OCTG3 2021 IN: Oil country tubular goods
Statement of Reasons—preliminary determination

Complainants

[11] The contact information of the Complainants are as follows:

EVRAZ Inc. NA Canada
P.O. Box 1670
100 Armour Rd
Regina SK  S0G 5K0

Welded Tube of Canada Corporation
111 Rayette Rd
Concord ON  L4K 2E9

EVRAZ Inc. NA Canada

[12] EVRAZ Inc. NA Canada (Evraz) is a vertically integrated steel pipe producer with four production facilities that manufacture oil country tubular goods (OCTG) located in Regina, Saskatchewan, as well as in Calgary, Camrose, and Red Deer, Alberta.^{Footnote 2} Evraz has operated in Canada since 2008 when it acquired the facilities formerly owned by IPSCO.^{Footnote 3}

Welded Tube of Canada Corporation

[13] Welded Tube of Canada Corporation (Welded Tube or WTC) was founded in 1970 as a family-owned business with three facilities in Canada producing and finishing OCTG: a primary production facility located in Concord, Ontario, and two finishing facilities located in Welland and Port Colborne, Ontario.^{Footnote 4}

Other Canadian producers

[14] The following Canadian producer also manufactures OCTG:

• Algoma Tubes Inc.
• Prudential Steel ULC (closed in July 2020)^{Footnote 5}
• Tenaris Global Services (Canada) Inc.

• Hydril Canadian Company LP.

  (The above companies are collectively referred to as “Tenaris Canada”):
  Tenaris Canada
  400-530 8th Ave SW
  Calgary AB  T2P 3S8

[15] Tenaris Canada along with the Complainants account for all known domestic production.

Trade unions^{Footnote 6}

[16] The following trade unions were identified for the various facilities producing like goods in Canada.

[17] For Evraz:

United Steel Workers 5890
26-395 Park St
Regina SK  S4N 3V9

United Steel Workers 6673
2888 Glenmore Trail SE
Calgary AB  T2C 4V7

UNIFOR 551
6215 48th Ave
Camrose AB  T4V 0K4

Iron Workers 805
106, 25 Chisholm Ave
St. Albert AB  T8N 5A5

[18] For Welded Tube:

United Steel Workers 8328
25 Cecil St
Toronto ON  M5T 1N1

UNIFOR 199
124 Bunting Rd
St. Catharines. ON  L2P 3G5

Importers

[19] The CBSA identified two potential importers of the subject goods from CBSA import documentation and from information submitted in the complaint. The potential importers were sent the CBSA’s Importer request for information (RFI)^{Footnote 7} in respect of imports of OCTG from Mexico. Tenaris Global Services Canada (TGS Canada) provided a response to the Importer RFI.^{Footnote 8}

Exporters

[20] The CBSA identified two potential exporters from CBSA import documentation and from information submitted in the complaint. Both parties were sent the CBSA’s Dumping RFI.^{Footnote 9}

[21] Tubos de Acero de Mexico S.A. (TAMSA) of Mexico, provided a response to the CBSA’s Dumping RFI,^{Footnote 10} as did its related vendor which facilitates export sales to Canada, Tenaris Global Services S.A. Uruguay (TGS Uruguay).^{Footnote 11}

Related suppliers

[22] Four related input suppliers to TAMSA, namely, Servicios Generales Tenaris Tamsa (SEGE),^{Footnote 12} Techgen S.A. de C.V. (Techgen),^{Footnote 13} Exiros B.V. Sucursal Uruguay (Exiros)^{Footnote 14} and Ternium México, S.A. de C.V. (Ternium)^{Footnote 15} also provided information related to their sales and costing of significant factor inputs provided to TAMSA for their production of OCTG.

Product definition^{Footnote 16}

[23] For the purpose of this investigation, subject goods are defined as:

Additional product information^{Footnote 17}

[24] For greater certainty, the term “green tube” refers to unfinished casing, tubing, or other tubular products (including upgradable OCTG that may or may not already be tested, inspected, and/or certified) originating in or exported from Mexico and imported for use in the production or finishing of OCTG meeting final specifications, including grade and connections, required for use downhole. Green tubes, as they are commonly referred to in the OCTG industry, are intermediate or in process tubing and casing which require additional processing, such as threading, heat treatment and testing, before they can be used as fully finished oil and gas well casing or tubing in end-use applications.

[25] For greater clarity, the product definition does not include green tubes originating in or exported from Mexico which are upgraded in the manner described above in an intermediate country prior to being exported to Canada for purposes of this dumping investigation. The CBSA considers these high-strength tubing and casing to originate in the intermediate country for purposes of the investigation.

[26] Pup joints are essentially short lengths of OCTG used for spacing in a drill string, and these are excluded where their length is 12 feet or below (with a three-inch tolerance), as defined in the API 5CT specification.

[27] Furthermore, accessory products used in conjunction with downhole OCTG tubing and casing strings such as cross-over joints, marker joints, elbows etc. are not covered by the product definition, nor are further manufactured products which use OCTG as inputs to their production such as vacuum insulated tubing (VIT). Coiled tubing is also not part of the product definition.

Product characteristics and uses^{Footnote 18}

[28] Casing is used to prevent the walls of the bored hole from collapsing, both during drilling and after the well has been completed. Tubing is used to convey oil and gas to the surface.

[29] As noted above, subject OCTG may be manufactured by the seamless or welded process. Typical casing and tubing end finishes include plain end, beveled, external upset ends, threaded, or threaded and coupled (including proprietary premium or semi-premium connections).

[30] OCTG must be able to withstand outside pressure and internal yield pressures within the well. In addition, OCTG must have sufficient joint strength to hold the weight of the pipe string and must be equipped with threads sufficiently tight to contain the well pressure where lengths are joined. Threading may be performed by the manufacturer or a third-party threading operation. Various factors limit the total amount of open hole that can be drilled at any one time, and it may be necessary to set more than one string of OCTG concentrically for certain portions of the well depth.

[31] Subject OCTG are supplied to meet at a minimum API specification 5CT. OCTG from Mexico is supplied in all grades including and not limited to, H40, J55, K55, N80, L80, L80 HC, L80 LT, L80 SS, C90, C95, C110, P110, P110 HC, P110 LT, T95, T95 HC, and Q125, or proprietary grades manufactured as substitutes for, or enhancements to, these specifications. The grade numbers define the minimum yield strength required of the grade in thousands of pounds per square inch (ksi).

[32] Heat-treated grades are more sophisticated higher strength grades of pipes used in horizontal applications, deeper wells, and more severe environments such as low temperature services, sour service, heavy oil recovery, etc. These grades are made beginning with the use of a specific chemistry in the steel (either in billet for the seamless process or the steel coil in the ERW process) and are further-processed with heat treatment to attain certain combinations of mechanical properties and/or resistance to corrosion and environmental cracking.

[33] For example, maximum strength (N80, P110, Q125), high-strength with lower ductility (normally proprietary enhancements of API grades), or high-strength combined with resistance to corrosion and environmental cracking (L80, C90, C95, C110, T95 and proprietary enhancements).

[34] Semi-premium and premium connections similarly enhance the function of an OCTG string by providing additional performance and/or sealing characteristics which may be required in more demanding applications.

Production process^{Footnote 19}

[35] OCTG casing and tubing are made on the same production equipment. Production may be by either the seamless or the welded process.

[36] The seamless process for producing OCTG begins with the formation of a central cavity in a sound solid steel billet to create a shell. The shell is then rolled on a retained mandrel and reduced in a stretch reduction mill to produce the finished size before cooling on a walking beam cooling bed.

[37] The welded process begins by slitting flat hot-rolled steel in coil form of a pre-determined thickness (skelp) to the proper width required to produce the desired diameter of pipe. The skelp is then sent through a series of forming rolls that bend it into a tubular shape. As the edges of the skelp come together under pressure in the final forming rolls, an electric current is passed between them. The resistance to the current heats the edges of the skelp to the welding temperature, and the weld is formed as the two edges are fused together. OCTG produced using the welded process is also known as electric-resistance welded (ERW) OCTG.

[38] Pipe that is formed by either the seamless or the ERW methods is then cut to length. Depending on the API or proprietary specifications needed, OCTG may also be heat-treated at this point. The product is then sent to the finishing line where it is beveled and threaded on both ends. Tubing may undergo a separate process of upsetting and normalizing prior to threading. Finally, a coupling and coupling protector are applied to one end of the pipe and a thread protector is applied to the other end before it is ready for shipment. Finishing operations also include cooling, straightening, facing, testing, coating, marking, and/or bundling.

[39] Evraz and Welded Tube both employ the ERW production process. Specifically, Evraz produces specific OCTG products at the following four locations.

[40] In Regina, Saskatchewan, Evraz produces ERW plain-end tubing in sizes ranging from 2.375 inches to 3.5 inches in outside diameter (OD).

[41] In Calgary, Alberta, Evraz produces ERW casing, threaded and coupled with API connections, in sizes ranging from 4.5 inches to 13.375 inches in OD, as well as ERW tubing, threaded and coupled with API connections, in sizes ranging from 2.375 inches to 3.5 inches in OD.

[42] In Camrose, Alberta, Evraz produces ERW plain-end casing in sizes ranging from 6.625 inches to 16 inches in OD.

[43] Finally, in Red Deer, Alberta, Evraz produces ERW casing, threaded and coupled with both API and proprietary (premium and semi-premium) connections, in sizes ranging from 4.5 inches to 12.75 inches in OD.

[44] Plain-end products are finished at either the Red Deer or the Calgary facilities. Finishing activities at these locations include heat treatment, as well as testing, inspection, measurement, and certification. In addition, threading and coupling for API, premium, or semi-premium connections takes place at the Red Deer facility and threading and coupling for API connections takes place at the Calgary facility.

[45] As a result of production at each of these facilities, Evraz is capable of producing ERW OCTG in grades including API 5CT H40, J55, L80, L80 HC, L80 HCI, L80 RY, N80, P110, P110 HC, P110 HCI, P110 RY and other proprietary grades.

[46] Welded Tube produces and finishes OCTG casing for the Canadian market at three production facilities in Canada. Welded Tube’s primary pipe production facility is in Concord, Ontario, where it produces, among other products, hollow structure sections and welded OCTG green tube for further processing into finished casing.

[47] The OCTG green tube produced at the Concord facility is transferred to the facility in Welland, Ontario for quenching, tempering, threading and coupling, and other finishing steps such as further testing and inspection. The output of the Welland facility therefore is finished API 5CT casing in sizes ranging from 4.5 inches to 9.625 inches OD, and up to 0.475 inches in wall thickness, in grades including H40, J55, N80, L80, L80 HC, P110, P110 HC, and proprietary grade WTC80, threaded and coupled with API and semi-premium connections.

[48] At its third facility, located in Port Colborne, Ontario, Welded Tube performs threading and coupling operations and other finishing steps such as further testing and inspection. The output of the Port Colborne facility therefore is finished API 5CT casing in sizes ranging from 4.500 inches to 9.625 inches OD, and up to 0.475 inches in wall thickness, in grades including H40, J55, N80, L80, L80 HC, EP L80, CY P110, P110, P110 HC, HP P110, and proprietary grade WTC80, threaded and coupled with API and semi-premium connections.

Classification of imports

[49] The allegedly dumped goods are normally classified under the following tariff classification numbers:

• 7304.29.00.11
• 7304.29.00.19
• 7304.29.00.21
• 7304.29.00.29
• 7304.29.00.31
• 7304.29.00.39
• 7304.29.00.41
• 7304.29.00.49
• 7304.29.00.51
• 7304.29.00.59
• 7304.29.00.61
• 7304.29.00.69
• 7304.29.00.71
• 7304.29.00.79
• 7306.29.00.11
• 7306.29.00.19
• 7306.29.00.21
• 7306.29.00.31
• 7306.29.00.29
• 7306.29.00.39
• 7306.29.00.61
• 7306.29.00.69

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

Normal value

[65] Normal values are generally estimated based on the domestic selling prices of like goods in the country of export, in accordance with the methodology of section 15 of SIMA which relies on domestic prices, or one of the methodologies of section 19. Where the methodology of subsection 19(b) is used, it is based on the aggregate of the cost of production of the goods, a reasonable amount for administrative, selling and all other costs, plus a reasonable amount for profits.

Export price

[66] The export price of goods sold to importers in Canada is generally estimated in accordance with the methodology of section 24 of SIMA based on the lesser of the adjusted exporter’s sale price for the goods or the adjusted importer’s purchase price. These prices are adjusted where necessary by deducting the costs, charges, expenses, duties and taxes resulting from the exportation of the goods as provided for in subparagraphs 24(a)(i) to 24(a)(iii) of SIMA.

[67] Where there are sales between associated persons and/or a compensatory arrangement exists, the export price is estimated based on the importer’s resale price of the imported goods in Canada to unrelated purchasers, less deductions for all costs incurred in preparing, shipping and exporting the goods to Canada that are additional to those incurred on the sales of like goods for use in the country of export, all costs included in the resale price that are incurred in reselling the goods (including duties and taxes) or associated with the assembly of the goods in Canada and an amount representative of the average industry profit in Canada as provided for in paragraphs 25(1)(c) and 25(1)(d) of SIMA.

Margin of dumping

[68] The estimated margin of dumping by exporter is equal to the amount by which the total estimated normal value exceeds the total estimated export price of the goods, expressed as a percentage of the total estimated export price. All subject goods imported into Canada during the POI are included in the estimation of the margins of dumping of the goods. Where the total estimated normal value of the goods does not exceed the total estimated export price of the goods, the margin of dumping is zero.

[69] Further information regarding each respondent who submitted a response is detailed below.

Mexico

Tubos de Acero de Mexico S.A.

[70] Tubos de Acero de Mexico S.A. (TAMSA) is a producer and exporter of subject goods, located in Veracruz, Mexico. TAMSA is 100% directly or indirectly owned by Tenaris S.A. (Luxembourg).

[71] Exports of subject goods by TAMSA represent over 99% of the value of subject goods shipped to Canada during the POI. All subject goods exported by TAMSA were to TGS Canada, its related importer.

[72] Both TAMSA and TGS Canada provided a substantially complete responses to the CBSA’s Dumping RFIs. Supplemental RFIs were sent to both parties to gather additional information and seek clarification regarding their original responses.

[73] During the POI, for some models, normal values were estimated based on the methodology of section 15 of SIMA, using domestic sales of like goods. For the remaining models, there were insufficient sales of like goods that met the conditions of sections 15 and 16 of SIMA, as such, normal values were estimated using the methodology of paragraph 19(b) of SIMA, based on the aggregate of the cost of production of the goods, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits. The cost of production was estimated in accordance with paragraph 11(1)(a) of the Special Import Measures Regulations (SIMR), based on TAMSA’s unverified cost data associated with the subject goods shipped to Canada. The amount for profits was estimated in accordance with subparagraph 11(1)(b)(ii) of the SIMR, based on the profits earned by TAMSA on its domestic sales of goods of the same general category during the PAP.

[74] Due to the relationship between the parties involved in the export sales, a preliminary reliability test was performed to determine whether the section 24 export prices were reliable as envisaged by SIMA. This test was conducted by comparing the section 24 export prices with the section 25 “deductive” export prices based on the importer’s resale prices of the imported goods to unrelated purchasers in Canada, less deductions for all additional costs incurred in preparing, shipping and exporting the goods to Canada, all costs included in the resale prices that were incurred in reselling the goods in Canada (including duties and taxes) and an amount for profit.

[75] The amount for profit was estimated in accordance with paragraph 22(a) of the SIMR based on the financial information relating to vendors that operated at a profit during the POI. The test revealed that the export prices in accordance with section 24 of SIMA were reliable and, therefore, export prices for TAMSA were estimated in accordance with section 24 of SIMA.

[76] For purposes of the preliminary determination, the total estimated normal value compared to the total estimated export price resulted in an estimated margin of dumping of 51.1% for TAMSA, expressed as a percentage of the export price.

All other exporters

[77] For exporters of subject goods originating in or exported from Mexico that did not provide a response to the Dumping RFI, the normal values and export prices were estimated on the basis of facts available. In establishing the methodology for estimating normal values and export prices, the CBSA analyzed all the information on the administrative record, including the complaint, the CBSA’s estimates at the initiation of the investigation and information submitted by the exporter during the investigation.

[78] The CBSA decided that the normal values estimated for the exporter whose submissions were substantially complete for the preliminary determination, rather than the information provided in the complaint or estimated at initiation, would be used to establish the methodology for estimating normal values since it reflects exporters’ actual trading practices during the POI.

[79] The CBSA considered whether the information from the exporter of OCTG in Mexico, who provided substantially complete information was appropriate to use as the basis for estimating the margin of dumping for all other exporters. The CBSA examined the difference between the estimated normal value and the estimated export price for each individual transaction of TAMSA, and considered that the highest amount (expressed as a percentage of the export price), was an appropriate basis for estimating normal values. This methodology relies on information related to goods that originated in Mexico and limits the advantage that an exporter may gain from not providing necessary information requested in a dumping investigation as compared to an exporter that did provide the necessary information.

[80] As a result, based on the facts available, for exporters that did not provide a substantially complete response to the Exporter dumping RFI, normal values of subject goods originating in or exported from Mexico were estimated based on the highest amount by which an estimated normal value exceeded the estimated export price, on an individual transaction for TAMSA during the POI. The transactions were examined to ensure that no anomalies were considered, such as very low volume and value, effects of seasonality or other business factors.

[81] The CBSA considered that the information submitted on the CBSA customs entry documentation was the best information on which to estimate the export price of the goods as it reflects actual import data.

[82] Using the above methodologies, for the preliminary determination, the estimated margin of dumping for all other exporters, excluding anomalies, is 128.4%, expressed as a percentage of the export price.

Summary of preliminary results

[83] A summary of the preliminary results of the dumping investigation respecting all subject goods released into Canada during the POI are as follows:

[84] In conducting the negligibility test, the CBSA relied upon the volume reported in the FIRM database^{Footnote 23} for OCTG from non-subject countries, since it was available for all imports during the POI.

[85] Under section 35 of SIMA, if at any time before making a preliminary determination the CBSA is satisfied that the actual and potential volume of goods of a country is negligible, the CBSA is required to terminate the investigation with respect to goods of that country.

[86] Pursuant to subsection 2(1) of SIMA, the volume of goods of a country is considered negligible if it accounts for less than 3% of the total volume of goods that are released into Canada from all countries that are of the same description as the goods.

[87] The volume of subject goods from Mexico is above 3% of the total volume of goods released into Canada from all countries. Based on the definition above, the volumes of subject goods from Mexico are therefore not negligible.

[88] If, in making a preliminary determination, the CBSA determines that the margin of dumping of the goods of a particular exporter is insignificant pursuant to section 38 of SIMA, the investigation will continue in respect of those goods but provisional duties will not be imposed on goods of the same description imported during the provisional period.

[89] Pursuant to subsection 2(1) of SIMA, a margin of dumping of less than 2% of the export price of the goods is defined as insignificant. The estimated margin of dumping for exporters from Mexico, expressed as a percentage of the export price, is above 2% and is, therefore, not insignificant. In respect of these goods, provisional anti-dumping duty will be imposed on goods of the same description imported during the provisional period.

[90] A summary of the estimated margins of dumping and provisional duties by exporter is presented in Appendix 1.

The Canada Border Services Agency

[96] The CBSA will continue its investigation and will make final decision by December 24, 2021.

[97] If the CBSA is satisfied that the goods were dumped, and that the margins of dumping were not found to be insignificant, a final determination will be made. Otherwise, the CBSA will terminate the investigation in respect of those goods and any provisional duty paid or security posted will be refunded to importers, as appropriate.

The Canadian International Trade Tribunal

[98] The CITT has begun its inquiry into the question of injury to the Canadian industry. The CITT is expected to issue its finding by January 26, 2022.

[99] If the CITT finds that the dumping has not caused injury, retardation or is not threatening to cause injury, the proceedings will be terminated and all provisional anti-dumping duty collected or security posted will be refunded.

[100] If the CITT makes a finding that the dumping has caused injury, retardation or is threatening to cause injury, anti-dumping duty in an amount equal to the margin of dumping will be levied, collected and paid on imports of OCTG that are of the same description as goods described in the CITT’s finding.

[101] For purposes of the preliminary determination of dumping, the CBSA has responsibility for determining whether the actual and potential volume of goods is negligible. After a preliminary determination of dumping, the CITT assumes this responsibility. In accordance with subsection 42(4.1) of SIMA, the CITT is required to terminate its inquiry in respect of any goods if the CITT determines that the volume of dumped goods from a country is negligible.