the program;
• b) There is insufficient information available to the CBSA to determine if the program was/is potentially available to the identified exporters/producers of subject goods;
• c) The program appears to have already expired or appears to have already been repealed;
• d) The program appears to be the duplicate of another investigated program or appears to be covered by another investigated program.

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

[131] The CBSA identified 109 potential programs through research of its previous subsidy investigations involving China, information previously obtained by the CBSA and publicly available information.

[132] In analyzing the information provided by the complainants and obtained by the CBSA through its own research, the CBSA has developed the following categories of programs and incentives that may be provided to exporter/producers of subject goods:

1. Special Economic Zones (SEZ) and other Designated Areas Incentives;
2. Preferential Loans and Loan Guarantees;
3. Grants and Grant Equivalents;
4. Preferential Tax Programs;
5. Relief from Duties and Taxes on Inputs, Materials and Machinery;
6. Reduction in Land Use Fees;
7. Goods/Services Provided by the Government at Less than Fair Market Value; and
8. Equity Programs.

[133] A full listing of all 158 programs to be investigated by the CBSA is found in the Appendix. As explained in more detail therein, there is sufficient reason to believe that these programs may constitute actionable subsidies and that exporters/producers of subject goods may have benefitted from these programs.

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

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

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

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

[138] Sufficient evidence is available to support the allegation that the subsidy programs outlined in the Appendix are available to exporters/producers of subject goods originating in or exported from China. In investigating these 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 are actionable subsidies and, therefore, countervailable under SIMA.

[139] The complainants estimated the amount of subsidy by using four Canadian FISC projects that were supplied by Chinese exporters as a representative sample. For each of these four projects, the complainants estimated the amount of subsidy by calculating the difference between the export price of the subject goods and the cost of the subject goods, using the figures estimated by the complainants.

[140] The CBSA used two of the four projects selected by the complainants, as well as two additional representative Canadian FISC projects identified in the complaint to estimate the overall amount of subsidy conferred upon the exporters of subject goods. In estimating the amount of subsidy, the CBSA calculated the difference between the estimated costs of subject goods and the estimated export prices for the four sampled projects. These sampled projects were deemed to be the representative FISC projects for all Canadian FISC projects during the Subsidy POI. For the four sampled projects, the estimated costs of subject goods were based on the information provided in the complaint and the estimated export prices were based on the information contained in the Customs documentation. Since the cited programs are believed to significantly lower the cost of production of the subject goods, this calculation is a reasonable estimate of the amount of subsidy.

[141] The CBSA’s analysis of the information indicates that subject goods imported into Canada during the period of January 1, 2014 to June 30, 2016, were subsidized and that the estimated amount of subsidy is 9.1% of the estimated export price of the subject goods.

[145] While the total value of the Canadian market for FISC increased by 8.6% between 2013 and 2015, the value of sales by the Canadian producers decreased by 15.6% during that period. The estimated increase in the total value of the Canadian market between 2014 and 2015 was 43.8%. Despite this very strong increase, the value of domestic sales decreased by 3.6%. The Canadian producers did not benefit from the increase in demand during that period. Imports from the five named countries, on the other hand, increased by 162% between 2013 and 2015. At the time of the 43.8% increase in demand between 2014 and 2015, the volume of subject imports increased by 386%. The most substantial increase in the volume of subject imports were from China. In this regard, FISC originating in China, increased by almost 900% between 2013 and 2015. The volume of subject imports from Korea also increased by 28% between 2013 and 2015, while the volume of subject imports from Spain increased by 51%. The volume of subject imports from the UAE and the UK decreased during that period, although the volume from the UAE increased substantially in 2015 in relation to the previous year.

[146] While the relative volume of subject imports has dropped in the first half of 2016, it has been somewhat proportional to a significant decrease in the total market, a decrease that is perhaps largely attributable to a slowdown in the Oil Fields expansion due to the significant decline in oil prices. For example, the latest publication (i.e. Summer 2016) of the Alberta Oil Sands Industry Quarterly Update, a Government of Alberta publication that provides updates for all Oil Sands projects in Alberta, still shows several projects as being “on hold”, “suspended” or “cancelled”.^{Footnote 39} The market share held by subject imports in the first half of 2016 increased despite the major decline in the market.

[147] Overall, the significant increased presence of subject imports, especially from China and Korea, combined with their high estimated margins of dumping, could be indicative of aggressive price strategies from producers from these countries, for the purposes of capturing shares of the Canadian market.

[148] The complainants alleged that prior to 2013, the domestic industry supplied FISC for the majority of relevant industrial projects and that it was almost always asked to bid. Since 2013, it has been common practice for the firms responsible for the engineering, procurement and construction (i.e. the EPC) to source in one of the named countries because the suppliers in the named countries were known in the industry to offer pricing that was well below what the domestic industry could offer.^{Footnote 40}

[149] The complainants provided 24 examples of contracts for the supply of FISC for large industrial projects that were lost to producers from the named countries. For nine of these projects, at least one of the complainants was involved in the bidding to supply FISC for at least a portion of the project, and lost to a producer in one of the named countries. For the other projects, the complainants were not invited to bid, as the contracts were awarded directly to producers in the named countries, allegedly because of their willingness to supply FISC at very low prices.

[150] The CBSA analysed Facility for Information Retrieval Management (FIRM) reports, Customs document entries, researched companies and industrial projects on the internet, and compared its own data with the complainants’ allegation regarding lost sales. In many instances, the CBSA was able to corroborate that specific projects were supplied by the named countries, and, as shown in the dumping section, that the FISC was supplied at significant margins of dumping. As shown in the subsidy section, it is also estimated that the goods from China were subsidized. On the basis of the information available, it seems quite likely that several of these sales were lost due to the significant price difference between the Canadian bid price and the foreign pricing.

[151] As a result of the lost sales, the complainants claim significant lost revenues.

[152] The complainants maintain that these dumped and subsidized imports have been the direct cause of the complainants’ suppressed sales volumes.

[153] The CBSA finds the complainants’ allegations of lost sales to be reasonable and well supported. The lost sales have been reasonably linked to the allegedly dumped and subsidized imports.

[154] The complainants stated that the alleged dumped and subsidized goods from the named countries have captured sales and market share by leveraging low pricing and subsequently undercutting the complainants’ pricing. The complainants also alleged that price undercutting by producers in the named countries has caused the domestic industry to discount pricing to obtain orders, resulting in price depression and substantial lost revenue to the domestic industry.

[155] In some instances, the CBSA was able to substantiate allegations of price undercutting by comparing the Complainants’ bid price on a project with the CBSA’s estimated export price for the project, based on FIRM data. The CBSA finds the complainants’ allegations of price undercutting to be reasonable and well supported. The evidence showed strong signs of price undercutting between 2013 and 2016.

[156] The complainants alleged that they have reduced prices on bids in order to remain competitive against imports of subject goods. The complainants also alleged that the impact of price depression and erosion can be seen in the domestic industry’s net profit margin. The domestic industry’s net profit margin has declined between 2013 and 2015 and the complainants alleged that 2016 is expected to be another year of declining net profit margins.

[157] The CBSA finds the complaint contains evidence of price depression as evidenced by the domestic industry’s declining net profit margins.

[158] The complainants alleged that the imports of subject goods from the named countries have been increasing the named countries’ share of the Canadian FISC market between 2013 and the first quarter of 2016. The complainants also alleged that the present market share of Canadian industry remains well below what it traditionally was prior to 2013.

[159] As illustrated in Table 2, from 2013 to 2016 Canadian producers experienced variable changes inmarket share. An initial increase of 10.9 percentage points from 2013 to 2014 was followed by a decline of 26.2 percentage points from 2014 to 2015. While the estimated market share for 2016 increased by 7.3 percentage points, this estimate was based on first half results only.

[160] The CBSA finds that imports of subject goods from the named countries have significantly increased the named countries’share of the Canadian Market between 2013 and 2016.

[161] The complainants alleged that the increasing presence of imports from the named countries have negatively affected their production levels and capacity utilization.

[162] The CBSA finds that that there is a general trend towards low and decreasing capacity utilization and that, subject to continuing market conditions, there is a reasonable threat to the Canadian industry.

[163] The complainants alleged that domestic FISC producers’ net profit has been falling between 2013 and 2016.

[164] The CBSA agrees that the domestic industry as a whole has had poor financial performance and that this is at least partly attributable to the injurious dumping of the subject goods.

[165] The CBSA finds that net profit margins for the industry have been declining and finds the allegations of poor financial results reasonably justified.

[166] The complainants alleged that their employment has dropped between 2013 and the first quarter of 2016. The complainants alleged that the reduction in employment is because of low capacity utilization due to the increasing presence of allegedly dumped and subsidized goods.

[167] The CBSA finds that there has been a reduction in the number of direct employees in the FISC sector and that, subject to continued market pressure due to allegedly dumped and subsidized imports, the threat of further reductions in direct employment is reasonably warranted.

[171] The complainants stated that the increase in the volume of allegedly dumped and subsidized subject goods in the Canadian market, at prices that undercut domestically produced like goods, pose a threat of further injury to the Canadian industry. The complainants also alleged that injury to the Canadian industry will continue to worsen through 2016 and 2017.^{Footnote 41}

[172] The CBSA finds that the complainants’ allegation of threat of injury posed by an increase in the rate of subject goods imports, both in absolute and relative terms, is reasonable and well supported.

[173] The complainants alleged that a multitude of factors affecting the Chinese FISC industry threaten to injure the complainants over the next 18 to 24 months.

[174] Based on publicly available industry reports, Chinese steel production is expected to increase and hit peak production capacity in 2016. The complainants further alleged that China will miss its goal of reducing its excess capacity, thereby suggesting that Chinese steel production will continue to increase until at least 2016.^{Footnote 42} The complainants further alleged that there is weakening domestic steel demand in China, thereby increasing the likelihood that Chinese FISC producers will procure low priced steel inputs and ultimately export their production to Canada.

[175] The CBSA finds that the allegations of significant excess capacity of steel producers in China and the threat of continued expansion of capacity are reasonable and well-supported. Steel is a primary input of FISC.

China

[176] The complainants alleged that Chinese FISC producers will be encouraged to export their products to Canada given a slowing Chinese economy, including construction and oil and gas sectors, and a contracting finished steel industry over the next few years. Further, these allegations are supported by industry publications which forecast market demand.^{Footnote 43}

[177] The complainants alleged that as the construction sector slows, Chinese producers of FISC will have to focus on export markets. Further, as China’s mining industry is plagued with overcapacity and the GOC is taking steps to reduce it, the complainants alleged that China’s consumption of FISC will decline over the next two years and this will force Chinese FISC producers to find new customers in foreign markets.

[178] The complainants further alleged, with supporting documentation, that many Chinese steel producers are state-owned, which helps explain why steel production is continuing despite overcapacity and unprofitability.^{Footnote 44}

[179] The CBSA finds that the complainants’ allegations of the threat of injury to the Canadian FISC industry, posed by stressed market conditions in China, are reasonable and well supported.

Korea

[180] The complainants alleged that, based on industry data, there has and will continue to be a significant drop in Korea’s consumption for finished steel products until at least 2017. In light of the pressure from Chinese imports and Korea’s shrinking exports of steel sections, the complainants alleged that Korean FISC producers will dump FISC on export markets, including Canada, in order to maintain market share, remain competitive, and cover production costs. The complainants further alleged that, similar to China, there is an incentive for Korean exporters to export upstream products containing steel sections and steel plate, which are the primary inputs in FISC.^{Footnote 45}

[181] The CBSA finds that the allegations of the threat of injury posed by stressed market conditions in Korea to be reasonable and well supported.

Spain

[182] The complainants alleged that, based on EU and Spanish industry data, low steel consumption, stagnant growth in the EU, and a significant increase in low-priced Chinese and other steel imports will lead to the offloading of Spanish FISC and steel production to export markets, such as Canada.^{Footnote 46} Further, the complainants alleged that while the Spanish construction industry is improving, industry data suggests that steel consumption is forecasted to remain low and the Spanish non-residential construction industry will likely remain sluggish with scarce large infrastructure projects.^{Footnote 47}

[183] The CBSA finds that the allegations of the threat of injury posed by stressed market conditions in Spain to be reasonable and well supported.

United Kingdom

[184] The complainants documented a number of sources that illustrate the UK steel industry is struggling because of China’s overcapacity of steel leading to large volumes of low-priced Chinese imports.^{Footnote 48} Several steel companies also reported significant job losses in 2015.^{Footnote 49} The complainants further alleged, based on public information that the UK’s current market is saturated with structural steel and that domestic producers will look for alternate export markets. Assuming the impact of these market conditions in the UK is similar to other named countries, producers in the UK may need to seek alternate export markets for FISC, such as Canada.

[185] The CBSA finds that it is a reasonable inference that an excess of steel in the UK combined with increasing volumes of low-priced Chinese imports will result in the UK seeking alternative markets, such as Canada.

United Arab Emirates

[186] The complainants alleged that the downturn in the oil and gas industry leading to decreased consumption in the UAE’s traditional export markets will probe the UAE to look for orders in order to fill their capacity with export markets, such as Canada.^{Footnote 50} Further, the complainants alleged, with supporting industry data, that the UAE oil and gas industry has been significantly affected by the downturn in oil prices.

[187] The direct consequence of the poor market conditions in the UAE is that the Canadian industry will inevitably be harmed in the following years. Further, increased competition here in Canada for fewer industrial projects may increase the exporters’ propensity to export their goods at dumped prices.

[188] The CBSA finds that there is a reasonable indication that stressed market conditions in the UAE pose a threat of injury to the Canadian FISC industry.

[189] The complainants alleged that, in light of the price of oil and commodities, there will be a decrease in projects requiring FISC over the next several years. With the presence of dumped and subsidized goods, the complainants alleged that domestic FISC producers and subject goods producers will be fighting for market share in the Canadian market. As FISC orders are weak and profits are low for the industry, the complainants alleged that further unfair competition and low FISC demand will cause increasing material injury to the domestic industry.^{Footnote 51}

[190] The CBSA recognizes the complainants’ allegations that the domestic industry is vulnerable to subject goods being dumped and subsidized.