MAT 2022 IN: Mattresses
Statement of Reasons—Preliminary determinations

Decision

Ottawa, July 20, 2022

Pursuant to subsection 38(1) of the Special Import Measures Act, the Canada Border Services Agency made preliminary determinations on July 7, 2022 respecting the dumping and subsidizing of certain mattresses originating in or exported from China.

Summary of events

[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] SIMA provides that, under normal circumstances, the decision whether to initiate investigations shall be made within 30 days of the date of the properly documented complaint. However, on February 2, 2022, the CBSA informed the complainant and the GOC that it had made the decision to extend this period to 45 days, pursuant to subsection 31(6) of SIMA.

[4] 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.

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

[6] Upon receiving notice of the initiation of the investigations, the Canadian International Trade Tribunal (CITT) commenced a preliminary injury inquiry, pursuant to subsection 34(2) of SIMA, into whether the evidence discloses a reasonable indication that the dumping and subsidizing of the above-mentioned goods have caused injury or are threatening to cause injury to the Canadian industry producing the like goods.

[7] On April 25, 2022, pursuant to subsection 37.1(1) of SIMA, the CITT made a preliminary determination that there is evidence that discloses a reasonable indication that the dumping and subsidizing of mattresses from China have caused injury to the domestic industry.

[8] On May 18, 2022, the CBSA notified interested parties that the preliminary stage of the investigations will be extended pursuant to subsection 39(1) of SIMA.

[9] On July 7, 2022, as a result of the CBSA’s preliminary investigations and pursuant to subsection 38(1) of SIMA, the CBSA made preliminary determinations of dumping and subsidizing of mattresses originating in or exported from China.

[10] On July 7, 2022, pursuant to subsection 8(1) of SIMA, provisional duty was imposed on imports of dumped and subsidized goods that are of the same description as any goods to which the preliminary determinations apply, and that are released during the period commencing on the day the preliminary determinations were made and ending on the earlier of the day on which the CBSA causes the investigations in respect of any goods to be terminated pursuant to subsection 41(1) of SIMA or the day the CITT makes an order or finding pursuant to subsection 43(1) of SIMA. Where an exporter’s estimated margin of dumping and/or estimated amount of subsidy is insignificant, provisional anti-dumping and/or countervailing duties will not be applied.

Period of investigation

[11] The Period of Investigation (POI) for the investigations is January 1, 2021 to December 31, 2021.

Profitability analysis period

[12] The Profitability Analysis Period (PAP) for the investigations is January 1, 2021 to December 31, 2021.

Interested parties

Product information

Like goods and class of goods

[39] 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.

[40] 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.

[41] 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.

[42] 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 9}

[43] 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 10}

[44] 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.

[45] In its preliminary injury inquiry for these investigations, the CITT further reviewed the matter of like goods and classes of goods. On May 10, 2022, the CITT issued its preliminary injury inquiry Statement of Reasons for these investigations, indicating that “the Tribunal finds that mattresses produced in Canada that are of the same description of the subject goods are “like goods” in relation to the subject goods and that there is one class of goods.”

The Canadian industry

[46] Prior to the initiation of the investigations, the CBSA contacted all known potential producers of mattresses in Canada to gather further information concerning the domestic production of mattresses for domestic consumption.

[47] The CBSA received letters of support from domestic producers of mattresses that represent a major proportion of the Canadian production.^{Footnote 11} Two domestic producers expressed a neutral opinion of the complaint.^{Footnote 12} None of the domestic producers contacted by the CBSA expressed opposition to the complaint.

[48] The complainant and the supporting producers account for the vast majority of the domestic production of like goods.

Imports into Canada

[49] During the preliminary phase of the investigations, the CBSA refined the estimated volume and value of imports based on information from CBSA import entry documentation and information received from exporters and importers.

[50] The following table presents the CBSA’s analysis of imports of mattresses for purposes of the preliminary determinations:

Representations

[51] During the preliminary phase of the investigations, counsel for the complainants made representations concerning various exhibits on the administrative records, including certain RFI responses.^{Footnote 13} These representations concern topics including the accuracy and completeness of information provided, government involvement with certain companies and sectors, the possible presence of a particular market situation, the relationships between certain parties, and other missing or unclear information provided in the RFI responses. Counsel for the complainants also made comments regarding the lack of response from the GOC.^{Footnote 14}

[52] The CBSA has noted the arguments and evidence submitted in the representations and will take them into consideration in the course of verifying and analyzing information for the purposes of a final decision.

Investigation process

[53] Regarding the dumping investigation, information was requested from all known exporters, producers, vendors and importers, concerning shipments of mattresses released into Canada during the POI.

[54] Regarding the subsidy investigation, information related to potential actionable subsidies was requested from all known exporters and producers in China. Information was also requested from the GOC concerning financial contributions made to exporters or producers of mattresses released into Canada during the POI. The GOC was also requested to forward the RFIs to all subordinate levels of government that had jurisdiction over the exporters.

[55] The GOC and the exporters/producers were also notified that failure to submit all required information and documentation, including non-confidential versions, failure to comply with all instructions contained in the RFI, failure to permit verification of any information or failure to provide documentation requested during the verification visits or the desk audits may result in the margin of dumping, the amount of subsidy and the assessment of dumping and/or countervailing duties on subject goods being based on facts available to the CBSA. Further, they were notified that a determination on the basis of facts available could be less favorable to them than if complete, verifiable information was made available.

[56] Several parties (i.e., importers and exporters) requested an extension to respond to their respective RFIs. The CBSA reviewed each request and granted extensions in instances where the reasons for making the requests constituted unforeseen circumstances or unusual burdens.

[57] After reviewing the RFI responses, deficiency letters and supplemental RFIs (SRFIs) were sent to several responding parties to denote any inadequacies in the response, seek clarification of information provided in the responses, and request any additional information, where necessary.

[58] Preliminary determinations are based on the information available to the CBSA at the time of the preliminary determinations. During the final phase of the investigations, the CBSA will continue to collect and verify information, the results of which will be incorporated into the CBSA’s final decisions, which must be made by October 5, 2022.

Dumping investigation

[59] The following presents the preliminary results of the investigation into the dumping of mattresses originating in or exported from China.

Preliminary results of the dumping investigation

Subsidy investigation

[148] In accordance with section 2 of SIMA, a subsidy exists if 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.

[149] Pursuant to subsection 2(1.6) of SIMA, there is a financial contribution by a government of a country other than Canada 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
4. the government permits or directs a non-governmental body to do anything referred to in any of paragraphs (a) to (c) 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

[150] Where subsidies exist, they may be subject to countervailing measures if they are specific in nature. According to subsection 2(7.2) of SIMA a subsidy is considered to be specific when it is limited, in a legislative, regulatory or administrative instrument, or other public document, to a particular enterprise within the jurisdiction of the authority that is granting the subsidy; or is a prohibited subsidy.

[151] A “prohibited subsidy” is either an export subsidy or a subsidy or portion of a subsidy that is contingent, in whole or in part, on the use of goods that are produced or that originate in the country of export. An export subsidy is a subsidy or portion of a subsidy contingent, in whole or in part, on export performance. An “enterprise” is defined as including a group of enterprises, an industry and a group of industries. These terms are all defined in section 2 of SIMA.

[152] Notwithstanding that a subsidy is not specific in law, under subsection 2(7.3) of SIMA a subsidy may also be considered specific having regard as to whether:

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

[153] For the 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 subject to countervailing measures if the persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of goods under investigation have benefited from the subsidy.

[154] Financial contributions provided by state-owned enterprises (SOEs) may also be considered to be provided by the government for purposes of this investigation. A 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 some combination thereof.

Preliminary results of the subsidy investigation

[155] The following presents the preliminary results of the investigation into the subsidizing of mattresses originating in or exported from China.

[156] At the initiation of the investigation, the CBSA sent Subsidy RFIs to the GOC, as well as to all known exporters/producers of mattresses in China.

[157] The GOC was also requested to forward the Subsidy RFIs to all subordinate levels of government that had jurisdiction over the exporters. The exporters/producers were requested to forward a portion of the Subsidy RFI to their input suppliers, who were asked to respond to questions pertaining to their legal characterization as SOEs.

[158] The GOC and the exporters/producers were also notified that failure to submit all required information and documentation, including non-confidential versions, failure to comply with all instructions contained in the Subsidy RFI, failure to permit verification of any information or failure to provide documentation requested during the verification visits or desk audits may result in the amount of subsidy and the assessment of countervailing duties on subject goods being based on facts available to the CBSA. Further, they were notified that a determination on the basis of facts available could be less favourable than if complete, verifiable information was made available.

[159] The GOC did not respond to the CBSA’s Government Subsidy RFI. The lack of response from the GOC limited the CBSA’s ability to estimate the amount of subsidy in the prescribed manner as the required information relating to financial contribution, benefit and specificity was not provided. It also limited the CBSA’s ability to determine whether producers, or other suppliers of goods and services, are public bodies.

[160] Although the GOC did not reply to the CBSA’s Government Subsidy, the CBSA nevertheless recognized the exporters’ level of cooperation and estimated an amount of subsidy for cooperative exporters. The amount of subsidy is estimated for the preliminary determination for the cooperative exporters on the basis of information provided by the exporters in their subsidy RFI responses and other publicly available information on the record.

[161] The available information indicates that these programs do not appear to be generally available to all enterprises in China. As well, due to the lack of a response by the GOC, there is not sufficient information on the administrative record to determine that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1) of SIMA. Therefore, guided by the principles of subsection 2(7.2) or subsection 2(7.3) of SIMA and basing its opinion on the best information available, the CBSA has taken the position that the subsidy derived from these programs is likely to be specific.

[162] In conducting its investigation, the CBSA requested information respecting the various programs, as listed in Appendix 2. During the preliminary phase of the investigation, the CBSA identified additional potential programs.

[163] The CBSA will continue to analyze the submitted information during the final phase of the investigation. The CBSA may also consider any other potential subsidy programs that have not yet been identified.

[164] An account of the subsidies received by each of the exporters that provided a response to the Subsidy RFI is provided below. The estimated amounts of subsidy for each of the exporters are also presented in a summary table in Appendix 1.

Foshan Suilong Furniture Co., Ltd.

[165] Foshan Suilong Furniture Co., Ltd. (Foshan Suilong) is a producer and exporter of subject goods located in Guangdong, China.

[166] Foshan Suilong provided a response to the Subsidy RFI.^{Footnote 25} For purposes of the preliminary determination, Foshan Suilong was found to have received countervailable benefits from the following seven subsidy programs:

1. Program 6: Design, Research and Development Grants
2. Program 7: Export Development Performance Grants
3. Program 14: Subsidies Related to Company/Enterprise Development and Innovation
4. Program 18: Subsidies Related to Science and Technology
5. Program 21: Subsidies to Provide Business Support
6. Program 25: Corporate Income Tax Reduction for New High Tech Enterprises (“NHTE”)
7. Program 26: Municipal/Local Income or Property Tax Reductions

[167] Further to its analysis of the information on the administrative record, the CBSA considers that the above subsidy programs may constitute a financial contribution that confers a benefit to the exporter. The CBSA also considers these programs may be specific and therefore actionable.

[168] For purposes of the preliminary determination, the estimated amount of subsidy for Foshan Suilong is 4.16%, expressed as a percentage of the export price.

Gold Lion Furniture (Shanghai) Co., Ltd.

[169] Gold Lion Furniture (Shanghai) Co., Ltd. (Gold Lion Furniture) is a producer and exporter of subject goods located in Shanghai, China.

[170] Gold Lion Furniture provided a response to the Subsidy RFI.^{Footnote 26} Gold Lion Furniture reported that it did not receive any subsidies during the POI, and the CBSA found no evidence of subsidies for Gold Lion Furniture. As such, for purposes of the preliminary determination, there is no subsidy amount for goods exported to Canada. A SRFI will be sent to gather additional information and seek clarification. The CBSA will continue to collect and verify information from Gold Lion Furniture.

Guangdong Eonjoy Technology Limited

[171] Guangdong Eonjoy Technology Limited (Guangdong Eonjoy) is a producer and exporter of subject goods located in Guangdong, China.

[172] Guangdong Eonjoy provided a response to the Subsidy RFI.^{Footnote 27} For the purposes of the preliminary determination, Guangdong Eonjoy was found to have received countervailable benefits from the following three subsidy programs:

1. Program 11: Environment Protection Grant
2. Program 14: Subsidies Related to Company/Enterprise Development and Innovation
3. Program 15: Subsidies Related to Employment, Training and Recruitment

[173] Further to its analysis of the information on the administrative record, the CBSA considers that the above subsidy programs may constitute a financial contribution that confers a benefit to the exporter. The CBSA also considers these programs may be specific and therefore actionable.

[174] For purposes of the preliminary determination, the estimated amount of subsidy for Guangdong Eonjoy is 0.06%, expressed as a percentage of the export price.

Guangzhou Younus Import and Export Co., Ltd.

[175] Guangzhou Younus Import and Export Co., Ltd. (Younus) is an exporter of subject goods, located in Beijing, China. Dongguan Ru Bing Foam and Furniture Co. Ltd. (Dongguan Ru Bing) is a producer of the subject goods located in Guangdong, China.

[176] Dongguan Ru Bing provided a response to the Subsidy RFI.^{Footnote 28} Dongguan Ru Bing reported that it did not receive any subsidies during the POI, and the CBSA found no evidence of subsidies for Dongguan Ru Bing. As such, for purposes of the preliminary determination, there is no subsidy amount for goods exported to Canada. A SRFI will be sent to gather additional information and seek clarification. The CBSA will continue to collect and verify information from Dongguan Ru Bing.

Healthcare Co., Ltd.

[177] Healthcare Co., Ltd. (Healthcare) is a producer and exporter of subject goods located in Rugao City, China.

[178] Healthcare provided a response to the Subsidy RFI.^{Footnote 29} For purposes of the preliminary determination, Healthcare was found to have received countervailable benefits from the following twelve subsidy programs:

1. Program 1: Loans from State-Owned Banks at Preferential Rates
2. Program 4: Preferential Export Financing and Export Credit Guarantee/Insurance
3. Program 7: Export Development Performance Grants
4. Program 10: Grant - Patent Assistance/Award
5. Program 14: Subsidies Related to Company/Enterprise Development and Innovation
6. Program 15: Subsidies Related to Employment, Training and Recruitment
7. Program 16: Subsidies Related to Pandemic Support
8. Program 18: Subsidies Related to Science and Technology
9. Program 19: Subsidies Related to Social Security
10. Program 21: Subsidies to Provide Business Support
11. Program 25: Corporate Income Tax Reduction for New High Tech Enterprises (“NHTE”)
12. Program 31: Relief from Duties and Taxes on Imported Material and Other Manufacturing Inputs

[179] Further to its analysis of the information on the administrative record, the CBSA considers that the above subsidy programs may constitute a financial contribution that confers a benefit to the exporter. The CBSA also considers these programs may be specific and therefore actionable.

[180] For purposes of the preliminary determination, the estimated amount of subsidy for Healthcare is 2.07%, expressed as a percentage of the export price.

Jiaxing Taien Springs Co., Ltd.

[181] Jiaxing Taien Springs Co., Ltd. (Jiaxing Taien Springs) is a producer and exporter of subject goods located in Zhejiang, China.

[182] Jiaxing Taien Springs provided a response to the subsidy RFI.^{Footnote 30} For the purposes of the preliminary determination, Jiaxing Taien Springs was found to have received countervailable benefits from the following three subsidy programs:

1. Program 7: Export Development Performance Grants
2. Program 14: Subsidies Related to Company/Enterprise Development and Innovation
3. Program 25: Corporate Income Tax Reduction for New High Tech Enterprises (“NHTE”)

[183] Further to its analysis of the information on the administrative record, the CBSA considers that the above subsidy programs may constitute a financial contribution that confers a benefit to the exporter. The CBSA also considers these programs may be specific and therefore actionable.

[184] For purposes of the preliminary determination, the estimated amount of subsidy for Jiaxing Taien Springs is 1.88%, expressed as a percentage of the export price.

Jinlongheng Furniture Co., Ltd.

[185] Jinlongheng Furniture Co., Ltd (Jinlongheng Furniture) is a producer and exporter of subject goods located in Guangdong, China.

[186] Jinlongheng Furniture provided a response to the Subsidy RFI.^{Footnote 31} For purposes of the preliminary determination, Jinlongheng Furniture was found to have received countervailable benefits from the following eight subsidy programs:

1. Program 6: Design, Research and Development Grants
2. Program 7: Export Development Performance Grants
3. Program 11: Environment Protection Grant
4. Program 15: Subsidies Related to Employment, Training and Recruitment
5. Program 17: Subsidies Related to Quality & Improvement
6. Program 18: Subsidies Related to Science and Technology
7. Program 21: Subsidies to Provide Business Support
8. Program 25: Corporate Income Tax Reduction for New High Tech Enterprises (“NHTE”)

[187] Further to its analysis of the information on the administrative record, the CBSA considers that the above subsidy programs may constitute a financial contribution that confers a benefit to the exporter. The CBSA also considers these programs may be specific and therefore actionable.

[188] For purposes of the preliminary determination, the estimated amount of subsidy for Jinlongheng Furniture is 0.47%, expressed as a percentage of the export price.

Xianghe Kaneman Furniture Ltd.

[189] Xianghe Kaneman Furniture Ltd. (Kaneman) is a producer and exporter of subject goods located in Heibei, China.

[190] Kaneman provided a response to the Subsidy RFI.^{Footnote 32} For purposes of the preliminary determination, Kaneman was found to have received countervailable benefits from the following three subsidy programs:

1. Program 11: Environment Protection Grant
2. Program 14: Subsidies Related to Company/Enterprise Development and Innovation
3. Program 26: Municipal/Local Income or Property Tax Reductions

[191] Further to its analysis of the information on the administrative record, the CBSA considers that the above subsidy programs may constitute a financial contribution that confers a benefit to the exporter. The CBSA also considers these programs may be specific and therefore actionable.

[192] For purposes of the preliminary determination, the estimated amount of subsidy for Kaneman is 0.11%, expressed as a percentage of the export price.

Zhejiang Glory Home Furnishings Co., Ltd.

[193] Zhejiang Glory Home Furnishings Co., Ltd (Glory) is a producer and exporter of subject goods located in Jiashan county, China.

[194] Glory provided a response to the Subsidy RFI.^{Footnote 33} For purposes of the preliminary determination, Glory was found to have received countervailable benefits from the following eleven subsidy programs:

1. Program 1: Loans from State-Owned Banks at Preferential Rates
2. Program 6: Design, Research and Development Grants
3. Program 14: Subsidies Related to Company/Enterprise Development and Innovation
4. Program 15: Subsidies Related to Employment, Training and Recruitment
5. Program 17: Subsidies Related to Quality & Improvement
6. Program 18: Subsidies Related to Science and Technology
7. Program 19: Subsidies Related to Social Security
8. Program 20: Subsidies Related to Talent and Skills
9. Program 21: Subsidies to Provide Business Support
10. Program 24: Corporate Income Tax Exemption and/or Reduction in Special Economic Zones (SEZs) and Other Designated Areas
11. Program 26: Municipal/Local Income or Property Tax Reductions

[195] Further to its analysis of the information on the administrative record, the CBSA considers that the above subsidy programs may constitute a financial contribution that confers a benefit to the exporter. The CBSA also considers these programs may be specific and therefore actionable.

[196] For purposes of the preliminary determination, the estimated amount of subsidy for Glory is 1.01%, expressed as a percentage of the export price.

Zinus Xiamen Inc.

[197] Zinus Xiamen Inc. (Zinus Xiamen) is a producer and exporter of subject goods, located Huzhou, China.

[198] Zinus Xiamen provided a response to the Subsidy RFI.^{Footnote 34} For purposes of the preliminary determination, Zinus Xiamen was found to have received countervailable benefits from the following three subsidy programs:

1. Program 1: Loans from State-Owned Banks at Preferential Rates
2. Program 15: Subsidies Related to Employment, Training and Recruitment
3. Program 19: Subsidies Related to Social Security

[199] Further to its analysis of the information on the administrative record, the CBSA considers that the above subsidy programs may constitute a financial contribution that confers a benefit to the exporter. The CBSA also considers these programs may be specific and therefore actionable.

[200] For purposes of the preliminary determination, the estimated amount of subsidy for Zinus Xiamen is 0.04%, expressed as a percentage of the export price.

Zinus Zhangzhou Inc.

[201] Zinus Zhangzhou Inc. (Zinus Zhangzhou) is a producer and exporter of subject goods, located ZhangPu-Xian, China.

[202] Zinus Zhangzhou provided a response to the Subsidy RFI.^{Footnote 35} For purposes of the preliminary determination, Zinus Zhangzhou was found to have received countervailable benefits from the following five subsidy programs:

1. Program 6: Design, Research and Development Grants
2. Program 7: Export Development Performance Grants
3. Program 8: Performance Award Grants
4. Program 15: Subsidies Related to Employment, Training and Recruitment
5. Program 16: Subsidies Related to Pandemic Support

[203] Further to its analysis of the information on the administrative record, the CBSA considers that the above subsidy programs may constitute a financial contribution that confers a benefit to the exporter. The CBSA also considers these programs may be specific and therefore actionable.

[204] For purposes of the preliminary determination, the estimated amount of subsidy for Zinus Zhangzhou is 0.23%, expressed as a percentage of the export price.

All other exporters—China

[205] For all other exporters of subject goods originating in or exported from China during the POI that did not provide a response to the Subsidy RFI or did not furnish sufficient information, the CBSA estimated an amount of subsidy on the basis of the following methodology:

1. the highest amount of subsidy for each of the 19 programs, as found at the preliminary determination, for the producers/exporters located in China for whom the CBSA has sufficient information to estimate an amount of subsidy, plus
2. the highest amount of subsidy for the 19 programs listed in (1), applied to each of the remaining 15 potentially actionable subsidy programs for which sufficient information is not available or has not been provided at the preliminary determination

[206] In establishing the methodology for estimating the amount of subsidy for all other exporters from China, the CBSA considered all of the information on the administrative record, including the complaint filed by the domestic industry, the CBSA’s estimates at the initiation of the investigation, and information submitted by exporters of subject goods from China.

[207] This methodology relies on information related to potentially actionable subsidies in China, it recognizes that the GOC did not provide a response to the Subsidy RFI (thereby impeding the CBSA’s ability to make a fully informed decision), and it limits the advantage that an exporter may gain from not providing necessary information requested in a subsidy investigation as compared to an exporter that did provide the necessary information.

[208] Using the above methodology, for the preliminary determination, the estimated amount of subsidy for all other exporters in China is 11.76%, expressed as a percentage of the export price.

Decisions

[217] On July 7, 2022, pursuant to subsection 38(1) of SIMA, the CBSA made preliminary determinations of dumping and subsidizing respecting mattresses originating in or exported from China.

Provisional duty

[218] Subsection 8(1) of SIMA provides that where a preliminary determination has been made and where the CBSA considers that the imposition of provisional duty is necessary to prevent injury, retardation or threat of injury, the importer in Canada of dumped and/or subsidized goods shall pay, or post security for, provisional duty. If, in making the preliminary determination, a determination is made that the estimated margin of dumping and/or the estimated amount of subsidy on the goods of an exporter is insignificant, subsection 8(1.3) provides that provisional anti-dumping and/or countervailing duties will not be imposed on importations of the goods from that particular exporter.

[219] Pursuant to subsection 8(1) of SIMA, provisional duty payable by the importer in Canada will be applied to dumped and subsidized imports of mattresses that are released from the CBSA during the period commencing on the day the preliminary determinations are made and ending on the earlier of the day on which the CBSA causes the investigations in respect of any goods to be terminated, in accordance with subsection 41(1), or the day on which the CITT makes an order or finding. The CBSA considers that the imposition of provisional duty is needed to prevent injury. As noted in the CITT’s preliminary determination, there is evidence that discloses a reasonable indication that the dumping and subsidizing of mattresses have caused injury to the domestic industry.

[220] Imports of mattresses originating in or exported from China and released by the CBSA on or after July 7, 2022, will be subject to provisional duties equal to the estimated margin of dumping and estimated amount of subsidy, expressed as a percentage of the export price of the goods per exporter. Appendix 1 contains the estimated margins of dumping, estimated amounts of subsidy and the rates of provisional duty.

[221] Importers are required to pay provisional duty in cash or by certified cheque. Alternatively, they may post security equal to the amount payable. Importers should contact their CBSA regional office if they require further information on the payment of provisional duty or the posting of security. If the importers of such goods do not indicate the required SIMA code or do not correctly describe the goods in the import documents, an administrative monetary penalty could be imposed. The imported goods are also subject to the Customs Act. As a result, failure to pay duties within the specified time will result in the application of the provisions of the Customs Act regarding interest.

Future action

Retroactive duty on massive importations

[230] Under certain circumstances, anti-dumping and/or countervailing duty can be imposed retroactively on subject goods imported into Canada. When the CITT conducts its inquiry on material injury to the Canadian industry, it may consider if dumped and/or subsidized goods that were imported close to or after the initiation of the investigations constitute massive importations over a relatively short period of time and have caused injury to the Canadian industry. Should the CITT issue a finding that there were recent massive importations of dumped and/or subsidized goods that caused injury, imports of subject goods released by the CBSA in the 90 days preceding the day of the preliminary determinations could be subject to anti-dumping and/or countervailing duty.

[231] In respect of importations of subsidized goods that have caused injury, 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. In such a case, the amount of countervailing duty applied on a retroactive basis will equal the amount of subsidy on the goods that is a prohibited subsidy. An export subsidy is a prohibited subsidy according to subsection 2(1) of SIMA.

Undertakings

[232] 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. An acceptable undertaking must account for all or substantially all of the exports to Canada of the dumped goods.

[233] Similarly, after a preliminary determination of subsidizing by the CBSA, other than a preliminary determination in which a determination was made that the amount of subsidy on the goods is insignificant, 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.

[234] In view of the time needed for consideration of undertakings, written undertaking proposals should be made as early as possible, and no later than 60 days after the preliminary determinations of dumping and subsidizing. Further details regarding undertakings can be found in the CBSA’s Memorandum D14-1-9.

[235] 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.

[236] 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

[237] A notice of these preliminary determinations of dumping and subsidizing will be published in the Canada Gazette pursuant to paragraph 38(3)(a) of SIMA.

Information

[238] This Statement of Reasons is posted on 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:
• Serena Major: 343-553-2004
• Hugo Dumas: 343-553-2007

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

Doug Band
Director General
Trade and Anti-dumping Programs Directorate

Appendix 1—summary of estimated margins of dumping, estimated amounts of subsidy and provisional duties payable

The following table lists the estimated margins of dumping, the estimated amounts of subsidy, and the provisional duty by exporter as a result of the decisions mentioned above. Imports of subject goods released from the Canada Border Services Agency on or after July 7, 2022, will be subject to provisional duties at the rates specified below.

Appendix 2—summary of preliminary findings for subsidy programs—China

This Appendix consists of descriptions of the subsidy programs which nine of eleven responding exporters, Foshan Suilong Furniture Co., Ltd.; Guangdong Eonjoy Technology Limited; Jiaxing Taien Springs Co., Ltd.; Jinlongheng Furniture Co., Ltd; Healthcare Co., Ltd.; Xianghe Kaneman Furniture Ltd.; Zhejiang Glory Home Furnishings Co., Ltd; Zinus Xiamen Inc.; and Zinus Zhangzhou Inc., benefited from during the course of the POI, and other potentially actionable subsidy programs identified by the CBSA that were not used by the responding exporters during the POI.

The CBSA has used the best information available to describe the potentially actionable subsidy programs that were not used by the responding exporters in the current investigation. This includes using information provided by the exporters and related suppliers, information included in the complaint, as well as information obtained from the CBSA’s research on potential subsidy programs in China.

Subsidy programs used by the responding exporters

Category 1: Preferential Loans and Loan Guarantees

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

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

General information

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 contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

For the purposes of the preliminary determination, 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

General information

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”.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

For the purposes of the preliminary determination, 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 6: Design, Research and Development Grants

General information

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

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA from the government that involve a direct transfer of funds. This grant confers a direct benefit to the recipient and the benefit is equal to the amount of the grant provided.

Specificity

For the purposes of the preliminary determination, 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 and Performance Grants

General information

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

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution, pursuant to paragraph 2(1.6)(a) of SIMA, from the government that involves a direct transfer of funds. This grant confers a direct benefit to the recipient and the benefit is equal to the amount of the grant provided.

Specificity

For the purposes of the preliminary determination, 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

General information

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

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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

General information

This is a grant for patents. 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’s 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’s 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.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution, pursuant to paragraph 2(1.6)(a) of SIMA, from the government that involves a direct transfer of funds. This grant confers a direct benefit to the recipient and the benefit is equal to the amount of the grant provided.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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

General information

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.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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

General information

Subsidies under this program are related to company and enterprise development and innovation grants and awards.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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

General information

Subsidies under this program are related to employment, training and recruitment programs.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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

General information

Subsidies under this program are related to pandemic support programs.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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

General information

Subsidies under this program are related to quality and improvement programs.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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

General information

Subsidies provided under this program are related to science and technology grants and awards.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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

General information

Subsidies provided under this program are related to social security programs.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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

General information

Subsidies provided under this program are related to talent and skills awards and grants.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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

General information

Subsidies provided under this program are related to programs providing business support.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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

General information

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 enterprise may receive a reduced corporate income tax rate of 15%.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 2(7.2) of SIMA because it is limited to enterprises in certain geographic areas.

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

General information

Under Article 28.2 of the Enterprise Income Tax Law in China, companies designated as high- or new-technology enterprises 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 World Trade Organization, the GOC listed this program.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 2(7.2) of SIMA because it is limited to enterprises in certain industries.

Program 26: Municipal/Local Income Tax Property Reductions

General information

This program covers reductions and exemptions in tax provided from Municipal/Local Income tax units. The CBSA has previously countervailed this program in investigations including Stainless Steel Sinks, Unitized Wall Modules, Photovoltaic Modules and Laminates, and Line Pipe under titles including “Reduction, Exemption or Refund of Land Use Fees, Land Rental Rates, and Land Purchase/Transfer Prices.”

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

For the purposes of the preliminary determination, 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 31: Relief from Duties and Taxes on Imported Material and Other Manufacturing Inputs

General information

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.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

For the purposes of the preliminary determination, the program may be considered specific pursuant to paragraph 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.

Other potentially actionable subsidy programs identified by the CBSA that were not used by the responding exporters

Based on the information available, for purposes of the preliminary determination, the CBSA has found that these programs were not used by the participating exporters in China. Based on the information available these programs may constitute financial contributions provided by the GOC, confer benefit to companies and appear to be specific. Therefore, for purposes of the preliminary determination, these programs appear to be countervailable. The CBSA will continue to further investigate these programs in the final phase of the investigation.

Program 2: Loan Guarantees Through the Government of China/SOE Banks/Public Bodies

General information

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

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

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

General information

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.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 5: Insurance Grants

General information

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

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

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

General information

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.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted that confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 12: Grants for the Retirement of Capacity

General information

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

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 13: Grants for Relocating Production Facilities

General information

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”.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 22: Subsidies for Utilities for Certain Enterprises

General information

Subsidies provided under this program related to utilities for specific enterprise classes.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 23: Award for the Establishment Of Non-Manufacturing Facilities

General information

Subsidies provided under this program relate to assistance in establishing non-manufacturing facilities.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government, and it confers a benefit to the recipient equal to the amount of the grant.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

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

General information

Despite the implementation of the new Enterprise Income Tax Law 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.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 28: Preferential Tax Policies Related to Research and Investment

General information

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.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

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

General information

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.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

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

General information

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.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

Program 32: Deed tax exemption for SOEs undergoing mergers or restructuring

General information

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.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

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

General information

This program relates to the provision, by the government, of goods or services at prices lower than the fair market value of the goods or services in the territory of the government providing the subsidy. Specifically, the CBSA investigated the acquisition of raw material inputs or utilities (i.e. Electricity, Water) from SOEs or state-controlled enterprises used in the production of subject goods.

State-owned or state-controlled suppliers 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 statute or other legal instrument expressly vests government authority in the entity concerned
• evidence that an entity is, in fact, exercising governmental functions and
• evidence that a government exercises meaningful control over an entity

In order to determine whether the exporter acquired its raw material or utilities from “government”, the CBSA requested detailed information from the exporters regarding their acquisition of raw materials and utilities. The Subsidy RFI also contained a small questionnaire intended for the domestic suppliers with instructions for the exporters to forward such questionnaire to their domestic suppliers. This questionnaire requested information regarding the ownership status of the supplier and other relevant information with respect to assessing whether the supplier is considered “government”.

Information was requested from exporters with respect to the ownership status of their raw material/utilities suppliers. Due to the lack of cooperation by the GOC and the limited information available regarding state-owned raw material suppliers, the CBSA has not been able to perform the in-depth level of analysis necessary to determine whether any suppliers that provided input materials to the exporters of subject goods are SOEs, and whether the SOEs are considered to be possessing, exercising, or vested with governmental authority. Notwithstanding, the CBSA will attempt to obtain further evidence in this regard during the final stage of the investigation.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA. That is, the government provides goods or services, other than general infrastructure, or purchases goods.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.

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

General information

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 right favored projects and producers.

Financial contribution

For the purposes of the preliminary determination, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA. That is, amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amount of the reduction/exemption.

Specificity

Due to the lack of a response by the GOC, there is not sufficient information on the record to determine whether this program is specific pursuant to subsection 2(7.2) or subsection 2(7.3) of SIMA; nor is there sufficient information to indicate that the subsidy is not specific pursuant to the criteria set out in subsection 2(7.1). On the basis of the available information, this program does not appear to be generally available to all enterprises in China and thus appears to be specific. This will be further analyzed in the final phase of the investigation.