Statement of reasons—Initiation of investigations: Polyethylene Terephthalate Resin 2 (PETR2 2025 IN)

Definition

[12] For the purpose of these investigations, subject goods are defined as:

Additional product information^{Footnote 3}

[13] PET is a clear, strong and lightweight plastic belonging to the polyester family. PET is typically called polyester chip when used for fibers or fabrics and “PET” or “PET resin” when used for bottles, jars, containers and packaging applications.

[14] Polyester chip is essentially the same material as textile grade PET resin in chip form. When used for fabrics and fibers, PET is typically referred to as “polyester”. The main difference lies in the terminology and specific formulation. “Textile grade PET resin” emphasizes its intended use in the textile industry and in some contexts may refer to PET resin in both flake and chip form, whereas “polyester chip” refers to the physical form of the material before it is processed into fibers. However, both terms describe the same base material (PET) tailored for use in textile applications, with properties optimized for fiber production and textile performance, and with an intrinsic viscosity below 0.70.

[15] Polyester is a polymer whose name comes from “poly” meaning many, and ester is a functional group obtained by the reaction of a carboxylic acid and an alcohol. The main inputs used in the production of PET resin are terephthalic acid (“TPA” or “PTA”, which refers to purified TPA) and monoethylene glycol (“MEG”), whose reaction results in the chemical structure of polyester.

[16] PET resin is primarily sold in bulk form as chips or pellets to downstream users/converters. Typically, PET resin is spherical or cylindrical in size. PET resin is a thermoplastic, which softens upon heating and can be made to flow under stress repeatedly. When cooled it regains its solid nature.

[17] Consumers identify containers produced with PET resin by the triangular recycle symbol with the #1 resin identification code and either PET or PETE written underneath.

[18] The product definition includes an intrinsic viscosity (IV) range. One of the most important characteristics of PET is referred to as IV. The IV of the material is measured in decilitres per gram (dl/g). IV is a measure of the polymer’s molecular chain length and molecular weight. IV reflects the material’s melting point, crystallinity and tensile strength. A higher IV means a tougher polymer.

[19] The IV is used as part of the specification to select the right grade of PET for a particular application. Packaging grade PET resin has a higher IV, generally greater than 0.70 deciliters per gram. Polyester used in fiber as fill and in textile industries has a lower IV, generally less than 0.70 deciliters per gram, and is clear rather than white.

[20] PET resin may contain some recycled material, although PET resin for packaging end uses (i.e. meeting the product definition parameters of 0.70 to 0.88 IV) generally ranges from a recycled content of 20% and up to 50% recycled content, but could include up to 99% recycled content.

[21] PET resin containing recycled content is sometimes referred to as “rPET”. It is important to note that some material that is referred to as rPET may be 100% recycled material, which does not meet the product definition in this complaint. The 100% recycled poly (ethylene terephthalate) resin is obtained through the simple process of recovery and recycling post-consumption mainly of PET bottles, which is often referred to as 100% rPET (post-consumer resin).

[22] The 100% rPET and PET resin production processes differ materially. The production of 100% rPET involves mechanical operations, including waste/scrap separation, washing, grinding and cutting functions. In contrast, the production of PET resin meeting the product definition in the complaint involves primarily chemical reaction processes. 100% rPET, in contrast to the PET resin meeting the product definition, is produced without any chemical conversion. 100% rPET is significantly more expensive to produce compared to PET resin. Producers of 100% rPET do not have the necessary equipment to produce PET resin with virgin content.

[23] PET resin (or vPET) production requires advanced, highly automated equipment for polymerization reactions, as well as equipment for synthesizing PET from raw materials like TPA and MEG (or EG).

[24] rPET production utilizes specialized recycling equipment, including:

• Debalers to unpack compressed PET bottle bundles
• Trommels to remove small contaminants
• Conveyor belts for material transport
• Plastic crushers to break down bottles into flakes
• De-labellers to remove labels
• Sink/float separation tanks for density-based separation and
• Specialized washing and drying equipment

[25] Finally, rPET production requires extruders with vacuum degassing and melt filtration systems, and then solid-state polymerization reactors to increase molecular weight and IV of rPET.

[26] 100% rPET used in bottling and packaging for food and beverage use applications, as with all packaging materials used in the sale of food and beverage, must comply with Division 23 of the Food and Drug Regulations. Health Canada’s Health Protection Branch conducts evaluations on the chemical safety of PET resin and will issue a “no objection letter” to food packaging suppliers for specified food packaging end uses, including the use of recycled materials for food packaging. Imported PET resin is held to the same Health Canada standards as domestic producers.

[27] PET resin may be processed into “PET preforms”, which is an intermediate product made of PET resin. It is a small, tube-like structure that serves as the initial stage in producing plastic bottles and containers. The production of preforms would therefore require Subject Good inputs but preforms themselves are not Subject Goods.

Production process^{Footnote 4}

[28] The primary inputs for PET resin are MEG and PTA. There is an alternative industrial manufacturing process using dimethyl terephthalate, however this process is largely obsolete in favour of the more modern PTA process.

[29] PET resin manufacturing generally consists of the following steps:

1. Slurry Preparation: The MEG and PTA are mixed into a slurry at their desired concentrations
2. Esterification: The slurry is heated at atmospheric pressure and reacts to form monomer
3. Additive Injection: Functional Additives, catalysts, and co-monomers are added to the monomer solution
4. Polymerization: Under vacuum and high temperature, the monomer reacts with itself in the presence of the catalyst to form an amorphous base polymer, with a chain length of approximately 100 units. The IV at this point in the process is approximately 0.50-0.65 dL/g
5. Pelletizing: The base polymer is then quenched in water and cut into small pellets
6. Crystallization and Reaction: The polymer pellets are heated and fed into a reactor where the polymer continues to increase its chain length, building up the IV of the pellets to the desired value, typically those found in the product definition

Classification of imports

[30] The allegedly dumped and subsidized goods are normally imported under the following tariff classification numbers:

1. 3907.61.00.00
2. 3907.69.00.10
3. 3907.69.00.80
4. 3907.69.00.90

[31] The listing of tariff classification numbers is for convenience of reference only. The tariff classification numbers 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.

Like goods and class of goods^{Footnote 5}

[32] Subsection 2(1) of SIMA defines “like goods” in relation to any other goods as “… (a) goods that are identical in all respects to the other goods, or (b) in the absence of any such goods…, goods the uses and other characteristics of which closely resemble those of the other goods.” 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.

[33] With respect to the definition of like goods, the complainant stated that the like and subject goods in this case are commodity products that compete with one another in the Canadian marketplace and are fully interchangeable with respect to key considerations including product quality, technical specifications, qualification by customers, reliability of supply and packaging. As a result, purchasing decisions are made primarily on the basis of price.

[34] For the purposes of this analysis, like goods consist of domestically produced PET resin described in the product definition.

[35] After considering questions of use, physical characteristics and all other relevant factors, the CBSA is of the opinion that subject goods and like goods constitute only one class of goods.

Domestic producers

[36] Besides the complainant, there are no other known producers of subject PET resin in Canada.

Estimates of domestic production^{Footnote 6}

[37] The complaint includes the annual production of like goods for the complainant from January 1, 2021 through September 30, 2024. As the complainant is the only producer in Canada, the complainant accounts for 100% of the production of subject PET resin in Canada.

Standing

[38] Pursuant to subsection 31(2) of SIMA, the following conditions must be met in order for an investigation to be initiated:

1. the complaint is supported by domestic producers whose production represents more than 50% of the total production of like goods by those domestic producers who express either support for or opposition to the complaint and
2. the production of the domestic producers who support the complaint represents 25% or more of the total production of like goods by the domestic industry

[39] Based on an analysis of information provided in the complaint, as well as the information gathered by the CBSA, the CBSA is satisfied that the standing requirements of subsection 31(2) of SIMA have been met.

The Canadian market

[40] The complainant, using Statistics Canada data, estimated the total value of imports of PET resin from China, Pakistan, and all other countries from January 1, 2021 to September 30, 2024.

[41] The CBSA conducted its own independent review of imports of PET resin from the CBSA’s Facility Information Retrieval Management (FIRM) database and the CBSA Assessment and Revenue Management (CARM) system using the tariff classification numbers under which the subject goods are imported from China, Pakistan and all other countries. In addition, the CBSA reviewed its Accelerated Commercial Release Operations Support System (ACROSS) data to correct any errors and remove non-subject imports.

[42] Detailed information regarding the sales from domestic production by the complainant as well as the volume of imports of subject goods cannot be divulged for confidentiality reasons. The CBSA, however, has prepared the following tables to show the estimated import share of subject goods in Canada as well as the Canadian market as a whole from:

[43] The CBSA will continue to gather and analyze information on the volume of imports during the period of investigation (POI) of January 1, 2024 to December 31, 2024 as part of the preliminary phase of the dumping and subsidy investigations and will refine these estimates.

Normal value

Complainant’s estimates of normal value

Section 15

[50] The complainant included estimates of normal values pursuant to section 15 of SIMA for China using domestic pricing information published by PCI Wood Mackenzie.^{Footnote 7}

[51] In the case of Pakistan, there was no domestic pricing information available, as an alternative, the complainant used pricing information in India published by PCI Wood Mackenzie.^{Footnote 8}

[52] The complainant states that due to production and transportation time, most subject goods purchased by Canadian customers arrive in the quarter after they are ordered. Therefore, the complainant applied a lag of one quarter to its estimated normal values (under section 15, 19(b) and 20) to account for the lead time between when the goods are ordered and when they arrive in Canada.^{Footnote 9}

Section 19(b)

[53] The complainant estimated normal values using a constructed cost approach based on the methodology in paragraph 19(b) of SIMA for both China and Pakistan. The calculations were based on the aggregate of estimates of the cost of production of the subject goods, a reasonable amount for administrative selling and all other costs and a reasonable amount for profits.

Complainant’s estimate of cost of production: China

[54] As detailed information regarding Chinese producers’ costs of production of the subject goods was not available, the complainant estimated the cost of production in China using:

• The quarterly average PTA (direct material) price in China, multiplied by the complainant’s own consumption rate of PTA per MT of PET resin^{Footnote 10}
• The average import cost of MEG (direct materials) in China, multiplied by the complainant’s own consumption rate of MEG per MT of PET resin^{Footnote 11}
• The complainant’s own quarterly consumption rate of additives multiplied by the total cost of direct materials per MT of PET resin^{Footnote 12}
• The complainant’s direct labour costs adjusted to reflect the difference between manufacturing wages in Canada and China^{Footnote 13}
• The complainant’s overhead costs^{Footnote 14}

[55] To estimate a reasonable amount for administrative, selling and other costs, and a reasonable amount for profits for the subject goods from China, the complainant relied on the publicly available financial results of Far Eastern New Century Corp. (FENC), a producer of PET resin with factories in China and Chinese Taipei. Using this information, the complainant estimated a reasonable amount for administrative, selling and other costs; financial expenses; and profits as a percentage of the costs of production for the whole complainant’s POI.^{Footnote 15}

Complainant’s estimate of cost of production: Pakistan

[56] As detailed information regarding Pakistani producers’ costs of production of subject goods was not available, the complainant estimated the cost of production of the subject goods from Pakistan using:

• The average import cost of direct materials (PTA and MEG) in Pakistan, as reported by UN Comtrade, multiplied by the complainant’s own consumption rate of PTA and MEG per MT of PET resin^{Footnote 16}
• The complainant’s own quarterly consumption rate of additives multiplied by the cost of direct materials per MT of PET resin^{Footnote 17}
• The complainant’s direct labour costs adjusted to reflect the difference between manufacturing wages in Canada and Pakistan^{Footnote 18}
• The complainant’s overhead costs^{Footnote 19}

[57] To estimate a reasonable amount for administrative, selling and other costs, and a reasonable amount for profits for the subject goods from Pakistan, the complainant relied on the publicly available financial results of Gatron, a producer of PET resin located in Pakistan. Using this information, the complainant estimated a reasonable amount for administrative, selling and other costs; financial expenses; and a reasonable amount for profits as a percentage of costs of production for the complainant’s POI.^{Footnote 20}

Section 20

[58] The complainant calculated section 20 normal values using the US as a surrogate country under paragraph 20(1)(c)(ii). Alternatively, the complainant suggested and estimated normal values using Mexico as a surrogate country.^{Footnote 21}

[59] The section 20 surrogate normal values estimated by the complainant for the US were calculated using a methodology similar to the one described in section 19(b) of SIMA. More specifically, direct materials, labour and factory overhead costs were calculated using an S&P Global’s publication. The complainant argues that this data is acceptable as it represents multiple producers of PET resin in the US. The cost of indirect materials were estimated using Alpek USA’s actual costs. Finally, GS&A, financial expenses and profit are based on the combined financial results of US producers Indorama and Alpek USA.^{Footnote 22}

[60] The complainant also submitted section 20 surrogate normal values estimates for Mexico using a methodology similar to the one described in section 19(b) of SIMA. The complainant used Alpek Polyester, S.A. de C.V.’s Cosoleacaque’s production cost to estimate the direct materials, labour and factory overhead costs. Then, combined with additional information from the consolidated financial statement of Indorama, a reasonable amount for GS&A, financial expenses and profit was calculated.^{Footnote 23}

CBSA’s estimate of normal valueh

[61] While the CBSA finds the complainant’s estimates of normal values under section 15 reasonable, due to the scarcity of publicly available information, the CBSA chose to proceed with the methodology described under section 19 of SIMA

[62] The CBSA estimated normal values using a constructed cost approach based on the methodology in paragraph 19(b) of SIMA, calculated based on the aggregate of estimates of the cost of production of the subject goods, a reasonable amount for administrative selling and other costs and a reasonable amount for profits for both China and Pakistan.

[63] The CBSA reviewed the complainant’s methodology for how it estimated normal values and found that approach reasonable, but made the following adjustments:

• The CBSA used quarterly prices of direct inputs imports into the subject countries. When the information was unavailable, the CBSA used the average price of the previous year
• The CBSA used an average cost of indirect materials per MT of PET resin during the entire POI
• The CBSA calculated an average labour cost per MT using the complainant’s own production cost for the entire POI. The labour reduction rate estimated by the complainant was then applied to this rate
• The CBSA calculated an average overhead rate using the complainant’s own production cost for the entire POI
• When currency needed to be converted to the Canadian dollar, quarterly exchange rates were used

[64] The CBSA agrees with the complainant’s estimates regarding the lead time for a customer to receive subject goods in Canada. Therefore, the CBSA also applied a lag of one quarter to its estimated normal values to account for delivery time between Pakistan and Canada.

[65] With respect to the complainant’s allegations that the conditions of section 20 prevail in the PET resin sector in China, the CBSA will endeavor to gather additional information from exporters, the GOC, and other relevant sources in order to enable the CBSA to form an opinion as to whether the conditions of section 20 exist in the domestic market for PET resin in China.

[66] While the CBSA acknowledges that there is reasonable evidence that the conditions of section 20 exist in the polyester sector in China, the CBSA finds the methodology of section 19 to be a conservative and reasonable basis for estimating normal values at this stage.

Export price

Complainant’s estimates of export price

[67] The export price of goods sold to an importer in Canada is generally determined in accordance with section 24 of SIMA as being an amount equal to the lesser of the exporter’s sale price for the goods and the price at which the importer has purchased or agreed to purchase the goods adjusted by deducting all costs, charges, expenses, and duties and taxes resulting from the exportation of the goods.

[68] The complainant estimated export prices of subject goods based on data from Statistics Canada. Since, the value for duty is declared by importers on an FOB basis, the complainant adjusted the export price by removing estimated delivery costs.^{Footnote 24}

CBSA’s estimates of export price

[69] In order to estimate export prices, the CBSA relied on information available through FIRM, CARM and ACROSS for the period of January 1, 2024 to December 31, 2024. The CBSA reviewed customs data for goods imported within the tariff classification numbers in which PET resin are imported under.

Estimated margins of dumping

[70] For the purposes of the initiation of the investigations, the CBSA has estimated margin of dumping using normal values based on the methodology of section 19 of SIMA for both China and Pakistan. While the CBSA finds the complainant’s estimates of normal values under section 15 reasonable, due to the scarcity of publicly available information, the CBSA chose to proceed with the methodology described under section 19 of SIMA.

[71] Furthermore, the CBSA acknowledges that there is reasonable evidence that the conditions of section 20 may exist in the polyester sector in China, however, the CBSA finds the methodology of section 19 to be a conservative and reasonable basis for estimating the margin of dumping at this stage.

[72] Based on the normal values estimated under section 19, the CBSA estimated the margin of dumping for subject goods from China and Pakistan by comparing the estimated normal value with the estimated export prices for the period of January 1, 2024 to December 31, 2024. The CBSA estimates that subject goods from China and Pakistan were dumped on average by 46.44% and 54.13% respectively, expressed as a percentage of the export price.

Subsidy programs in China

[92] In alleging that actionable subsidies were applicable to the subject goods imported from China, the complainant mainly relied on previous CBSA subsidy investigations and the US Department of Commerce’s (USDOC) investigations and past countervailing duty findings. The complainant also relied on industry reports, GOC documents, producer’s annual reports, WTO Notifications, and general news articles and publications.

[93] The complainant referred to the CBSA’s investigations in regards to the subsidizing of Carbon and Alloy Steel Line Pipe, Cold-Rolled Steel, Copper Tube, Container Chassis, Concrete Reinforcing Bar, Decorative and Other Non-structural Plywood, Fabricated Industrial Steel Components, Galvanized Steel Wire, Large Diameter Line Pipe, Mattresses, OCTG, Pup Joints, Polyethylene Terephthalate Resin (2017), Photovoltaic Modules and Laminates, Piling Pipe, Stainless Steel Sinks, Steel Grating, Sucker Rods, Unitized Wall Modules, Upholstered Domestic Seating, and Wind Towers.^{Footnote 26} Information was also referenced from the USDOC’s findings of PET resin in both 2016 and 2021.^{Footnote 27} Additionally, the complainant provided other potentially actionable subsidy programs specifically conferred to China’s PET resin industry based on their own research.^{Footnote 28}

[94] The complainant listed a number of alleged subsidy programs, explained how the subsidy is alleged to constitute a financial contribution and why it would be considered to be specific, and therefore actionable. The complainant alleges that each program is either used by or is available for use by producers and exporters of PET resin in China. The documents that formed the basis for these allegations were appended to the complaint.^{Footnote 29}

[95] The CBSA reviewed the relevant public reports for the subsidy programs identified in the complaint. The CBSA also reviewed the descriptions of subsidy programs provided in reports for other investigations, in particular for other programs found by the USDOC and from more recent subsidy investigations by the CBSA concerning goods from China, such as Pea Protein, Wind Towers, Mattresses, and Container Chassis.

[96] As a result, based on the information available, the CBSA identified 25 potentially actionable subsidy programs that may have benefited Chinese producers/exporters of PET resin. Many of these are programs the CBSA has already countervailed in respect of previous subsidy investigations concerning goods from China. These programs have been grouped into the following five categories:

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

[97] The CBSA’s analysis revealed that the alleged subsidy programs constitute potential financial contributions by the GOC that may have conferred benefits to producers/exporters of PET resin. In addition, the programs were further examined and were considered to be potentially specific either in law or in fact within the meaning of subsections 2(7.2) and 2(7.3) of SIMA.

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

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

CBSA's conclusion

[100] Sufficient evidence is available to support the allegations that PET resin originating in or exported from China have been subsidized. In investigating these programs, the CBSA has requested information from the GOC, exporters and producers to determine whether exporters/producers of subject goods received benefits under these programs and whether these programs, or any other programs, are actionable subsidies and, therefore, countervailable under SIMA.

Estimated amount of subsidy

[101] The complainant was unable to estimate the amounts of subsidy on a program basis for the subject goods imported from China. Instead, the complainant estimated the amount of subsidy as being equal to the difference between the estimated total cost of production and the export price for Chinese PET resin.^{Footnote 30}

[102] The CBSA estimated the amount of subsidy conferred to exporters of the subject goods from China by comparing the estimated full costs of the subject goods with their total estimated export prices, using the costing and export price methodologies explained in the “Evidence of Dumping” section.

[103] It is the CBSA’s understanding that subsidies have the effect of lowering the cost of production of goods which allows exporters to pass-through the subsidy benefits in reducing the selling price of those goods to Canada. Therefore, the CBSA is satisfied that the exporter’s ability to sell subject goods to Canada at prices substantially below their estimated costs supports the complainant’s allegations that the imported goods are subsidized.

[104] The CBSA’s analysis of the information indicates that subject goods imported into Canada during the period of January 1, 2024 to December 31, 2024 were subsidized and that the estimated amount of subsidy is 34.5% of the export price.

Price undercutting, price depression and lost sales

[109] The complainant argues that exporters of PET resin located in China and Pakistan have been able to capture market share at the expense of the Canadian industry by undercutting Alpek’s pricing. Even when taking into consideration shipping cost, PET resin from both subject countries is still priced lower than what Alpek can offer on the Canadian market.^{Footnote 32}

[110] The complainant provided quarterly estimates of import prices and price undercutting from 2021 to Q3 2024. During this period, the complainant argues that they faced continuous price undercutting by exporters from China and Pakistan.^{Footnote 33}

[111] The complainant submits that imported PET resin have been sold on the Canadian market at unfairly low prices, which directly contributed to depressing Alpek’s prices. The complainant also notes that the volume of PET resin entering Canada from the subject countries rose as the undercutting margins widened.^{Footnote 34}

[112] Additionally, the complainant submits that the average unit price of PET resin from the subject countries during the period Q4 2023 to Q3 2024, was lower than the average unit price of imports from non-subject countries and Alpek's average domestic selling price.

[113] The price of PET resin imported from the subject countries was lower than Alpek’s price during the period Q4 2023 to Q3 2024. The complainant also notes that the price of PET resin imported from the subject countries was 51.8% lower than the average price of imports from non-subject countries.^{Footnote 36}

[114] According to the complainant’s calculation, the average price of imports from China and Pakistan decreased by approximately $676 and $813 respectively, between 2022 and 2023. Combined, the subject countries lowered their annual average price by $730 per MT.^{Footnote 37}

[115] The complainant argues that because China and Pakistan prices are unfairly low, the subject countries have been able to achieve growth in volumes and also limit the access of non-subject countries to the Canadian market. In fact, the complainant reports that while the subject countries represented 51.2% of imports during the period Q4 2023 to Q3 2024, non-subject countries individually represented less than 3%, with the exception of the US. The subject countries’ average price was $1,383 per MT compared to $2,100 for the other countries.^{Footnote 38}

[116] The complainant submits that imports from China and Pakistan have put a downward pressure on prices in Canada and that without these imports, prices would not have decreased as significantly as they did.

[117] The complainant provided evidence of lost sales on an offer specific basis of the allegedly dumped and subsidized goods. This includes detailed commercial intelligence along with supporting documentation. The complainant also argues that the evidence shows that importers have developed business relationships with exporters in the subject countries and that these exporters are undercutting Alpek’s prices.^{Footnote 39}

[118] Based on the CBSA’s analysis of the information detailing price undercutting, price depression and individual lost sales contained in the complaint as well as the CBSA’s estimate of imports and market share, the CBSA finds that the complainant’s claim of price undercutting and lost sales to be reasonable and well supported. Furthermore, the CBSA estimates that subject goods from China and Pakistan were dumped by 46.44% and 54.13%, respectively, and that subject goods from China were subsidized by an amount of subsidy of 34.5%, expressed as a percentage of the export price. As such, the CBSA finds the injury factors of price undercutting, price depression and lost sales to be sufficiently supported and linked to the allegedly dumped and subsidized goods.

Increase in volume of subject goods imports and lost market share

[119] The complainant alleges that imports of subject goods from China and Pakistan have increased significantly in recent years, directly contributing to its lost market share. To support its allegation, the complainant provided estimates of imports and its own domestic volume of sales during the period from 2021 to Q3 2024.^{Footnote 40}

[120] As it relates to the volume and value of imports into Canada during the period of 2021 to Q3 2024, the complainant provided its estimates based on Statistics Canada data. The volume of subject goods imports, increased overall from 46,439 MT in 2021 to 50,646 MT in Q1-Q3 2024.

[121] According to the complainant’s estimates, the share of Chinese PET resin imports continued to rise year over year, with a slight decrease when comparing 2023 to Q1-Q3 2024. As for Pakistan, the share of PET resin imports gradually declined year over year.

[122] The complainant emphasized the fact that the subject countries have increased their market share since 2021. On the other hand, Alpek’s market share declined over the same period.^{Footnote 42}

[123] The CBSA’s analysis of import data supports the allegation of an increase in the import volume of the allegedly injurious dumped and subsidized goods between 2021 to 2024.

[124] The CBSA’s estimate of imports, from 2021 to 2024, shows that with the exception of a minor decline in 2023, the size of the apparent PET resin market in Canada remained stable between 2021 and 2024. During that time, the volume and value of imports of the subject goods from China rose by 208% and 211% respectively. The volume of imports from Pakistan stayed constant, but their value dropped by 15.6%. Meanwhile, the total volume and value of imports from non-subject countries fell by 62.2% and 9.1%, respectively.

[125] Based on the information submitted by the complainant and its own analysis, the CBSA finds that the injury factors of increased volume of subject goods and lost market share are sufficiently supported and linked to the allegedly dumped and subsidized goods.

Impact on financial results

[126] The complainant alleges that the dumped and subsidized goods have had an injurious impact on their financial results. To support its allegation the complainant provided income statements for domestic sales of PET resin.^{Footnote 43}

[127] The information contained in the complaint demonstrates and support the injurious impact of the allegedly dumped and subsidized subject goods on the complainant’s income statement. The CBSA finds that the injury factor is sufficiently supported and reasonably linked to the alleged dumped and subsidized goods.

Reduced employment

[128] The complainant alleges that it had to reduce the number of employees as a consequence of the impact of the volume and pricing of the subject goods from China and Pakistan had on its financial situation. In support of this allegation the complainant provided information concerning employment levels.^{Footnote 44}

[129] The information presented by the complainant supports its claim of reduced employment. However, the CBSA determines that the injury factor of reduced employment is not sufficiently linked to the allegedly dumped and subsidized goods.

CBSA's conclusion: Injury

[130] Overall, based on the evidence provided in the complaint, and supplementary data available to the CBSA through its own research and customs documentation, the CBSA finds that the evidence discloses a reasonable indication that the dumping of the subject goods from China and Pakistan, and the subsidizing of the subject goods from China, have caused injury to the PET resin industry in Canada in the form of price undercutting, price depression, lost sales, increase in volume of subject good imports, lost market share, impact on financial results and reduced employment.

Global market conditions

[132] The complainant alleges that global production capacity of PET resin will continue to increase in the near future. The data submitted by the complainant shows that global PET resin production capacity rose between 2022 and 2024 and is projected to continue to do so in 2025. Production capacity has surpassed global demand since 2022 and this trend will likely continue in the near future.^{Footnote 45}

[133] The complainant notes that in 2023, global excess capacity was greater than the estimated size of the Canadian market.^{Footnote 46}

[134] The CBSA finds that the information available suggests that there is significant excess production capacity in the global PET resin industry. The CBSA also finds that this is likely to continue and lead to worsening global capacity utilization rates in the next 12 to 18 months. Since foreign producers have an incentive to preserve their capital investment by maintaining output quantities, it is likely that they will be searching for new markets. The CBSA finds that this could lead to increased exports of subject goods to Canada in the future and threatens to further injure the Canadian domestic industry.

Subject countries market conditions

[135] The complainant alleges that it is reasonable to expect that due to PET resin overcapacity and negative economic outlook in the subject countries, Canada will likely see greater volumes of dumped and subsidized subject goods being imported in the near future. The complainant claims that these trends will cause injury if anti-dumping and countervailing duties are not imposed.

China

1. China’s capacity and production

[136] The complainant states that China is the world’s largest producer of PET resin. In 2023, production capacity in China remained in excess of its domestic needs. Furthermore, total Chinese capacity is projected to increase by 27% between 2023 and 2026.^{Footnote 47}

[137] The complainant cites CZ Insights which reported that over 1.8 million MT of additional capacity was expected to come online in 2024 in China alone. It is projected that Jiangsu Sanfangxiang will increase capacity by 750,000 MT in July 2024, Sichuan Hanjiang New Materials by 600,000 MT in June-July 2024 and Yisheng Petrochemical 500,000 MT in June 2024.^{Footnote 48}

[138] The CBSA agrees with the complainant and finds that overcapacity and low utilization rates in China will remain an issue in the near future. This will incentivise producers of PET resin in China to seek new markets to export their excess production. The CBSA finds that this situation may result in an increase of dumped and subsidized subject goods being exported to Canada and poses a threat to the domestic industry in Canada.

2. China’s Economic and Demand Outlook

[139] The complainant states that while demand for PET resin in China has increased since 2023, it did not meet the post pandemic growth expectations. The complainant cites a 2021 Mordor Intelligence report which forecasted that PET resin consumption in China in 2027 would increase significantly. However, a more recent report from Wood Mackenzie estimated that domestic consumption in China would likely be lower.^{Footnote 49}

[140] The complainant refers to The Economist, which reported that GDP growth in China is expected to decelerate and reach 4.9% in 2024, 4.5% in 2025 and 4.3% in 2026. These numbers are much lower than what was expected as part of the post pandemic recovery. This situation, coupled with ongoing property market downturn, will likely have a negative impact on consumer spending during 2024 and 2025. The downturn in consumer spending will have an impact on discretionary spending related to certain food and beverages, lowering demand for PET resin in China. The complainant submitted information that confirms weak demand for products made of PET resin. For instance, the volume of packaged food sales dropped by 1.5% in 2023.^{Footnote 50}

[141] The complainant argues that in the anticipation of a much stronger post pandemic demand for PET resin, producers in China would have likely planned capacity additions to respond to future demand. However, the expected demand growth did not materialize and producers are left with additional capacity.^{Footnote 51}

[142] The CBSA finds that the disparity between China's capacity, demand, and growth rates indicate that excess capacity will only become worse and will remain an issue in the foreseeable future. To sustain utilization rates, producers in China are likely to look for open export markets, like Canada, to dump their excess production of PET resin. The CBSA finds that this situation may result in a rise in the export of dumped and subsidized subject goods into Canada and that this situation poses a threat to the domestic industry in Canada.

Pakistan

1. Pakistan’s Capacity and Production

[143] The complainant argues that there is excess PET resin capacity in Pakistan and that this surplus will continue to increase in the near future. It is expected that production capacity will increase by 16% between 2023 and 2026. However, during the same period, actual production is likely to increase only by 7.4%. This suggests that the utilization rate in Pakistan's PET resin sector will decline if goods are not exported to overseas markets.^{Footnote 52}

[144] The complainant acknowledges that the PET resin sector in Pakistan is small when compared to the size of the same sector in China. However, excess capacity, coupled with low utilization rates in Pakistan, will force PET resin producers to export the subject goods into Canada to help them recover their fixed costs. The complainant argues that producers in Pakistan will export the subject goods at dumped prices and that this situation threatens to further injure the PET resin industry in Canada.^{Footnote 53}

[145] The CBSA agrees with the complainant and finds that overcapacity and low utilization rate will remain an issue in the near future. Producers of PET resin in Pakistan, looking to increase their utilization rate, are likely to search for foreign markets to export their excess production. The CBSA finds that this situation may result in an increase in the volume of subject goods being dumped into Canada and poses a threat to the domestic industry in Canada.

2. Pakistan’s Economic and Demand Outlook

[146] The complainant submits that demand in Pakistan will not be sufficient to absorb forecasted production and capacity growth. The complainant cites Wood Mackenzie, which reports that PET resin production capacity will increase between 2022 and 2026. However, during the same period, demand for PET resin will not increase significantly. This information supports the argument that new and planned production capacity will target export markets, rather than domestic market.^{Footnote 54}

[147] The complainant also mentions some challenges PET resin producers in Pakistan will face in the near future. High inflation, stagnant wages and rising interest rates are expected to limit consumers’ spending between 2024 and 2028. This will force consumers to reduce discretionary spending, which includes some products made of PET resin. Additionally, the government of Pakistan imposed new taxes on sugary drinks and carbonated beverages, which will also reduce demand for PET resin. The complainant argues that this will force producers of the subject goods to look at export markets to sell their excess production.^{Footnote 55}

[148] Based on the information submitted by the complainant, the CBSA finds that the economic situation in Pakistan, coupled with the disparity between production capacity and demand, indicate that excess capacity will remain an issue in the foreseeable future. To improve utilization rates, producers in Pakistan are likely to look for open export markets, like Canada, to dump their excess production of PET resin. The CBSA finds that this situation may result in an increase in the volume of subject goods being exported to Canada at dumped prices and poses a threat to the domestic industry in Canada.

Export-orientation of the subject countries

[149] The complainant alleges that PET resin producers in China and Pakistan are highly export-oriented and it is likely that they will continue to rely on the Canadian market for their exports.

China

[150] The complainant submitted UN Comtrade data which show that exports of PET resin from China have grown significantly.^{Footnote 56}

[151] The complainant notes that while UN Comtrade data are not available for 2024, other sources show the importance of export markets for PET resin producers in China. According to one Chinese website, Wankai Global, despite new trade restrictions on PET resin made in China, exports have reached a record high in 2024. As for CZ Insights, they report that Chinese export sales have increased significantly due to ongoing capacity expansion.^{Footnote 57}

[152] The complainant claims that the effect of Chinese PET resin capacity expansion and global oversupply has already led to the closure of several PET resin production facilities in Europe and the US.^{Footnote 58}

[153] The CBSA finds the complainant’s claim that producers of PET resin are export oriented to be reasonable. Furthermore, considering that producers in China have plans to increase their production capacity in the near future, the CBSA believes that the volume of export is likely to increase in the near future. The CBSA recognizes that increasing the volume of imported dumped and subsidized subject goods in Canada would threaten to cause further injury to the Canadian PET resin industry.

Pakistan

[154] The complainant submits that the Government of Pakistan is engaged in an economic growth strategy based on exports. This strategy translates into funding and export incentives for domestic producers. Based on their current export performance and export contracts, manufacturers are allowed to purchase inputs under Pakistan's 2021 Export Facilitation Scheme without paying a number of taxes and duties. Furthermore, the government has expanded special economic zones, which provide financial benefits to Pakistani exporters.^{Footnote 59}

[155] According to the Pakistan Bureau of Statistics, the government strategy has contributed to a rise in exports of around $3 billion in a year. The Government of Pakistan has set an export goal of USD $100 billion by the end of the fiscal year 2027-2028, up from USD $35 billion in 2023.^{Footnote 60}

[156] The complainant claims that Pakistan’s PET resin exports for 2021 and 2022 dipped because of the COVID-19 pandemic, but recovered to 2020 levels in 2023. Pakistan’s export volumes accounted for more than half the country’s total production in 2023.^{Footnote 61}

[157] The complainant argues that producers of PET resin in Pakistan are capable of quickly ramping up volumes to a given market in order to take advantage of pricing and demand gaps. For instance, they recently benefited from the EU’s anti-dumping duties imposed on PET resin imports from China, increasing exports by 276% between Q1 2023 and Q1 2024.^{Footnote 62}

[158] The complainant gives the example of Gatron and Gatronova, two producers of PET resin in Pakistan that heavily rely on export markets. Almost half of Gatron’s revenues are from export sales, while Gatronova claims to export to more than 45 countries. The complainant notes that Pakistan’s exports are likely to increase in 2024 and 2025 since an additional 108,000 MT of PET resin production capacity will come online in the near future.^{Footnote 63}

[159] The CBSA finds the complainant’s claim that producers of PET resin are export oriented to be reasonable. Furthermore, considering that producers in Pakistan have plans to increase their production capacity, the CBSA believes the volume of export is likely to increase in the near future. The CBSA recognizes that an increasing volume of imported dumped goods in Canada would cause further injury to the Canadian PET resin industry.

Increase in volume of dumped and subsidized goods

[160] The complainant points out that figures from Statistics Canada reveal that PET resin producers from the subject countries have been able to maintain a significant share of the Canadian market. The complainant goes on to say that it is reasonable to expect production surpluses in the subject countries to result in greater export volumes to Canada in the near future.^{Footnote 64}

[161] The complainant argues that PET resin imports from the subject countries have increased by 45% between 2021 and 2023. Imports of PET resin from China have increased each year since 2020 and account for 32% of total imports in Q1-Q3 2024. Imports from Pakistan accounted for 18% of total PET Resin imports during the same period. Furthermore, Canada was Pakistan’s second-largest PET resin export market after the US in each year from 2020 to 2023.^{Footnote 65}

[162] The complainant claims that the highest volume of imports from the subject countries arrived in the most recent periods, from 2023 to Q3 2024. Additionally, when comparing Q1-Q3 2023 to Q1-Q3 2024, imports of subject goods increased by 5%.^{Footnote 66}

[163] The CBSA notes that imports from Pakistan have decreased significantly since 2021 in favor of imports from China. Nevertheless, import volumes from Pakistan are still significant.

[164] The CBSA finds that the information summited by the complainant demonstrates that Canada continues to be a major export market for producers and exporters from China and Pakistan. Considering that certain exporters intend to increase their production capacity at a time when domestic demand in the subject countries remains weak, it is reasonable to assume that production surpluses in the subject countries will result in increased export volumes. Overall, the CBSA believes that these trends would threaten to cause injury if anti-dumping and countervailing duties are not imposed.

Persistent price undercutting

[165] The complainant reiterates that PET resin from the subject countries have entered Canada at low prices between Q4 2023 and Q3 2024. The complainant argues that their selling prices were significantly impacted by the price-depressing effect of imports from China and Pakistan. Even after reducing their prices, the complainant states that they have not been able to compete against the unfairly priced dumped and subsidized goods.^{Footnote 67}

[166] As previously presented by the complainant, the subject countries’ quarterly undercutting margins have been at their highest since 2023. The complainant submits that it is likely that imports from both subject countries will continue to have low prices and suppress prices in the Canadian market in the near future.^{Footnote 68}

[167] The complainant cites CZ Insights which reports that the profitability of Chinese PET resin exports has been worsening because of weak demand, oversupply and rising freight costs. While this was happening, exports of low price PET resin from China to Canada increased significantly. The complainant claims that when faced with adverse conditions in their home market, Chinese exporters will increase their sales to Canada at low prices. The complainant contends that given that oversupply in China is only predicted to intensify in the next two years, the detrimental effects of low-priced imports will most certainly persist.^{Footnote 69}

[168] In the injury section, the CBSA stated that the complainant’s claim of price undercutting was reasonable. This extends to the claim that PET resin entering the Canadian market from the subject countries will continue to be imported at unfairly low prices in the near future. Moreover, this will further increase the demand for PET resin from the subject countries. The CBSA finds that the Canadian industry will likely be harmed without protection against low-priced imports of PET resin from China.

Diversion of dumped and subsidized subject goods in response to anti-dumping and countervailing measures taken by other countries

[169] The complainant claims that the anti-dumping and countervailing measures imposed by other countries against PET resin and other similar goods are evidence that producers in China have a propensity to dump in export markets. To substantiate this claim, the complainant listed anti-dumping and countervailing investigations regarding PET resin and similar goods in several countries.^{Footnote 70}

[170] The complainant submits that exporters in China have also been found to be dumping and subsidizing PET film, sheet and strip in various countries. These goods share similar inputs, equipment and production processes with PET resin.^{Footnote 71}

[171] As a result of the increased trade barriers against PET film, sheet and strip, the complainant submits that the subject countries will likely divert their production to making subject goods for export to Canada.^{Footnote 72}

[172] The complaint cites Wood Mackenzie which reports that anti-dumping duties on PET resin from China are expected to lower imports into Europe and North America between 2024 and 2030. Furthermore, Wood Mackenzie also explains that as trade channels move away from protected markets, dumping of PET resin from China increased in Africa, Asia and Latin America. For example, Mexico and South Korea have placed temporary anti-dumping duties on PET resin produced in China. The complainant points out that the case of Mexico is particularly relevant since Canada is situated in the same geographic area and has a market of a similar size. Chinese PET resin exports that were previously heading for the Mexican market could easily be diverted to Canada.^{Footnote 73}

[173] The complaint reiterates that exporters of PET resin from Pakistan have a history of stepping in to cover gaps left by Chinese exporters who were forced to withdraw from specific export markets following the imposition of anti-dumping measures. Between Q1 2023 and Q1 2024, Pakistan's PET exports to the EU climbed by 276%, following the imposition of provisional anti-dumping duties by the EU on imports of PET resin from China. Likewise, after the US imposed anti-dumping duties on PET from China in 2016, Pakistan strengthened its market share in the US. The complainant argues that even if anti-dumping duties are imposed on PET resin from China, the domestic industry would continue to be threatened by increased volumes of imports from Pakistan.^{Footnote 74}

[174] The CBSA finds that the subject countries are likely to divert their excess production to the Canadian market if similar anti-dumping and countervailing measures imposed by other governments are not put in place in Canada. This diversion of dumped and subsidized PET resin threatens to cause injury to the domestic industry in the near future.

Attractiveness of the Canadian market

[175] According to the complainant, damages to the domestic PET resin industry will worsen over the next two years if Canada continues to be an attractive destination for PET resin exported from the subject countries.

[176] The complainant argues that the compounding effects of several factors will increase Canada's attractiveness amongst PET resin producers. Worldwide overcapacity is growing more quickly than global demand, and at the same time, several countries are progressively limiting access to their PET resin market by imposing new trade restrictions. The complainant notes that the Canadian market is particularly vulnerable because it is the only North American market without trade restrictions against Chinese PET resin. As a result, it is likely that exporters in the subject countries will increase their export volume to Canada in 2025.^{Footnote 75}

[177] The CBSA finds that the information presented by the complainant suggests that the Canadian market will continue to be attractive to producers in the subject countries in the near future. The current absence of anti-dumping and countervailing duties may lead to a rise in the volume of PET resin being imported from the subject countries at dumped and subsidized prices and cause further injuries to the PET resin industry in Canada.

Product shifting and production imperative

[178] The complainant submits that all PET resin producers are capable of producing PET resin that is suitable for both textiles and bottles. By investing in specific equipment, a textile-grade PET manufacturer may decide to transform its production plant into a PET resin facility. As a result, the production capacity used to make textile-grade PET can be repurposed to make the subject goods. Although textile-grade PET cannot be used in place of bottle-grade PET resin, both products are made using the same inputs.^{Footnote 76}

[179] The complainant argues that the PET resin business is capital-intensive and if producers can continue to operate at their marginal cost of production, they have an incentive to preserve their capital investment by maintaining output quantities. As such, if demand for textile grade PET is low, producers are incentivized to shift production to bottle grade PET resin to help them maintain production level.^{Footnote 77}

[180] The complainant reports that several companies in China and Pakistan are producing textile-grade PET resin and some of these producers are also producing bottle-grade PET resin. For example, Pakistan Synthetics Limited (PSL), converted a textile-grade facility in order to produce PET resin in 2016. In response to domestic market pressure, PSL chose to transform its facility and produce PET resin instead of textile-grade PET. The complainant also submitted a list of major textile-grade resin producers in the subject countries.^{Footnote 78}

[181] The complainant claims that there are some signs that product shifting in Pakistan may increase. Over the last two years, the export-oriented textile industry in Pakistan has been severely impacted. According to information submitted by the complainant, exports of textile products from Pakistan have decreased by 16% between 2022 and 2023 and several textile companies have closed. Furthermore, domestic producers are facing intense competition from importers. According to one Pakistani producer, Ibrahim Fibres Limited, Pakistan has seen higher level of imports in 2023 despite tariffs being imposed on textile-grade PET resin from several countries.^{Footnote 79}

[182] The CBSA finds that the information suggests that there is a potential for product shifting in Pakistan. The CBSA also finds that product shifting may lead to increased exports of subject goods into Canada in the future and thereby threaten to cause injury to the Canadian domestic industry. However, the CBSA finds that the potential of product shifting in China is less clear, and as a result, it doesn’t threaten to harm the Canadian domestic industry in the near future.

CBSA's conclusion: Threat of injury

[183] The complaint contains evidence that discloses a reasonable indication that there is a threat of injury to the PET resin industry in Canada. The information provided by the complainant indicates that global market conditions; subject countries market conditions; export-orientation of the subject countries; increase in volumes of dumped and subsidized goods; persistent price undercutting; diversion of dumped and subsidized subject goods in response to anti-dumping and countervailing measures taken by other countries; attractiveness of the Canadian market; product shifting and production imperative are collectively posing a threat to the Canadian industry.

Causal link: Dumping/subsidizing and injury/threat of injury

[184] The CBSA finds that the complainant has sufficiently linked the injury it has suffered to the alleged dumping and subsidizing of the subject goods imported into Canada. This injury includes price undercutting, price depression, lost sales, increase in volume of subject good imports, lost market share, impact on financial results and reduced employment.

[185] The complainant submitted that the continued dumping and subsidizing of goods from China and Pakistan will cause further injury to the Canadian domestic industry in the future. As discussed above, the CBSA is of the opinion that this allegation of threat of injury is reasonably supported.

[186] In summary, the CBSA is of the opinion that the information provided in the complaint has disclosed a reasonable indication that the alleged dumping and subsidizing have caused injury and is threatening to cause injury to the Canadian domestic industry.

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