RB2 2016 IN
Certain Concrete Reinforcing Bar
Statement of Reasons

[1] On June 30, 2016, the Canada Border Services Agency (CBSA) received a written complaint from ArcelorMittal Long Products Canada, g.p. (ArcelorMittal LCNA), located in Contrecoeur, Quebec, Gerdau Longsteel North America (Gerdau), located in Whitby, Ontario and AltaSteel Ltd. (AltaSteel), located in Edmonton, Alberta, (hereafter ‘the complainants’), alleging that imports into Canada of certain concrete reinforcing bar originating in or exported from the Republic of Belarus (Belarus), Chinese Taipei, the Hong Kong Special Administrative Region of the People’s Republic of China (Hong Kong), Japan, the Portuguese Republic (Portugal) and the Kingdom of Spain (Spain) (hereinafter “named countries” and “subject goods”) are being dumped. The complainants allege that the dumping has caused injury and is threatening to cause injury to the Canadian industry producing like goods.

[2] The complainants provided evidence to support the allegations that certain concrete reinforcing bar from Belarus, Chinese Taipei, Hong Kong, Japan, Portugal and Spain has been dumped. The evidence also discloses a reasonable indication that the dumping has caused injury and is threatening to cause injury to the Canadian industry producing like goods.

[3] On July 21, 2016, pursuant to paragraph 32(1)(a) of the Special Import Measures Act (SIMA), the CBSA informed the complainants that the complaint was properly documented. The CBSA also notified the governments of Belarus, Chinese Taipei, Hong Kong, Japan, Portugal and Spain that a properly documented complaint had been received.

[4] On August 19, 2016, pursuant to subsection 31(1) of SIMA, the CBSA initiated an investigation respecting the dumping of certain concrete reinforcing bar from the named countries.

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

[32] 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] In its past inquiries involving rebar, the CITT determined that domestically produced rebar constituted like goods to the goods at issue.^{Footnote 3} In particular, the CITT noted:

While rebar comes in a variety of sizes and can be either regular or of a weldable variety, the evidence indicates that rebar is a commodity-type product that is used to reinforce concrete. Further, the evidence indicates that imported rebar is interchangeable with domestically produced rebar. The Tribunal finds that domestically produced rebar is similar to the subject goods in terms of physical characteristics, has the same end uses and is substitutable.

Consequently, for the purposes of this inquiry, the Tribunal finds that rebar produced by the domestic industry, defined in the same manner as the subject goods, constitutes like goods to the rebar imported from the subject countries.^{Footnote 4}

[34] The complainants maintain that there has been no change of circumstances with respect to the criteria identified by the CITT in the previous proceedings. The CBSA is satisfied that the like goods and subject goods are commodity products that compete with one another in the Canadian marketplace, and are fully interchangeable.

[35] In addition, the complainants provided the following reasons to support that there is a single class of like goods that are analogous with the scope of subject goods:

In Rebar I, the issue of classes of goods was analyzed at length. The CITT determined there was a single class of goods. In particular, the CITT found that uncoated (or black) rebar and coated rebar constituted a single class of goods. The CITT noted that uncoated and coated rebar are manufactured the same way, have the same general end-use (i.e., concrete applications), must meet the same base ASTM standard which covers the “essential and defining characteristics of the product”, that there is downward substitutability of the coated rebar for applications that require only black rebar, that the price difference between uncoated and coated rebar was not significant, and that uncoated and coated rebar compete in the same market and are distributed by the same distributors or consumed by the same fabricators or customers.

These characteristics have not changed; coated and uncoated rebar continue to have the same physical and market characteristics. The complainants therefore submit that there is a single class of goods.^{Footnote 5} [Footnotes Omitted]

[36] Based on the CITT’s reasons in Rebar I Finding (NQ-2014-001), rebar produced by the domestic industry forms a single class of like goods to the subject goods. The CBSA agrees that all domestically produced rebar is “like goods” to the “subject goods” and forms a single class of goods for the purposes of this dumping investigation.

[37] The domestic industry is comprised of four producers. The complainants, ArcelorMittal LCNA, Gerdau and AltaSteel, represent almost all production of like goods in Canada, with the remainder being attributable to MANA, who supports the complaint.

[38] In Inquiry NQ-2014-001 involving Rebar I, the CITT also noted that Harris Rebar could be considered a producer of coated rebar. The CITT stated the following with respect to domestic production of like goods:

In this inquiry, it is manifest that the collective production of ArcelorMittal LCNA, AltaSteel and Gerdau accounts for a major proportion of the total domestic production of like goods.

The preponderance of the evidence on the Tribunal’s record indicates that the three domestic producers are responsible for the vast majority, if not all, of the production of uncoated rebar in Canada.

With respect to coated rebar, there is evidence that a rebar fabricator, Harris Rebar, is also a known producer of coated rebar. However, Harris Rebar is primarily a fabricator of rebar and, although the Tribunal has considered the information available on the company’s production volume, the Tribunal finds that the collective production of ArcelorMittal LCNA, AltaSteel and Gerdau accounts for almost all of the total domestic production of rebar (both coated and uncoated). It is therefore appropriate for the Tribunal to conclude that ArcelorMittal LCNA, AltaSteel and Gerdau constitute the domestic industry for the purposes of this inquiry.^{Footnote 6} [Footnotes Omitted]

[39] The complainants addressed the potential inclusion of Harris Rebar as a domestic producer in the complaint and indicated that Harris Rebar's sales of coated rebar are not significant in the rebar market in Canada. Further, since the input product used by Harris- i.e., rebar - is itself like or subject goods, the complainants consider the coating process to be a finishing operation rather than production of like goods.”^{Footnote 7}

[40] Based on the available evidence, the CBSA is satisfied that the complainants’ production of like goods constitutes almost all of the domestic production of like goods.

Standing

[41] Subsection 31(2) of SIMA requires that the following conditions for standing be met in order to initiate an investigation:

• 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
• 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.

[42] Since the complainants and MANA are the only producers of rebar in Canada, their combined production account for 100% of the total domestic production of like goods. Even if Harris Rebar’s sales of coated rebar are considered to constitute domestic production of like goods, the complaint would still be supported by producers comprising substantially all of the total production of like goods in Canada. Therefore, the CBSA is satisfied that the standing requirements pursuant to subsection 31(2) of SIMA have been met.

[43] According to the complainants, subject goods and like goods are distributed through the same channels and the conditions of competition apply to all rebar whether produced in the named countries or in Canada.^{Footnote 8}

[44] The domestic industry markets its rebar to customers across Canada. Rebar may be sold directly to rebar fabricators, or steel service centres/distributors. Rebar fabricators are the major link in the supply chain. They quote jobs to the construction sector, buy the steel, cut and bend to order and deliver to job sites.

[45] The complainants estimate that approximately 90% of market sales go directly to rebar fabricators. Service centres/distributors purchase rebar in a range of grades and sizes and stock the product for re-sale, primarily to smaller rebar fabricators. Canadian distributors and rebar fabricators may purchase domestically from the Canadian mills, from importers or from other distributors located in Canada or abroad. Service centres/distributors and rebar fabricators may also import directly from mills in the named countries.^{Footnote 9}

[46] The complainants estimated the domestic market by supplementing their own internal sales information with the information provided by MANA and publicly available import data obtained from Statistics Canada. Global Affairs Canada import permit data was used to estimate April and May 2016 import volumes.^{Footnote 10}

[47] The CBSA conducted its own independent review of imports of rebar from the CBSA’s (Facility Information Retrieval Management (FIRM)) database as per the HS classification codes under which the subject goods are imported from the named countries. In addition, B3 customs entry supporting documentation was requested from the Trade Compliance Division of the CBSA. The review of customs entry documentation resulted in substantial changes to the import statistics.

[48] It should be noted that for the purposes of a preliminary determination, the CBSA will further revise the import statistics based on information received from exporters and importers of the subject goods. This information will allow for the removal of any non-subject goods from the statistics while correcting any other errors that may be present in the FIRM data.

[49] The CBSA’s import data support the complainants’ claims that imports of subject goods into Canada from the named countries have been increasing and are not negligible.

[50] Detailed information regarding domestic production and the volume of imports of subject goods cannot be divulged for confidentiality reasons. The CBSA, however, has prepared the following table to show the estimated import share of subject goods in Canada.

[51] The complainants alleged that subject goods from Belarus, Chinese Taipei, Hong Kong, Japan, Portugal and Spain have been injuriously dumped into Canada. Dumping occurs when the normal value of the goods exceeds the export price to importers in Canada.

[52] Normal values are generally based on the domestic selling price of like goods in the country of export where competitive market conditions exist or on the full cost of the goods plus a reasonable amount for profits.

[53] The export price of goods sold to importers in Canada is generally the lesser of the exporter’s selling price and the importer’s purchase price, less all costs, charges, and expenses resulting from the exportation of the goods.

[54] Estimates of normal value and export price by both the complainants and the CBSA are explained as follows.

[77] 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 must terminate the investigation with respect to goods of that country.

[78] 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 and that are of the same description as the goods.

[79] The table below indicates that the estimated import volume for each of the named countries is greater than 3% of total imports during the POI.

[80] The complainants alleged that the subject goods have been dumped and that such dumping has caused and is threatening to cause material injury to the rebar industry in Canada.

[81] SIMA refers to material injury caused to the domestic producers of like goods in Canada. The CBSA has accepted that rebar produced by the complainants are like goods to those imported from the named countries.

[82] In support of their allegations, the complainants provided evidence of price undercutting, erosion and suppression; lost sales and market share; reduced profits; and reduced production and capacity utilization.

[99] The complaint contains reasonable evidence regarding the threat of injury due to increasing import volumes of subject goods from the named countries. The complainants submit that massive excess capacity in the named countries, a soft market, international conditions, relatively high prices in the Canadian market, vulnerability of the Canadian industry based on recent financial performance and the demonstrated propensity of the named countries to dump steel clearly demonstrate that there is a reasonable indication that subject goods threaten the domestic industry with injury.

[100] Without protection, the complainants believe that the domestic industry will be threatened by imports of subject goods from the named countries. The complainants state that there are two major global developments currently affecting the market for rebar, each of which increases the threat of injury posed by the subject goods to the domestic industry. First, the global economic outlook is weak and the market for rebar is still recovering from the global economic crisis. This global weakening is having a significant impact on the pricing and demand for the subject goods. Second, there is presently massive global overcapacity in the market for rebar, driven primarily by producers in China.

[101] The CBSA agrees that the evidence shows that global economic outlook is generally weak and the market for rebar is pressured by massive global overcapacity in the steel industry. Furthermore, the CBSA agrees that the evidence shows that current market conditions in Asia and Europe are likely to lead rebar producers to turn to export markets, thereby threatening injury to the Canadian domestic industry.

[102] As to the named countries’ market conditions, the complainants submitted that their economies are generally weak and slowing. In regards to rebar, the complainants indicated that some named countries have forecasts indicating increases in production volumes, supply imbalances, and excess production capacity.^{Footnote 29}

[103] The CBSA agrees that the evidence shows that market conditions in the named countries may lead rebar producers to focus on export markets, thereby threatening injury to the Canadian domestic industry.

[104] In regards to the Canadian market conditions, Canada’s economy is expected to experience slow growth through 2017.^{Footnote 30} Similarly, rebar demand in Canada is forecasted to grow at a slow pace over the next few years.^{Footnote 31} Additionally, as a commodity product, price is the primary factor in rebar purchasing decisions. The steel industry itself is capital intensive in nature, requiring high capacity utilization rates to cover fixed costs. Given this combination of factors, the CBSA believes that the pricing pressures on the Canadian domestic industry will continue in the near future.

[105] Current evidence indicates that the combined current excess capacity of Chinese Taipei, Japan and Spain is approximately 9 million MT.^{Footnote 32} Further, while production levels are showing growth, rebar demand is expected to remain weak in the named countries. As this trend is expected to continue through 2016, the complainants contend that subject country rebar producers will seek out new export markets including Canada.

[106] The complainants submit that active sales in Canada by the named countries indicate existing channels of distribution, and therefore, increased risk of dumped subject goods. Based on the evidence provided, the CBSA concurs with this assessment.

[107] The complainants contend that Canada is an attractive market for producers facing difficult market conditions in their home markets and traditional export markets. Consequently, the named countries will continue to export significant volumes of dumped goods to Canada and that these dumped goods will cause injury in the Canadian domestic industry.

[108] Relative pricing of rebar in different international markets is a key factor when considering the likely volume of dumped subject goods from the named countries. As Canada’s prices for rebar are generally higher relative to other regions in the world, the complainants submit that the named countries are likely to continue to export significant volumes of rebar to Canada in the near term.

[109] The CBSA believes that the higher Canadian market prices combined with the named countries excess capacity and weakening home market demand described above, indicate that rebar exporters from the named countries are likely to continue to export substantial volumes of subject goods to the Canadian market.

[110] The complainants provided a list of findings by Canada against Chinese Taipei and Japan as evidence that certain producers have a propensity to dump to Canada. They also provided a list of trade remedy measures or decisions pending by other countries on various steel products, including rebar, against the named countries.^{Footnote 33}

[111] The complainants maintain that the presence of these trade remedies further increases the likelihood that these producers would export significant volumes of dumped rebar into Canada in the absence of a finding. Of note is the current European Union investigation related to rebar from Belarus and the final dumping determinations made by Australia related to rebar from Chinese Taipei and Spain.

[112] The CBSA agrees that certain named countries that are subject to dumping measures with respect to steel in Canada and other markets, including rebar, increases the likelihood of dumped rebar into Canada.

[113] The complainants state that the volume of rebar imports from the named countries increased from nil in 2013 to 33,301 MT in 2014, increasing to 239,023 MT in 2015.^{Footnote 34} In Q1 2016, imports from the named countries totalled 16,965 MT, representing slightly more than half of the total 2014 imports from these countries.^{Footnote 35} April 2016 data indicates that export shipments of subject goods have continued to increase exponentially, reaching 98,650 MT in April alone.^{Footnote 36}

[114] The share of imports and the share of the Canadian market by the named countries have increased since 2013. Given the evidence provided by the complainants and the evidence available to the CBSA, the CBSA agrees that the volumes of imported subject goods will likely continue to increase.

[115] When the importations of subject goods enter the Canadian domestic market at prices that are likely to have a depressing or suppressing effect on the price of like goods and are likely to increase demand for further imports of the goods, this results in another threat of injury factor. The prices of subject goods from the named countries have, on average, been consistently lower than those of the complainants. The complainants submit that this is a clear indication that injurious dumping will continue in the absence of a finding.

[116] The complaint contains reasonable evidence regarding the threat of injury due to increasing import volumes of subject goods from the named countries. The increasing volumes of imports of subject goods at prices that substantially undercut domestic producer pricing will continue to depress or supress domestic prices and threaten to take market share from the Canadian producers. The CBSA is of the view that the adverse volume and price effects of increasing dumped imports threatens to cause domestic producers to suffer further decline in production, capacity utilization, market share, prices, operating income, return on investment and other indicators of material injury.

[117] The CBSA finds that the complainants have sufficiently linked the injury they have suffered to the alleged dumping of subject goods imported into Canada. The injury includes price undercutting, erosion and suppression; lost sales and market share; reduced profits, and reduced production and capacity utilization.

[118] The injury relates directly to the price advantage the apparent dumping has produced between the imports of subject goods from the named countries and the like goods produced in Canada. Evidence has been provided to establish this link in the form of price quotes, market data, production figures and financial information related to their production and sales of like goods in Canada.

[119] The CBSA also finds that the complainants have provided sufficient evidence that there is a reasonable indication that continued alleged dumping of subject goods imported into Canada threaten to cause injury to the Canadian industry producing these goods.

[120] Based on information provided in the complaint, in combination with the research and analysis conducted by the CBSA, the CBSA is of the opinion that there is evidence that certain concrete reinforcing bar originating in or exported from the Republic of Belarus, Chinese Taipei, the Hong Kong Special Administrative Region of the People’s Republic of China, Japan, the Portuguese Republic and the Kingdom of Spain imported into Canada has been dumped, and there is a reasonable indication that such dumping has caused and is threatening to cause injury to the Canadian industry. As a result, a dumping investigation was initiated in respect of this matter under subsection 31(1) of SIMA on August 19, 2016.

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

[122] The CBSA requested information from all potential exporters and importers to determine whether or not subject goods imported into Canada, during the period of investigation of June 1, 2015 to May 31, 2016, were dumped. The information requested will be used to determine the normal values, export prices and margins of dumping, if any.

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

[124] The CITT will conduct a preliminary inquiry to determine whether the evidence discloses a reasonable indication that the alleged dumping of the goods have caused or are threatening to cause injury to the Canadian industry. The CITT must make its decision on or before the 60th day after the date of the initiation of the investigation. If the CITT concludes that the evidence does not disclose a reasonable indication of injury to the Canadian industry, the investigation will be terminated.

[125] If the CITT finds that the evidence discloses a reasonable indication of injury to the Canadian industry and the CBSA investigation preliminarily reveals that the goods have been dumped, the CBSA will make a preliminary determination of dumping within 90 days after the date of the initiation of the investigation, by November 17, 2016. Where circumstances warrant, this period may be extended to 135 days from the date of the initiation of the investigation.

[126] Previously, under section 35 of SIMA, if, at any time before making a preliminary determination, the CBSA was satisfied that there was insufficient evidence of dumping to justify proceeding, the margin of dumping of the goods of a country was insignificant or the actual and potential volume of dumped goods of a country was negligible, the CBSA would terminate the investigation with respect to goods of that country.

[127] On June 22, 2016, SIMA was amended so that now if, at any time before the CBSA makes a preliminary determination, the CBSA is satisfied that that the volume of goods of a country is negligible, the investigation will be terminated.

[128] Imports of subject goods released by the CBSA on and after the date of preliminary determination of dumping, other than a preliminary determination in which a determination was made that the margin of dumping is insignificant, may be subject to provisional duty in an amount not greater than the estimated margin of dumping on the imported goods.

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

[130] After the preliminary determination, if, in respect of goods of any country, the CBSA’s investigation reveals that imports of the subject goods have not been dumped or that the margin of dumping is insignificant, the investigation will be terminated.

[131] If a final determination of dumping is made, the CITT will continue its inquiry and hold public hearings into the question of material injury to the Canadian industry. The CITT is required to make a finding with respect to the goods to which the final determination of dumping applies, not later than 120 days after the CBSA’s preliminary determination.

[132] In the event of an injury finding by the CITT, imports of subject goods released by the CBSA after that date will be subject to anti-dumping duty equal to the applicable margin of dumping on the imported goods.

[133] When the CITT conducts its inquiry concerning injury to the Canadian industry, it may consider if dumped goods that were imported close to or after the initiation of an investigation constitute massive importations over a relatively short period of time and have caused injury to the Canadian industry.

[134] Should the CITT issue such a finding, anti-dumping duties may be imposed retroactively on subject goods imported into Canada and released by the CBSA during the period of 90 days preceding the day of the CBSA making a preliminary determination of dumping.

[135] After a preliminary determination of dumping by the CBSA, an exporter may submit a written undertaking to revise selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated. An acceptable undertaking must account for all or substantially all of the exports to Canada of the dumped goods.

[136] Interested parties may provide comments regarding the acceptability of undertakings within nine days of the receipt of an undertaking by the CBSA. The CBSA will maintain a list of parties who wish to be notified should an undertaking proposal be received. Those who are interested in being notified should provide their name, telephone and fax numbers, mailing address and e-mail address to one of the officers identified in the “Information” section of this document.

[137] If an undertaking were to be accepted, the investigation and the collection of provisional duties would be suspended. Notwithstanding the acceptance of an undertaking, an exporter may request that the CBSA’s investigation be completed and that the CITT complete its injury inquiry.

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

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

[140] To be given consideration in this phase of this investigation, all information should be received by the CBSA by January 5, 2017.

[141] Any information submitted to the CBSA by interested parties concerning this investigation is considered to be public information unless clearly marked “confidential.” Where the submission by an interested party is confidential, a non-confidential version of the submission must be provided at the same time. This non-confidential version will be made available to other interested parties upon request.

[142] Confidential information submitted to the CBSA will be disclosed on written request to independent counsel for parties to these proceedings, subject to conditions to protect the confidentiality of the information. Confidential information may also be released to the CITT, any court in Canada, or a WTO/NAFTA dispute settlement panel. Additional information respecting the Directorate’s policy on the disclosure of information under SIMA may be obtained by contacting one of the officers identified below or by visiting the CBSA’s Web site.

[143] The investigation schedule and a complete listing of all exhibits and information are available at http://www.cbsa-asfc.gc.ca/sima-lmsi/i-e/menu-eng.html. The exhibits listing will be updated as new exhibits and information are made available.

[144] This Statement of Reasons has been provided to persons directly interested in these proceedings. It is also posted on the CBSA’s Web site at the address below. For further information, please contact the officers identified as follows: