Statement of reasons—initiation of investigations: Wind towers (WT 2023 IN)

Decision

Ottawa, May 5, 2023

Pursuant to subsection 31(1) of the Special Import Measures Act, the Canada Border Services Agency initiated investigations on April 21, 2023, respecting the alleged injurious dumping and subsidizing of utility wind towers and utility wind tower sections originating in or exported from China.

Summary

[1] On March 1, 2023, the Canada Border Services Agency (CBSA) received a written complaint from Marmen Inc. (Trois-Rivières, QC) and Marmen Énergie Inc. (Matane, QC) (collectively “Marmen”) (hereinafter, “the complainant”) alleging that imports of utility wind towers and utility wind tower sections (wind towers) originating in or exported from the People’s Republic of China (China) have been dumped and subsidized. The complainant alleged that the dumping and subsidizing have caused injury and are threatening to cause injury to Canadian producers of wind towers.

[2] On March 22, 2023, pursuant to paragraph 32(1)(a) of the Special Import Measures Act (SIMA), the CBSA informed the complainant that the complaint was properly documented. On March 31, 2023, the CBSA informed the Government of China (GOC) that a properly documented complaint had been filed. The GOC was provided with the non-confidential version of the subsidy complaint and was invited for consultations pursuant to Article 13.1 of the Agreement on subsidies and countervailing measures, prior to the initiation of the subsidy investigation. The CBSA did not receive any request for consultations.

[3] The complainant provided evidence to support the allegations that certain wind towers from China have been dumped and subsidized, as well as evidence that discloses a reasonable indication that the dumping and subsidizing have caused injury or are threatening to cause injury to the Canadian industry producing like goods.

[4] On April 21, 2023, pursuant to subsection 31(1) of SIMA, the CBSA initiated investigations respecting the dumping and subsidizing of certain wind towers from China.

Interested parties

Complainant

[5] The name and address of the complainant is as follows:

Marmen Inc.
557 rue des Érables
Trois-Rivières, QC  G8T 8Y8

Marmen Énergie Inc.
1905 av. du Phare O
Matane, QC  G4W 3N1

[6] Marmen was founded in 1972. Marmen is a manufacturing partner of original equipment manufacturers in the aviation, oil and gas, hydropower, steam and gas turbines, mining and steel mills, wind power, nuclear power, infrastructure, space, defense and military industries.^{Footnote 1}

Other producers

[7] The complainant stated that they are the only producer of wind towers in Canada.^{Footnote 2} The CBSA did its own research, but could not identify any other producers in Canada.

Trade union

[8] The complainant stated that their employees are not represented by a trade union.^{Footnote 3} As Marmen is the only known producer of wind towers in Canada, there are no known trade unions.

Exporters

[9] The CBSA identified 83 potential exporters of the subject goods from CBSA import documentation and from information submitted in the complaint. All of the potential exporters were asked to respond to the CBSA’s dumping, subsidy, and section 20 requests for information (RFI).

Importers

[10] The CBSA identified 36 potential importers of the subject goods from CBSA import documentation and from information submitted in the complaint. All of the potential importers were asked to respond to the CBSA’s importer RFI.

Government

[11] Upon initiation of the investigations, the GOC was sent the CBSA’s government subsidy RFI and the CBSA’s government section 20 RFI.

[12] For the purposes of these investigations, the GOC refers to all levels of government, i.e., federal, central, provincial/state, regional, municipal, city, township, village, local, legislative, administrative or judicial, singular, collective, elected or appointed. It also includes any person, agency, enterprise, or institution acting for, on behalf of, or under the authority of, or under the authority of any law passed by, the government of that country or that provincial, state or municipal or other local or regional government.

Product information

The Canadian industry

Evidence of dumping

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

[40] Normal values are generally based on the domestic selling price of like goods in the country of export where competitive market conditions exist or as 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.

[41] The complainant made the allegation that the wind tower sector in China may not be operating under competitive market conditions and as such, the domestic market for wind towers may not be relied upon for the purpose determining normal values. Accordingly, the complainant submitted that normal values should be determined under section 20 of SIMA.

[42] 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.

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

Section 20 allegations

[65] Section 20 is a provision of SIMA that may be applied to determine the normal value of goods in a dumping investigation where certain conditions prevail in the domestic market of the exporting country. In the case of a prescribed country under paragraph 20(1)(a) of SIMA, it is applied where, in the opinion of the CBSA, the government of that country substantially determines domestic prices and there is sufficient reason to believe that the domestic prices are not substantially the same as they would be in a competitive market.^{Footnote 23}

[66] The provisions of section 20 are applied on a sector basis rather than on the country as a whole. The sector reviewed will normally only include the industry producing and exporting the goods under investigation.

[67] The CBSA initiates dumping investigations on the presumption that section 20 is not applicable to the sector under investigation unless there is information that suggests otherwise.

[68] A section 20 inquiry refers to the process whereby the CBSA collects information from various sources in order to form an opinion as to whether the conditions described under subsection 20(1) of SIMA exist with respect to the sector under investigation. Before initiating an inquiry under section 20, the CBSA must first analyze the information submitted in the complaint and the evidence it has gathered independently to determine if it is sufficient to warrant the initiation of an inquiry.

[69] The complainant alleges that the conditions described in section 20 of SIMA prevail in regards to the wind tower sector in China. That is, the complainant alleges that this particular industry sector in China does not operate under competitive market conditions and consequently, wind tower prices established in the domestic markets in China would not be reliable for purposes of determining normal values.^{Footnote 24}

[70] The complaint included a variety of evidence to support the claim that the GOC substantially determines domestic prices of wind towers in the country and that the prices are substantially different than they would be in a competitive market. Specifically, the complainant provided evidence of state-ownership in the wind power industry sector impacting the consumption of subject goods in China, state-ownership and subsidization in the wind tower sector, and state-ownership and subsidization in the steel industry, which is the primary input in the production of wind towers.

[71] The complainant also cited specific policies implemented by the GOC, such as China’s 14th Five-Year Plan for National Economic and Social Development and Long-Range Objectives for 2035; 14th Five Year Renewable Energy Plan; Made in China 2025; 14th Five-Year Plan for Circular Economy Development; and the Iron and Steel Industry Adjustment and Upgrade Plan.^{Footnote 25}

[72] Based on its own analysis, the CBSA believes that there is reasonable evidence to support an inquiry into the allegations that the measures taken by the GOC substantially influence prices in the wind tower sector in China, and that the prices are substantially different than they would be in a competitive market.

[73] Consequently, on April 21, 2023, the CBSA included in its investigation, a section 20 inquiry in order to determine whether the conditions set forth in paragraph 20(1)(a) of SIMA prevail in the wind tower sector in China.

[74] As part of this section 20 inquiry, the CBSA sent section 20 RFIs to all potential producers and exporters of wind towers in China, as well as to the GOC, requesting detailed information related to the wind tower sector in China.

[75] For the purposes of obtaining information necessary to calculate normal values pursuant to subparagraph 20(1)(c) of SIMA, the CBSA requested information from producers in surrogate countries. As such, the CBSA has selected Mexico, India, Indonesia, and South Korea as potential surrogate countries and has sent questionnaires to known producers of wind towers in these countries.

[76] The CBSA selected Mexico, India, Indonesia, and South Korea as surrogate countries due to their domestic production of wind towers, economic development, and are market-based economies.

[77] Importers will be requested to provide information on sales of like goods produced in the surrogate countries, in the event that normal values must be determined under paragraph 20(1)(d) of SIMA.

[78] In the event that the CBSA forms an opinion that domestic prices of wind towers in China are substantially determined by the government, and there is sufficient reason to believe that the domestic prices are not substantially the same as they would be if they were determined in a competitive market, the normal values of the goods under investigation will be determined, pursuant to paragraph 20(1)(c) of SIMA, where such information is available, on the basis of the domestic selling prices or the aggregate of the cost of production, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits of like goods sold by producers in any country designated by the CBSA and adjusted for price comparability; or, pursuant to paragraph 20(1)(d) of SIMA, where such information is available, on the basis of the selling price in Canada of like goods produced and imported from any country designated by the CBSA and adjusted for price comparability.

Evidence of subsidizing

[79] In accordance with section 2 of SIMA, a subsidy exists where there is a financial contribution by a government of a country other than Canada that confers a benefit on persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of goods. A subsidy also exists in respect of any form of income or price support within the meaning of Article XVI of the General Agreement on Tariffs and Trade, 1994, being part of Annex 1A to the World Trade Organization (WTO) Agreement that confers a benefit.

[80] Pursuant to subsection 2(1.6) of SIMA, a financial contribution exists where:

1. practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities
2. amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not collected
3. the government provides goods or services, other than general governmental infrastructure, or purchases goods or
4. the government permits or directs a non-governmental body to do anything referred to in any of paragraphs (a) to (c) above where the right or obligation to do the thing is normally vested in the government and the manner in which the non-governmental body does the thing does not differ in a meaningful way from the manner in which the government would do it.

[81] A state-owned enterprise (SOE) may be considered to constitute “government” for the purposes of subsection 2(1.6) of SIMA if it possesses, exercises, or is vested with, governmental authority. Without limiting the generality of the foregoing, the CBSA may consider the following factors as indicative of whether the SOE meets this standard: 1) the SOE is granted or vested with authority by statute; 2) the SOE is performing a government function; 3) the SOE is meaningfully controlled by the government; or 4) some combination thereof.

[82] If a subsidy is found to exist, it may be subject to countervailing measures if it is specific. A subsidy is considered to be specific when it is limited, in law or in fact, to a particular enterprise or is a prohibited subsidy. An “enterprise” is defined under SIMA as also including a “group of enterprises, an industry and a group of industries.” Any subsidy which is contingent, in whole or in part, on export performance or on the use of goods that are produced or that originate in the country of export is considered to be a prohibited subsidy and is, therefore, specific according to subsection 2(7.2) of SIMA for the purposes of a subsidy investigation.

[83] In accordance with subsection 2(7.3) of SIMA, notwithstanding that a subsidy is not specific in law, a subsidy may also be considered specific in fact, having regard as to whether:

• there is exclusive use of the subsidy by a limited number of enterprises
• there is predominant use of the subsidy by a particular enterprise
• disproportionately large amounts of the subsidy are granted to a limited number of enterprises and
• the manner in which discretion is exercised by the granting authority indicates that the subsidy is not generally available

[84] For purposes of a subsidy investigation, the CBSA refers to a subsidy that has been found to be specific as an “actionable subsidy,” meaning that it is countervailable.

Evidence of injury

[98] The complainant alleges that the subject goods have been dumped and subsidized and that such dumping and subsidizing have caused and are threatening to cause material injury to the wind tower industry in Canada.

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

[100] In support of its allegations, the complainant provided evidence of: increased volume of subject goods and lost market share, lost sales, price undercutting, price depression, reduced profitability, suppressed capacity utilization, reduction of employment and insufficient return on investment.^{Footnote 29}

Threat of injury

[121] The complainant alleges that the dumped and subsidized goods threaten to cause further material injury to the domestic producer of wind towers. The complainant provided the following information to support the allegation that imports of subject goods threaten to cause further injury to the Canadian industry.

Scope of the investigations

[170] The CBSA is conducting investigations to determine whether the subject goods have been dumped and/or subsidized.

[171] The CBSA has requested information from all potential exporters and importers to determine whether or not subject goods imported into Canada during the POI of April 1, 2021 to March 31, 2023 were dumped. The information requested will be used to determine the normal values, export prices and margins of dumping, if any. The CBSA also requested information from the GOC with respect to the possibility that the conditions of section 20 of SIMA exist in the wind tower sector in China.

[172] The CBSA has also requested information from the GOC and all potential producers/exporters to determine whether or not subject goods imported into Canada during the POI of April 1, 2021 to March 31, 2023 were subsidized. The information requested will be used to determine the amounts of subsidy, if any.

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

Future action

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

[175] If the CITT finds that the evidence discloses a reasonable indication of injury to the Canadian industry and the CBSA’s preliminary investigations reveal that the goods have been dumped and/or subsidized, the CBSA will make preliminary determinations of dumping and/or subsidizing within 90 days after the date of the initiation of the investigations, by July 20, 2023. Where circumstances warrant, this period may be extended to 135 days from the date of the initiation of the investigations.

[176] Under section 35 of SIMA, if, at any time before making a preliminary determination, the CBSA is satisfied that the volume of goods of a country is negligible, the investigation will be terminated with respect to goods of that country.

[177] Imports of subject goods released by the CBSA on and after the date of preliminary determinations of dumping and/or subsidizing, other than goods of the same description as goods in respect of which a determination was made that the margin of dumping of, or the amount of subsidy on, the goods is insignificant, may be subject to provisional duty in an amount not greater than the estimated margin of dumping and/or the estimated amount of subsidy on the imported goods.

[178] Should the CBSA make preliminary determinations of dumping and/or subsidizing, the investigations will be continued for the purpose of making final decisions within 90 days after the date of the preliminary determinations.

[179] After the preliminary determinations, if, in respect of goods of a particular exporter, the CBSA’s investigations reveal that imports of the subject goods from that exporter have not been dumped or subsidized, or that the margin of dumping or amount of subsidy is insignificant, the investigation(s) will be terminated in respect of those goods.

[180] If final determinations of dumping and/or subsidizing are 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 determinations of dumping and/or subsidizing apply, not later than 120 days after the CBSA’s preliminary determinations.

[181] 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 and countervailing duty equal to the amount of subsidy on the imported goods. Should both anti-dumping and countervailing duties be applicable to subject goods, the amount of any anti-dumping duty may be reduced by the amount that is attributable to an export subsidy.

Retroactive duty on massive importations

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

[183] Should the CITT issue such a finding, anti-dumping and countervailing 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 preliminary determinations of dumping and/or subsidizing.

[184] In respect of importations of subsidized goods that have caused injury, however, this provision is only applicable where the CBSA has determined that the whole or any part of the subsidy on the goods is a prohibited subsidy, as explained in the previous “Evidence of subsidizing” section. In such a case, the amount of countervailing duty applied on a retroactive basis will be equal to the amount of subsidy on the goods that is a prohibited subsidy.

Undertakings

[185] After a preliminary determination of dumping by the CBSA, other than a preliminary determination in which a determination was made that the margin of dumping of the goods is insignificant, an exporter may submit a written undertaking to revise selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated.

[186] Similarly, after the CBSA has rendered a preliminary determination of subsidizing, a foreign government may submit a written undertaking to eliminate the subsidy on the goods exported or to eliminate the injurious effect of the subsidy, by limiting the amount of the subsidy or the quantity of goods exported to Canada. Alternatively, exporters with the written consent of their government may undertake to revise their selling prices so that the amount of the subsidy or the injurious effect of the subsidy is eliminated.

[187] An acceptable undertaking must account for all or substantially all of the exports to Canada of the dumped or subsidized goods. Interested parties may provide comments regarding the acceptability of undertakings within nine days of the receipt of an undertaking by the CBSA. The CBSA will maintain a list of parties who wish to be notified should an undertaking proposal be received. Those who are interested in being notified should provide their name, telephone number, mailing address and email address to one of the officers identified in the “Contact us” section of this document.

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

Publication

[189] Notice of the initiation of these investigations is being published in the Canada Gazette pursuant to subparagraph 34(1)(a)(ii) of SIMA.

Contact us

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

[191] To be given consideration in these investigations, all information should be received by the CBSA by August 29, 2023, at noon.

[192] Any information submitted to the CBSA by interested parties concerning these investigations 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.

[193] Confidential information submitted to the CBSA will be disclosed on written request to independent counsel for parties to these proceedings, subject to conditions to protect the confidentiality of the information. Confidential information may also be released to the CITT, any court in Canada, or a WTO or Canada-United States-Mexico Agreement (CUSMA) dispute settlement panel. Additional information respecting the CBSA’s policy on the disclosure of information under SIMA may be obtained by contacting one of the officers identified below or by visiting the CBSA’s website.

[194] The schedule of the investigations and a complete listing of all exhibits and information are available. The exhibit listing will be updated as new exhibits and information are made available.

[195] For further information, please contact the officers identified as follows:

Contact us

• Telephone:
• Ted Chester: 343-553-1888
• Nalong Manivong: 343-549-0429

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

Appendix 1: Description of identified programs

Evidence provided by the complainant and obtained by the CBSA suggests that the Government of China may have provided support to exporters/producers of subject goods in the following manner.

Category 1: Preferential loans and loan guarantees

Program 1: Loans from state-owned banks at preferential rates

This program relates to government loans at a preferential rate of interest. The benefit provided in this case is a lower rate of interest than would otherwise be available if the enterprises had to obtain a non-guaranteed commercial loan (i.e. the benchmark non-guaranteed commercial loan). Financial institutions may be considered to constitute “government” if they possess, exercise or are vested with government authority, which may be indicated by the following factors:

• Where a statue or other legal instrument expressly vests government authority in the entity concerned
• Evidence that an entity is, in fact, exercising governmental functions; and
• Evidence that a government exercises meaningful control over an entity

The CBSA has previously countervailed this program in mattresses, container chassis, decorative and other non-structural plywood (decorative plywood), cold-rolled steel and upholstered domestic seating.

In the investigation by the U.S. Department of Commerce (USDOC) in wind towers from China, it appears that they countervailed this program as “Policy Lending to the Renewable Energy Industry.”

The USDOC listed the following laws, decisions, and regulations as examples of the GOC’s implementation of plans for wind tower industry development and preferential policy lending.

1. Article 25 of the Renewable Energy Law: financial institutions are afforded discretion to offer preferential loans with a financial interest subsidy to certain renewable energy projects, provided that the project is listed in the national development guidance catalogue of the renewable energy industry and meet other loan requirements
2. National Development Reform Commission (“NDRC”) Directory Catalogue on Readjustment of Industrial Structure: contains a list of encouraged projects the GOC develops through loans and other forms of assistance, and two encouraged projects listed relates to wind power
3. Article 5 of the Decision of the State Council on Promulgating the Interim Provisions on Promoting Industrial Structure Adjustment for Implementation (Decision 40): The GOC proclaims support and development of renewable energy industries including the “speed up” of the development of wind power through policies and measures

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 2: Loan guarantees through the Government of China/SOE banks/public bodies

Assurance provided by the Government of China, a SOE bank or public (the guarantor) to assume the debt obligation of a borrower if that borrower defaults. A guarantee can be limited or unlimited, making the guarantor liable for only a portion or all of the debt.

The CBSA has previously countervailed this program in container chassis, decorative plywood, cold-rolled steel, upholstered domestic seating, large diameter carbon and alloy steel line pipe (large line pipe), FISC and line pipe.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 3: Debt and interest forgiveness on loans from state-owned banks

To stimulate the economy and support the development of key industries, the state-owned banks write off bad debts or interest owed by state-owned enterprises.

The CBSA has previously countervailed this program in mattresses, container chassis, seamless casing.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 4: Debt-to-equity swaps for less than fair market value

In this program, asset management companies formed by the Government of China are permitted to purchase “non-performing loans” from State-Owned Banks and then conduct debt-to-equity swap transactions with companies that are liable for the “non-performing loans” forgiving some or all of a company's debt in exchange for equity in the company.

The CBSA has previously countervailed this program in cold-rolled steel and oil country tubular goods (OCTG).

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to state-owned enterprises.

Program 5: Preferential export financing and export credit guarantee/insurance

The China Export & Credit Insurance Corporation (Sinosure) is a state funded policy oriented insurance company that was established to promote China’s foreign trade and economic cooperation. The China Exim Bank and Sinosure each provide export credit guarantees which, according to information from the Bank, have “played a key role in supporting Chinese companies to go global” and promoted “the export of new and high tech products.”

The CBSA has previously countervailed this program in mattresses, line pipe and upholstered domestic seating.

In the 2012 investigation by the USDOC into wind towers from China, it appears that they countervailed this program as “Financing Services Provided by the Export-Import Bank of China (aka Export Buyer's Credit Program).”

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e., amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not collected. The above confers a benefit to the exporter by way of reducing its financial costs upon obtaining loans from a financial institution, and the benefit is equal to the amount of the exemption/deduction. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 2: Grants and grant equivalents

Program 6: Insurance grants

This program constitutes local and provincial government reimbursement grants on credit insurance fees.

The CBSA has previously countervailed this program in mattresses, galvanized steel wire, seamless casing, octg, pup joints, stainless steel sinks, line pipe, large line pipe and upholstered domestic seating.

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 7: Design, research and development grants

A grant that provides financial aid for enterprises determined to have undertaken expenses in design or research and development.

Grants may be provided for the commercialization of technological innovation and research findings and to promote scientific and technological results.

The CBSA has previously countervailed this program in mattresses, sucker rods, copper tube, photovoltaic modules and laminates, OCTG, unitized wall modules, seamless casing, pup joints, decorative plywood and upholstered domestic seating.

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 8: Export development and performance grants

Companies in China receive such grants provided by the GOC to assist in the development of export markets or to recognize export performance.

For example, awards may also be provided to assist in marketing and export brand development and overseas investment. Other export awards may also be provided to enterprises that export high-tech products or achieve certain export volume. Financial subsidies may be provided for participations in trade exhibitions. Grants are provided for trade dispute expenses, the exportation of goods and increasing export value, and the International Service Outsourcing Industry.

The CBSA has previously countervailed this program in mattresses, sucker rods, OCTG, unitized wall modules, galvanized steel wire, aluminum extrusions, carbon steel welded pipe, steel grating, decorative plywood and upholstered domestic seating.

As per the Statement of Reasons (SOR) issued at the OCTG final determination, the program was established in the Circular of the Trial Measures of the Administration of International Market Development Funds for Small and Medium-Sized Enterprises Cai Qi No. 467, 2000, which came into force on October 24, 2000. The program was established to support the development of small and medium-sized enterprises, to encourage SMEs to join in the competition of international markets, to reduce the business risks of the enterprises, and to promote the development of the national economy. The granting authority is the Foreign Trade and Economic Department and the program is administered at the local levels.

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 9: Performance award grants

A grant that provides financial aid for enterprises with excellent performances.

Grants in the form of awards may be provided to major tax payers, enterprises who are recognized for their brands or trademarks in China.

Awards may be provided for recognition of contributions to the local economy.

The CBSA has previously countervailed this program in mattresses, seamless casing, aluminum extrusions, OCTG, pup joints, copper tube, line pipe and upholstered domestic seating.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 10: Reductions in land use and/or rental fees

This program provides for the reduction in land use fees and rental rates for a certain number of years. Examples of this program in action include: a document titled '[2003] No. 8 Preferential Supply of Land', in order to offset costs for industrial companies in the Ninghai Economic Development Zone; or similar initiatives in the Tianjin Binhai New Area and the Tianjin Economic and Technological Development Area.

The CBSA has previously countervailed this program in mattresses, stainless steel sinks, unitized wall modules, photovoltaic modules and laminates, seamless casing, OCTG, pup joints, line pipe, decorative plywood and upholstered domestic seating.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 11: Grant—Patent assistance/award

Based on the information available to the CBSA, this program was provided in several provinces, such as Guangdong, Shanghai and Jiangsu.

For example, the GOC’s document associated with this program for Guangdong province may include: “Administrative Measures of Patent Award of Guangdong Province.” In Guangdong province, this program was administered by the Intellectual Property Office of Guangdong, the Bureau of Personnel of Guangdong Province and municipal level authorities. The program was established to support improvement in technology innovation and to promote intellectual property.

In addition, the GOC document associated with this program for Shanghai may include: “The administrative measures regarding the financial support/subsidy for Patents by Shanghai.” In Jiangsu province, this program was administrated by Jiangsu Intellectual Property Office.

The CBSA has previously countervailed this program in mattresses, decorative plywood.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 12: Environment protection grant

These are grants provided by the GOC for the purposes of improving environmental performance, for example, monitoring and cleaning pollutants, improving energy efficiency, upgrading facilities to be more environmentally efficient, and waste water treatment. The grants are also provided to support various environmental conservation and energy-saving projects.

The CBSA has previously countervailed this program in mattresses and copper tube.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 13: Grants for the retirement of capacity

The GOC’s 12th Five-Year Plan for Energy Conservation and Emission Reduction calls for accelerating and eliminating “backward production capacity” in certain industrial sectors, including the elimination of 48 million MT of steel production. In 2013, the State Council issued the “Guiding Opinion on Resolving the Problem of Severe Excess Capacity,” which called for establishing special funds to accelerate the elimination of backwards capacity and to also support industries with excess production capacity.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 14: Grants for relocating production facilities

As part of the GOC’s 12th Five-Year Steel Development Plan, the PRC has been relocating urban based steel producers to locations outside of their current city. The GOC’s 12th Five-Year Plan for Energy Conservation and Emission Reduction calls for the relocation for “heavy polluting enterprises” and for measures to optimize the “regional spatial layout” of “key industries,” including the steel industry.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 15: Subsidies related to company/enterprise development and innovation

Available information indicates that the GOC has introduced several grants and incentives related to company and enterprise development and innovation grants and awards.

For example, the awards may be provided to encourage and support enterprises to develop new technologies. Grants may also be provided to encourage enterprises to upgrade business technologies and processes.

The CBSA has previously countervailed this program in mattresses and upholstered domestic seating.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 16: Subsidies related to employment, training and recruitment

Available information indicates that the GOC has introduced several grants and incentives designed to support job stabilization by assisting companies with unemployment insurance payments as well as supporting the recruitment, training and subsequent job security of their staff. Grants may also be provided to improve labor relations.

Subsidies may also be granted to companies that recruit recent graduates, youths and impoverished laborers. Subsidies may also be provided to agencies that monitor and analyze employment conditions/situations in an area.

The CBSA has previously countervailed this program in mattresses and upholstered domestic seating.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 17: Subsidies related to pandemic support

Available information indicates that the GOC has introduced several grants and incentives designed to support job stabilization and weather economic hardships experienced by exporters during the COVID-19 pandemic. This grant may also be provided to promote the resumption of work and production.

The CBSA has previously countervailed this program in mattresses and upholstered domestic seating.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 18: Subsidies related to quality & improvement

Available information indicates that the GOC has introduced several grants and incentives related to quality and improvement in production.

The CBSA has previously countervailed this program in mattresses and upholstered domestic seating.

For example, awards may be provided to encourage enterprises to upgrade the equipment and increase the production capacity as well as provide support to optimize production and sales process, and interconnect production and management data for enterprises; and improve efficiency.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 19: Subsidies related to science and technology

Available information indicates that the GOC has introduced several grants and incentives related to science and technology.

The CBSA has previously countervailed this program in mattresses and upholstered domestic seating.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 20: Subsidies related to social security

Available information indicates that the GOC has introduced several grants and incentives related to social security.

The CBSA has previously countervailed this program in mattresses and upholstered domestic seating.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 21: Subsidies related to talent and skills

Available information indicates that the GOC has introduced several grants and incentives related to talent and skills.

The CBSA has previously countervailed this program in mattresses and upholstered domestic seating.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 22: Subsidies to provide business support

Available information indicates that the GOC has introduced several grants and incentives related to providing business support.

The CBSA has previously countervailed this program in upholstered domestic seating.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 23: Subsidies for utilities for certain enterprises

Available information indicates that the GOC has introduced several grants and incentives related to utilities for specific enterprises classes.

The CBSA has previously countervailed this program in upholstered domestic seating.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 24: Subsidies for the establishment of non-manufacturing facilities

Available information indicates that the GOC has introduced several grants and incentives related to assistance in establishing non-manufacturing facilities.

The CBSA has previously countervailed this program in upholstered domestic seating.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 25: Special economic zones (SEZs) and other designated areas incentives

The complainant alleges that producers of wind towers established or located in the SEZ benefit from various incentives, including but not limited to, free currency exchange and free licenses.

Wind tower producers may avail themselves of grants/awards for investments, construction, expansion, development, upgrading, technological transformation and modernizing operations.

Wind tower producers may also benefit from the following subsidies: rent, employment, recruitment and training, social security, unemployment insurance, storage, transportation and logistics, refund or exemption of export duty.

Wind tower producers who establish or relocate headquarters in the SEZ, who achieve national and global brand recognition and rankings, who become publically listed on stock exchanges and who are involved in formulation of standards may also receive awards.

Wind tower producers may also receive tax refund for profits re-invested in SEZs and reimbursement for services fees charged for the commissioned withholding, collection and levying of tax payments.

In the investigation by the USDOC in Wind Towers from China, it appears that they countervailed the following programs:

• Support Funds for Construction of Project Infrastructure Provided by Administration Commission of Lianyungang Economic and Technology Development Zone (“LETDZ”) for the company’s investments within the LETDZ
• Award for Good Performance in Paying Taxes for top 20 income tax payers located in the LETDZ
• Award of Taicang City to Support Public Listing of Enterprises for company’s successful listing on the Shenzhen Stock Exchange and
• Award of Taicang City to Promote Development of Industrial Economy for the Three-year period 2010 to 2012

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to either enterprises in certain geographic areas.

Program 26: Financial/loan interest subsidy

The complainant alleges that wind tower producer may benefit from subsidies in the form of grants to assist in the payment of loans. The program was established to support technology improvement and innovation projects and industrial transformation and upgrading projects. Similar programs were established for importations of encouraged products and technology.

The CBSA has previously countervailed this program in cold-rolled steel, stainless steel sinks, silicon metal, galvanized steel wire, PET resin and copper tube, carbon steel and alloy steel line pipe and unitized wall modules.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 27: Grants for international certification

This grant is provided to help enterprises to obtain international product certification.

The CBSA has previously countervailed this program in photovoltaic modules.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 28: Grants to enterprises that store goods in logistics enterprises located in bonded warehouse and customs custody warehouses

The program was established on June 20, 2020 in order to develop the logistics of companies.

The CBSA has previously countervailed this program in container chassis.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 29: Grants for safety production

The program provides “a grant for safety production” to exporters that are considered “an advanced enterprise.

The CBSA has previously countervailed this program in copper tube.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 3: Preferential tax programs

Program 30: Corporate income tax exemption and/or reduction in special economic zones (SEZs) and other designated areas

This program was established under the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, which came into effect on July 1, 1991. The program was allegedly established to absorb investment in special economic zones (SEZs) and designated areas to take the lead in their economic development. The granting authority responsible for this program is allegedly the State Administration of Taxation and the program is administered by local tax authorities.

Under this program, it is alleged that an eligible enterprises may receive a reduced corporate income tax rate of 15%.

The complainant has alleged that there are several known wind tower producers to benefit from their location in SEZs. The complaint alleges that additional preferential tax programs are available in the various SEZs.

The CBSA has previously countervailed this program in aluminum extrusions, carbon steel welded pipe, OCTG, seamless casing, line pipe, and upholstered domestic seating.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to enterprises in certain geographic areas.

Program 31: Corporate income tax reduction for new high tech enterprises (“NHTE”)

Under Article 28.2 of the Enterprise Income Tax Law in China, companies designated as high- or new-technology enterprises (HNTEs) are entitled to a reduced income tax rate of 10 percent instead of the normal national corporate tax rate of 25 percent. The granting authority responsible for this program is alleged to be the State Administration of Taxation and the program is administered by local tax authorities. In its notification of subsidy programs to the WTO, the GOC listed this program.

The CBSA has previously countervailed this program in mattresses, FISC, line pipe, certain seamless casing, OCTG, pup joints, decorative plywood, upholstered domestic seating and container chassis.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to enterprises in certain industries.

Program 32: Municipal/local income or property tax reductions

This program covers reductions and exemptions in tax provided from municipal/local income tax units.

The CBSA has previously countervailed this program in mattresses and upholstered domestic seating.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 33: Preferential tax policies for foreign-invested enterprises (FIEs)

Despite the implementation of the new Enterprise Income Tax Law (EITL) in 2008, which officially superseded the old FIE Tax Law, FIEs have likely continued to benefit from various incentives that were provided under the older FIE Tax Law. Specifically, Article 9 of the FIE Tax Law delegates to China’s provincial and local governments the authority to provide exemptions and reductions of local income taxes for “productive” FIEs. Eligibility criteria vary by province and the relevant governmental authorities administer the application process.

The CBSA has previously countervailed this program in mattresses, pup joints and seamless casing. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to foreign-invested enterprises.

Program 34: Preferential tax policies related to research and investment

Under this program based on the 2008 corporate tax law, high- or new-technology enterprises may deduct 50 percent of their total R&D expenses from their taxable income. Eligible expenses include design costs, expenses for materials and fuel consumed through R&D activities, wages, salaries, and benefits for personnel engaged in R&D activities, depreciation expenses on instruments and equipment, and many other expenses.

The CBSA has previously countervailed this program in photovoltaic modules and laminates, seamless casing, OCTG, pup joints, decorative plywood, and upholstered domestic seating. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 35: Accelerated depreciation on fixed assets

The GOC listed this preferential tax treatment in their most recent notification of active subsidy programs to the WTO. This preferential tax treatment’s objective is to speed up industrial restructuring.

The granting authorities for this subsidy include the Ministry of Finance and the State Administration of Taxation, granted under the following legislation:

• Ministry of Finance Circular Cai Shui No. 75 of 2014
• Ministry of Finance Circular Cai Shui No. 106 of 2015
• Ministry of Finance Circular Cai Shui No. 54 of 2018
• Ministry of Finance Circular Cai Shui No. 66 of 2019

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 36: Corporate Income Tax Reduction for Newly Profitable Enterprises

The program provides “productive” enterprises that are scheduled to operate for more than 10 years a possible exemption from income tax for the first two years of profitability and income tax payments reduced by half the standard rate for the next three to five years.

The CBSA has previously countervailed this program in cold-rolled steel and sucker rods.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 37: Exemption from city maintenance and construction taxes and education fee surcharges for foreign-invested enterprises (FIEs)

The program was established in order to support the construction of offices for new residents.

The CBSA has previously countervailed this program in photovoltaic modules, rebar and PET resin.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 38: Income tax deductions for enterprises that recruit retired soldiers

The program was established on January 1, 2019 in order to “encourage employment for retired soldiers.”

The CBSA has previously countervailed this program in container chassis.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 4: Relief from duties and taxes

Program 39: Offsets to taxable income related to purchases of domestic machinery

Under this program, a tax credit up to 40% of the purchase price of domestic equipment may apply to the incremental increase in tax liability from the previous year. The legal bases of this program are the Provisional measures on enterprise income tax credit for investment in domestically produced equipment for technology renovation projects of July 1, 1999 and the Notice of the State Administration of Taxation on Stopping the Implementation of the Enterprise Income Tax Deduction and Exemption Policy of the Investments of an Enterprise in Purchasing Home-made Equipment, No. 52 [2008] of the State Administration of Taxation, effective January 1, 2008.

The CBSA has previously countervailed this program in aluminum extrusions, photovoltaic modules, laminates, seamless casing, OCTG, and pup joints.

In a recent investigation by the USDOC into Mattresses from China, it appears that they countervailed this program as “VAT Rebates on Domestically Produced Equipment.”

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 40: Exemption or refund of tariff and import value-added tax (VAT) for imported technologies and equipment

The program was established to absorb investment in SEZs and encourage districts to take the lead in development. The granting authority responsible for this program is the General Administration of Customs and this program is administered by local customs authorities. Under this program, machinery and equipment, spare parts, raw and semi-processed materials, means of transportation and other capital goods necessary for production that are imported by enterprises in SEZs are exempted from import duties.

The CBSA has previously countervailed this program in photovoltaic modules, laminates, unitized wall modules, seamless casing, pup joints, and line pipe.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 41: Relief from duties and taxes on imported material and other manufacturing inputs

Under a duty drawback program, a subsidy may exist where the amount of duties and taxes relieved or refunded on inputs incorporated into exported goods is found to be in excess of the actual liability that existed on those imports.

The CBSA has previously countervailed this program in photovoltaic modules and laminates, seamless casing, OCTG and pup joints.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 42: Deed tax exemption for SOEs undergoing mergers or restructuring

The GOC imposes a deed tax on transfers of land and real estate. In the context of an ownership transfer by means of an asset sale, as opposed to a stock sale, a deed tax of three to five percent is levied on the amount of the purchase price, and the purchaser is responsible for paying the tax. The GOC’s “Notice of the Ministry of Finance and the State Administration of Taxation on Several Deed Tax Policies Concerning Enterprise Reorganization and Restructuring,” exempts this deed tax where the transfer of ownership occurs as part of the restructuring or merger of an SOE.

This financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 5: Good / services provided by the government at less than fair market value

Program 43: Acquisition of government inputs/utilities at less than fair market value

The complainant alleges that exporters may avail themselves of input materials or utilities from state-owned enterprises (SOE) at below fair market value. They have identified hot-rolled steel plate and electricity as an input that may be provided to wind tower producers at less than fair market value.

The CBSA has previously countervailed this program in mattresses, seamless casing, OCTG, stainless steel sinks, steel piling pipe, large line pipe, pup joints, upholstered domestic seating and container chassis.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA as they involve the provision of goods or services, other than general governmental infrastructure. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 44: Provision of land for less than adequate remuneration by government

All land in China belongs to the government (i.e., either national or local governments, or through a “collective” at the township or village level), and government land agencies across China control the allocation of land through the granting of land-use rights.

The CBSA has previously countervailed this program in line pipe and large line pipe.

This financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 6: Other potential countervailing programs

Program 45: Wind Energy Accommodative programs

The Wind Energy Accommodative programs were formed in part to benefit the energy sector in China including renewable energy through provision of tax incentives, feed-in tariff (“FIT”) schemes and grants. FIT schemes are policies formulated to benefit renewable energy producers. Specifically, the government and a domestic renewable energy producer will consent to a long-term contract (i.e., 15 to 20 years) for the government to provide a guarantee to purchase renewable energy from the renewable energy producer at a specified above market rate.

These programs confer a financial contribution, as described at paragraphs 2(1.6)(a)-(c) of SIMA, by way of a direct transfer of funds from the government, exempting or deducting amounts otherwise owing or due to the government, or providing goods and services, or purchasing goods, such as wind towers at more than fair market value. The benefit to the recipient varies depending on the type of financial contribution received under this program. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 46: GOC Catalogue of Industries for Encouraging Foreign Investment (2020 Version)

In January 2021 the GOC implemented the “Catalogue of Industries for Encouraging Foreign Investment (2020 Version). Any industry mentioned in the catalogue will benefit from preferential treatment including tariff exemptions on imported “self-use” equipment, access to preferential land prices, and lower corporate income tax rates for foreign-invested enterprises in encouraged industries in the central, western, and northeastern regions of China. Given that power production and supplying industries, including wind energy, is an encouraged industry in the “national” catalogue, the complainant alleges that wind tower producers receive actionable benefits under this program.

These programs confer a financial contribution, as described at paragraphs 2(1.6)(a)-(c) of SIMA, by way of a direct transfer of funds from the government, exempting or deducting amounts otherwise owing or due to the government, or providing goods and services, or purchasing goods, such as wind towers at more than fair market value. The benefit to the recipient varies depending on the type of financial contribution received under this program. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 47: Renewable power subsidy and subsidy debt owed to wind tower producers

In November 2021, China’s finance ministry set the 2022 renewable power subsidy at over USD $607 million, and approximately 41% of that amount (or USD $243 million) will be allocated to wind farms. In May 2022, Bloomberg reported that China will use most of a USD $63 billion government fund toward paying off subsidies owed to the renewable energy sector.

The complainant alleges that wind tower producers benefit from the renewable power subsidy and that the Government of China has outstanding subsidy payments owed to these producers.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 48: Special Industrialization Fund for Wind Power Equipment

In August 2008, the GOC issued the Provisional Measures on the Administration of the Special Fund Supporting the Industrialization of Wind Power Equipment, Cai Jian No. 476 (2008). The provisional measures established a “Special Industrialization Fund" which distributes award grants to domestically controlled or wholly owned enterprises that manufacture wind power machines and equipment within China.

The complainant alleges that wind tower producers still benefit from this subsidy program.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.