GM 2020 IN: Certain grinding media
Statement of Reasons—Initiation of investigations

Decision

Ottawa, December 31, 2020

Pursuant to subsection 31(1) of the Special Import Measures Act, the Canada Border Services Agency initiated investigations on December 17, 2020, respecting the alleged injurious dumping and subsidizing of certain grinding media originating in or exported from India.

Summary

[1] On October 27, 2020, the Canada Border Services Agency (CBSA) received a written complaint from Magotteaux Limitée (Magotteaux) (hereinafter, “the complainant”), alleging that imports of certain grinding media (GM) originating in or exported from India are being dumped and subsidized. The complainant alleged that the dumping and subsidizing have caused injury and are threatening to cause injury to the Canadian industry producing like goods.

[2] On November 17, 2020, pursuant to paragraph 32(1)(a) of the Special Import Measures Act (SIMA), the CBSA informed the complainant that the complaint was properly documented. The CBSA also notified the Government of India (GOI) that a properly documented complaint had been received. The GOI was also provided with the non-confidential version of the subsidy complaint and was invited for consultations prior to the initiation of the subsidy investigation, pursuant to Article 13.1 of the Agreement on Subsidies and Countervailing Measures.

[3] On December 16, 2020 consultations were held between the Government of Canada and the GOI via videoconference. During the consultations, the GOI made representations with respect to its views on the evidence presented in the non-confidential version of the subsidy complaint. A written copy of the GOI’s remarks regarding the complaint was submitted on the same day. The CBSA considered the written representations made by the GOI in its analysis.

[4] The complainant provided evidence to support the allegations that GM from India has been dumped and subsidized. The evidence also discloses a reasonable indication that the dumping and subsidizing have caused injury and are threatening to cause injury to the Canadian industry producing like goods.

[5] On December 17, 2020, pursuant to subsection 31(1) of SIMA, the CBSA initiated investigations respecting the dumping and subsidizing of GM from India.

Interested parties

Product information

Like goods and class of goods

[40] Subsection 2(1) of SIMA defines “like goods” in relation to any other goods as goods that are identical in all respects to the other goods, or in the absence of any identical goods, goods the uses and other characteristics of which closely resemble those of the other goods.

[41] In considering the issue of like goods, the Canadian International Trade Tribunal (CITT) typically looks at a number of factors, including the physical characteristics of the goods (such as composition and appearance), their market characteristics (such as substitutability, pricing, distribution channels and end uses), and whether the domestic goods fulfill the same customer needs as the subject goods.

[42] The complainant stated that like goods are those goods described in the product definition. That is, domestically produced GM, which meets the product definition. Therefore, it does not include domestically produced goods which are specifically excluded from the product definition. The complainant also submits that subject goods and like goods form a single class of goods.

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

The Canadian industry

[44] The complaint includes data on domestic production and on domestic sales of GM for domestic consumption.^{Footnote 10}

[45] The complainant accounts for all known domestic production of like goods.

Canadian market

[48] The complainant, using Statistics Canada data, estimated the total volume of imports of GM from India and all other countries for 2017 to August 2020.^{Footnote 11}

[49] The tariff classification numbers for GM include both subject and non-subject goods. As such, the complainant made a number of adjustments in an effort to remove non-subject goods.^{Footnote 12}

[50] The CBSA conducted its own analysis of imports of the goods based on CBSA’s import data, which demonstrated similar trends and volumes with respect to imports of GM compared to information provided in the complaint.

[51] Detailed information regarding the volume and value of imports of GM and domestic production cannot be divulged for confidentiality reasons. The CBSA, however, has prepared the following table to show the apparent Canadian market for like goods, using the CBSA’s estimates of imports and the complainants’ estimates of domestic production for domestic consumption.^{Footnote 13}

[52] The CBSA will continue to gather and analyze information on the volume of imports as part of the preliminary phase of the dumping and subsidizing investigations and will refine these estimates.

Evidence of dumping

[53] The complainant alleged that the subject goods from India have been injuriously dumped into Canada. Dumping occurs when the normal value of the goods exceeds the export price to importers in Canada.

[54] Normal values are generally based on the domestic selling price of like goods in the country of export where competitive market conditions exist or as the aggregate of the cost of production of the goods, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits.

[55] The export price of goods sold to importers in Canada is generally the lesser of the exporter’s selling price and the importer’s purchase price, less all costs, charges and expenses resulting from the exportation of the goods.

[56] Estimates of normal values and export prices by both the complainant and the CBSA are discussed below.

Evidence of subsidizing

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

[87] Pursuant to subsection 2(1.6) of SIMA, a financial contribution exists where:

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

[88] A state-owned enterprise (SOE) may be considered to constitute “government” for the purposes of subsection 2(1.6) of SIMA if it possesses, exercises, or is vested with, governmental authority. Without limiting the generality of the foregoing, the CBSA may consider the following factors as indicative of whether the SOE meets this standard: 1) the SOE is granted or vested with authority by statute; 2) the SOE is performing a government function; 3) the SOE is meaningfully controlled by the government; or 4) some combination thereof.

[89] If a subsidy is found to exist, it may be subject to countervailing measures if it is specific. A subsidy is considered to be specific when it is limited, in law or in fact, to a particular enterprise or is a prohibited subsidy. An “enterprise” is defined under SIMA as also including a “group of enterprises, an industry and a group of industries”. Any subsidy which is contingent, in whole or in part, on export performance or on the use of goods that are produced or that originate in the country of export is considered to be a prohibited subsidy and is, therefore, specific according to subsection 2(7.2) of SIMA for the purposes of a subsidy investigation.

[90] In accordance with subsection 2(7.3) of SIMA, notwithstanding that a subsidy is not specific in law, a subsidy may also be considered specific in fact, having regard as to whether:

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

[91] For purposes of a subsidy investigation, the CBSA refers to a subsidy that has been found to be specific as an “actionable subsidy”, meaning that it is countervailable.

[92] The complainant alleged that subject goods have been subsidized and maintained that exporters/producers of subject goods have received countervailable subsidies from various levels of the GOI, including central and state levels of government.^{Footnote 23}

[93] In alleging that actionable subsidies were applicable to the subject goods imported from India, the complainant relied extensively on a subsidy finding conducted by Brazil’s Subsecretariat of Trade Defense and Public Interest (SDCOM), respecting chrome-alloyed and/or iron grinding media from India.^{Footnote 24} This document served as the principle basis for the complainant to support its allegations that Indian grinding media producers/exporters benefited from countervailable subsidies.

[94] The complainant also relied on a WTO panel report respecting Indian export related measures,^{Footnote 25} previous CBSA’s subsidy investigations regarding certain Carbon Steel Welded Pipe and certain Polyethylene Terephthalate Resin, US Department of Commerce and European Commission subsidy investigations, publications issued by the central and state governments of India, and other publically available information.

[95] The complainant identified 15 subsidy programs which may have conferred benefits to the producers/exporters of the subject goods in India, and in turn resulted in the actionable subsidizing of exports of subject goods to Canada.^{Footnote 26}

[96] The CBSA reviewed the information provided in the complaint, and also conducted its own research with respect to Indian subsidy programs, in order to gather complete and up-to-date information on certain incentive schemes offered by the central and state governments of India.

[97] The CBSA also reviewed the relevant decision documents for the investigations referred to by the complainant.

[98] Generally speaking, the CBSA’s examination of the reference material provided in the complaint provided support for the complainant’s allegations that grinding media originating in or exported from India has been subsidized. On the basis of its analysis, the CBSA determined that in respect of one program identified by the complainant there was not sufficient evidence regarding the applicability of the subsidy program to producers of GM (i.e. Program Sales Tax Deferral).

[99] The CBSA also found one program identified by the complainant appeared to be generally available (i.e. Program Deductions under the Income Tax Act). Further, some of the program names identified by the complainant were modified by the CBSA. Finally, based on its own research, the CBSA identified two subsidy programs which were not identified by the complainant (i.e. Programs Pre-shipment and Post Shipment Export Financing and Incentives for Micro, Small & Medium Manufacturing Enterprises).

[100] As a result, the CBSA will investigate a total of 16 Indian subsidy programs. The 16 subsidy programs were grouped into the following six categories:

1. Relief from duties and taxes on materials and machinery
2. Grants and grant equivalents
3. Preferential loans and loan guarantees
4. Subsidy programs provided by the State Government of Gujarat
5. Subsidy programs provided by the State Government of Maharashtra
6. Subsidy programs provided by the State Government of Tamil Nadu

[101] The CBSA’s analysis revealed that the alleged subsidy programs constitute potential financial contributions by the GOI that may have conferred benefits to producers/exporters of GM. 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. The description of the identified programs are found in the Appendix.

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

Evidence of injury

[109] The complainant alleges that the subject goods have been dumped and subsidized and that such dumping and subsidizing have caused and are threatening to cause injury to the domestic industry producing like goods in Canada.

[110] SIMA refers to material injury caused to the domestic producers of like goods in Canada. The CBSA has concluded that GM produced by the domestic industry are like goods to the subject goods from India.

[111] In support of their injury allegations, the complainant provided evidence of an increase in the volume of imports of the subject goods, price depression and price suppression, lost sales, price undercutting, lost market share, impacted financial results, and capacity underutilization, reduction in employment.

Volume of dumped and subsidized imports^{Footnote 28}

[112] The import data provided by the complainant demonstrates a significant increase in the volume of subject goods imported from India between 2017 and H1 2020. From 2017 to 2018, imports of subject goods increased by over 330%. From 2018 to 2019, imports of subject goods increased by another 90%. If importation levels remain constant between H1 and H2 2020, subject imports will have increased by 1,140% from 2017 to 2020.

[113] From 2017 to H1 2020, the size of the domestic market remained stable. In terms of share of the domestic market, in 2017, subject good imports from India represented 4.8%. This figure rose to 20.3% in 2018, 41.8% in 2019 and 52.9% in H1 2020. This can be contrasted with the domestic producer’s share of the Canadian market, which stood at 88.3% in 2017. This figure declined to 79.7% in 2018, 58.0% in 2019 and 47.0% as of H1 2020, representing a decrease in market share held by the domestic producer of 41.3% since 2017.

[114] From the above data, it can be concluded that the dramatic increase in subject good imports from India correlates with the loss of market share held by the domestic producer. The CBSA’s estimates of import volumes confirm the trends alleged by the complainant, displaying an increase in imports of subject goods of 896% since 2017.

[115] 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. The increase was substantial in both absolute and relative terms.

Price depression and price suppression^{Footnote 29}

[116] The complainant’s data suggests that subject goods have caused price depression in the domestic market. Imported subject goods have gained market share by leveraging low prices that both undercut and depress domestic producer pricing. According to the complainant, the low-priced subject goods have caused sales to be made at declining prices, resulting in lost revenue and decreasing levels of profitability.

[117] According to the complainant, competition against allegedly dumped and subsidized goods has resulted in a trend of decreasing quarterly price offerings to its customers since late 2017. In the complaint, there are multiple examples where the domestic producer had to significantly decrease their prices to retain sales.^{Footnote 30}

[118] Based on the CBSA’s analysis of information contained in the complaint, as well as the CBSA’s estimates and analysis of imports, the CBSA finds the complainant’s claims of price depression and price suppression to be reasonable and well supported. As such, the CBSA finds that this injury factor is reasonable, well supported, and linked to the volume of imports of allegedly dumped and subsidized goods.

Lost sales^{Footnote 31}

[119] The complainant alleges that throughout each quarter of the analysis period, imports of subject goods have undersold the complainant’s domestic pricing, resulting in lost sales to their two largest customers.^{Footnote 32}

[120] Based on the information provided in the complaint, the CBSA finds the allegation of lost sales to be reasonable, well supported, and sufficiently linked to imports of allegedly dumped and subsidized goods.

Price undercutting^{Footnote 33}

[121] The complainant submitted that the prices paid by its domestic customers for subject goods are below the prices offered by the complainant. The complainant further submitted that the pricing gap between its sales of grinding media to domestic customers, which have not been influenced by the allegedly dumped and subsidized subject goods versus the offering prices made to the aforementioned domestic customers that have switched to imported subject goods is significant.

[122] Where the allegedly dumped and subsidized goods compete with domestically produced grinding media, pricing systematically dictates that the sale to be awarded to the imported subject goods. The domestic producer cannot reduce its pricing enough to attempt to recover its customers.

[123] Evidence provided by the complainant identified a significant pricing gap between the price of grinding media offered to domestic customers that have not sourced imported subject goods from India versus those domestic customers that have been influenced by the allegedly dumped and subsidized subject goods. Since Q1 2019, the pricing difference has ranged from 0.56% to 13.70%, when compared to pricing offered to domestic customers who have not been influenced by the subject goods.

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

Lost market share^{Footnote 34}

[125] The complainant alleges that they have lost domestic market share as a result of the importation of the allegedly dumped and subsidized subject goods from India.

[126] Based on import data supplied by the complainant, imported subject goods from India have been increasing their market share of the domestic industry since 2017. Between 2018 and 2019, it is estimated that importation of the subject goods increased in volume by 90.5%. Through the first half of 2020, imports of subject goods from India continued to increase, allowing for an estimate for full-year data representative of a 38.9% increase over 2019. In total, the volume of importation of subject goods from India is estimated to have increased by 1,040% since 2017.

[127] The complainant provided data on their domestic and export sales of grinding media from 2017 through H1 2020. The data demonstrated a trend of decreasing domestic sales throughout the abovementioned periods.

[128] The CBSA’s data indicates that, between 2017 and the first nine month of 2020, the market share of the domestic industry decreased from 88.2% to 45.7%, while during the same period, the market share of the subject imports increased significantly from 4.8% to 54.0%. During the POI, the market shares held by the domestic industry and the subject imports were 50.4% and 49.3%, respectively.

[129] Based on the above and the CBSA’s analysis of the information contained in the complaint, the CBSA finds the claim of lost market share to be well supported, and the CBSA is of the opinion that this injury factor is reasonable and sufficiently linked to the volume of imports of allegedly dumped and subsidized goods.

Impacted financial results^{Footnote 35}

[130] The complainant submits that its financial performance has been adversely impacted by a significant decrease in domestic sales.^{Footnote 36}

[131] The complainant stated that domestic sales declined steadily from 2017 to H1 2020 and noted that profit margins have experienced a decline as a result of pressure imposed by the subject goods. Gross margins on domestic sales fell between H1 2018 and H1 2019, while experiencing a steep decline between H1 2019 and H1 2020.

[132] Based on the evidence provided by the complainant, the CBSA finds the claims that the complainant’s financial performance has been adversely impacted by imports of allegedly dumped and subsidized goods to be reasonable and sufficiently supported.

Production capacity underutilization^{Footnote 37}

[133] The complainant submitted that they have experienced a steady decrease in production capacity utilization rates since 2017. To support this allegation, the complainant provided domestic industry data of production volumes for the period from 2017 to the first half of 2020.

[134] Based on the information provided by the complainant, the CBSA finds that there is a reasonable link between the presence of the allegedly dumped and subsidized goods and the complainant’s inability to increase capacity utilization with respect to GM.

Reduction in employment^{Footnote 38}

[135] The complainant explained that, since 2018, they have had to reduce employee working hours. In addition, year-over-year employment has also decreased as a result of decreasing sales. The total number of employees has decreased by 10% between 2017 and Q1 2020.

[136] Based on information provided by the complainant, the CBSA finds that there is a reasonable link between the presence of the allegedly dumped and subsidized goods and the complainant’s reduction in employment levels with respect to GM production.

Threat of injury

[138] The complainant states that the imports of the allegedly dumped and subsidized goods threaten to cause further material injury to the Canadian domestic industry.

[139] The complainant provided the following information to support the allegation that imports of subject goods threaten to cause further injury to the Canadian industry.

Threat to continuous investments^{Footnote 39}

[140] The complainant alleges that planned capital expenditures at the Magog Plant have been revised, and the reduced capital expenditures are at risk of being eliminated.

[141] The complainant further explained that the projected capital expenditures for 2020, spanning investments in infrastructures and machinery, legal compliance and best management practices, major maintenance and information technology, have been revised downwards, with no planned expenditures for 2021. The complainant stated that corporate management support for plant investment is expected to be lost due to the continuation of low-priced imports of GM from India.^{Footnote 40}

[142] Upon review of the information provided by the complainant, the CBSA finds that the evidence provided presents a reasonable and well supported threat of injury for investments.

Nature of the subsidy programs and the likely effects on trade^{Footnote 41}

[143] The complainant submits that a number of alleged subsidy programs made available by the GOI are export contingent and therefore prohibited. The prohibition stems from the recognition that export subsidies “are specifically designed to distort international trade, and therefore likely to hurt other countries’ trade.”^{Footnote 42}

[144] The complainant explained that the nature of the subsidies in question and the effects that they are likely to have on trade indicate that the alleged dumping and subsidizing of the goods, to the extent that they have not already caused injury to the domestic industry, are threatening to cause injury to the domestic industry.

[145] Based on the CBSA’s analysis of the alleged subsidy programs, the CBSA confirms that many of the alleged subsidy programs are export contingent. The CBSA recognizes that the nature of the programs and their effects on trade could lead to additional exportation of injurious GM from India to Canada.

Likely volume of subject good imports^{Footnote 43}

[146] The complainant submits that the volume of allegedly dumped and subsidized imports from India has increased significantly within the recent time-period. The increase in imports has corresponded with low-priced import offers that have undercut the complainant’s pricing and had a significant impact on the domestic industry.

[147] The complainant submits that it has lost customers to the subject goods and claims that it is at risk of losing an additional long-standing customer, which began testing out subject goods in the summer of 2020.^{Footnote 44}

[148] The complainant alleges that the volume of subject good imports will likely continue to rise relatively to domestic consumption over the next 12 to 18 months unless applicable measures are imposed.

[149] Based on the evidence submitted by the complainant and available to the CBSA, the CBSA recognizes that the volumes of subject goods will likely continue to increase.

Substantial increase in production capacity and excess production capacity^{Footnote 45}

[150] The complainant submits that there is clear indication that the global economy and other export markets for subject goods will shrink significantly as a result of the pandemic. Other export markets demonstrate limited capacity to absorb current export levels of subject goods, let alone an increase in exports amid a decrease in spending and investment that will reduce demand for grinding media.

[151] Continued expansions to the capacity of AIAE contrasts sharply with the ability of other export markets to absorb additional exports. In August 2019, following an expansion of 50,000 MT of grinding media, AIAE had a grinding media production capacity of 340,000 MT, out of a total production capacity of 390,000 MT for High Chrome Internal Mills (HCMI) which includes the capacity of both grinding media and cast linings. According to AIAE, capacity for grinding media and cast linings were set to increase by an additional 50,000 MT each, bringing total capacity to 390,000 MT of grinding media, out of a total production capacity of 490,000 MT of HCMI.^{Footnote 46}

[152] According to information provided in the complaint AIAE has underutilized capacity, which the complainant stated exceeds that of the entire Canadian market for grinding media.

[153] Based on the information provided in the complaint, the CBSA finds that the added production capacity of grinding media by AIAE in the past two years already exceeded the size of the entire Canadian market, which could lead to additional exportation of injurious GM from India to Canada.

Prices that are likely to have a significant depressing or suppressing effect^{Footnote 47}

[154] The complainant states that allegedly dumped and subsidized goods from India have entered the domestic market at low prices, which have had price depressing effects, resulting in lost sales.

[155] Given this persisting situation, and taking into account that price competition takes place at each sales negotiation with a major client, typically on a quarterly basis, the complainant submits that the price spread is likely to continue, and subject goods are thus likely to have a significant depressing and suppressing effect on the price of domestic like goods in the future.

[156] The complainant alleges that the offering of subject goods at dumped and subsidized prices is likely to increase demand for further imports of the goods. The complainant provided account specific information indicative of the fact that the volume of imports of subject goods are likely to further increase relative to domestic consumption unless measures are imposed.

[157] Based on the information provided in the complaint, the CBSA recognizes that imports from India have entered Canada at increasingly low prices and caused price-depressing and price-suppressing effects, which could lead to additional exportation of injurious GM from India to Canada.

Diversion of dumped and subsidized goods to Canada^{Footnote 48}

[158] The complainant alleges that Brazil’s recent imposition of anti-dumping and countervailing duties on grinding media from India is relevant, due to the fact that Brazil is rich in mining resources and was previously an important market for Indian exporters.

[159] To support their claim, the complainant stated that in 2016, Indian exports of grinding media to Brazil totaled 13,732 MT. By contrast, from January to April 2020, there were no exports of grinding media from India to Brazil. The imposition of trade remedies successfully curtailed Indian imports into Brazil, illustrating that without resorting to dumping and/or sales of subsidized grinding media, Indian producers could not compete in the Brazilian market. Importantly, the lack of Indian grinding media within the Brazilian market coincides with the increased penetration of Indian grinding media in the Canadian market.

[160] The reduction of Indian exports to Brazil reinforces the complainant’s allegation that dumped and subsidized goods from India are likely to cause injury in Canada. In addition, the curtailing of market opportunities in Brazil necessarily leads export-oriented producers in India to seek alternatives for their exports in other markets. This accentuates the threat of injury to the domestic industry in Canada, as it frees more capacity in India, and leads to the likely diversion of subject goods that previously were exported to Brazil.

[161] The CBSA finds that Indian grinding media exporters are likely to seek other export markets, including Canada, to recover some of the volumes lost in the Brazilian market.

Market conditions in India and resulting impact on the domestic industry^{Footnote 49}

[162] The complainant states that while India’s economy grew 4.2% in 2019, growth is projected to decline to 1.9% in 2020. Both decreasing domestic growth and demand are currently coupled with excess production capacity for grinding media. This combination lends further support to the threat of injury resulting from subject goods being exported into Canada at dumped and subsidized prices.

[163] The complainant states that the Canadian economy is forecasted to experience slowing growth, alongside weak oil prices, declining manufacturing and cooling investment in various sectors. The complainant further states that while GDP growth for 2019 was 1.9% according to the IMF, GDP is anticipated to retract by -6.2% in 2020.^{Footnote 50} The complainant submits that if the Canadian market contracts as forecasted, it will experience a decreased market share due to rising subject good imports and a market contraction.

[164] The complainant states that as import competition from India has increased steadily from 2017 through H1 2020, the performance of the domestic industry has been adversely impacted by allegedly dumped and subsidized imports over the same period, causing total and domestic sales volumes to decline. Evidence indicates that these trends will continue through the end of 2020 and into 2021. India has exported large and increasing volumes of subject goods to Canada, which threaten injury to the domestic industry by deeply undercutting Canadian grinding media pricing.

[165] The complainant adds that evidence indicates Indian producers are export oriented and have well established channels of distribution within Canada. This evidence supports the conclusion that India will continue to export large volumes of allegedly dumped and subsidized subject goods, priced to undercut domestic goods, helping to secure sales in Canada at the expense of the complainant. There is also a risk that those sales increase throughout the remainder of the year through to 2021. This will result in further injury to the domestic industry.

[166] The CBSA’s analysis of the information contained in the complaint revealed market conditions that the CBSA recognizes may lead GM producers in India to target certain export markets, including Canada, which may cause further injury to the Canadian industry.

Causal link: dumping/subsidizing and injury/threat of injury

[168] The CBSA finds that the complainant has sufficiently linked the injury they suffered in price depression and price suppression, lost sales, price undercutting, lost market share, impacted financial performance, capacity underutilization and reduced employment to the alleged dumping and subsidizing of the subject goods imported into Canada and the price advantage this provides.

[169] Evidence has been provided to establish this link via import data, specific examples of lost sales and financial information, as provided in the complaint and respective attachments, as well as in the injury allegations submitted.

[170] The complainant submitted that the continued dumping and subsidizing of goods from India will cause further injury to the Canadian domestic industry in the future. As discussed above, the CBSA is of the opinion that this allegation of threat of injury is reasonably supported.

[171] In summary, the CBSA is of the opinion that the information provided in the complaint has disclosed a reasonable indication that the alleged dumping and subsidizing have caused injury and are threatening to cause injury to the Canadian domestic industry.

Conclusion

[172] Based on information provided in the complaint, other available information, and the CBSA’s import documentation, the CBSA is of the opinion that there is evidence that GM originating in or exported from India has been dumped and subsidized. Further, there is a reasonable indication that such dumping and subsidizing have caused and are threatening to cause injury to the Canadian industry. As a result, pursuant to subsection 31(1) of SIMA, dumping and subsidy investigations were initiated on December 17, 2020.

Scope of the investigations

[173] The CBSA is conducting investigations to determine whether the subject goods have been dumped and/or subsidized.

[174] The CBSA has requested information from all potential exporters and importers to determine whether or not subject goods imported into Canada during the POI of October 1, 2019 to September 30, 2020, were dumped. The information requested will be used to determine the normal values, export prices and margins of dumping, if any.

[175] The CBSA has also requested information from the GOI and all potential producers/exporters to determine whether or not subject goods imported into Canada during the POI of October 1, 2019 to September 30, 2020, were subsidized. The information requested will be used to determine the amounts of subsidy, if any.

[176] All parties have been clearly advised of the CBSA’s information requirements and the time frames for providing their responses.

Future action

[177] The CITT will conduct a preliminary inquiry to determine whether the evidence discloses a reasonable indication that the alleged dumping and subsidizing of the goods have caused or are threatening to cause injury to the Canadian industry. The CITT must make its decision on or before the 60th day after the date of the initiation of the investigations. If the CITT concludes that the evidence does not disclose a reasonable indication of injury to the Canadian industry, the investigations will be terminated.

[178] If the CITT finds that the evidence discloses a reasonable indication of injury to the Canadian industry and the CBSA’s preliminary investigations reveal that the goods have been dumped and/or subsidized, the CBSA will make preliminary determinations of dumping and/or subsidizing within 90 days after the date of the initiation of the investigations, by March 17, 2021. Where circumstances warrant, this period may be extended to 135 days from the date of the initiation of the investigations.

[179] Under section 35 of SIMA, if, at any time before making preliminary determinations, the CBSA is satisfied that the volume of goods of a country is negligible, the investigation(s) will be terminated with respect to goods of that country.

[180] Imports of subject goods released by the CBSA on and after the date of preliminary determinations of dumping and/or subsidizing, other than goods of the same description as goods in respect of which a determination was made that the margin of dumping of, or the amount of subsidy on the goods is insignificant, may be subject to provisional duty in an amount not greater than the estimated margin of dumping or the estimated amount of subsidy on the imported goods.

[181] Should the CBSA make preliminary determinations of dumping and/or subsidizing, the investigations will be continued for the purpose of making final decisions within 90 days after the date of the preliminary determinations.

[182] After the preliminary determinations, if, in respect of goods of a particular exporter, the CBSA’s investigations reveal that imports of the subject goods from that exporter have not been dumped or subsidized, or that the margin of dumping or amount of subsidy is insignificant, the investigation(s) will be terminated in respect of those goods.

[183] If final determinations of dumping and/or subsidizing are made, the CITT will continue its inquiry and hold public hearings into the question of material injury to the Canadian industry. The CITT is required to make a finding with respect to the goods to which the final determinations of dumping and/or subsidizing applies, not later than 120 days after the CBSA’s preliminary determinations.

[184] In the event of an injury finding by the CITT, imports of subject goods released by the CBSA after that date will be subject to anti-dumping duty equal to the applicable margin of dumping on the imported goods and countervailing duty equal to the amount of subsidy on the imported goods. Should both anti-dumping and countervailing duties be applicable to subject goods, the amount of any anti-dumping duty may be reduced by the amount that is attributable to an export subsidy.

Retroactive duty on massive importations

[185] When the CITT conducts an inquiry concerning injury to the Canadian industry, it may consider if dumped and/or subsidized goods that were imported close to or after the initiation of an investigation constitute massive importations over a relatively short period of time and have caused injury to the Canadian industry.

[186] Should the CITT issue such a finding, anti-dumping and countervailing duties may be imposed retroactively on subject goods imported into Canada and released by the CBSA during the period of 90 days preceding the day of the CBSA making preliminary determinations of dumping and/or subsidizing.

[187] In respect of importations of subsidized goods that have caused injury, however, this provision is only applicable where the CBSA has determined that the whole or any part of the subsidy on the goods is a prohibited subsidy, as explained in the previous “Evidence of Subsidizing” section. In such a case, the amount of countervailing duty applied on a retroactive basis will be equal to the amount of subsidy on the goods that is a prohibited subsidy.

Undertakings

[188] After a preliminary determination of dumping by the CBSA, other than a preliminary determination in which a determination was made that the margin of dumping of the goods is insignificant, an exporter may submit a written undertaking to revise selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated.

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

[190] An acceptable undertaking must account for all or substantially all of the exports to Canada of the dumped goods. Interested parties may provide comments regarding the acceptability of undertakings within nine days of the receipt of an undertaking by the CBSA. The CBSA will maintain a list of parties who wish to be notified should an undertaking proposal be received. Those who are interested in being notified should provide their name, telephone and fax numbers, mailing address and e-mail address to one of the officers identified in the “Information” section of this document.

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

Publication

[192] Notice of the initiation of these investigations is being published in the Canada Gazette pursuant to subparagraph 34(1)(a)(ii) of SIMA.

Information

[193] Interested parties are invited to file written submissions presenting facts, arguments, and evidence that they feel are relevant to the alleged dumping and subsidizing. Written submissions should be forwarded to the attention of the SIMA Registry and Disclosure Unit.

[194] To be given consideration in this phase of the investigations, all information should be received by the CBSA by January 25, 2021.

[195] Any information submitted to the CBSA by interested parties concerning these investigations is considered to be public information unless clearly marked “confidential”. Where the submission by an interested party is confidential, a non-confidential version of the submission must be provided at the same time. This non-confidential version will be made available to other interested parties upon request.

[196] Confidential information submitted to the CBSA will be disclosed on written request to independent counsel for parties to these proceedings, subject to conditions to protect the confidentiality of the information. Confidential information may also be released to the CITT, any court in Canada, or a WTO or Canada-United States-Mexico Agreement (CUSMA) dispute settlement panel. Additional information respecting the CBSA’s policy on the disclosure of information under SIMA may be obtained by contacting one of the officers identified below or by visiting the CBSA’s website.

[197] The schedule of the investigations and a complete listing of all exhibits and information are available on the CBSA's website. The exhibit listing will be updated as new exhibits and information are made available.

[198] This Statement of Reasons has been provided to persons directly interested in these proceedings. It is also available through the CBSA’s website at the address below. For further information, please contact the officers identified as follows:

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

• Telephone:
• Benjamin Crossan: 343-553-1634
• Jason Huang: 343-553-1891

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

Doug Band
Director General
Trade and Anti-dumping Programs Directorate

Appendix: description of identified programs

Evidence provided by the complainant and obtained by the CBSA suggests that the Government of India (GOI) may have provided support to exporters/producers of subject goods in the following manner:

I. Relief from duties and taxes on materials and machinery

Program 1. Advanced Authorization Scheme (AAS)

Pursuant to Chapter 4 of the Foreign Trade Policy 2015-2020 (FTP) issued by the GOI, Advanced Authorization Scheme (AAS) allows duty free import of inputs that are physically incorporated into products that are subsequently exported. Import duty of fuel, oil and catalysts that are consumed or utilized in the production of export products may also be exempted.^{Footnote 51} According to the FTP, Advanced Authorization can be issued either to a manufacturer exporter or a merchant exporter tied to a supporting manufacturer, and is valid for 12 months from the date of issue of the Authorization.

The CBSA has previously countervailed this program in investigations including Oil Country Tubular Goods (OCTG II), Carbon Steel Welded Pipe (CSWP II), and Polyethylene Terephthalate Resin (PET Resin).

The program may constitute a financial contribution in that 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, pursuant to section 2(1.6)(b) of SIMA. The program may be considered as specific pursuant to paragraph 2(7.2)(b) of SIMA if it is contingent, in whole or in part, on export performance, and, as such, considered as a prohibited subsidy.

Program 2. Duty Drawback Scheme (DDS)

Pursuant to section 75 of the Customs Act 1962 and the Customs and Central Exercise Duties Drawback Rules 2017, Duty Drawback Scheme (DDS) replaced Duty Entitlement Passbook Scheme and is administered by the Department of Revenue.^{Footnote 52} Under the DDS, products made out of duty paid inputs are exported and thereafter a refund of duty is claimed on the basis of two methods: i) actual duty/tax incidence (brand rate) or ii) averages (all industry rates). Duty drawback rates are normally published on a yearly basis. According to the information provided in the complaint, the duty drawback rates for 2019 and 2020 for the goods subject to the complaint (i.e. under HS heading 7325) are 1.8% and 1.6% of the FOB value of the goods, respectively.^{Footnote 53}

The CBSA has previously countervailed this program in the OCTG II investigation.

The program may constitute a financial contribution in that 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, 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. Further, the subsidy may be considered as specific pursuant to paragraph 2(7.2)(b) of SIMA if it is contingent, in whole or in part, on export performance, and, as such, considered as a prohibited subsidy.

Program 3. Duty Free Import Authorization Scheme (DFIA)

Pursuant to Chapter 4 of the FTP, Duty Free Import Authorization Scheme (DFIA) allows import of inputs including oil and catalyst used/consumed in the production of exported products without payment of basic customs duty. The difference between the DFIA and the AAS is that the DFIA only applies to basic customs duty, however, additional customs duty/excise duty, being not exempt, may be adjusted as credit.^{Footnote 54}

The program may constitute a financial contribution in that 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, 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. Further, the subsidy may be considered as specific pursuant to paragraph 2(7.2)(b) of SIMA because it is contingent, in whole or in part, on export performance, and, as such, considered as a prohibited subsidy.

Program 4. Export Promotion Capital Goods Scheme (EPCG)

Pursuant to Chapter 5 of the FTP and Chapter 5 of the Handbook of Procedures (HBP),^{Footnote 55} the objective of Export Promotion Capital Goods Scheme (EPCG) is to facilitate import of capital goods for producing quality goods and services to enhance India’s export competitiveness. The EPCG allows import of capital goods for pre-production, production and post-production at zero or reduced customs duty rates, subject to an export obligation equivalent to six times of the duty saved on the imported capital goods within a period of six years.

The CBSA has previously countervailed this program in investigations including OCTG II and PET Resin.

The program may constitute a financial contribution in that 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, pursuant to section 2(1.6)(b) of SIMA. The subsidy may be considered as specific pursuant to paragraph 2(7.2)(b) of SIMA if it is contingent, in whole or in part, on export performance, and, as such, considered as a prohibited subsidy.

II. Grants and grant equivalents

Program 5. Merchandise Exports from India Scheme (MEIS) / Scheme for Remission of Duties and Taxes on Exported Products (RoDTEP)

Pursuant to Chapter 3 of the FTP and Chapter 3 of the HBP,^{Footnote 56} the objective of Merchandise Exports from India Scheme (MEIS) is to offset infrastructural inefficiencies and associated costs involved in export of goods/products, which are produced/manufactured in India, especially those having high export intensity, employment potential and thereby enhancing India’s export competitiveness.

The MEIS was introduced in April 2015 under the FTP to replace five different previous schemes including Focus Product Scheme (FPS), Focus Market Scheme, Market Linked Focus Product Scheme, etc.^{Footnote 57} Under the MEIS, exporters are eligible to receive rewards in the form of a freely transferable financial instrument, known as duty credit scrip, and the amount of such reward was determined by multiplying the FOB value of the recipient’s exports of a notified good to a notified designation country/market with an applicable rate assigned to the good and market.^{Footnote 58}

According to the information provided in the complaint, in March 2020, the GOI announced the approval for introducing a new program, Scheme for Remission of Duties and Taxes on Exported Products (RoDTEP) with an intention to replace the MEIS in a phased manner.^{Footnote 59}

The CBSA has previously countervailed the FPS program in investigations including OCTG II, CSWP II and PET Resin.

The program may constitute a financial contribution in that 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, pursuant to section 2(1.6)(b) of SIMA. The subsidy may be considered as specific pursuant to paragraph 2(7.2)(b) of SIMA if it is contingent, in whole or in part, on export performance, and, as such, considered as a prohibited subsidy.

III. Preferential loans and loan guarantees

Program 6. Interest equalization scheme on pre and post shipment rupee export credit

Program interest equalization scheme on pre and post shipment rupee export credit was introduced by the Reserve Bank of India (RBI) on December 4, 2015.^{Footnote 60} The program was in effect from April 1, 2015 for five years, and “from the month of December 2015 onwards, banks shall reduce the interest rate charged to the eligible exporters as per our extant guidelines on interest rates on advances by the rate of interest equalisation provided by Government of India”. The rate of interest equalization specified in the program is 3% per annum, i.e., eligible exporters can receive reduction in interest rate of 3% from banks.

The scheme is available to exports of a wide range of products under 416 tariff codes including HS code 7325, and to exports made by Micro, Small & Medium Enterprises (MSMEs) across all tariff codes.^{Footnote 61} In November 2018, the RBI increased the reduction in interest rate from 3% to 5% for exports made by MSMEs^{Footnote 62}, and in January 2019, the RBI expanded and included exports made by merchant exporters in the program.^{Footnote 63} On May 13, 2020, the RBI approved the extension of the program for one more year, up to March 31, 2021.^{Footnote 64}

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 subsidy may be considered as specific pursuant to paragraph 2(7.2)(b) of SIMA because it is contingent, in whole or in part, on export performance, and, as such, is considered as a prohibited subsidy.

Program 7. Pre-shipment and post shipment export financing

Program pre-shipment and post shipment export financing was first introduced by the RBI in 1967, with the intention of making short-term working capital financing available to exporters at internationally comparable interest rates, with export credit available both in Rupee as well as in foreign currency.^{Footnote 65} The program provides export‐contingent loans to eligible companies at preferential interest rates. Pre-shipment financing is issued by a financial institution when a seller requires working capital respecting the goods prior to shipment. Post shipment financing is a type of loan provided by a financial institution to an exporter or seller against a shipment that has already been made.

The CBSA has previously countervailed this program in the CSWP II investigation.

The 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 subsidy may be considered as specific pursuant to paragraph 2(7.2)(b) of SIMA because it is contingent, in whole or in part, on export performance, and, as such, is considered as a prohibited subsidy.

IV. Subsidy programs provided by the State Government of Gujarat (SGOG)

Program 8. Reimbursement of Net Value-added Tax (VAT) / Net State General Sales Tax (SGST) to MSMEs, Large, Mega & Ultra Mega Industrial Undertakings

Pursuant to the Gujarat Industrial Policy 2015, the State Government of Gujarat (SGOG) provides financial assistance by way of reimbursement of net Value-added Tax (VAT) / net State General Sales Tax (SGST) to MSMEs, Large, Mega & Ultra Mega Industrial Undertakings. The objective of this program is to attract increased investments to the state in the manufacturing sector to create more employment opportunities, and to achieve balanced regional growth and inclusive development of the state. The program came into effect on July 25, 2016 and remains in force for a period of five years.^{Footnote 66} The GOI confirmed the existence of the program in its most recent notification to the World Trade Organization (WTO).^{Footnote 67}

The 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.

Program 9. Electricity duty exemption

Under the authority of the Gujarat Electricity Duty Act 1958 and relevant notifications issued by the SGOG, industrial establishments that meet the definition of new industrial undertaking or additional unit of the industrial undertaking, and have made investments in fixed assets exceeding Indian Rupee 100 crores (or ten billion rupees) are exempted from payment of electricity duties for a period of five years.^{Footnote 68}

The CBSA has previously countervailed this program in the PET Resin investigation.

The program may constitute a financial contribution in that 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, 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.

Program 10. Electricity duty reduction on furnace

Under the authority of the Gujarat Electricity Duty Act 1958 and relevant notifications issued by the SGOG, the rate of duty on electricity consumed in electrochemical, electrolyte and electrometallurgy processes carried out by industrial establishments is reduced from 15% to 10%, subject to certain conditions.^{Footnote 69}

The program may constitute a financial contribution in that 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, 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.

Program 11. Provision of land and water for less than fair market value

Pursuant to the Gujarat Industrial Development Act 1962, the Gujarat Industrial Development Corporation (GIDC) was established with a goal of accelerating industrialization in the state. The GIDC has established 182 industrial estates and has acquired maximum land for the development of industries in the state.^{Footnote 70} According to the complainant, the GIDC administrates the program and provides certain industries with land at discounted allotment rates. The complainant submits that AIAE has six production facilities located in the GIDC Ahmedabad region where the discounted allotment rates apply.^{Footnote 71}

The 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.

V. Subsidy programs provided by the State Government of Maharashtra (SGOM)

Program 12. Incentives for large-scale industries and mega projects under Package Scheme of Incentives (PSI)

Program Package Scheme of Incentives (PSI) was first introduced in 1964 and has been amended from time to time. The objective of the PSI was to encourage the dispersal of industries to lesser developed areas in the state so as to achieve higher and sustainable economic growth. According to the current PSI, which came into effect on April 1, 2019 and is valid for a period of five years, the State Government of Maharashtra (SGOM) provides various financial incentives to Micro, Small & Medium Manufacturing Enterprises, Large Scale Industries (LSI), Mega Projects and Ultra Mega Projects.^{Footnote 72}

Under the PSI, LSI units are eligible for certain investment promotion subsidies, such as subsidy on 50 % of gross State General Sales Tax (SGST) payable by the unit on the first sale of eligible products billed and delivered within the state, exemption from electricity duty, and waiver of stamp duty. Respecting subsidies offered to mega projects, a customized package of incentives are provided to eligible mega projects, subject to state approval, up to a limit in the amount of investment made.

The GOI confirmed the existence of the program in its most recent notification to the WTO.^{Footnote 73} The CBSA has previously countervailed this program in the OCTG II investigation.

The program may constitute 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 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.

Program 13. Incentives for micro, small & medium manufacturing enterprises under PSI

Pursuant to section 4 of the PSI, new Micro, Small & Medium Manufacturing Enterprises (MSMEs) and small industries that fall within the definition of the Micro, Small and Medium Enterprises Development Act 2006, are eligible for the following incentives:^{Footnote 74}

• Subsidy on 100 % of gross SGST payable by the unit on the first sale of eligible products billed and delivered within Maharashtra
• Interest subsidy in respect of interest actually paid to the Banks and Public Financial Institutions on term loans for acquisition of fixed capital assets
• Exemption from electricity duty
• Waiver of stamp duty
• Power tariff subsidy and
• Additional incentives for strengthening MSMEs

The GOI confirmed the existence of the program in its most recent notification to the WTO.^{Footnote 75}

The program may constitute 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 may also constitute financial contribution in that 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, 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.

Program 14. Provision of land for less than fair market value

Pursuant to the Maharashtra Industrial Development Act 1962, the Maharashtra Industrial Development Corporation (MIDC) was established to provide businesses with infrastructure such as land, roads and water supply. The MIDC has so far developed 233 industrial areas in the state.^{Footnote 76} According to the complainant, AIAE has one of its production facilities located in the MIDC industrial areas and the supporting documentation provided in the complaint indicates that the land rate provided by the MIDC for the industrial areas is approximately half of the rate for commercial areas in the state.^{Footnote 77}

The 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.

VI. Subsidy programs provided by the State Government of Tamil Nadu (SGOTN)

Program 15. Capital subsidy / electricity duty exemption under Tamil Nadu Industrial Policy (TNIP)

The key objectives of the Tamil Nadu Industrial Policy 2014 (TNIP) are to position Tamil Nadu as the most preferred state for manufacturing, to attract incremental investments of over 10% every year in manufacturing, and to achieve an annual average growth rate of 14% in the manufacturing sector in the state. Under the TNIP, various incentives are provided to eligible new and expansion manufacturing units depending on the location within the state, the size of investment and the employment criteria.^{Footnote 78}

Under the TNIP, manufacturing units located in the state are classified as three different district categories: A – Chennai, Tiruvallur and Kancheepuram, B – Other than A & C, and C – Southern Districts, and manufacturing units in the A & B categories are eligible for the following standard incentives:

• Capital subsidy and electricity tax exemption
• Stamp Duty concession and
• Environmental Protection Infrastructure subsidy

Under this program, eligible new or expansion manufacturing units are provided with capital subsidy and electricity tax exemption on power purchased from the Tamil Nadu Generation and Distribution Corporation Ltd. or generated and consumed from captive sources based on employment and investment in fixed assets /eligible assets. The complainant submits that one of AIAE’s facilities located in Trichy belongs to the A or B category, therefore, they are eligible for the capital subsidy and electricity tax exemption under this program.

The program may constitute 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 may also constitute financial contribution in that 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, 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.

Program 16. Incentives for Mega, Super-Mega & Ultra-Mage Projects under TNIP

Pursuant to the TNIP, Mega, Super-mega & Ultra-mega projects located in the A & B categories are eligible for a structured package of incentives if those projects satisfy both the investment and employment criteria fixed for each category. For example, net output VAT and Central Sales Tax (CST) paid by eligible mega projects are given as investment promotion subsidy or soft loan for 10 years from the date of commercial production with a ceiling of 80% of the investment made.^{Footnote 79} According to the complainant, one of AIAE’s facilities located in Trichy belongs to the A or B category, therefore, they may be eligible for this program.

The program may constitute 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 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.