OCTG4 2021 IN: Oil country tubular goods
Statement of Reasons—preliminary determination

Complainant

[12] The name and address of the Complainant is as follows:

Algoma Tubes Inc.
Prudential Steel ULC
Tenaris Global Services (Canada) Inc.
Hydril Canadian Company LP
(The above companies are collectively referred to as “Tenaris Canada”)
400-530 8th Ave SW
Calgary AB  T2P 3S8

Tenaris Canada

[13] Tenaris Canada manufactures OCTG in Canada at its Algoma Tubes Inc. (Algoma) facility located in Sault Ste. Marie, Ontario using the seamless process. Algoma produces seamless casing in outside diameters ranging from 4.5 to 9.875 inches for both American Petroleum Institute (API) and proprietary grades. Algoma has been producing OCTG for over 30 years.^{Footnote 2}

[14] All OCTG produced by Algoma are green tubes before they are finished. While Algoma has its own threading, coupling and heat-treating capabilities, some Algoma product is threaded with an OCTG premium connection at the Hydril Canadian Company LP (Hydril) facility in Alberta.^{Footnote 3}

[15] Up until summer of 2020, Prudential Steel ULC (Prudential) had been producing electric resistance welding (ERW) OCTG casing and tubing at its Calgary, Alberta facility in diameters ranging from 2.375 inches to 11.75 inches, primarily in grades H40, J55 and also in proprietary higher strength grades. The mill had threading, coupling and testing facilities but did not heat-treat goods.^{Footnote 4} Higher strength proprietary grades like PS80, are produced using skelp with the required chemistry. Prudential produced API and proprietary premium connections, but some product was threaded with an OCTG premium connection at the Hydril facility in Alberta.^{Footnote 5}

[16] Tenaris Canada is currently relocating its ERW production capability that was formerly at the Prudential facility, to be housed at the Algoma facility.^{Footnote 6} The Prudential facility ceased production in July 2020. This transition is expected to be completed near the end of 2021.^{Footnote 7}

[17] Hydril produces specialized premium connections for OCTG casing and tubing. Tenaris Global Services (TGS) provides management, sales and marketing support to the production facilities of Algoma.^{Footnote 8}

Other Canadian producers

[18] The following Canadian producers also manufacture OCTG:

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

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

[19] Evraz, WTC along with the Complainant account for all known domestic production.

Trade unions^{Footnote 9}

[20] Tenaris Canada identified the United Steelworkers (USW) as a known trade union association representing persons employed in OCTG production in Canada. Tenaris Canada’s relevant union locals are Local Union 7226 for Prudential and Local Union 9548 for Algoma. Evraz’s relevant USW union locals are Local Union 5890 (Regina) and Local Union 6673 (Calgary).

Importers

[21] The CBSA identified one importer of the subject goods from CBSA import documentation and from information submitted in the complaint. The importer was sent the CBSA’s Importer request for information (RFI)^{Footnote 10} in respect of imports of OCTG from Austria, and it provided a response to the Importer RFI.^{Footnote 11}

Exporters

[22] 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 12}

[23] Voestalpine Tubulars GmbH & Co KG (“VAT”) of Austria, provided a response to the CBSA’s Dumping RFI.^{Footnote 13}

Related suppliers

[24] One related input supplier to VAT, Voestalpine Stahl Donawitz GmbH (VASD),^{Footnote 14} also provided information related to the costing of a significant factor input provided to VAT for their production of OCTG.

Product definition^{Footnote 15}

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

Additional product information^{Footnote 16}

[26] 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 Austria 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.

[27] For greater clarity, the product definition does not include green tubes originating in or exported from Austria 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.

[28] 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.

[29] 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 17}

[30] 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 fluids up and down the well. This most commonly means carrying oil and gas to the surface, and may also involve conveying steam down the well, such as in Steam Assisted Gravity Drainage (SAGD) or Cyclic Steam Stimulation (CSS) applications.

[31] 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).

[32] 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.

[33] Subject OCTG are supplied to meet at a minimum API specification 5CT. OCTG from Austria 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).

[34] The most common grades of low-strength casing and tubing are J55, K55 and H40. Heat-treated grades (e.g. L80, P110 and T95) are more sophisticated grades of pipe and are used in deeper wells and more severe environments, such as low-temperature service, sour service and heavy oil recovery.

[35] 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.

[36] 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).

[37] 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 18}

[38] OCTG casing and tubing are made on the same production equipment. Production may be by either the seamless or the electric resistance welded (ERW) process.

[39] Tenaris Canada employs the seamless production process at its Algoma manufacturing operations, starting with its purchasing of steel bars (also known as billets) which are imported from sister companies. The steel bar is cut into a billet and then loaded into the rotary furnace to be heated and readied for the Hot Rolling Mill (HRM). Once the HRM has transformed the billet into a tube it enters into a reheat furnace. The stretch reduction/sizing mill produces the final dimensions.

[40] Depending on the desired grade, the next process may involve heat-treatment. Finishing operations include Non-Destructive Testing (NDT), electromagnetic inspection (EMI) testing, hydrotesting, thread inspection, coupling, varnishing and stenciling.

[41] Tenaris Canada had until recently employed the ERW production process. From 1966 until July 2020, Tenaris Canada produced ERW steel pipes at its Prudential facility, located in Calgary.

[42] ERW OCTG is produced by slitting flat hot-rolled steel in coil form of a predetermined 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 pressed together.

[43] Steel tubes are formed by either the seamless or the ERW methods and are then cut-to-length. Depending on the API specifications required, OCTG may also be heat-treated at this point. The product is then sent to the finishing line where it is tested (NDT, EMI and hydrotesting) 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 OCTG and a thread protector is applied to the other end before it is ready for shipment. Finishing operations also include cooling, straightening, inspection, testing, coating, and/or bundling.

Classification of imports

[44] 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

[45] 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

[63] 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 paragraph 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

[64] 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.

Margin of dumping

[65] The estimated margin of dumping 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, for each exporter. 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.

[66] Further information regarding the respondent who submitted a response is detailed below.

Austria

Voestalpine Tubulars GmbH & Co KG

[67] Voestalpine Tubulars GmbH & Co KG (VAT) was incorporated in 1978 and is a subsidiary of Voestalpine AG, a public company listed on the Vienna Stock Exchange. VAT is a producer and exporter of subject goods located in Kindberg, Austria, which first exported subject goods to Canada approximately 30 years ago. VAT produces seamless tubular products with an outside diameter up to 193.7 mm (7 5/8 inches).

[68] Subject goods exported by VAT represent all subject goods shipped to Canada during the POI. All subject goods exported by VAT were to an arm’s length importer.

[69] The response to the Dumping RFI from VAT was substantially complete.

[70] During the POI, VAT did not have sufficient sales of like goods in the domestic market that met the conditions of sections 15 and 16 of SIMA. Normal values were estimated using a paragraph 19(b) methodology, 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 SIMR, based on VAT’s unverified cost data associated with the subject goods shipped to Canada. The amount for profits was estimated using VAT’s financial information available to the CBSA.

[71] Export prices for the subject goods were estimated in accordance with section 24 of SIMA, based on the lesser of the exporter’s selling price and the importer’s purchase price, adjusted by deducting the costs, charges and expenses incurred in preparing the goods for shipment to Canada and resulting from the exportation and shipment of the goods.

[72] The total estimated normal value compared to the total estimated export price results in an estimated margin of dumping of 35.1% for VAT, expressed as a percentage of the export price.

Summary of preliminary results

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

[74] 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.

[75] In conducting the negligibility test, the CBSA relied upon the volume reported in the FIRM database^{Footnote 22} for OCTG from non-named countries, since it was available for all imports during the POI.

[76] 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.

[77] The volume of subject goods from Austria 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 Austria are therefore not negligible.

[78] 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.

[79] 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 Austria, expressed as a percentage of the export price, is above 2% and is, therefore, not insignificant.

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

The Canada Border Services Agency

[86] The CBSA will continue its investigation and will make a final decision by January 21, 2022.

[87] 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

[88] The CITT has begun its inquiry into the question of injury to the Canadian industry. The CITT is expected to issue its finding by February 22, 2022.

[89] 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.

[90] 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.

[91] 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.