FISC 2018 SP
Certain Fabricated Industrial Steel Components
Statement of Essential Facts

[19] The name and address of the applicant is as follows:

Woodfibre LNG Limited
Suite #1020, 1075 W Georgia St
Vancouver, BC
V6E 3C9

[20] Woodfibre, a privately held Canadian company, intends to import LNG modules including pipe rack modules for purposes of the Woodfibre LNG Project.^{Footnote 6}

[21] A copy of the non-confidential version of the scope ruling application filed by Woodfibre is available on the CBSA’s Listings of Exhibits website at http://www.cbsa-asfc.gc.ca/sima-lmsi/sp-pp/fisc2018/fisc2018-ex-eng.html.

[22] At the initiation of the scope proceeding, the CBSA identified 16 Canadian producers of like goods based on information collected during the original 2016 FISC investigation.

[23] The CBSA sent a Producer Request for Information (RFI) to all producers of like goods. The CBSA received submissions from five Canadian producers of FISC, namely, Supermetal Structures Inc., Supreme Group LP, Waiward Steel LP, Ocean Steel & Construction Ltd., and MacDougall Steel Erectors Inc.

[24] The CISC submitted a letter outlining its position and provided information and various documentary evidence to support its position.

[25] At the initiation of the scope proceeding, the CBSA identified 85 known and potential importers of subject goods based on information collected during the original 2016 FISC investigation.

[26] The CBSA sent an Importer RFI to all known and potential importers of subject goods. The CBSA received submissions from three importers of FISC, namely, Husky Oil Operations Limited, Shell Canada Limited and Suncor Energy Inc.

[27] At the initiation of the scope proceeding, the CBSA identified 80 known and potential exporters and/or producers of subject goods based on information collected during the original 2016 FISC investigation.

[28] The CBSA sent an Exporter RFI to all known and potential exporters and/or producers. The CBSA received a submission from one exporter/producer of FISC. However, no comments were provided in regards to whether LNG modules including pipe rack modules are subject to the CITT’s finding.

[29] Several parties requested an extension to respond to their respective RFIs. The CBSA reviewed each request; however, extensions were not granted to any of the parties because the reasons for making the requests did not constitute unforeseen circumstances or unusual burdens. The CBSA informed the parties that submissions received after the RFI response deadline would only be taken into consideration if time and resources allow. All responses received by the CBSA before the closing of the record were taken into consideration for purposes of making its preliminary assessment.

[30] Details pertaining to the arguments and information submitted by the applicant and other parties are provided below.

Applicant - Woodfibre

[31] Woodfibre concedes that the product definition contemplates assembly in modules. However, Woodfibre argues that the product definition should be properly read as “simple modules” that are assembled from FISC rather than “complex modules” that undergo manufacturing or production processes to become something new – machinery for use in an LNG plant.^{Footnote 7}

[32] Woodfibre noted that the term “assembly” has been defined by the CITT, in Appeal No. AP-95-084, as a “means to fit together the parts of a [machine]” and as “a number of component parts fitted together to form a single device or unit.”^{Footnote 8}

[33] Woodfibre also noted that in Flat Hot-Rolled Carbon and Alloy Steel Sheet and Strip, RR-2015-002, the CITT found that:^{Footnote 9}

“production requires a change beyond mere finishing which results in the substantial transformation of the original good into a new and significantly different set of goods. Although production often involves significant value added, this is not, in and by itself, an essential element of the test of what constitutes production for the CITT. The CITT looks at the totality of the process to determine whether substantial transformation has occurred.”

[34] Further, Woodfibre recalled that in Photovoltaic Modules and Laminates, NQ-2014-003, the CITT made a distinction between “production” and “assembly” as follows:^{Footnote 10}

“… OEM production is more than a mere assembly or finishing service. The manufacturing process involves the application of capital, labour, highly specialized equipment, product testing and certification.

[35] Woodfibre submits that its LNG modules including pipe rack modules are complex modules that would involve more than simple assembly but rather would undergo production (i.e., the FISC would be manufactured into complex modules).

[36] Woodfibre further adds that in Appeal No. AP-99-063, the CITT made a distinction between “machines” and “structures” and that the CITT has recognized that structures do not include any “notion of machinery or equipment.” Woodfibre concedes that a simple module, constructed purely out of FISC fulfils this requirement for being “structural” but a complex module does not.^{Footnote 11}

[37] Woodfibre holds the position that these complex modules have specific LNG functionality which defines the character of the completed and distinct modules and not the structure of the modules.^{Footnote 12}

[38] Given the arguments and facts outlined above, Woodfibre is of the view that its LNG modules including pipe rack modules are complex modules and therefore not subject to the CITT’s finding.

[39] On September 19, 2018, counsel for Woodfibre provided comments in response to the RFI submissions filed with the CBSA.^{Footnote 13}

[40] Woodfibre emphasized that the LNG modules including pipe rack modules exhibit full functionality and the operation of these modules are commissioned and tested prior to their export to Canada. Woodfibre noted that the Canadian producer responses do no provide supporting evidence that the complex modules are not manufactured goods.

[41] Woodfibre challenged the assertion by the Canadian producers that FISC remains FISC throughout the entire process. Woodfibre indicated that there is no evidence on the record that asserts the essential characteristic of these modules is defined by their FISC components. Woodfibre stated that complex modules are defined by non-FISC elements which also comprise the majority of the value of the complex modules. Further, Woodfibre submitted that the drawings provided to the CBSA clearly show the modules’ functionality and require more than simply connecting FISC together into an assembly.

[42] Woodfibre objected to the claim that Canadian producers can create modules and noted that this fact is irrelevant for determining the subjectivity of LNG modules including pipe rack modules. Woodfibre also disputed the accuracy of the claim that Canadian producers have produced effectively identical modules to the Woodfibre LNG modules including pipe rack modules.

Husky Oil Operations Limited^{Footnote 14}

[43] Husky Oil Operations Limited (Husky) is an importer of modules from China.

[44] Husky is of the view that the Woodfibre LNG modules including pipe rack modules are not subject to the CITT’s finding.

[45] Husky stated in its response that it supports the position of Woodfibre.

Shell Canada Limited^{Footnote 15}

[46] Shell Canada Limited (Shell) is a joint-venture partner in LNG Canada Development Inc. (LNGC). LNGC has proposed to design, build and operate a LNG plant and marine export terminal facility near Kitimat, BC.

[47] Shell is of the view that the Woodfibre LNG modules including pipe rack modules are not subject to the CITT’s finding.

[48] LNGC indicated that it has submitted information and comments to the CITT, the Federal Court of Appeal and the Department of Finance in regards to the finding and its own project in Kitimat. Shell submits that it has nothing to add to Woodfibre’s position.

Suncor Energy Inc.^{Footnote 16}

[49] Suncor Energy Inc. and its subsidiaries (Suncor) is the operator of the Fort Hills Energy L.P. Suncor imports similar complex modules for use in the oil sands mining and refining operations.

[50] Suncor is of the view that the Woodfibre LNG modules including pipe rack modules are not subject to the CITT’s finding.

[51] Suncor submits that these modules are not considered “structural goods” but rather non-FISC, highly technical, fully integrated components with specific functionality that is primary to the essential character of the module. These modules contain steel and structural components but also specialized equipment.

[52] Suncor submits that while some modules involve little more than connecting units of FISC together, many types of modules are fundamentally different products. They are finished, manufactured goods, akin to industrial machines that serve a particular operating function.

Supermetal Structures Inc.^{Footnote 17}

[53] Supermetal Structures Inc. (Supermetal) is a Canadian producer/fabricator of like goods. Supermetal is located in Levis, Quebec and was one of the complainants in the 2016 FISC investigation.

[54] Supermetal is of the view that the Woodfibre LNG modules including pipe rack modules are subject to the CITT’s finding.

[55] Supermetal is of the opinion that FISC incorporated in the proposed Woodfibre LNG modules including pipe rack modules falls within the product definition as the definition does not differentiate between “FISC-only” and “complex” modules. Further, Supermetal emphasized that FISC remains FISC regardless “of whether it is assembled or partially assembled into modules, or unassembled, for use in structures for … ”.

[56] Supermetal is of the position that LNG modules including pipe rack modules, although complex, are intermediate construction of a process facility and are not considered manufactured goods. A module cannot be sold separately as a good with a stand-alone function and it does not have market value if not attached with other components of a process facility.

[57] Supermetal argues that FISC incorporated in the Woodfibre LNG modules including pipe rack modules remain FISC and do not lose their identity. Supermetal also noted that there is no transformation of the FISC into a manufactured good. Similar to its own experiences with past projects, Supermetal submits that these modules would fall into the category of assembly resulting from thoughtful construction planning and coordination of a production facility in a remote area.

[58] Further, with respect to the pipe rack module for the Woodfibre project, Supermetal maintains that the pipe rack type modular assembly is expressly referred to in the product definition.

Supreme Group LP^{Footnote 18}

[59] Supreme Group LP (Supreme) is a Canadian producer/fabricator of like goods. Supreme is located in Acheson, Alberta and was one of the complainants in the 2016 FISC investigation.

[60] Supreme is of the view that the Woodfibre LNG modules including pipe rack modules are subject to the CITT’s finding.

[61] Supreme disagrees with the notion put forth by Woodfibre that the LNG modules including pipe rack modules are more complex than any other modules assembled for oil and gas projects completed in Canada including the complex modules for Suncor Fort Hills and NorthWest Redwater projects in Alberta. Supreme notes that many of the complex modules were assembled at a module yard adjacent to Supreme’s FISC production facility in Acheson. Supreme argues that if FISC within complex modules for oil and gas extraction in Alberta is subject to the CITT’s finding, then so is the FISC within LNG modules.

[62] Supreme holds the position that modules, including LNG modules, are not manufactured goods. Supreme argues that modules are intermediate construction of a facility in transportable units and that modules are assembled using construction trades with various tools and machinery.

[63] Supreme maintains that FISC is not transformed into another good when assembled into a module, including a complex module. Supreme explains that FISC retains its essential characteristics when assembled into modules and does not lose these characteristics when piping, electrical panels and machinery are attached. In this regards, FISC is the support framework that forms the skeleton of a structure.

[64] Supreme notes that Woodfibre does not explain how FISC ceases to be FISC when a “substantial” quantity of other goods are attached nor does Woodfibre explain the transformation process of FISC, which continues to be readily identifiable.

[65] Supreme does not see how FISC “assembled into modules” ceases to be FISC “assembled into modules” when the proportion of non-FISC goods attached reaches a certain proportion by value or weight.

[66] Finally, Supreme submits that the product definition is clear in that it includes FISC and FISC assembled or partially assembled into modules.

Waiward Steel LP^{Footnote 19}

[67] Waiward Steel LP (Waiward) is a Canadian producer/fabricator of like goods. Waiward is located in Edmonton, Alberta and was one of the complainants in the 2016 FISC investigation.

[68] Waiward is of the view that the Woodfibre LNG modules including pipe rack modules are subject to the CITT’s finding.

[69] According to Waiward, the product definition clearly applies to the FISC in fully assembled or partially assembled modules and does not distinguish between “complex” modules and “less complex” modules.

[70] Waiward maintains that LNG modules are no more complex than other modules that contain FISC produced by Waiward and other Canadian producers for oil and gas projects in Canada.

[71] Waiward submits that modules, including LNG modules, are not manufactured goods but rather intermediate construction of a facility in transportable units.

[72] Finally, Waiward argues that FISC is not transformed into another good when assembled into a module, including a complex module. FISC maintains its essential characteristics when assembled into a module; forming the skeleton of a structure. FISC is the support framework and integrates processing equipment.

Ocean Steel & Construction Ltd.^{Footnote 20}

[73] Ocean Steel & Construction Ltd. (Ocean) is a Canadian producer/fabricator of like goods. Ocean is located in Saint John, New Brunswick. Ocean supported the 2016 FISC complaint.

[74] Ocean is of the view that Woodfibre’s LNG modules including pipe rack modules are subject to the CITT’s finding.

[75] Ocean holds the position that modules are not manufactured goods. Ocean explains that in order to speed up the construction of a project, items are assembled offsite and delivered to the project site in larger pieces/components/modules to be connected. The FISC used in modules offsite are the same FISC used if assembly was done on site. Ocean argues that offsite assembly of FISC with other items into “a module” does not transform the FISC into something different. The FISC remains readily identifiable, performing its function as a support structure for equipment.

[76] Ocean notes that it has provided FISC for modules in Atlantic Canada, Saskatchewan and Alberta and that FISC in the LNG modules are not different than the FISC used in past projects produced by Ocean.

[77] Finally, Ocean submits that FISC whether arriving on the Woodfibre project site in unassembled, assembled or partially assembled states should all still be considered within the scope of the product definition.

MacDougall Steel Erectors Inc.^{Footnote 21}

[78] MacDougall Steel Erectors Inc. (MacDougall) is a Canadian producer/fabricator of like goods. MacDougall is located in Borden-Carleton, Prince Edward Island. MacDougall supported the 2016 FISC complaint.

[79] MacDougall is of the view that Woodfibre’s LNG modules including pipe rack modules are subject to the CITT’s finding.

[80] MacDougall maintains that the product definition includes FISC within modules and it does not differentiate between “FISC-only” modules and “complex” modules.

[81] MacDougall also holds the position that modules are not manufactured goods. They are intermediate construction of process facilities.

[82] Finally, MacDougall submits that FISC assembled within modules, including the LNG modules and pipe rack modules, are not transformed into something other than FISC. The FISC retains the characteristics of FISC.

Canadian Institute of Steel Construction^{Footnote 22}

[83] CISC is an association representing Canada’s steel construction industry. CISC is of the view that Woodfibre’s LNG modules including pipe rack modules are subject to the CITT’s finding.

[84] CISC disagreed with Woodfibre’s characterization of modules as a finished “good”. CISC is of the position that a module is a small portion of a facility that is constructed into a transportable unit.

[85] CISC further argued that there is no primary nor secondary market for a single module. In the primary market, additional construction is required and all the modules must be integrated together at the project site in order for the modules to have any market value. In the secondary market, each module would be disassembled with the FISC being sold for scrap and the mechanical equipment being sold separately.

[86] CISC contested Woodfibre’s characterization of modules as analogous to a car. It argued that a car is a complete functioning unit, whereas, a module is only useful and functioning to the extent that it is connected with other modules in an integrated industrial project.

[87] CISC disputed the suggestion that Woodfibre is buying a good when it procures modules. It argued that this characterization is inconsistent with how modularization actually occurs for industrial projects. Typically, the owner or the EPC, is intimately involved in all the aspects of the project from design to procurement to modularization to installation. Modular assembly is the purchase of a construction service, not the purchase of a good. The owner or the EPC will provide free-issued materials including FISC and non-FISC components to the module yard and therefore the owner or the EPC already owns the goods.

[88] CISC disagreed with Woodfibre’s characterization that a module is stand-alone good separate from its parts. It argued that different standards and codes apply to different parts of a module and industrial facility after construction. Canadian regulatory requirements treat various parts of a module as distinct and separate.

[89] CISC argued that the characterization of a module as a finished good manufactured by the module yard is inconsistent with how work is warrantied. If there is an issue with FISC, the owner or the EPC will have to address it with the FISC producer. If there is an issue with an equipment, the owner or the EPC will have to address it with the equipment manufacture. The owner or the EPC is not going to the module yard to address defects in the goods assembled into the module unless the defect is the module yard’s performance.

[90] CISC disagreed with Woodfibre’s description of module construction as the “processing” of FISC. It argued that module construction is neither processing nor manufacturing. Rather, it is taking FISC, bolting and/or welding those FISC together, and attaching non-FISC goods to the FISC structure. Attaching non-FISC goods to the FISC structure does not process, manufacture or transform the FISC into something else.

[91] CISC noted that the CBSA concluded in its final determination that FISC within a cold box module and a complete conveyor system satisfied the product definition.