MAT 2022 IN: Mattresses
Statement of Reasons—Initiation of investigations

Decision

Ottawa, March 11, 2022

Pursuant to subsection 31(1) of the Special Import Measures Act, the Canada Border Services Agency initiated investigations on February 24, 2022, respecting the alleged injurious dumping and subsidizing of certain mattresses originating in or exported from China.

Summary

[1] On December 20, 2021, the Canada Border Services Agency (CBSA) received a written complaint from Restwell Mattress Co. Ltd. (Restwell) and the United Steelworkers (USW) (hereinafter, the complainants), alleging that imports of certain mattresses (mattresses) from the People’s Republic of China (China) are being dumped and subsidized. The complainants alleged that the dumping and subsidizing have caused injury and are threatening to cause injury to the Canadian industry producing like goods.

[2] On January 10, 2022, pursuant to paragraph 32(1)(a) of the Special Import Measures Act (SIMA), the CBSA informed the complainants that the complaint was properly documented. The CBSA also notified the Government of China (GOC) that a properly documented complaint had been received. The GOC 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. A request for consultations was not received by the CBSA.

[3] The complainants provided evidence to support the allegations that mattresses from China have been dumped and subsidized. The evidence also discloses a reasonable indication that the dumping and subsidizing have caused injury and/or are threatening to cause injury to the Canadian industry producing like goods.

[4] On February 24, 2022, pursuant to subsection 31(1) of SIMA, the CBSA initiated investigations respecting the dumping and subsidizing of mattresses from China.

Interested parties

Product information

Like goods and class of goods

[28] 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.

[29] In considering the issue of like goods, the 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.

[30] With respect to the definition of like goods, the complainants stated that like goods are those goods described in the product definition. That is, domestically produced mattresses, which meet the product definition. Therefore, it does not include domestically produced goods which are specifically excluded from the product definition.

[31] The complainants submit that the domestic industry, as defined in the complaint, produces or has the ability to produce the whole range of mattresses included in the scope of the complaint. With respect to physical and market characteristics, the complainants submit that the physical characteristics of the goods are the same whether imported or produced domestically. Additionally, the complainants note that imported and domestically produced mattresses have the same methods of manufacture. Finally, the complainants submit that the market characteristics are the same for imported and domestically produced mattresses, as are the customers’ needs.^{Footnote 5}

[32] To further support their submission that the like goods and subject goods constitute a single class of goods, the complainants referred to a 2019 determination by the United States (US) International Trade Commission (ITC) where, for a similar subject goods definition, the ITC found that Chinese and US produced like goods constitute a single class of goods.^{Footnote 6}

[33] After considering questions of use, physical characteristics and all other relevant factors, the CBSA is of the opinion that domestically produced mattresses, that are 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

[34] The complaint includes data on domestic production and on sales of mattresses for domestic consumption.^{Footnote 7} Specifically, the complaint includes the annual production of like goods for Restwell from January 1, 2017 through September 30, 2021, as well as annual production of like goods for the producers who provided letters of support.

[35] The complainants estimated the total sales volume of all domestic producers of like goods based on Statistics Canada domestic shipment data for mattresses under NAICS 33971.^{Footnote 8}

[36] The CBSA contacted all known potential producers of mattresses in Canada to gather further information concerning the domestic production of mattresses for domestic consumption.

[37] The CBSA received letters of support from domestic producers of mattresses that represent a major proportion of the Canadian production.^{Footnote 9} Two domestic producers expressed a neutral opinion of the complaint.^{Footnote 10} None of the domestic producers contacted by the CBSA expressed opposition to the complaint.

[38] For the purposes of estimating total domestic production of like goods in Canada, the CBSA referred to the estimates contained in the complaint which were based on data from Statistics Canada. The CBSA is not able to determine whether the responses to the CBSA’s Standing RFI represent an exhaustive estimate of the total Canadian industry. As such, the Statistics Canada information provided in the complaint represents the best information available.

[39] Based on the information in the complaint and on the administrative record the CBSA is satisfied that Restwell, together with the supporting producers, account for a major proportion of the total domestic production of like goods.

Canadian market

[42] The complainants, using data from Statistics Canada, estimated the total volume of imports of mattresses from China and all other countries from January 1, 2017 to September 30, 2021.^{Footnote 11}

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

[44] The CBSA conducted its own analysis of imports of mattresses based on CBSA’s import data, commercial entry information and commercial intelligence provided by the complainants. In the CBSA’s review of commercial entry information for mattresses entering Canada, adjustments were made to the FIRM data to correct any errors respecting the quantity and value for duty as necessary. The CBSA notes there are discrepancies in the volumes estimated by the complainants and the CBSA. The adjustments made by the CBSA were made based on import data not available to the complainants such as commercial entry information.

[45] The CBSA’s estimate of the apparent Canadian market for like goods, using the CBSA’s estimates of imports and information concerning domestic production for domestic consumption found on the administrative record, is as follows:^{Footnote 13}

[46] The CBSA will continue to gather and analyze information on the volume of imports during the dumping and subsidizing period of investigation (POI) of January 1, 2021 to December 31, 2021, as part of the preliminary phase of the dumping and subsidizing investigations and will refine these estimates.

Evidence of dumping

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

[48] 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.

[49] The complaint did not include estimates of normal values pursuant to section 15 of SIMA. The complainants explained that sufficient information was not available to estimate normal values pursuant to section 15 of SIMA

[50] As such, the complainants estimated normal values using a constructed cost approach based on the methodology in paragraph 19(b) of SIMA, calculated based on the aggregate of an estimate of the cost of production of the subject goods, an estimate for a reasonable amount for administrative, selling and other costs and an estimate of a reasonable amount for profits.

[51] 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.

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

Evidence of subsidizing

[77] 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.

[78] 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

[79] 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.

[80] 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.

[81] 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

[82] 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.

Subsidy programs in China

[83] In alleging that actionable subsidies were applicable to the subject goods imported from China, the complainants mainly relied on previous CBSA and US Department of Commerce (USDOC) subsidy investigation findings. The complainants also relied on industry reports and government documents, WTO Trade Policy Reviews, and general news articles and publications.

[84] The complaint provided evidence of 16 different programs that producers of subject goods in China may have benefited from.

[85] The complainants listed a number of subsidy programs, with references to the provisions in SIMA, under which the subsidy is alleged to constitute a financial contribution and under which it would be considered to be specific and, therefore, actionable. The complainants have also claimed that each program is either used by or is available for use by producers and exporters of mattresses in China. The documents that formed the basis for these allegations were appended to the complaint.

[86] The complainants primarily referred to the CBSA’s investigations in regards to the subsidizing of Upholstered Domestic Seating, Line Pipe, Thermoelectric Coolers and Warmers, Unitized Wall Modules, OCTG, Seamless Casing, Pup Joints, Carbon Steel Welded Pipe, Cold-Rolled Steel and Large Diameter Line Pipe. Subsidy information was also referenced from the Mattresses investigation by the USDOC.

[87] The CBSA reviewed the relevant public reports for the subsidy programs identified in the complaint. The CBSA also reviewed the descriptions of subsidy programs provided in reports for other investigations, including other programs found by the USDOC.

[88] As a result, based on the information available, the CBSA identified 34 potentially actionable subsidy programs that may have benefited Chinese producers/exporters of mattresses. Many of these are programs that the CBSA has already countervailed in respect of previous subsidy investigations concerning goods from China. These programs have been grouped into the following five categories:

1. Preferential loans and loan guarantees
2. Grants and grants equivalents
3. Preferential tax programs
4. Relief from duties and taxes
5. Goods/services provided by the government at less than fair market value

[89] The CBSA’s analysis revealed that the alleged subsidy programs constitute potential financial contributions by the GOC that may have conferred benefits to producers/exporters of mattresses. 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.

[90] The description of the identified programs to be investigated are found in the Appendix.

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

Evidence of injury

[97] The complainants allege 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.

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

[99] In support of their injury allegations, the complainants provided evidence of: an increase in the volume of dumped and subsidized imports, lost market share, lost sales, price undercutting, price suppression, and reduced profitability and employment.^{Footnote 23}

Threat of injury

[120] The complainants state that the import of the allegedly dumped and subsidized goods threatens to cause further material injury to the Canadian domestic industry. The complainants provided the following information to support the allegation that imports of subject goods threaten to cause further injury to the Canadian industry.

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

[134] The CBSA finds that the complainants have sufficiently linked the injury they suffered in terms of lost market share, lost sales, price undercutting, price suppression, and reduced profitability and employment to the alleged dumping and subsidizing of the subject goods imported into Canada and the price advantage this provides.

[135] 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.

[136] The complainants submitted that the continued dumping and subsidizing of goods from China 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. [137] 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

[138] 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 certain mattresses originating in or exported from China have been dumped and subsidized. Further, there is evidence that discloses 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 February 24, 2022.

Scope of the investigations

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

[140] 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 January 1, 2021 to December 31, 2021, were dumped. The information requested will be used to determine the normal values, export prices and margins of dumping, if any.

[141] The CBSA has also requested information from the GOC and all potential producers/exporters to determine whether or not subject goods imported into Canada during the POI of January 1, 2021 to December 31, 2021, were subsidized. The information requested will be used to determine the amounts of subsidy, if any.

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

Future action

[143] 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 has caused or is 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.

[144] 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 May 25, 2022. Where circumstances warrant, this period may be extended to 135 days from the date of the initiation of the investigations.

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

[146] 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 the goods is insignificant, may be subject to provisional duty in an amount not greater than the estimated margin of dumping and the estimated amount of subsidy on the imported goods.

[147] 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.

[148] 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.

[149] 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.

[150] 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

[151] 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.

[152] 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.

[153] 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

[154] 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.

[155] 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.

[156] 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.

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

Publication

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

Information

[159] 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.

[160] To be given consideration in the investigations, all information should be received by the CBSA by July 4, 2022.

[161] 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.

[162] 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.

[163] The schedule of the investigations and a complete listing of all exhibits and information are available. The exhibit listing will be updated as new exhibits and information are made available.

[164] This Statement of Reasons is 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:
• Shawn Ryan: 902-943-9978
• Hugo Dumas: 343-553-2007

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

Doug Band
Director General
Trade and Anti-dumping Programs Directorate

Appendix—description of identified programs

Category 1: Preferential Loans and Loan Guarantees

Program 1: Loans from State-Owned Banks at Preferential Rates

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

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

The CBSA has previously countervailed this program in Fabricated Industrial Steel Components (FISC), Carbon and Alloy Steel Line Pipe (Line Pipe), Pup Joints, Oil Country Tubular Goods (OCTG), Seamless Casing and Upholstered Domestic Seating (UDS).

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

Program 2: Loan Guarantee through the Government of China/SOE Banks/Public Bodies

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

The CBSA has previously countervailed this program in Large Diameter Carbon and Alloy Steel Line Pipe (Large Line Pipe), FISC, Line Pipe and UDS.

In a recent investigation by the US Department of Commerce (USDOC) in Mattresses from the People’s Republic of China, it appears that they countervailed this program as “Export Loans from Chinese State-Owned Banks (SOCBs)”

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

Program 3: Debt and Interest Forgiveness on Loans from State-Owned Banks

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

The CBSA has previously countervailed this program in Seamless Casing.

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

Program 4: Preferential Export Financing and Export Credit Guarantee/Insurance

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

The CBSA has previously countervailed this program in Line Pipe and UDS.

In a recent investigation by the USDOC into Mattresses from China, it appears that they countervailed this program as “Export Seller’s Credit” and “Export Buyer’s Credit”.

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

Category 2: Grants and Grant Equivalents

Program 5: Insurance Grants

This program constitutes local and provincial government reimbursement grants on credit insurance fees.

The CBSA has previously countervailed this program in Galvanized Steel Wire, Seamless Casing, OCTG, Pup Joints, Stainless Steel Sinks, Line Pipe, Large Line Pipe and UDS.

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

Program 6: Design, Research and Development Grants

A grant that provides financial aid for enterprises determined to have undertaken expenses in design or research and development.

The CBSA has previously countervailed this program in Sucker Rods, Copper Tube, Photovoltaic Modules and Laminates, OCTG, Unitized Wall Modules, Seamless Casing, Pup Joints, Decorative and Other Non-Structural Plywood (Plywood) and UDS.

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

Program 7: Export Development Performance Grants

Companies in China receive such grants provided by the GOC to assist in the development of export markets or to recognize export performance.

The CBSA has previously countervailed this program in Sucker Rods, OCTG, Unitized Wall Modules, Galvanized Steel Wire, Aluminum Extrusions, Carbon Steel Welded Pipe, Steel Grating, Plywood and UDS.

As per the SOR issued at the OCTG final determination, the program was established in the Circular of the Trial Measures of the Administration of International Market Development Funds for Small and Medium-Sized Enterprises Cai Qi No. 467, 2000, which came into force on October 24, 2000. The program was established to support the development of small and medium-sized enterprises, to encourage SMEs to join in the competition of international markets, to reduce the business risks of the enterprises, and to promote the development of the national economy. The granting authority is the Foreign Trade and Economic Department and the program is administered at the local levels.

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

Program 8: Performance Award Grants

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

The CBSA has previously countervailed this program in Seamless Casing, Aluminum Extrusions, OCTG, Pup Joints, Copper Tube, Line Pipe and UDS.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 9: Reductions in Land Use and/or Rental Fees

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

The CBSA has previously countervailed this program in Stainless Steel Sinks, Unitized Wall Modules, Photovoltaic Modules and Laminates, Seamless Casing, OCTG, Pup Joints, Line Pipe, Plywood and i.

In a recent investigation by the USDOC into Mattresses from China, it appears that they countervailed this program as “Provision of Land Use Rights in SEZs for Less Than Adequate Remuneration (LTAR)”

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

Program 10: Grant - Patent Assistance/Award

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

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

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

The CBSA has previously countervailed this program in Plywood.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 11: Environment Protection Grant

These are grants provided by the GOC for the purposes of improving environmental performance, for example, monitoring and cleaning pollutants, improving energy efficiency, upgrading facilities to be more environmentally efficient, and waste water treatment.

The CBSA has previously countervailed this program in Copper Tube.

In a recent investigation by the USDOC into Mattresses from China, it appears that they countervailed this program as “Grants for Energy Conservation and Emission Reduction”.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 12: Grants for the Retirement of Capacity

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

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 13: Grants for Relocating Production Facilities

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

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 14: Subsidies Related to Company/Enterprise Development and Innovation

Available information indicates that the GOC has introduced several grants and incentives related to company and enterprise development and innovation grants and awards.

The CBSA has previously countervailed this program in UDS.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 15: Subsidies Related to Employment, Training and Recruitment

Available information indicates that the GOC has introduced several grants and incentives designed to support job stabilization by assisting companies with unemployment insurance payments as well as supporting the recruitment, training and subsequent job security of their staff.

The CBSA has previously countervailed this program in UDS.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 16: Subsidies Related to Pandemic Support

Available information indicates that the GOC has introduced several grants and incentives designed to support job stabilization and weather economic hardships experienced by exporters during the COVID-19 pandemic.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 17: Subsidies Related to Quality & Improvement

Available information indicates that the GOC has introduced several grants and incentives related to quality and improvement in production.

The CBSA has previously countervailed this program in UDS.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 18: Subsidies Related to Science and Technology

Available information indicates that the GOC has introduced several grants and incentives related to science and technology.

The CBSA has previously countervailed this program in UDS.

The complainants allege that producers are eligible to receive grants associated with the State Key Technology Project Fund, which is meant to support the technological renovation of key industries, key enterprises and key products by means of increasing the issuance of financial bonds, to promote technological advancement of the enterprises, upgrade the products range, improve the quality of the products, develop import-substitution products, increase effective supply, enlarge internal demands and ensure a continuous and stable development of the national economy.

The complainants also allege that the GOC created the SME Technology Innovation Fund (SME Fund) in which businesses who qualify must be in accordance with “national industrial policy, high technology content, strong innovation..” and must produce in an area with “clear market demand and competitiveness.”

In a recent investigation by the USDOC into Mattresses from China, it appears that they countervailed this program as “SME Technology Innovation Fund”.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 19: Subsidies Related to Social Security

Available information indicates that the GOC has introduced several grants and incentives related to social security.

The CBSA has previously countervailed this program in UDS.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 20: Subsidies Related to Talent and Skills

Available information indicates that the GOC has introduced several grants and incentives related to talent and skills.

The CBSA has previously countervailed this program in UDS.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 21: Subsidies to Provide Business Support

Available information indicates that the GOC has introduced several grants and incentives related to providing business support.

The CBSA has previously countervailed this program in UDS.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 22: Subsidies for Utilities for Certain Enterprises

Available information indicates that the GOC has introduced several grants and incentives related to utilities for specific enterprises classes.

The CBSA has previously countervailed this program in UDS.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 23: Subsidies for the Establishment of Non-Manufacturing Facilities

Available information indicates that the GOC has introduced several grants and incentives related to assistance in establishing non-manufacturing facilities.

The CBSA has previously countervailed this program in UDS.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 3: Preferential Tax Programs

Program 24: Corporate Income Tax Exemption and/or Reduction in Special Economic Zones (SEZs) and Other Designated Areas

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

Under this program, it is alleged that an eligible enterprises may receive a reduced corporate income tax rate of 15%.

The complainants have alleged that there are several known mattress producers who stand to benefit from their location in SEZs, including the Guangdong Province SEZ.

The CBSA has previously countervailed this program in Aluminum Extrusions, CSWP, OCTG, Seamless Casing, Line Pipe, and UDS.

In a recent investigation by the USDOC into Mattresses from China, it appears that they countervailed this program as the following: Tax Incentives for Businesses in the Guangdong Province Special Economic Zone (SEZ).

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

Program 25: Corporate Income Tax Reduction for New High Tech Enterprises (“NHTE”)

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

The CBSA has previously countervailed this program in FISC, Line Pipe, Certain Seamless Casing, OCTG, Pup Joints, Plywood, UDS, and Container Chassis.

In a recent investigation by the USDOC into Mattresses from China, it appears that they countervailed this program as “Income Tax Reductions for High- and New-Technology Enterprises”.

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

Program 26: Municipal/Local Income or Property Tax Reductions

The CBSA has previously countervailed this program in UDS.

The CBSA has also previously countervailed this program in Stainless Steel Sinks, Unitized Wall Modules, Photovoltaic Modules and Laminates, and Line Pipe under the title “Reduction, Exemption or Refund of Land Use Fees, Land Rental Rates, and Land Purchase/Transfer Prices.”

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

Program 27: Preferential Tax Policies for Foreign-Invested Enterprises (FIEs)

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

The CBSA has previously countervailed this program in Pup Joints and Seamless Casing. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

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

Program 28: Preferential Tax Policies Related to Research and Investment

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

The CBSA has previously countervailed this program in Photovoltaic Modules and Laminates, Seamless Casing, OCTG, Pup Joints, Plywood, and UDS. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

In a recent investigation by the USDOC into Mattresses from China, it appears that they countervailed this program as “Income Tax Deduction for Research and Development Expenses Under the Enterprise Income Tax Law (EITL)”.

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

Category 4: Relief from Duties and Taxes

Program 29: Offsets to Taxable Income Related to Purchases of Domestic Machinery

Under this program, a tax credit up to 40% of the purchase price of domestic equipment may apply to the incremental increase in tax liability from the previous year. The legal bases of this program are the Provisional measures on enterprise income tax credit for investment in domestically produced equipment for technology renovation projects of July 1, 1999 and the Notice of the State Administration of Taxation on Stopping the Implementation of the Enterprise Income Tax Deduction and Exemption Policy of the Investments of an Enterprise in Purchasing Home-made Equipment, No. 52 [2008] of the State Administration of Taxation, effective January 1, 2008.

The CBSA has previously countervailed this program in Aluminum Extrusions, Photovoltaic Modules and Laminates, Seamless Casing, OCTG, and Pup Joints.

In a recent investigation by the USDOC into Mattresses from China, it appears that they countervailed this program as “VAT Rebates on Domestically Produced Equipment”.

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

Program 30: Exemption or Refund of Tariff and Import Value-Added Tax (VAT) for Imported Technologies and Equipment

The program was established to absorb investment in SEZs and encourage districts to take the lead in development. The granting authority responsible for this program is the General Administration of Customs and this program is administered by local customs authorities. Under this program, machinery and equipment, spare parts, raw and semi-processed materials, means of transportation and other capital goods necessary for production that are imported by enterprises in SEZs shall be exempted from import duties.

The CBSA has previously countervailed this program in Photovoltaic Modules and Laminates, Unitized Wall Modules, Seamless Casing, Pup Joints, and Line Pipe.

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

Program 31: Relief from Duties and Taxes on Imported Material and Other Manufacturing Inputs

Under a duty drawback program, a subsidy may exist where the amount of duties and taxes relieved or refunded on inputs incorporated into exported goods is found to be in excess of the actual liability that existed on those imports.

The CBSA has previously countervailed this program in Photovoltaic Modules and Laminates, Seamless Casing, OCTG and Pup Joints.

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

Program 32: Deed Tax Exemption for SOEs Undergoing Mergers or Restructuring

The GOC imposes a deed tax on transfers of land and real estate. In the context of an ownership transfer by means of an asset sale, as opposed to a stock sale, a deed tax of three to five percent is levied on the amount of the purchase price, and the purchaser is responsible for paying the tax. The GOC’s “Notice of the Ministry of Finance and the State Administration of Taxation on Several Deed Tax Policies Concerning Enterprise Reorganization and Restructuring,” exempts this deed tax where the transfer of ownership occurs as part of the restructuring or merger of an SOE.

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

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

Program 33: Acquisition of Government Inputs/Utilities at Less than Fair Market Value

The complainants allege that exporters may avail themselves of input materials or utilities from state-owned enterprises (SOE) at below fair market value. They have identified electricity as an input that may be provided to mattress manufacturers at less than fair market value.

The CBSA has previously countervailed this program in Seamless Casing, OCTG, Stainless Steel Sinks, Steel Piling Pipe, Large Line Pipe, Pup Joints, UDS, and Container Chassis.

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

Program 34: Provision of Land for Less than Adequate Remuneration by Government

All land in China belongs to the government (i.e., either national or local governments, or through a “collective” at the township or village level), and government land agencies across China control the allocation of land through the granting of land-use rights.

The CBSA has previously countervailed this program in Line Pipe and Large Line Pipe.

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