OCTG3 2021 IN: Oil country tubular goods
Statement of Reasons—Initiation of an investigation

Decision

Ottawa, July 15, 2021

Pursuant to subsection 31(1) of the Special Import Measures Act, the Canada Border Services Agency initiated an investigation on June 30, 2021, respecting the alleged injurious dumping of certain oil country tubular goods originating in or exported from Mexico.

Summary

[1] On May 10, 2021, the Canada Border Services Agency (CBSA) received a written complaint from Evraz Inc. NA Canada (Regina, Saskatchewan) and Welded Tube of Canada Corp. (Concord, Ontario) (hereinafter, the Complainants) alleging that imports of certain oil country tubular goods (OCTG) originating in or exported from Mexico are being dumped. The Complainants alleged that the dumping has caused injury and is threatening to cause injury to the Canadian industry producing like goods.

[2] On May 31, 2021, 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 Mexico that a properly documented complaint had been received.

[3] The Complainants provided evidence to support the allegations that OCTG from Mexico has been dumped. The evidence also discloses a reasonable indication that the dumping has caused injury and is threatening to cause injury to the Canadian industry producing like goods.

[4] On June 30, 2021, pursuant to subsection 31(1) of SIMA, the CBSA initiated an investigation respecting the dumping of OCTG from Mexico.

Interested parties

Product information

Like goods and class of goods

[43] 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.

[44] In considering the issue of like goods, the Canadian International Trade Tribunal (CITT) typically looks at a number of factors, including the physical characteristics of the goods, their market characteristics, and whether the domestic goods fulfill the same customer needs as the subject goods.

[45] As noted in the complaint, the CITT has consistently determined that welded and seamless OCTG are like goods, and that OCTG of different grades are not separate classes of goods.^{Footnote 8} Welded and seamless OCTG have similar characteristics and generally compete with one another in the domestic market.

[46] OCTG casing and tubing are made to the same minimum API 5CT specifications and/or to proprietary equivalent/enhanced specifications, and are both used in down hole well applications. Casing and tubing are produced on the same equipment and have the same channels of distribution.

[7] Although the goods produced by the Canadian industry may or may not be considered identical in all respects to the subject goods imported from Mexico, the CBSA has concluded that the Canadian goods closely resemble the subject goods. Further, after reviewing the physical characteristics of the goods, the end-uses and all other relevant factors, the CBSA is of the opinion that the subject goods constitute only one class of goods.

The Canadian industry

[48] The domestic industry is comprised of 3 producers: the Complainants and Tenaris Canada, which is divided into Algoma Tubes (Sault Ste. Marie, Ontario) and Tenaris Hydril (Nisku, Alberta). Prudential Steel was also part of the Tenaris Canada group of companies until it was closed in July 2020.^{Footnote 9}

Canadian market

[54] The Complainants estimated the domestic market by supplementing their own internal sales information and their estimates of Tenaris Canada’s domestic sales from domestic production. Using Statistics Canada data and Global Affairs Canada import permit data, the Complainants estimated the total volume of imports of OCTG from Mexico, the United States and all other countries for the full years of 2017 to 2020 as well as January to April 2020 and 2021 respectively. Tenaris Canada’s sales of Mexican imports were calculated based on the estimated imports and adjusted to account for estimated changes in inventory levels based on market intelligence and information available from prior proceedings before the CITT.^{Footnote 11}

[55] The CBSA conducted its own independent review of the import data from the CBSA’s customs database for goods imported from January 2018 to March 31, 2021. The CBSA made adjustments to customs import data obtained through FIRM^{Footnote 12} to correct data entry errors and to remove non-subject imports from the database based on its review. In addition, the CBSA also reviewed goods description reports generated from the Accelerated Commercial Release Operations Support System (ACROSS) database for goods imported from January 2020 to March 31, 2021.

[56] The table below summarizes the CBSA’s estimate of imports:

[57] Detailed information regarding the volume and value of imports of OCTG and domestic production cannot be divulged for confidentiality reasons. The CBSA, however, has prepared the following table to show the estimated import share of subject goods in Canada as well as the Canadian market as a whole.^{Footnote 13}

[58] The CBSA will continue to gather and analyze information on the volume of imports during the period of investigation of May 1, 2020 to April 30, 2021, as part of the preliminary phase of the dumping investigation and will refine these estimates.

Evidence of dumping

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

[60] Normal values are generally based on the domestic selling price of like goods in the source of export where competitive market conditions exist or as the aggregate of the cost of production of the goods, a reasonable amount for general, administrative, selling (GS&A), and other costs, and a reasonable amount for profits.

[61] 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.

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

Evidence of injury

[83] The Complainants alleged that the goods from Mexico have been dumped, and that the dumping has caused and is threatening to cause material injury to the domestic industry in Canada.

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

[85] The Complainants have relied significantly on confidential declarations from three major arm’s length distributors of OCTG in Canada, each of which has identified TAMSA as the source of dumping of OCTG into Canada which is causing injury to the Canadian market.^{Footnote 33}

[86] Each of these declarations provided extensive information and allegations concerning the effects of injurious dumping of OCTG from Mexico, all of which is alleged to be produced by TAMSA.

[87] These declarations provide substantial corroborative support to the allegations the Complainants have made with respect to the alleged injury caused to the Canadian industry. This includes evidence the Complainants have provided in respect of: a substantial increase in subject imports; loss of market share; price undercutting and lost sales; price depression; price suppression; and negative impacts on: financial performance, employment, return on investments, production and capacity utilization.

[88] The Complainants were also careful to acknowledge that the decline in the Canadian market has contributed to the injury it has sustained since early in 2020. However, the Complainants have argued and provided evidentiary support that “dumped Mexican imports were in and of themselves a cause of materially injurious volume effects over the period of investigation.”^{Footnote 34}

Major proportion

[89] A condition that must be satisfied prior to initiation of an investigation is that there must be a reasonable indication that the dumping or subsidizing is causing injury to the domestic industry. Domestic industry is defined in subsection 2(1) of SIMA. Part of that definition refers to “domestic producers whose collective production of the like goods constitutes a major proportion of the total domestic production of the like goods...”

[90] Although the term “major proportion” is not defined in either SIMA or the WTO Agreements, the CBSA has, for some time, been equating a “major proportion” with at least 25 to 30%. That is, in practice, it was required that the complaint contain evidence of injury to 25 to 30% of Canadian production. Therefore, the 25% rule required for standing, in most cases, will be satisfied in conjunction with the major proportion analysis.^{Footnote 35}

[91] Similar to the approach when dealing with the standing issue, a producer may be disregarded from calculations when assessing the “major proportion” issue, if that producer is related to an importer or exporter of the allegedly dumped imports, or if the producer is itself an importer of the allegedly dumped or subsidized goods.

[92] Given the earlier analysis that Tenaris Canada would not be considered part of the domestic producers for purposes of standing in subsection 31(2) of SIMA, the CBSA extended the same consideration in respect of injury to the major proportion of the domestic industry. Without Tenaris Canada factored into the equation, Evraz and Welded Tube account for 100% of the domestic industry for purposes of this complaint.

Corporate strategy and the recent substantial increase in subject imports

[93] The Complainants cited their Canadian Market estimates as evidence of past and very recent surges in subject imports which they alleged have caused injury to the Canadian industry producing the like goods.

[94] The backdrop to these sudden import surges over the period of review, is largely attributed to Tenaris’s business model. Tenaris’s mills do not operate with autonomy in determining their production schedules; and as such, the decision as to where goods are produced to satisfy sales are not at the sole discretion of the individual facilities.^{Footnote 36} This has previously been acknowledged by the CITT in past proceedings concerning OCTG:

[95] More recently, during the Certain Steel Goods Safeguard inquiry, the CITT noted Tenaris’s business strategy which resulted in displacing Canadian production through its imports from TAMSA:

[96] The recent closure of Prudential steel and subsequent dramatic increase in imports from Mexico in Q1-2021 of grades previously manufactured at the Prudential facility, are further evidence of this corporate strategy. The global inventory management model allows Tenaris to quickly switch from domestic production to imports to manage its efficiencies in order to hold existing and secure additional market share.

[97] The CITT further noted that this strategy is not purely influenced by domestic facility availability:

[98] As noted by the Complainants, the CITT took the acknowledgment of this corporate strategy one step further to affirm that it was, in part, causing injury to the Canadian industry:

[99] The CITT then summarized its injury analysis in the 2019 Safeguard hearing by stating:

[100] The Complainants acknowledged the enormous volume of subject imports in 2018 and the subsequent declines in 2019 and 2020, while pointing out that the apparent Canadian market also decreased substantially over that same period. However, it is the more recent Q1-2021 period which they emphasize as the most concerning indicator of injury. The data provided by the Complainants indicated that “the absolute volume of imports from Mexico has since increased by 8% from 17,344 MT April YTD 2020 to 18,734 MT as of April YTD 2021.”^{Footnote 41}

[101] The CBSA’s import data confirms a similar percentage increase in Q1-2021 over the same period in Q1-2020. This comparative increase is accompanied by a 32.8% share of imports based on volume that Mexico is estimated to hold in Q1-2021 as per Table 1. This is the largest import share for Mexico based on volume during the period of analysis.

Loss of market share

[102] The Complainants emphasized that in terms of the injury from subject imports, it is the relative levels of subject imports which are most telling rather than trends in absolute volumes. That is, the volume of imports of subject OCTG from Mexico relative to the domestic industry’s production.^{Footnote 42}

[103] The Complainants noted that “the period of sharpest increase in subject imports of OCTG from Mexico relative to domestic production started in the latter part of 2020 into 2021.”^{Footnote 43}

[104] The CBSA’s data concerning apparent Canadian market mirrors the trend in Mexican imports growing as a ratio of the complainants’ sales from domestic production.

[105] The Complainants also stated that “the share of subject imports from Mexico also grew substantially relative to total imports of OCTG, from 22.4% in 2018 to 29.0% in interim 2021. With the exception of imports from the United States, subject imports from Mexico were by far the most significant source of OCTG imports from any country in 2020 and interim 2021.”^{Footnote 44}

[106] The CBSA’s data does indicate that while the USA maintains a fairly steady share of OCTG imports, those from Mexico are growing significantly in import share. The share of Mexican imports relative to the overall apparent Canadian market has also grown over the same period with a growth from 8.2% in 2019 to 11.8% in 2020 and up to 18.8% in Q1-2021.^{Footnote 45}

[107] Over the same period, the CBSA estimates that since 2019, the Complainants have been losing market share in Canada; from 29.8% in 2019 down to 24.0% in 2020 to 19.5% in Q1-2021.^{Footnote 46}

[108] The Complainants contended that the CITT’s finding in its recent Certain Steel Goods Safeguard investigation corroborates that Tenaris is gaining market share through TAMSA:

[109] In addition, the Complainants pointed out that the Tribunal cited the public questionnaire response of Pacific Tubulars, which reported that “imports from Mexico are the biggest component of imports into Canada and those imports will continue regardless of the order being rescinded or not. Mexican imports are the single biggest factor in displacing Canadian production.”^{Footnote 48}

[110] Based on the above and the CBSA’s analysis of the evidence contained in the complaint, the CBSA is of the opinion that the evidence reasonably demonstrates the Complainants’ loss of market share can, in part, be reasonably linked to the imports of the allegedly dumped subject goods.

Price undercutting and lost sales

[111] The Complainants have relied significantly on confidential declarations from three OCTG distributors to corroborate their allegations that Tenaris’s Mexican OCTG is undercutting the price of like goods. ATP, Hallmark, and Triumph—distributors who quote customers and receive price feedback from end-users regarding their price levels on specific items on a regular basis—each individually affirmed that Tenaris’s Mexican OCTG is the price leader in the market and consistently undercuts domestically-produced OCTG on a model-specific basis.^{Footnote 49}

[112] The Complainants further alleged that Tenaris’s dual position in the market as major importer of alleged dumped goods from Mexico and producer of like goods in Canada, exacerbates the injury to the Canadian industry as Tenaris is able to provide a broader range of bundled products that is a combination of domestic and imported OCTG in order to win entire bids.

[113] Consequently, the injury sustained by the Canadian industry is amplified by dumped goods, which the Complainants alleged is making Tenaris’s tenders, which can include both domestic and imported OCTG, more competitive, causing the Canadian industry to suffer a cascading effect of injury through lost sales than had the subject goods been completely separate negotiations from domestically produced goods.

[114] This alleged effect is evident in the CBSA’s Apparent Canadian Market analysis. The combination of estimated sales by Tenaris Canada from domestic production and imports from Mexico rose over the period of analysis as a percentage of the total apparent market. As noted in Table 2 of this report, in 2018, those combined sales accounted for 40.3% of the apparent market and climbed to 43.6% in 2020 and 54.8% in Q1-2021.

[115] The Complainants also provided 16 examples of lost sales where they were allegedly undercut by subject goods going back to 2018 and covered a material amount of estimated volume.^{Footnote 50} The sworn declarations from each of the three distributors as well as two other declarations from Evraz provided more detailed analysis of dumped subject goods and included additional evidence in the form of attachments which supported claims made in the declarations.

[116] The Complainants further alleged that while seamless OCTG typically trades for a premium over OCTG produced by the ERW method, subject “imports are actually undercutting domestically produced welded OCTG in absolute or real terms. This is also likely to have (and to continue to have) a significantly depressive effect on the price of like goods as the market corrects to restore the historical seamless premium.”^{Footnote 51}

[117] As noted earlier, the Complainants also argued that “dumped Mexican imports were in and of themselves a cause of materially injurious volume effects over the period of investigation.”^{Footnote 52}

[118] This allegation is supported by the CBSA’s estimate of the Apparent Canadian Market.

[119] Based on the above and the CBSA’s analysis of the evidence contained in the complaint, including the three confidential declarations from Canadian distributors of OCTG, the CBSA is of the opinion that the Complainants’ evidence reasonably demonstrates the Complainants have faced significant price undercutting and as a result, have lost sales, both of which can reasonably be linked to the imports of the allegedly dumped subject goods.

Price depression and suppression

[120] The Complainants stated that they have been forced to lower their prices to compete against the allegedly dumped pricing of the subject goods, which have continued to undercut their selling prices as discussed above. In the sworn declarations provided, the Complainants presented several examples where they lowered their price quotes given that they were competing against subject imports and still lost those sales.

[121] The Complainants provided numerous examples of declines in average unit values (AUVs) over the Period of analysis as support to their argument that dumped subject goods have been depressing their pricing of OCTG in Canada.^{Footnote 53}

[122] Also in support of their arguments, the Complainants made a reference to the recent CITT expiry review decision on OCTG 1, where the commodity nature of OCTG coupled with a depressed market was cited along with the ensuing effect this has with price sensitivity:^{Footnote 54}

[123] Given the evidence of price undercutting discussed above, it is reasonable to believe that this undercutting, at prices which appear dumped, has also depressed prices as the Complainants struggle to compete with those prices by lowering their own. However, given the downturn in the OCTG market since early 2020, which saw dramatic declines in the demand for OCTG in the Canadian market, it is difficult to quantify how much of the price declines reported by the Complainants are attributable to the dumped subject goods.

[124] The Complainants have also alleged that the dumped subject goods have suppressed their ability to raise prices to keep in step with rising costs. They alleged two types of evidence in respect of price suppression.

[125] The first is the cost-price squeeze, whereby costs grow as a ratio of selling prices. The Complainants cited their financial reports in support of this allegation.^{Footnote 56}

[126] Both Evraz and Welded Tube have faced increasing raw material input costs since 2020, with Evraz purchasing scrap and Welded Tube purchasing hot-rolled coil (HRC) in their OCTG production. To illustrate the significance of the cost increases, the Complainants stated that HRC prices increased from US$437/ton in August 2020 to US$1,375/ton in April 2021.^{Footnote 57}

[127] The second evidence of price suppression alleged by the Complainants is at the account specific level.^{Footnote 58}

[128] With respect to price suppression, the CBSA is of the opinion that the evidence provided reasonably supports the Complainants’ argument that the dumped subject goods have contributed to their inability to raise prices to offset rising raw material costs and to maintain margins. These raw material cost increases are unrelated to the downturn in the OCTG market and producers should have a reasonable expectation to pass on cost increases, which the evidence provided indicates they have been unable to do.^{Footnote 59}

Negative impact on financial performance

[129] According to the Complainants, the allegedly dumped subject imports have negatively impacted their financial performance, which can be attributed to the Complainants having lowered their prices in order to compete with the allegedly dumped subject imports.

[130] Exacerbating the situation is that the injury sustained by the Complainants comes at a time when Tenaris Prudential, the closest local supplier, ceased its supply and left the market entirely.

[131] Evraz stressed the importance of being “allowed to participate fully in any market recovery at the earliest possible time” as well as the “destructive impact of losses at key accounts.”^{Footnote 60}

[132] The Complainants asserted that “these trends in industry profitability need not have resulted, notwithstanding the significant market contraction experience over 2019 and 2020. But for the lost volumes and lost pricing sustained by the Complainants in head-to-head competition with Tenaris sales of dumped Mexican OCTG, the industry very well could have weathered the market downturn significantly better, even with reduced sales and production output on lower overall OCTG demand.”^{Footnote 61}

[133] In support of their assertion, the Complainants included a “but for” analysis which further demonstrated that even a minimal increase in their selling prices would have had significant effect on the their gross margins such as to not leave them in the current more perilous situation.^{Footnote 62}

[134] Based on the above and the CBSA’s analysis of the evidence contained in the complaint, the CBSA is of the opinion that the Complainants’ evidence reasonably demonstrates that the imports of the allegedly dumped subject goods, which have undercut the domestic industry’s prices, suppressed and depressed those prices and caused the domestic industry to lose market share, have subsequently had a negative impact on the Complainants’ financial results.

Negative impact on employment

[135] The Complainants stated that the negative impacts on financial performance experienced as a result of the importation of allegedly dumped subject goods, addressed in the previous section, have significantly impacted their ability to maintain optimal levels of employment.

[136] The Complainants underscored the fact that Evraz, for example, maintained relatively stable employment levels.^{Footnote 63}

[137] However, the alleged dumped Mexican OCTG imports, including the inventory draw down at the time of a severe market downturn in 2020, resulted in all of Evraz’s OCTG mills being temporarily idled, affecting employees involved in OCTG production. While the Complainants concede that the impacts on employment in 2020 were due to the market downturn, “the extent to which layoffs were required and the length of time during which Evraz facilities remained idle was directly attributable to Tenaris’ destructive importer conduct.”^{Footnote 64}

[138] The Complainants also provided examples of significant employment and operational impacts for Welded Tube.^{Footnote 65}

[139] Based on the above and the evidence contained in the complaint, the CBSA is of the opinion that the Complainants’ evidence reasonably demonstrates that the imports of the allegedly dumped subject goods, which were previously noted to have contributed to the financial hardship experienced by the Canadian industry, have exacerbated the impact on employment beyond the market downturn, which includes a temporary shutdown of Evraz’s facilities.

Negative impact on the return on investments

[140] The Complainants have stated their commitment to make investments in their Canadian operations.

[141] Both Evraz and Welded Tube have made significant investments in their Canadian production facilities in the past;^{Footnote 66} however, these planned investments are very much in doubt given current OCTG market demand and pricing uncertainties.^{Footnote 67}

[142] Both Evraz and Welded Tube have also spent significant resources developing OCTG products. The Complainants alleged that these investments in product development are now in danger of not providing an appropriate return on investment due to the dumping of subject goods.^{Footnote 68}

[143] Based on the above and the evidence contained in the complaint, the CBSA is of the opinion that the evidence reasonably demonstrates that the Complainants’ ability to achieve a reasonable rate of return on investments has been negatively impacted due to poorer financial performance which has been linked to the imports of the allegedly dumped subject goods.

Negative impact on the production and capacity utilization

[144] The Complainants stated that the trends in capacity and production demonstrate that capacity utilization remains depressed. The Complainants contended that “while the collapse of Evraz and Welded Tube’s production, capacity utilization and domestic sales from domestic production is in part attributable to the significant downturn in the oil and gas industry,” “Mexican imports were in and of themselves a cause of materially injurious volume effects over the period of investigation.”^{Footnote 69}

[145] Similar to the analysis on sales and market share earlier, the data available to the CBSA indicates that the Complainants have suffered greater relative declines in production than the decline in the market suggests they should have, had it been the only cause.

[146] Based on CBSA’s analysis and the evidence contained in the complaint, the CBSA is of the opinion that the evidence reasonably demonstrates that the Complainants’ ability to maintain production and capacity utilization rates have been negatively impacted by the imports of the allegedly dumped subject goods, which have displaced production of the Complainants.

Threat of injury

[148] The Complainants alleged that the dumped goods threaten to cause further material injury to the domestic producers of oil country tubular goods. The Complainants provided the following information to support the allegation that imports of subject goods threaten to cause further injury to the Canadian industry.

Likely increased subject imports

[149] The Complainants cited the recent trends in subject imports as evidence that increased subject good imports is inevitable, “particularly given the closure and decommissioning of the Prudential facility in Calgary” that previously produced lower grade products in Canada. The Complainants also cited the export orientation of TAMSA, coupled with the expected market demand increase in Canada in 2021 and beyond.^{Footnote 70}

[150] In particular, the Complainants referenced that “the absolute volume of imports from Mexico has increased by 8%, from 17,344 MT in interim 2020 to 18,734 MT in interim 2021, notwithstanding a year-over-year decrease in the estimated apparent market.”^{Footnote 71}

[151] The Complainants also cited recent statements by Tenaris’s CEO and Chairman, that as demand in North America has picked up, Tenaris was actively “strengthening {its} position in the U.S. and Canadian Markets.”^{Footnote 72}

[152] The Complainants emphasized the significance of this in relation to the evidence that Tenaris: “does not expect its new ERW mill in Sault Ste. Marie, or its idled U.S. mills to begin or increase production until later in 2021,^{Footnote 73} leaving TAMSA to strengthen its position in Canada and the United States.” Beginning in March 2020, Tenaris temporarily shut down numerous mill operations in the United States, but continued operations in Mexico.^{Footnote 74}

Likely negative price effects

[153] The Complainants stated that the likely negative price effects is supported by the fact that the “subject goods have already undercut, depressed and suppressed the prices of the like goods. But there is also—right up until the most period, Q1-2021—a clear trend of lower pricing in the Mexican imports and an increasing trend of underselling, while at the same time, the domestic industry’s costs are rising.” As such, the Complainants state that “it is a virtual certainty that the dumped subject goods will have a significant depressing and suppressing effect on the price of like goods”^{Footnote 75}

[154] This concern has become exacerbated by the recent increase in “importing extraordinarily low-priced carbon grade imports from Mexico since Q4 2020.”^{Footnote 76}

[155] The Complainants argued that the injurious impact on the domestic industry is likely to worsen, given the current vulnerability of the domestic industry, which includes delays in restarts of production operations, of depressed sales and production, of lost market share, and of declining profitability. The Complainants also cited the CITT’s recent orders continuing the findings on OCTG I and II as evidence of the injury vulnerability faced by the Canadian industry to dumped imports.

[156] The Complainants further cited what they characterized as a longstanding pattern of behaviour by Tenaris as a global entity where “there is absolutely no reason to believe that this leveraging will stop over the next 12 months and beyond.”^{Footnote 77} This pattern of behaviour is worsened according to the Complainants when considering the substantial volume of annual seamless OCTG TAMSA has available for export.^{Footnote 78}

[157] With Tenaris’s United States mills expected to re-start later this year, the Complainants alleged that TAMSA will no longer have as much of a U.S. market to sell OCTG to. The Complainants thus argued that:

[158] The Complainants also cited potential trade restrictions in the U.S. and the European Union (E.U.) as mechanisms which will divert Mexican OCTG to Canada in absence of anti-dumping measures. The expected growth in drilling activity and ensuing demand for OCTG in Canada, coupled with the idling of Evraz and Welded Tube facilities in Canada, were also cited as factors the Complainants believe will lead to increased exports of OCTG from Mexico over the next 12-months, in absence of anti-dumping protection.^{Footnote 81}

Likely adverse impact

[159] In regards to the likely adverse impact of the continued dumping of OCTG from Mexico, the Complainants cited the cumulative evidence on the record and in particular, “the detailed evidence of the three arm’s length distributors included with this complaint demonstrates not only that the subject goods have been undercutting the like goods over the past two plus years, but that this trend of undercutting is in fact increasing.”^{Footnote 82}

[160] As part of the support to the statement regarding undercutting, the Complainants provided data on average import prices from Mexico over the period, to demonstrate the progressive pricing decline from Mexico. The Complainants separated the data by broad classifications (i.e. HS Classification codes) to reduce the impact of changing product mix influencing average prices.^{Footnote 83}

[161] The likely adverse effect of this according to the Complainants is that the decline in import pricing from Mexico coincides with a period where the Complainants are experiencing higher costs due to increases in raw material pricing. They argued that competing with dumped goods that undercut them in the market is damaging enough but even more so when they should in fact be raising their own prices to offset cost increases.^{Footnote 84}

[162] Based on the above, the CBSA is of the opinion that that the Complainants’ evidence reasonably demonstrates many of the injury factors cited throughout the complaint are a threat to continue in the future, causing an adverse financial impact through increasingly dumped volumes of OCTG, which undercut the Complainants’ domestic selling prices.

Magnitude of the margin of dumping

[163] The Complainants submitted that the magnitude of their estimated margin of dumping of 24.9% for Mexico indicates that the threat posed by the dumped subject goods is real, foreseeable, and imminent.

[164] The CBSA’s estimated weighted average margins of dumping for Mexico is 22.1%. This is very comparable in terms of magnitude to the range of margins estimated by the Complainants on individual transactions.

[165] Based on the above, the CBSA is of the opinion that that the Complainants’ evidence reasonably demonstrates that the subject goods pose a threat to the domestic industry based on the magnitude of the estimated margin of dumping.

Causal link—dumping and injury/threat of injury

[167] The CBSA finds that the Complainants have reasonably linked the injury they have suffered to the alleged dumping of subject goods imported into Canada. The injury includes a substantial increase in subject imports; loss of market share; price undercutting and lost sales; price depression; price suppression; negative impacts on financial performance, employment, return on investments, production and capacity utilization.

[168] This injury relates directly to the price advantage the apparent dumping has produced between the imports of subject goods from Mexico and the like goods produced in Canada. Evidence has been provided to establish this link and includes: price quotes, market data, the sworn declarations of the three arm’s length distributors, citations from CITT proceedings and financial information related to the production and sales of like goods in Canada.

[169] The CBSA also finds that the Complainants have provided sufficient evidence of a reasonable indication that the continued alleged dumping of the subject goods threatens to cause further injury in the future.

[170] In summary, the evidence submitted by the Complainants discloses a reasonable indication that the alleged dumping has caused injury and is threatening to cause injury.

Conclusion

[171] 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 OCTG originating in or exported from Mexico have been dumped. Further, there is a reasonable indication that such dumping has caused and is threatening to cause injury to the Canadian industry. As a result, pursuant to subsection 31(1) of SIMA, a dumping investigation was initiated on June 30, 2021.

Scope of the investigation

[172] The CBSA is conducting an investigation to determine whether the subject goods have been dumped.

[173] The CBSA has requested information from all potential exporters and importers to determine whether or not subject goods imported into Canada during the period of investigation (POI) of May 1, 2020 to April 30, 2021, were dumped. The information requested will be used to determine the normal values, export prices and margins of dumping, if any.

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

Future action

[175] The CITT will conduct a preliminary inquiry to determine whether the evidence discloses a reasonable indication that the alleged dumping 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 investigation. If the CITT concludes that the evidence does not disclose a reasonable indication of injury to the Canadian industry, the investigation will be terminated.

[176] If the CITT finds that the evidence discloses a reasonable indication of injury to the Canadian industry and the CBSA’s preliminary investigation reveal that the goods have been dumped, the CBSA will make preliminary determinations of dumping within 90 days after the date of the initiation of the investigation, by September 28, 2021. Where circumstances warrant, this period may be extended to 135 days from the date of the initiation of the investigation.

[177] 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.

[178] Imports of subject goods released by the CBSA on and after the date of a preliminary determination of dumping, 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 on the imported goods.

[179] Should the CBSA make a preliminary determination of dumping, the investigation will be continued for the purpose of making final decisions within 90 days after the date of the preliminary determinations.

[180] After the preliminary determination, if, in respect of goods of a particular exporter, the CBSA’s investigation reveal that imports of the subject goods from that exporter have not been dumped, or that the margin of dumping is insignificant, the investigation will be terminated in respect of those goods.

[181] If a final determination of dumping is 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 determination of dumping applies, not later than 120 days after the CBSA’s preliminary determination.

[182] 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.

Retroactive duty on massive importations

[183] When the CITT conducts an inquiry concerning injury to the Canadian industry, it may consider if dumped 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.

[184] Should the CITT issue such a finding, anti-dumping 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 a preliminary determination of dumping.

Undertakings

[185] 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.

[186] 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.

[187] 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

[188] Notice of the initiation of this investigation is being published in the Canada Gazette pursuant to subparagraph 34(1)(a)(ii) of SIMA.

Information

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

[190] To be given consideration in this investigation, all information should be received by the CBSA by November 3, 2021.

[191] Any information submitted to the CBSA by interested parties concerning this investigation 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.

[192] 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 the SIMA Registry and Disclosure Unit or by visiting the CBSA’s website.

[193] The schedule of the investigation 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.

[194] 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:
• Andrew Manera: 343-553-1868
• Andy Fei: 343-553-1866

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

Doug Band
Director General
Trade and Anti-dumping Programs Directorate