A-272
A-272
CANADA BORDER SERVICES AGENCY
NON-CONFIDENTIAL COMPLAINT
The Dumping and Subsidizing of Certain Welded Large Diameter Carbon and Alloy Steel Line Pipe
Originating in or Exported from The People's Republic of China and the Dumping of Certain Welded Large Diameter Carbon and Alloy Steel Line
Pipe Originating in or Exported from Japan
Submitted By: EVRAZ Inc. NA Canada
February 5, 2016
CASSIDY LEVY KENT (CANADA) LLP Suite 1470, 55 Metcalfe Street
Ottawa, Ontario KIP 6L5 Tel: (613)368-4170 Fax: (613) 368-4171
Christopher J. Kent Christopher J. Cochlin
Christopher R.N. McLeod Michael Milne
Hugh Seong Seok Lee Susana May Yon Lee
Solicitors for EVRAZ Inc. NA Canada
NON-CONFIDENTIAL
Table of Contents
1. Identification of the Complainant ........................................................................................ !
2. Imported Goods ..................................................................................................................... 2
A. Product Description .......................................................................................................... 2
B. Product Characteristics and Product Use .......................................................................... 2
C. Production Process ............................................................................................................ 4
D. Tariff Classification .......................................................................................................... 7
E. Countries of Export ........................................................................................................... 7
F. Known Exporters .............................................................................................................. 7
G. Known Canadian Importers .............................................................................................. 9
H. Marketing and Distribution ............................................................................................... 9
3. Domestic Like Goods ........................................................................................................... ! 0
4. Single Class of Like Goods .................................................................................................. ! I
s. The Canadian Industry ....................................................................................................... 11
6. Dumping ............................................................................................................................... 11
A. Introduction ..................................................................................................................... I I
B. Section I9 Nonnal Value Analysis ................................................................................. I2
I. China ............................................................................................................................... I2
11. Japan ............................................................................................................................... I4
c. Section 20 Nonnal Value Analysis ................................................................................. l6
I. China as a Non-Market Economy ................................................................................... I 6
ii. Surrogate Nonnal Value ................................................................................................. 28
D. Export Price .................................................................................................................... 29
NON-CONFIDENTIAL
E. Margins of Dumping ....................................................................................................... 30
7. Subsidization ........................................................................................................................ 31
8. Demonstrating lnjury .......................................................................................................... 31
A. Injury ............................................................................................................................... } I
l. Volume Effects of Dumped and Subsidized Imports ..................................................... 32
11. Undercutting, Depression and Suppression ofPrices ..................................................... 33
lll. Impact of Subject Goods on the State of the Domestic lndustry .................................... 36
IV. Additional Evidence of Causation: Account-Specific Allegations ................................. 39
v. Summary ......................................................................................................................... 39
B. Threat of Injury .............................................................................................................. .40
l. Significant Rate of Increase in Imports of Subject Goods ............................................ .41
11. The Domestic Industry Currently is Particularly Vulnerable to Imports of Subject Goods . ....................................................................................................................................... 43
111. Japan and China have Freely Disposable and Growing Capacity, which will Encourage Exports of Dumped and Subsidized Goods to Canada ......................................................... .46
iv. Market Conditions will Encourage Increased Exports to Canada .................................. 51
v. The Government of China and Japan Actively Encourage Exports of Dumped and Subsidized Subject Goods to Relieve Excess Capacity ......................................................... 51
vi. Potential Impact of the Subject Goods on the Prices of the Like Goods ........................ 58
vii. The Imposition of Antidumping or Countervailing Measures by the Authorities of a Country other than Canada ....... , ............................................................................................ 59
viii. The Magnitude of the Dumping and Subsidization ........................................................ 61
ix. Conclusion ...................................................................................................................... 62
9. Conclusion ............................................................................................................................ 62
1. Introduction: Line Pipe from China is Subsidized ........................................................... 64
2. Provision of Goods and Services at Less Than Fair Market Value by the GOC ........... 66
11
NON-CONFIDENTIAL
A. Provision of Goods and Services, and Purchase of Goods by the State-owned enterprises ("SOEs") at Less Than Fair Market Value ................................................................................ 66
1. Provision of Steel Inputs by the SOEs at Less than Fair Market Value ......................... 69
B. Provision of Land and/or Land Use Rights for Less Than Adequate Remuneration ..... 72
ii. Provision of Land for Less Than Adequate Remuneration Within the Economic and Technology Development Zone for Less Than Adequate Remuneration ............................. 72
iii. Provision of Land for Less Than Adequate Remuneration by Jiangsu Province ........... 74
iv. Provision of Land tor Less Than Adequate Remuneration within the Wuxi High-tech Development Zone ................................................................................................................. 75
C. Provision of Electricity at Less Than Fair Market Value ............................................... 76
D. Provision of Government Assets at Less Than Fair Market Value through Privatization . ........................................................................................................................................ 78
3. Preferential Loans Provided by the GOC and State-owned Banks ("S0Bs") ............... 80
A. Preferential Loans and Financing Provided by the GOC through the SOBs .................. SO
B. Export Seller's Credit Provided by the Export-Import Bank of China .......................... 85
C. Export Buyer's Credit Provided by the Export-Import Bank ofChina .......................... 87
D. Import Credit Provided by the Export-Import Bank ofChina ........................................ 88
E. Onlending Support Provided by the Export-Import Bank of China through Loan Guarantees or Loan Repayment.. ............................................................................................... 89
F. Trade Financing Services Provided by the Export-Import Bank ofChina ..................... 90
G. Preferential Loans and Other Financial Services Provided by the Export-Import Bank "Going-out" for Outbound Investments .................................................................................... 91
H. Discounted Loans for Export-oriented Enterprises ........................................................ 93
4. Preferential Export Guarantee and Insurance Provided by the GOC ........................... 94
A. Export Guarantees Provided by the GOC ....................................................................... 94
B. Preferential Export Credit Insurance Provided by the China Export and Credit Insurance Corporation, Including Grants Provided by the GOC to Cover Export Credit Insurance Fees.95
111
NON-CONFIDENTIAL
5. Debt-to-equity Swaps by China's Asset Management Companies ................................. 98
6. Debt Forgiveness by the GOC .......................................................................................... ! 00
7. Income Tax Benefits Provided by the GOC .................................................................... IOI
A. Preferential Income Tax Benefits for Foreign Invested Enterprises ............................ ! 01
v. Income Tax Reduction for F!Es Designated as HNTEs and Located in Designated Areas ...................................................................................................................................... 102
v1. Reduced Tax Rate for Productive F!Es Scheduled to Operate for a Period not Less Than Ten Years ............................................................................................................................. I 03
vii. Income Tax Refund for Re-investment of FIE Profits by Foreign Investors ............... 104
viii. Preferential Tax Policies for Foreign Invested Export Enterprises .............................. 1 05
IX. Preferential Tax Policies for the R&D of F!Es ............................................................. l 06
x. FIEs and Foreign Enterprises which have Establishments or Places in China and are Engaged in Production or Business Operations Purchasing Domestically Produced Equipment ............................................................................................................................ I 06
xi. Preferential Tax Policies for Enterprises with F!Es Established in Special Economic Zones ("SEZs") Excluding Shanghai Pudong Area ............................................................ ! 07
xii. Preferential Income Policies for F!Es Established in Open Coastal Cities or SEZs in Old Urban Cities ......................................................................................................................... ! 08
xiii. Preferential Income Policies for Technology Intensive or Knowledge Intensive FIEs Established in Open Coastal Cities or SEZs in Old Urban Cities ....................................... ! 09
xiv. Local Income Tax Exemptions and Reductions in SEZs and Other Designated Areas ..... ...................................................................................................................................... 11 0
B. Other Preferential Income Tax Policies Provided by theN ational Govemment... ....... lll
xv. Income Tax Reductions for the Enterprises Designated as "High and New Technology Enterprises" .......................................................................................................................... 111
xvi. Preferential Tax Policies for Domestic Enterprises Purchasing Domestically Produced Equipment for Technology Upgrading Purpose .................................................................. 112
xv11. Preferential Tax Policies for F!Es Established in the Pudong Area of Shanghai .. 113
IV
NON-CONFIDENTIAL
xvu1. Income Tax Refund Where Profits Re-invested in SEZs and Other Designated Areas of Guangdong Province ....................................................................................................... 114
xix. Preferential Tax Policies in the Western Region .......................................................... 115
C. Preferential Income Tax Policies Provided by Sub-national Governments ................. 116
xx. Income Tax Refund for Enterprises Located in Tianjin Jinnan Economic Development Area ...................................................................................................................................... 117
xxi. Accelerated Depreciation on Fixed Assets in Binhai New Area ofTianjin ................. 118
8. Exemption or Reduction of Indirect Taxes and Other Governmental Charges and Fees ............................................................................................................................................. 119
A. Value-added Tax ("VAT") Reduction and Exemption for Recycled Products ............ 120
B. VAT Retltnds under the Foreign Trade Development Fund Program ......................... I 2 I
C. Exemption of Tariff and Import VAT for the Imported Technologies and Equipment ..... ...................................................................................................................................... 122
D. VAT Exemptions for State-authorized Enterprise Technical Centers .......................... 123
E. VAT Refunds for FIEs Purchasing Domestically-Produced Equipment ..................... 123
F. Import tariff and VAT exemptions for F!Es and certain domestic enterprises using imported equipment in encouraged industries ......................................................................... 124
G. VAT and Income Tax Exemption/Reduction for Enterprises Adopting Debt-to-Equity Swaps ...................................................................................................................................... 126
H. Tariff and Value-added Tax (VAT) Exemptions on Imported Materials and Equipment in SEZs and other Designated Areas Located in Guangdong Province .................................. 126
I. VAT Exemptions for Central Region ........................................................................... I 27
J. Refund of Land Transfer Fees ...................................................................................... 128
K. Exemption of Local Miscellaneous Taxes for F!Es ..................................................... 128
9. Grants Provided by the National and Sub-national Authorities in of the GOC .......... 129
A. Grants for Funding Research. Science and Technology Related Activities ................. 129
XXII. R&D Assistance Grant .......................................................................................... 130
v
NON-CONFIDENTIAL
xxm. National Innovation Fund for Technology Based Firms ....................................... 131
xxiv. Provincial Scientific Development Plan Fund ....................................................... 131
xxv. Special Supporting Fund for Commercialization of Technological Innovation and Research Findings ................................................................................................................ l32
XXVI. Venture Investment Fund of Hi-tech Industry ....................................................... 133
xxv11. National High-Tech R&D Program (Also Known as the 863 Program) ............... 133
B. Export Promotion Grants .............................................................................................. 134
xxvm. Export Assistance Grant.. ................................................................................... l35
xxix. Export Brand Development Fund .......................................................................... 136
xxx. Grants for Export Activities ................................................................................... l3 7
xxxi. Grants for Top Ten Privately-owned Export Enterprises of Tianjin for the Year of 2008 ............................................................................................................................... 137
xxxii. Local and Provincial Government Reimbursement Grants on Export Credit Insurance Fees ..................................................................................................................... 13 8
xxxiii. Special Fund for Fostering Stable Growth of Foreign Trade ............................. 138
xxxiv. Liaoning High-Tech Products & Equipment Export Interest Assistance .............. l39
C. Environmental Grants ................................................................................................... 140
xxxv. Emission Reduction and Energy-saving Award .................................................... 140
xxxv1. 2009 Energy-saving Fund in Jiangsu Province ..................................................... 141
xxxvn. Environment Protection Award in Jiangsu Province ......................................... 141
xxxviii. 2007 and 2008 Energy-saving Grant in Changzhou City .................................. 142
xxxix. Water Saving Enterprise ........................................................................................ l43
D. Other Grants .................................................................................................................. l43
xl. Innovative SME Grants ................................................................................................ 143
xli. Allowance to Pay Loan Interest in Support of Small and Medium Sized Businesses .145
Vl
NON-CONFIDENTIAL
xlii. Enterprise Innovation Award ofQishuyan District ...................................................... l45
xliii. Jiangdu City Industrial Economy Performance Award ......................................... 146
xliv. Gaocun Government Grant .................................................................................... l47
xl v. Wend eng Government Grant ........................................................................................ 14 7
xlvi. Grant for key enterprises in equipment manufacturing industry of Zhongshan .... 148
xlvii. Superstar or Famous Enterprise Grant.. ................................................................. l49
xlviii. Awards to Enterprises Whose Products Qualify for "Well-Known Trademarks of China" or "Famous Brands of China" .................................................................................. 149
xlix. Repaying Foreign Currency Loan by Returned VAT ............................................ 151
!. Special Fund for Fostering Stable Growth of Foreign Trade in 2009 .......................... 152
li. Award of Taxpayers in Yanghang Industrial Park ....................................................... l52
10. Various Additional Subsidics ............................................................................................ 153
A. Various Subsidies Provided in Liaoning Province Under the Five Points and One Line Development Strategy ............................................................................................................. 153
B. The "Torch Project" ...................................................................................................... 156
C. There are Numerous Other Chinese Subsidies Programs the Agency found Countervailable in Previous Cases: ......................................................................................... 157
D. The Agency found additional programs potentially actionable in the Preliminary Detennination of Certain Carbon and Alloy Steel Line Pipe fi'om China .............................. 160
Vll
I Exhibit I Number 1 Exhibit 2-1 I
I Exhibit 2-2 1 Exhibit 2-3
I Exhibit 5-l
I Exhibit 6-l
Exhibit 6-2
Exhibit 6-3
Exhibit 6-4
I Exhibit 6-5 I
~Exhibit 6-6
Exhibit 6-7
Exhibit 6-8
Exhibit 6-9
1 Exhibit 6-10
.. Exh1b1t 6-11
~Exhibit 6-12
Exhibit 6-13
NON-CONFIDENTIAL
Table of Exhibits
Description l Designation 1
1 List of known Chinese and Japanese Producers or I Confidential l I Exporters of Subject Goods I I Excerpts of Simdex Steel Manufacturers Worldwide Guide Confidential I [ List of known Canadian Importers of Chinese and Japanese t Confidential \ 1 Subject Goods I I
Evraz Canada Income Statement Confidential I Evraz Canada Product Costing Information I Confidential I I Section 19 Normal Values Calculation for China I Confidential
I Labour Adjustment Rate Public I
\ Limited, "20 14 Annual Report of Chu Kong Petroleum and I I Natural Gas Steel Pipe Holdings Limited" 1
1 Shengli 01l & Gas Pipe Holdings Ltd "20 14 Annual Report Public of Shengli Oil & Gas Pipe Holdings Limited" Baoshan Iron & Steel Co., Ltd., "2014 Annual Report of
· Baoshan Iron & Steel Co., Ltd." Yulong, "2014 Financial Statements of China Yulong Company", with English translations
I JFE Holdings, "2014 Financial Statements of JFE Holding;s"
, N1ppon Steel & Sum1tomo Metal CorporatiOn "2014 I Financial Statements of Nippon Steel & Sumitomo Metal
I Public
Public
Public
\ Pubhc
I
I Corporation" ..
1 Marmch1, "20 15 Annual Report of Marui chi Steel Tube I Public
---1 I
---1 I ~
I Ltd." (Year ended March 31, 2015) ~ Section 19 Nonnal Value Calculations for Japan .. I Confidential
rE=-:xlcc1i::-b""it""6=--""'I4""""'~+1-.G""o~v~e~m-m-e~n-t--:of China, "Development Policies for the Iron II Public and Steel Industry- Order of theN ational Development
I and Refonn Commission (No. 35)", with English
~anslation""s~~;-; .. --:~-1 Exhibit 6- fs 1 Uovernment of China, "Blueprint for the Adjustment and
I Revitalization of the Steel Industry", with English Public
I I . ~7""'~+-1 c=::tr:"a"'ns atwns . -::--~~+::-c:-7e~~---i
6-16 1\ Tianjin Shiming Yuweiye Steel Trade Co., Ltd., "L245 Public
I . Line Pipe's Severe Overcapacity Pressure Like Being Born I Down by the Weight of Mount Taishan", with English
L I translations
viii
I Exhibit 6-17
I I
I Exhibit 6-18
I 1
Exhibit 6-19
Exhibit 6-20
~
Exhibit 6-21
Exhibit 6-22
I Exhibit 6-23
I Exhibit 6-24
I I Exhibit 6-25
J Exhibit 6-26
I Exhibit 6-27
· Exhibit 6-28
Exhibit 6-29
I Exhibit 6-30
Exhibit 6-31
Exhibit 6-32
Exhibit 6-33
Exhibit 6-34
Exhibit 6-35
J' Exhibit 6-36
NON-CONFIDENTIAL
Chinapipe.net, "Steel Pipe Industry's Excess capacity Problem Got Worse: Seamless Steel Pipe Production's Capacity utilization is only 67.14%", with English translations Hebei Steel Pipe Factory, "Most Fundamental Reasons to Why Line Pipe Capacity is in Excess", with English translations Peop1e.com.cn; "Opinions of State Council Issued Directives on Resolving Severely Excess capacity Problems, Guo Fa (20 13) No. 41 ", with English translations The People's Government of Hunan Province, "Implementation Measures from the Hunan Provincial Government on Resolving the Problem of Severe Overcapacity, XiangZhengFa (2014) No. 15", with English translations Reuters, "FACTBOX- China's 10 biggest steel mills in 2012" State-Owned Steel Enterprises
I Shangdong Steel Pipe Co., Ltd, "Private line pipe / comeanies reaching an end?", with English translations I "Guizhou News, "Pipeline Companies Monopolize 'Three I Barrels of Oil': Is it facing a Split?'', with English I translations 1 PetroChina Company Lnnited, "About PetroChma"
I Sina Finance, "PetroChina Monopolizes the Transportation I ofNatural Gas: Accused oflncreasing Gas Price", with
English Translations SteelFirst, "China to impose tax on steel imported for re-ex ort"
1 Tianjin Guanghengrun Steel Co., "(X42 Line Pipes) Local j Governments Don't Dare to be Bold and Resolute-1 S~eki~1g for St~bility", with English Translations
1 Curing Deficits Expetienced by X60 Line Pipe
i TtanJm TtanYtXmgLong Iron & Steel Trade Co., Ltd., l Government Subsidization is the Miraculous Medicine to
' Enterprises", with English Translations Metal Expert, "World Pipes Markets", January 2015
Section 20 Surrogate Normal Values
I Chinese and Japanese Export Prices
j Chinese HS Codes
1 Japanese HS Codes
I Public
I
\ Public
I Public
I 1 I Public I I I
I l I I I
Public I
I I
1 Public I Public
I Public
I I
Public I
I Public~
~ Public . I I Public I
I ,,hlfc--j
Confidential~ Coo fidoo<iol ; Public
Public
Public 1
I Statistics Canada Import Data for the Chinese and Japanese Public I I • I
Confidenti~ j Subject Goods
1 Margin of dumping calculations for Chinese subject goods I using section 19 nonnal values ·----~·~--·~~---~
lX
j Exhibit 6-37
I Exhibit 6-~3~8-I j Exhibit 7-A-1
1 Exhibit 7-A-2 ; Exhibit 7-A-3 ; I
j Exhibit 7-A-4
I Exhibit 7 -A-5
I Exhibit 7-A-6
I Exhibit 7-A-7
i Exhibit 7 -A-8
I Exhibit 7-A -9
I Exhibit 7-A-10
I Exhibit 7-A-11 I [Exhibit 7-A-12
I i I Exhibit 7-A-13 I
Exhibit 7-A-14
Exhibit 7 -A-15
Exhibit 7-A-16
j Exhibit 7-A-17
Exhibit 7-A-18
I
Exhibit 7-A-19
i Exhibit 7-A-20
I Exhibit 7-A-21
NON-CONFIDENTIAL
Margin of dumping calculations for Japanese subject goods \ Confidential 1\
usmg sect10n 19 nonnal values _ I _ ----1
Margin of dumping calculation for Chinese subject goods ; Confidential i using section 20 surrogate normal values \ i Shashi Steel Pipe Works, "President's Speech" \ Public ,
Hengyang Valin Steel Tube Co., Ltd., "Company \ Public ~ Introduction" - I Hengyang Valin Steel Tube Co., Ltd., "Products: Line j Public l\ Pipe" • Holdings Limited, "About Us" I Public ~ WSP Holdings Limited, "Products Overview" 1 Pubhc ;
Chu Kong Petroleum and Natural Gas Steel Pipe Holdings Limited, "Annual Re ort 20 14" R. Tang, US Congressional Research Service, "China's
i Public i
j Steel Industry and Its Impact on the United States: Issues 1 Public )
i for Congress", September 21, 20 I 0 I
I Industry Today, "Chinese Steel Industry: China Deploys I State Power to Dominate Global Steel Industry"
Public
I CNOOC Kingland Pipeline Ltd., "Company Introduction" Public
CNOOC Kingland Pipeline Ltd., "CNOOC Kingland Public Pipeline Ltd. Boosts Overseas Sales ofERW Pipes", March 4,2008
1 CNOOC, "2014 Annual Report" \ Public [ China Daily, "Hunan Valin Iron and Steel Group Co., Public 1 Ltd.", January 29,2012 I Hunan Valin Steel Co., "Valin Group Signed Strategic 1 Public
Cooperation Agreement with China Resources Co oratiOn'' March I, 2012 I 'uuu~ -l ' ' The United States Department of Commerce, Issues and ~ Decision Memorandum for Final Detennination: Circular
1
;
Welded Carbon Quality Steel Line Pipe from the People's ~ Re ublic of China, C-570-936, November 17, 2008. 1
The United States Department ofCommerce,-Issues and \Pttblic , Decision Memorandum for the Final Determination: Drill 1 ~ 1 Pi e from the Peo le's ReJublic of China, C-570-966 _ _i , The United States Department of Commerce, Issues and I Public i Decision Memorandum for the Final Dete_::n;;n::in=a=ti.::o::n:_: L=t._.·g"'hcct-_ __j__~--~
X
NON-CONFIDENTIAL
1 walled Rectangular Pipe and Tube from the People's \ [Republic of China, C-570-915 .
!Exhibit 7-A-2:::2~+, -O;T;;'h"'e-":u•'Cn.o:l""te""d7-::0S'"ta.o:te"'s:::D::=-e-=p1a-"rt-=m~e'"'n=-t -o~f -=c~o-m-m-er_c_e_, 7"Is_s_u-es._an-d~-rl\ "'P-cub:-cl~i· c-----i I ' . j Decision Memorandum for the Final Detennination:
1 I 1 Certain Steel Grating from the People's Republic of China, fc::t 1 C-570-948, May 28, 20 I 0 I Exhibit 7-A-23 1
1
The United States Department of Commerce, Issues and \Public I
1 Decision Memorandum for the Final Detennination: ·
\,' I Certain Steel Wheels from the People's Republic of China, II
I C-570-974 . Exhibit 7-A-24 I The United States Department of Commerce, Issues and Public
i I Exhibit 7-A-25
I Exhibit 7-A-26
, Decision Memorandum for the Final Detennination: Utility I
1
1 Scale Wind Towers from the People's Republic of China,
, C-570-982, December 17, 2012 1 The United States Department of Commerce, Issues and 1 Decision Memorandum for the Final Detennination: 1 Certain Tow-behind Lawn Groomers and Certain Parts I Thereof from the People's Republic of China, C-570-940
The United States Department of Commerce, Issues and 1 Decision Memorandum for the Final Determination: High [ Pressure Steel Cylinders from the People's Republic of 1 China, C-570-978, A ril30, 2012
1 Public
I I Public
I Exhibit 7-A-27 I The United States Department of Commerce, Issues and Public I Decision Memorandum for the Final Detennination: Wire I I I Decking from the People's Republic of China, C-570-950,
1
1
I June 3, 2010 .
Exhibit 7-A-30
Exhibit 7-A-31
Ministry of Land and Resources of the People's Republic of China, "Public Notice on the Technical Evaluations and Standards for the Selling Price of State-owned Construction Land Use Rights and Pilot Implementations, General Office of the Ministry of Land and Resources (2013) No 20", with English translations. Ministry of Commerce of the People's Republic of China, "List ofNational Economic and Technology Development Zones", with English translations.
XI
Public
I
l'"b:j
L::hibit 7-A-32
I Exhibit 7-A-33
Exhibit 7-A-34
Exhibit 7-A-35
Exhibit 7-A-36
I
I I I Exhibit 7-A-37
Exhibit 7-A-38
Exhibit 7-A-39
Exhibit 7 A 40 - -
I 1 Exhibit 7-A-41
Exhibit 7-A-42 I i i
Exhibit 7-A-43
1 Exhibit 7-A-44 I
NON-CONFIDENTIAL
~de in China.com, "Company Marketing Webpage for 1 Public 1,,
I Qmgdao Kwayt Co., Ltd." . -~-+.::,~::-"~~ ~-4 : American Petroleum Institute, API Standard API-5L \ Public ' I Certified Companies Located in the People's Republic of
I I China Department of Land and Resources of J iangsu Province & I Public Jiangsu Development and Refonn Commission, "Public
I Notice Pertaining to the Implementing the Adjustment Standards of the Lowest Selling Price of Industrial Land ' ' ' Use", LGTZF (2009) No 175, with English translations. I
I Public Globalization Monitor, "Wuxi New District"
New District ofWuxi Municipal People's Government I Public Management Committee & Wuxi National High-tech Industrial Development Zone Management Committee, I "Preferential Policies for Wuxi HTDZ: Preferential Policies I for Encouraging Foreign Invested Enterprises Invest in New and High Technology Enterprises," January 1998, 1
with English translations. United States Ener gy
I Februar 4, 2014 Infonnation Administration "China"
1 Global Times, "NDRC to Increase Electricity Prices in I Five Provinces", May 18, 2011 '! The United States Department of Commerce, Issues and . Decision Memorandum for the Final Detennination: .
1
l Lightweight Thermal Paper from the People's Republic of , China, C-570-921, Se tember 25, 2008 1 The United States Department of Commerce Issues and I Decision Memorandum for the Final Detennination: Pre-
stressed Concrete Steel Wire Strand from the People's Republic of China, C-570-946, May 14, 20 I 0 The United States Department of Commerce, Issues and Decision Memorandum for the Final Detennination: Certain Kitchen Appliance Shelving and Racks from the People's Republic of China, C-570-942, July 20, 2009 The United States Department of Commerce, Issues and Decision Memorandum for the Final Detennination: Certain Oil Country Tubular Goods from the People's Republic of China, C-570-944, November 23, 2009 The United States Department of Commerce, Issues and Decision Memorandum for the Final Detennination: Galvanized Steel Wire from the People's Republic of China, C-570-976, March 19,2012 The United States Department of Commerce, Issues and .. DecisiOn Memorandum for the Fmal Detenmnal!on. Lightweight Thermal Paper from the People's Republic of China, C-570-921, Se !ember 25, 2008
XII
I Public
1 Public I
Public
' Public
Public
Public
I Public
I
I I Public i
I
~ ' I
I I ' ---i
I I i
I I
I I
i
' I
' I i
I
'
I I i
[ Exhibit 7-A-45
I
Exhibit 7-A-46
I l Exhibit 7-A-47
I
I / Exhibit 7-A -48
I [ Exhibit 7-A-49
1 Exhibit 7-A-50
I J Exhibit 7-A-51
Exhibit 7-A-52
I Exhibit 7-A-53
I bhibit7-A-54
, Exhibit 7-A-55
Exhibit 7-A-56
Exhibit 7-A-57
, Exhibit 7-A-58 i
- -Exhibit 7 A 59
Exhibit 7 -A-60
NON-CONFIDENTIAL
The United States Department of Commerce, Issues and Decision Memorandum for the Final Detennination: Certain Magnesia Carbon Bricks from the People's
1 Public I
Re ublic of China, C-570-955, July 26, 20_,_1 0~----:-+-----c~-------j The United States Department of Commerce, Issues and I Public Decision Memorandum for the Final Detennination: \ Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe from the People's Republic of China, C-570-957, Se !ember I 0, 20 l 0 The United States Department of Commerce, Issues and Decision Memorandum for the Final Determination: Certain Coated Paper Suitable for High-quality Print Graphics Using Sheet-fed Presses from the People's
Public
Republic of China, C-570-959, September 20,2010 i The United States Department of Commerce, Issues and
1
1 Public Decision Memorandum for the Final Detennination: Multilayered Wood Flooring from the People's Republic of I China, C-570-971, October II, 20 ll I The United States Department of Commerce, Issues and Public 1
Decision Memorandum for the Final Detennination: I Crystalline Silicon Photovoltaic Cells, Whether or Not !' I Assembled into Modules, from the People's Republic of \.·'II
China, C-570-980, o.:::ct,o~.::be""r-'9"''-=2-::,0c-;12:o----~-~----~-+-;;-;-;7----i· The United States Department of Commerce, Issues and ; Public Decision Memorandum for the Final Determination: Drawn Stainless Steel Sinks from the People's Republic of China, C-570-984, February 19,2013
1 Public . Chun Chun Ni, The Institute of Energy Economics of i
I Japan, "China's Electric Power Industry and Its Trend", A ri12006
I ' - ' -
I Shengli Oilfield Freet Petroleum Co., Ltd., "Company Profile"
I "The People's Republic of China's 12th Five-year Plan",
I with English translations.
I Global Times, "Chma to encourage mcreased pnvate investment in banking sector" June ?8 201?
Public
I Mlie
Public i
I The Export-Import Bank of China, "Export Seller's Credit" I -
Public
1 Qingdao Economic and Trade Bureau, "Notice Pertaining Public \ to the Foreign Trade Enterprises' Financing Research i
i
, Requirements," May 22,2013, with English translations. i
I Great Wall Equipment, "About Us" tPublic I Cardofcom, "Company Introduction of Hengyang Valin Public
Steel Tube Co., Ltd" I ' ' " Shandong Shengh Steel Pipe Co., Ltd., About Us " i Public
I I
The Export-Import Bank of China, "Export Buyer's Credit"j_I,_ub_l_ic ___ j
X Ill
NON-CONFIDENTIAL
I Exhibit 7-A-61 I The Export-Import Bank of China, "2014 Annual Report" [Public ~ 1-1 E::::-cxlcc1i::--b::--it-:7:--A-:c--6::2~+~-:::T::che Export-Import Bank of China, "Brieflntroduction" I Public 1
L§xhibit 7-A-63 I The Export-Import Bank of China, "Import Credit" . -- \ Public I
1 Exhibit 7-A-64 I The Export-Import Bank of China, "Onlending Loans of 1 Public i,· 1 f Foreign Governments and International Financial ) I ~ 1 Institutions" 1 ,
1 Exhibit 7:A-65 l Fmancial Tunes, "Hu Rejects Calls to Reform State's --i-:1 Pub!;;;-~ 1 Role", November 8, 2012
1-1 E-xlcc1i~b-,-it-7,--A--6-6-+I-=-T=h:_:_e::._E_z_x:.p:_:oc.:rt.~-l:::m:.::pc:o:_.rtc::L:B:.:an:.ck::_o-:f-C~h.,-in-a-, -,T-r-a-cd·e~-F-cir-1a_n_c~in-g~,---1~-Public [
I Exhibit 7-A-67 [ Organisation for Economic Co-operation and Public -r I I Development, "Trade and Agriculture Directorate Trade ) I k II Committee", March 16,2015 1 _j 1 Exhibit 7-A-68 , Ting Xu, China Brief Volume II Issue 17, "Destmatwn I Public I I I Unknown: Investment in China's 'Go Out' Policy", , I I I September-::1-=6'-'· 2_0_1_1--c-.,.-::---:-:=---:---::::-: -~--+-\ ::-:-;:------1\ ~7-A-69 1 M. Martin, "Congressional Research Service, China's Public 1
h \ Banking System: Issues for Congress", February 20, 2012 I Exhibit 7-A-70 i Shengli Oil & Gas Pipe Holdings Limited, "Annual Report Public
I 2013" Exhibit 7-A-71 1 Caijing.com.cn, "China's Policy Banks", September 9,
'2009
Public
I
Exhibit 7-A-72 1' China Daily USA, Steel Firms to Relocate Capacity \Public
1 Abroad, November 27, 2013 -:--:----::---\t-.:-~:------1 I Exhibit 7:--Ac-:-7:::3:--+1 ::T"'h-e-::P:-e...cop-l:-e7's~B=a-J-=1k_o_f~C=hr:-.n-a-, t7h-e-c:S-:-t-at-e-:-Administration of
1
: Public I
j Foreign Exchange, the Ministry of Foreign Tradeand 1
1,
I 1 Economic Cooperation and the State Adrmmstratron of / Taxation, Circular Concerning Printing and Distributing / Detailed Rules on Rewarding and Punishment Concerning
1 Provisional Regulations over Examination of Export
I Collections of Foreign Exchange, YinFa (2000) No 58, 'I ~ I February I 7, 2000
r=~:-:--:::-~~,_~~~~~~~---~~~~~~------~~~----· Exhibit 7-A-74 1 Guangzhou Mayer Corp., Ltd., "About Us" 1 Public 1
1 Exhibit 7-A-75 I Baosteel, "Public Acknowledgement" I Public~ Exhibit 7 A 76 ' The Export Import Bank of China "Intermediary Public -~ - - -
\ Business" '
Exhibit 7-A-77 [ China Export and Cn.!dit Insurance Company, "Company
I . Profile" I Exhibit 7-A-78 [ China Export and Credit Insurance Company, "20 11
I Annual Report" Exhibit 7-A-79 I China Export and Credit Insurance Company, "20 10
[ Exhibit 7-A-80 I Annual Report" . . ( China Export and Credit Insurance Company, "2009
I Annual Report" .. / Exhibit 7-A-81 I China Export and Credit Insurance Company, "2008
L I Annual Report"
xiv
Public
Public
Public
Public
Public
~ l
_j
NON-CONFIDENTIAL
i Exhibit 7-A-82 [ China Export and Credit Insurance Company, "2007 I Public l j 1 Annual Report" , I i I Exhibit 7-A-83 1 Steel Orbis, "Handan Steel Produces 30,000 MT ofX80 I Public ! i I Line Pipe Steel in Jan-Feb", March 8, 7013 =:-:---+-1 ~;-;-;-----!,[ I Exhibit 7-A-84 \ China Export and Credit Insurance Corporation, "2011 i Public I
L 1' Annals Highlights" I i Exhibit 7-A-85
1 Angang Steel Company Lumted, "Summary of Core I Public J',
k, I I 1 Business"
I Exhibit 7-A-86 \ Shengli Oilfield Freet Petroleum Steel Pipe Co., Ltd., 1 Public 1
, \ "Corporate Profile" I I ,~-cE:::::x-chc-iocb-cit'""7=---:A--""8:::7-t-1 F:::::a::.r:::a"'y"'P~e"'trc:oc:l-=eu~I....:nc=cS:-t-e-:el:-P=-I~p-e-:C::-o-·.-, "'L-td"'.-, '"'"A"C7'b_o_u·t-U~s"'" ------1-:P:-t"""Ib"'l.,-ic~~
Exhibit 7-A-88 1 Shandong Shengli Steel Pipe Co., Ltd., "About Us" \ Public
Exhibit 7-A-92 [ KPMG, "PRC Corporate Income Tax Law" Pubhc Exhibit 7-A-93 1 Constitutional and Mainland Affairs Bureau of the I Public
li I Government of the Hong Kong Special Administrative
1
\
I Region, "The HKSAR's Work in Complementing the
I . National 12th Five-year Plan" . __ __j Exhibit 7-A-94 1 China Knowledge, "Tianjin Jinnan Economic Development I Public 1
A~" ' I
Exhibit 7-A-89 [' Shandong Shengli Steel Pipe Co., Ltd., "Xinjiang- Brief
1
Public Introduction" .
Exhibit 7-A-90 / FEMCO, "Kunshan Pearl Machinery" 1 Public Exhibit 7-A-91 I Liaoning Northern Steel Pipe Co., Ltd., "Introduction" I Public
1 Exhibit 7-A-95
., ro uc s: me !PC I
, Exhibit 7-A-98 I Tianjin Pipe Group Corporation, "Company Profile" Public I Exhibit 7-A-99
I
I China Briefing, "China Expands Tax Incentives to Promote \ Public i Circular Economy", November 28,2011
1 Tianjin Dehua Petroleum Equipment Manufacturing Co., Public 1 Ltd., "Company Profile" I I Tianjin Delma Petroleum Equipment Manufacturing Co., : Public \ Ltd., "Contact Us" I
I Exhibit 7-A-96
1
1 Tianjin Delma Petroleum Equipment Manufacturing Co., : Public Ltd "P d t L. p· "
1
Exhibit 7-A-97
Exhibit 7-A-100 Baosteel Group Co., "Developing Recycle Economy" Public
Exhibit 7-A-101 ' Panyu Chu Kong Steel Co., Ltd., "Company News: PCK Public was Selected as the First 'National Recognized Corporate
'. " Techmcal Center m the Industry e ) i-cE=-xl"'11-;;'.b7it-,7=--""A--"'!-::0'1:'2+1 :::T"'ia"'n;c.;ji:c. n-P:i:-pc:..e_G:::::r-oc..u_p""c::o'r"-p'-o""r-at7io""I""'1,"'':-::'R:-&::-::D-C::-en-t-e"'r•"'• ------1 Public
Public
I Exhibit 7:A-1041 The United States Department of Commerce, Issues and \Public
1 Decision Memorandum for the Final Detennination: 1 I
L. [Aluminum Extrusion from the People's Republic of China, I 1 ~~----Li C:::..-570,968, March 28,2011 -~-.......L. -·---,__.J
Exhibit 7-A-1 03 Hengyang Valin Steel Tube Co., Ltd., "Products: Acid I Resistance Line Pipe"
XV
NON-CONFIDENTIAL
[Exhibit 7-A-105 I Wiley Rein & Fielding LLP, "The China Syndrome: How I I Subsidies and Government Intervention Created the ' I \ I V>'9rld's Largest Steel Industry", July 2006 1 Exhibit 7-A-106 [Oilfield International Trading, "Products: Oil Special Pipe I I & Accessories"
I Exhibit 7 -A-I 08 I East Re~~ources, "Marketing Webpage of Shandong
\ Public
I 1 Public
) Public
) Public b ) Xinyuan Steel Pipe Manufacturing Co., Ltd." 1 Exhibit 7-A-1 09 ) Huludao City Steel Pipe Industrial Co., Ltd., "About Us" Public
I Exhibit 7-A-110 I Australian Anti-dumping Commission, Report to the [Public
I l Minister No. 148: Certain Aluminum Extrusions Exported I
. \ to Australia from the People's Republic of China, April 15,
I \ 20]0 I
Exhibit 7-A-111 1 The Ministry of Science and Technology of the People's I Public 1 I Re ublic of China, "National High-tech R&D Prob>ram" I
Exhibit 7-A-112 [Insight at Pacific Community Ventures & the Initiative for I Public
I 1 Responsible Investment at Harvard University, "Case .l
1
li
I, Study 13: National High-tech R&D (863) Program",
b , January 2011 ,~--:---~:::7--=:---:--:c-~+=~:-:-~~---J 'I Exhibit 7~A-113 [The Ministry of Science and Technology of the People's '['Public I
1 Republic of China, "China Science and Technology I I Newsletter", September 30, 2004 I
Exhibit 7-A-114 Baosteel, "Social Responsibility: Value Creation"
I Exhibit 7-A-115 1 Jiangsu Chang Bao Steel Tube Co., Ltd., "About Us" I Exhibit 7-A-116 , Ansteel Group: "Shareholders"
Exhibit 7 -A-117 I An gang Steel Company Limited, "20 13 Annual Report"
1
Exhibit 7-A-118 [ Ningbo Jun Cheng Metal Pipe Co., Ltd., "Products: API 5L , Piee"
Exhibit 7-A-119 1
Ningbo Jun Cheng Metal Pipe Co., Ltd., "Group Profile"
Exhibit 7-A-120 f Changzhou Yuanyang Steel Tube, "Product Introduction: i Brief Introduction"
Exhibit 7-A-121 I Changzhou Yuanyang Steel Tube, "Contact Us"
Exhibit 7-A-122 Changzhou Yuanyang Steel Tube, "Sales Network"
Exhibit 7-A-123 I The Simdex Steel Tube Manufacturers Worldwide Guide, i "Y angzhou Lontrin Steel Tube"
Exhibit 7-A-124 I
1 Zhongshan Walchamp Steel Pipe Company Ltd., "Contact
I Exhibit 7-A-125 iUs" / Zhongshan Walchamp Steel Pipe Company Ltd., "Survey
" i ) of the Comeanyand Products ) Exhibit 7-A-126 ['Australian Anti-dumping Commission, Investigation mto
l the Alleged Subsidisation of Certain Toilet Paper Exported
1 from the People's Republic of China: Preliminary Report
-~----L~ ::.~~=-0:::~:.-x_istence of Countervailable Subsidies, September
xvi
Public
I Public Public
Public
Public
Public i i Public I I br I I Pu 1c I Public
I Public
Public
I Public
I Public
NON-CONFIDENTIAL
II Exhibit 7-A-127 China Daily, '"Five Points, One Line' Strategy Guiding
Light for Liaoning", March 9, 2007
I, Exhibit 7 -~A~-~12~8::-~-c'M=."in=:i'-st"'ry~of7' C~om~m2..e"""r'-ce.cco''rc:-P7R::z::Cc,~ 'c, S:Cp-e-e·cl-~17b_y_t1""1e-· ""G_o_v-ern-·-o-r -~ecP':'t-:tb-:1:-i c-----1,
I Public
of Liaoning Province", April 24, 2007 1 j [Exhibit 7-A-129 The Government of Liaoning Province, "Several Policy l Public :1
1
1 Suggestions of the People's Government of Liaoning I [
11
Province on Encouraging Coastal Major Development 1
1
,
: Regions to Expand Opening-up to the Outside World", 1
I January 23, 2006
Exhibit 7-A-134
Exhibit 7-A-135
Exhibit 7-A-136
I
Exhibit 7-A-137
I Exhibit 7-A-138
I Exhibit 8-1
1 Exhtbtt 8-2
1 Exhibit 8-3 I
I Exhibit 8-4
Exhibit 8-5
Exhibit 8-6
l Exhibit 8-7
n ro uc ton I -l 1 Jiangsu Valin-Xigang Special Steel Co., Ltd., "Product I Public I Catalogue: Line PiJ:le" I
\ Tianjin Pipe Corporation Enterprise, Inc., "Tianjin Pipe \ Public I (Group) Corporation: Products" Ministry of Science and Technology of the People's Public. I
I
Republic of China, "Administration of Key High-tech Enterprises under the National Torch Project", April 25, 2011, with English translations. j Ministry of Science and Technology of the People's / Public
I Republic of China, "Notice on the Issuance of the
I Administrative Measures for Detennining New High-tech
I
Enterprises", April28, 2008, with English translations. Wenzhou Municipal Sci- Tech Bureau, "National Torch I Public
' 1 Program of China" I I Economic Indicators Confidential I I • Declarallon of Dave Coffin . Confidentw~
I Moody's Investors Service, "Rating Action: Moody's places . Public 1
\ Evraz North America PLC's ratings (Ba3 CFR) under ~~ review for downgrade", October 13,2015
I GTIS, Chinese and Japanese Exports of Welded LP over I Public I 16mches, January to November 2015 I Steel Business Briefing 2015, "China's welded pipe output, I Confidential I exports down amid summer lull", August 28, 2015 I 1 MBR, Market Tracker, "MBR Welded Linepipe & Confidential I OCTG", December 22,2015 ~ [ MBR Market Tracker, "MBR Welded Linepipe & OCTG", I Confidential 1 January 29, 2016 .
xvii
1 Exhibit 8-8 I
\ Exhibit 8-9
i Exhibit 8-10 I
I Exhibit 8-1 I
I I Exhibit 8-12
'
Exhibit 8-13
~xhibit 8-14
\ Exhibit 8-15
I Exhibit 8-16 I
\ Exhibit 8-17
I Exhibit 8-18
~~hibit 8-19 1 Exhibit 8-20
I Exhibit 8-21
I I Exhibit 8-22
I Exhibit 8-23
Exhibit 8-24
\ Exhibit 8-25
I E 'hihi• 8-26
1ibit 8-27
I Exhibit 8-28
'
NON-CONFIDENTIAL
OECD, "Excess Capacity in the Global Steel Industry: The I Public [ Current Situation and Ways Forward", 2015 ~~:--~~-j OECD, "Developments in Steelmaking Capacity of Non-
1 Public 1
OECD Economies", 2013 ' ,--~~----~~~~----4
CPCN News, "How to Deal with the Four Industries' 1 Public Severely Excess Production Capacity", August I, 2014, [ with English translations I
OECD, "Industry and globalisation: Excess capacity and [ Public risks of trade friction cloud the outlook for the global steel 1
industry", December 12,2014 1
1 Nippon Steel & Sumitomo Metal, "Annual Report 2013, [ Public I (Year Ended March 31, 2013) , The World Bank, "Chma 1s adjusting to slower econom1c I Public \growth, says new world bank re ort", Jul I, 2015
- / The Wall Street Journal, Lingling Wei "China Moves to / Public I Devalue Yuan", August II, 2015 1
I The Globe and Mail, Pete Sweeney and Lu J ianxin "China[ 1, Public [ devalues yuan by 2%, sees biggest one-day fall since 1994" I Steel Business Briefing 2015, "Special report: Yuan I Confidential I devaluation poses problems for EU steel", August 20, 2015 I \ MBR, Market Tracker, "MBR Welded Linepipe & \ Confidential I OCTG", April 30, 2015 I
I Steel Business Briefing, "China's Chu Kong squeezed by \. Confidential
1 delays of new pipeline in 2013", April I, 2014
xviii
I
I Exhibit 8-29
I Exhibit 8-30 :
I Exhibit 8-31
I I Exhibit 8-32
:
I [ Exhibit 8-33
I r Exhibit 8-34 :
I I Exhibit 8-35
[ Exhibit 8-36
I Exhibit 8-3 7
Exhibit 8-38
Exhibit 8-39 .. -I Exhtbtt 8 40
I Exhibit 8-41
1 Exhibit 8-42
Exhibit 8-43
I I Exhibit 8-44
NON-CONFIDENTIAL
1 Steel Business Briefing, "L;-~ver investment and corruption I Confidential I I hit China eneq,'Y pipe demand", March24, 2014 I .~ 1 SBB Insight, Platts, "Pipemakers adapt to oil price plunge", l Confidential 1
i January 30 7015 I :
I Steel Busi~e~s Briefing, "China's Nov daily output hits the I year's low", December 15, 2015 I The U.S. International Trade Commission, "Certain \ Welded Large Diameter Line Pipe from Japan (Second I Review)", Investigation No. 731-TA-919, September 2013 1 The U.S. International Trade Commission, "Certain \ Welded Line Pipe from Korea and Turkey", Investigation j Nos. 701-TA-524-525 and 731-TA-1260-1261 1 (Preliminary) I JFE, "JFE Holdings' Financial Results for Fiscal" (Year [2014 Ended March 31, 2015) 1 MBR, "Strategic prospects for the global transmtssion IJinepipe market by type, size, range, and grade", 2014
MBR, "Whitepaper- MBR's Outlook for 2015"
I Petroleum Services Association of Canada, "20 15 Canadian Drilling Activity Forecast", April 30, 2015 Metal Expert, "World Pipes Markets" January 2015
PWC, "Japan: Foreign Tax Credit'
' " ' ' -1 JFE Holdmgs, Inc., JFE Groups Ftfth Medmm term J Business Plan", April23, 2015
J (Year Ended March 31, 2015) ' - ' 1 Nippon Steel & Sumitomo Metal "Annual Report ?015"
J The U.S. International Trade Commission, "Circular 1 Welded Carbon Quality Steel Line Pipe from China", 1 Investigation No. 731-TA-1149 (Final), May 2009 I The U.S. International Trade Commission, "Certain J Seamless Carbon and Alloy Steel Standard, Line, and I Pressure Pipe from China", Investigation Nos. 701-TA-469 I and 731-TA-1168 (Final), November 2010 I Evraz Canada, Internal Planning Document, Novetnber [2016
XIX
Confidential
Public
Public
Public
Confidential
' Confidential
Confidential
Confidential
Public
1 Publ!c
I Public
Public
:
: I
~ : ' ! ' l :
I i I
--Public
I Confidential
NON-CONFIDENTIAL
1. Identification of the Complainant
I. This Complaint is filed with the Canada Border Services Agency ("CBSA" or the
"Agency"), pursuant to s. 31 of the Special Import Measures Act ("SIMA"), by EVRAZ Inc. NA
Canada and its affiliate Canadian National Steel Corporation (collectively, "Evraz Canada"). To
the best ofEvraz Canada's knowledge, Evraz Canada is the only producer oflike goods in Canada.
2. Contact infonnation for Evraz Canada is as follows:
EVRAZ Inc. NA Canada P.O. Box 1670, I 00 Annour Road Regina, SK S4P 3C7
Canadian National Steel Corporation 5302 39 Street Camrose, AB T4V 2N8
Tel: (403) 543-8000 Fax: ( 403) 543-8008 E-mail: [email protected] Contact: Brian Kristofic, Director- Trade and Govemment Affairs Direct: +1(312) 533-3618
3. Evraz Canada operates large diameter line p1pe manufacturing facilities in Regina,
Saskatchewan and in Camrose, Alberta. As a Canadian subsidiary of EVRAZ Inc. NA
headquartered in Chicago, IL, the financial data of Canadian National Steel Corporation have been
consolidated with those of its sister company Evraz Inc. NA Canada for purposes of reporting the
domestic industry financial perfonnance in this Complaint.
4. As noted above, to the best of Evraz Canada's knowledge, Evraz Canada accounts for the
entirety of production oflike goods in Canada and the company is not aware of any other producers
oflike goods in Canada.
NON-CONFIDENTIAL
2. Imported Goods
A. Product Description
5. The goods that are the subject of this Complaint ("subject goods" or "subject imports") are
defined as:
Certain welded large diameter carbon and alloy steel line pipe originating in or exported ±rom the People's Republic of China and Japan with an outside diameter greater than 24 inches (609.6 mm), and less than or equal to 60 inches (1524 mm), regardless of wall thickness, length, surface finish (coated or uncoated), end tinish (plain end or beveled end), or stencilling and certification (including multiple-stenciledimultiple-certitied line pipe for oil and gas transmission and other applications).
For 1,>reater certainty, the product definition includes:
a) line pipe produced to American Petroleum Institute ("API") specification 5L, in Grades A25, A, B and X f,>rades up to and including XI 00, or equivalent specifications and grades, including specification CSA Z245.1 up to and including Grade 690.
b) unfinished line pipe (including pipe that may or may not already be tested, inspected, andior certified to line pipe specifications) originating in China and Japan, and imported for use in the production or finishing ofline pipe meeting final specifications, including outside diameter, f,>rade, wall-thickness, length, end finish, or surface finish; and
c) non-prime and secondary pipes ("limited service products").
B. Product Characteristics and Product Usc
6. The subject goods are used in the oil and gas sector primarily in pipelines for the
transmission of oil and natural gas products over long distances but also in a variety of mining
applications, including as shnTy pipe in oil sands operations.
7. The Canadian market for large diameter line pipe is governed by applicable line pipe
specifications including CSA specification Z245.1 for line pipe used in pipeline applications. Oil
and gas transmission pipelines must, in tum, for example, confonn to CSA Z662 (Oil and Gas
2
NON-CONFIDENTIAL
Pipeline Systems). That said, international trade in line pipe (including sales into the United States)
is governed primary by API specification 5L. For example, CSA Z245.1 Grade 448 pipe is
considered to be equivalent to API 5L Grade X65. The API SL X grade numbers define the
minimum yield strength required of the grade in kilopounds per square inch. This equivalency
applies to other specifications, including ISO, which means that a particular line pipe may be
certified and stenciled as complying with multiple standards if all the requirements of each
standard/grade are met (leading to dual-, triple-, and further multiple-stenciled line pipe). Indeed,
it is common practice to certify multiple grades of pipe on a Mill Test Report. It is also common
practice to substitute grades other than that initially requested by a customer with an equivalent
grade. Mill Test Reports are provided to show that the properties of the supplied pipe meet the
requirements of the actual grade supplied.
8. Evraz Canada manufactures or is capable of manufacturing line p1pe to API 5 L
specifications in grades up to and including XI 00 and to all equivalent grades under CSA Z245.l,
and in all outside diameter sizes covered by this Complaint.
9. The Subject Goods cover all large diameter line pipe meeting or supplied to meet the above
specifications and grades, as well as equivalent specifications and grades, regardless of whether
the line pipe has been multiple-stenciled to indicate that it meets or is supplied to meet additional
end-use specifications. For purposes of !,>reater clarity, all large diameter line pipe stenciled or
otherwise marked as meeting or supplied to meet API 5L (or equivalent specifications) for use as
oil and gas pipelines are covered in this Complaint as Subject Goods regardless of whether the
pipe is marked as meeting any other end-uses or is supplied to meet any other end-uses. Line pipe
that is manufactured and tested to meet higher API specifications (or equivalent CSA and ISO
specifications) automatically confonns to lower specifications and may therefore have multiple
3
NON-CONFIDENTIAL
stencils identifying additional end uses, such as American Society for Testing and Materials
("ASTM"), and equivalent specifications for end use as standard pipe (for low-pressure
conveyance of steam, water, natural gas, air and other liquids in plumbing and heating
applications), piling pipe, and other such end uses.
I 0. Large diameter line pipe has notable product characteristics that distinguish it trom other
pipe products. These include being more resistant to highly corrosive ("sour") environments,
which is accomplished by a secondary refining process in the production of the steel to increase
the purity of the steel, thereby making it more resistant to corrosion from sour gas. The grain size
of the steel plate used as an input into the production of large diameter line pipe is also more
refined, which affects the low-temperature toughness of the steel. Large diameter line pipe also
typically is sold in API grades ofX70 or greater, which speaks to higher strengths of steel. Finally,
large diameter line pipe is characterized by higher defonnability and higher pressure-crushing
properties.
11. The Subject Goods may be manufactured by one of three welded processes, as described
immediately below. The typical end tinish is a beveled end to allow for welding in the field,
although large diameter line pipe could also be supplied as plain end (square cut).
C. Production Process
12. The production processes for welded large diameter line pipe are as follows.
13. Submerged arc welded ("SAW") large diameter line pipe derives its name from the stage
in the production process wherein the welding arc is submerged in flux while the welding occurs.
The flux protects the steel in the weld area from impurities found in the air when heated to welding
temperatures. Large diameter double submerged arc welded ("DSA W") line pipe requires both
inside and outside welds, which are accomplished in separate processes, hence the "double" prefix.
4
NON-CONFIDENTIAL
DSAW encompasses both longitudinally welded SAW ("LSAW") and helical (or spiral) welded
SAW ("HSA W").
14. Large diameter LSA W line pipe is most often produced using either the pyramid rolls
method (also known as the rolled and welded method) or the U&O method (also known as the
"U-0-E" method). The difference between these two processes exists only in the method of
forming the steel cylinder. The pyramid rolls method begins with three rolls arranged in a
pyramidal structure, between which the steel plate is pressed until it is fonned into a cylinder- the
time required depends on the grade and thickness of the plate. In the U&O method, the cylinder is
first tonned into aU shape using a "U" press, then curled into an 0 shape (i.e., a cylinder) using
an "0" press. Under this method, the "E" in the U-0-E descriptor signifies the press process in
which the pipe is trade (or "stitch") welded until further SAW welding is perfonned.
15. Once fonned, the cylinder is then welded both from the inside and the outside
longitudinally along the Jen1,>ih of the cylinder using the SAW process, with up to five welding
wires, which in the end results in a welded pipe.
16. Stages in the LSA W production process typically include: cutting and baiting the steel into
strips ("skelp"); pre-bending; fonning; stitch and pre-welding; internal and external SAW
processing; finishing; straightening; cold expanding (for yield strength); demagnetization; seam
removal, and bevelling (depending on the order in question).
17. Large diameter HSA W (or "spiral weld") line pipe is characterized as a steel pipe having a
DSAW seam the entire length of the pipe in a spiral fonn. HSAW is produced using hot-rolled coil
that is tonned into a hollow cylinder by twisting the skelp as it is unrolled (in the same manner
that the cardboard core in a roll of paper towel is forn1ed) and then welded as the edges come
5
NON-CONFIDENTIAL
together using an automated SAW process both inside the cylinder and outside the cylinder. The
end product is a welded pipe.
18. Stages in the HSA W production process typically include: de-coiling and leveling; skelp
end welding for continuous rolling; edge trimming and bevelling; forming and tack welding;
cutting to length; skelp and repair welding; inside cleaning of pipe; intemal and extemal SAW;
further inside cleaning; weld seam removal at pipe ends; and beveling of pipe ends (depending on
the order in question).
19. Both LSA Wand HSA W line pipe production processes also comprise a number of quality
control steps including, but not limited to, the following: skelp and edge ultrasonic testing;
sampling and destructive testing; inspection of SAW; tack weld inspection; hydrostatic testing;
ultrasonic testing; x-ray weld inspection/filmless radiography; final inspection; and generation of
certificates. Evraz Canada employs both the LSA W process and the HSA W process for its
production oflarge diameter line pipe.
20. Using the U&O method, large diameter line pipe is generally produced in 40-foot lengths
(commonly known as "double random lengths" or "DRL"). Using the pyramid roll method,
however, large diameter line pipe is most often produced in 20-foot lengths ("single random
lengths" or "SRL") or shorter; this may require producers to girth-weld multiple sections together
to achieve greater lengths, as needed. Using the spiral weld method, large diameter line pipe can
be rolled into exact lengths up to approximately 115 feet (including "triple random lengths"/"TRL"
of 60 feet and "quadruple random lengths"/"QRL" of 80 feet).
21. Small diameter line pipe (i.e., line pipe with an outside diameter of up to 24 inches) is a
separate product, with wholly difTerent costs, production processes and sales considerations.
Among other characteristics of distinction, the DSA W, HSA W and LSA W processes used to
6
NON-CONFIDENTIAL
produce large diameter line pipe are different and distinct from the electric resistance weld
("ERW") process used to produce small diameter line pipe. Moreover, a significant proportion of
small diameter line pipe is sold through distributors, while large diameter line pipe is almost
entirely sold directly by Evraz Canada to end users.
D. Tariff Classification
22. The Subject Goods are normally imported under the following tariff codes for line pipe
(Customs Tariff):
• 7305.11.00.21
• 7305.11.00.29
• 7305.12.00.20
• 7305.19.00.21
• 7305.19.00.29
E. Countries of Export
23. This Complaint is with respect to line pipe originating in or exported from China and Japan.
F. Known Exporters
24. The companies known to be producers or exporters of subject goods are listed in
Confidential Exhibit 2-1. Detailed descriptions of the production facilities of a number of the
producer-exporters are contained in the Simdex Steel Tube Manufacturers Worldwide Guide;
relevant excerpts are attached in Confidential Exhibit 2-2. Specifically, Chinese exporters
include:
• Baoji Petroleum Steel Pipe Co., Ltd ("Baoji")
o Liaoyang Steel Pipe
o Zhongyou BSS PetroPipe
o Ziyang Pipe Mill
o Baoji SMI Steel Petroleum Pipe
7
NON-CONFIDENTIAL
o Shanghai BSW Petro-Pipe
• Baoshan Iron & Steel Co., Ltd. ("Baosteel")
• Huludao City Steel Pipe Industrial Co., Ltd. ("Huludao")
• Hunan Shinestar Steel Industries Corporation ("Shinestar")
• Liaoyang Steel Tube Co., Ltd ("LST")
• Panyu Chu Kong Pipe Co., Ltd ("PCK")
• Shengli Oil & Gas Pipe Holding Ltd ("Shengli")
• Threeway Steel Co., Ltd. ("Threeway")
• Tianjin Pipe (Group) Company ("TPCO")
• Yulong Steel Pipe Co., Ltd ("Yulong")
25. Japanese exporters include:
• JFE Steel Corporation ("JFE Steel")
o JFE Steel Corporation/Chita Works
o JFE Steel Corporation/East Japan Works (Keihin)
• Nippon Steel and Sumitomo Metal Corporation ("NSSMC")
o Nippon Steel & Sumikin Fine Technology Co., Ltd./Kashiwara Works
o Nippon Steel & Sumitomo Metal Corporation/Kashima Works
o Nippon Steel & Sumitomo Metal Corporation/Kimitsu W arks
o Nippon Steel & Sumitomo Metal Corporation/Kimitsu Works (Tokyo Area)
o Nippon Steel & Sumitomo Metal Corporation/Nagoya Works
o Nippon Steel & Sumitomo Metal Corporation/OIT A WORKS (Hikari Pipe & Tube)
o Nippon Steel & Sumitomo Metal Corporation/Wakayama Works (Kainan)
o Nippon Steel & Sumitomo Metal Corporation/Wakayama Works (Wakayama)
• Marui chi Steel Tube Ltd. ("MKK")
• Nishimura Koki Co., Ltd.
• Osaka Tokushu Kokan Mfg. Co., Ltd.
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G. Known Canadian Importers
26. The importers listed in Confidential Exhibit 2-3 are believed to account for the majority
of subject goods (which include distributors, brokers, traders, and end users).
H. Marketing and Distribution
27. There is no one model for marketing and distribution for Subject Goods. However, the use
of large diameter line pipe generally involves procurement for very large transmission projects.
Pipeline planning is a long process including pennitting, land acquisition, government approvals,
stakeholder relations, and procurement of labor and materials to construct a pipeline. As such,
decisions made currently will affect production years in the future. For instance, the typical
timeline for projects involving subject goods may be as follows: pipeline is announced in 2015;
RFP issued in 2017; pipe production may start in2018; pipeline construction may run from 2018-
2019; and full pipeline service may not occur until 2020 or later.
28. Generally, impotis of subject goods are either (I) marketed and sold through to supply
distributors (including international traders), who then in turn sell to end-users, or (2) sold direct
by the mill, typically in large volumes, to end-users. Large diameter line pipe is generally delivered
directly from the pipe manufacturer to the end-user at the pipeline project location. A significant
proportion of market sales of subject goods is destined to large exploration and production
("E&P") companies and pipeline companies who purchase the line pipe for oil & gas transmission
purposes.
29. Given the nature of the large-scale projects for which subject goods are sourced, it is most
common for manufacturers to be required to submit a bid directly to prospective end-users in
response to an RFP issued by that end-user customer. If a bid is successful, the line pipe
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manufacturer typically sells the pipe directly to that end user and arranges for delivery directly to
the pipeline project location.
30. Imports of subject goods are typically sold by agents, brokers, or trading companies to
domestic distributors, or are sold directly by the Chinese or Japanese pipe mill to distributors, who
then market them to end-users. In this supply chain model, the large diameter line pipe may not
always be paid for upon receipt. Rather, the pipe may be sold on consignment to the distributor
and billed only when the pipe is shipped by the domestic distributor to the end user. There are
many distributors in Canada selling subject goods. These companies are well-financed and range
from smaller enterprises to large multinational publicly-traded finns.
3. Domestic Like Goods
31. The large diameter line pipe produced by Evraz Canada are "like goods," within the
meaning of section 2 of the SIMA, to the subject goods.
32. First, the subject goods compete directly in the Canadian market with the large diameter
line pipe produced by Evraz Canada. Large diameter line pipe produced in Canada and the subject
goods are also commodity products, which are fully interchangeable and fully substitutable for
each other in the marketplace.
33. Second, the subject goods are sold through the same channels of distribution and have the
same end uses as the large diameter line pipe produced by Evraz Canada in Canada. Generally,
both the large diameter line pipe produced in Canada and imports of subject goods either are sold
to distributors who sell the products to the end user, or they are sold directly to large volume
end-user customers. These market sales are, in large part, destined for the oil and gas industry. The
subject goods and the large diameter line pipe produced in Canada by Evraz Canada, in this way,
compete directly in the same distribution channels and for the same end-user customers.
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34. For the foregoing reasons, domestically-produced large diameter line pipe are like goods
to the subject goods.
4. Single Class of Like Goods
35. The like goods produced by Evraz Canada constitute a single class of! ike goods. There are
no material distinctions to be made based on product characteristics, channels of distribution,
product methods, or other factors that would justifY separate classes.
5. The Canadian Industrv
36. To the best of its knowledge, Evraz Canada, on its own, represents the entirety of
production in Canada of like goods. Specifically, Evraz Canada produces large diameter line pipe
in outside diameters of above 24 inches through 60 inches, using DSA W production method (both
LSA W and HSA W, as described above.).
37. Evraz Canada does not import subject goods from either China or Japan.
6. Dumping
A. Introduction
38. For reasons elaborated below, Evraz Canada submits that the Chinese large diameter line
pipe industry does not operate under market economy conditions and therefore dumping margins
should be calculated pursuant to section 20 of SIMA. It is therefore requested that the CBSA initiate
a section 20 investigation. Evraz Canada has provided evidence that large diameter line pipe from
China has been dumped at substantial margins using the methodologies provided under
subsection 19(b) and section 20 of SIMA.
39. In addition, Evraz Canada has not been able to procure Japanese domestic market pricing
for large diameter line pipe based on the infonnation reasonably available to Evraz Canada.
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However, Evraz Canada will show that large diameter line pipe from Japan has been dumped at
substantial margins using the methodology under subsection 19(b) of SilviA based on the positive
evidence.
B. Section 19 Normal Value Analysis
i. China
40. Evraz Canada has been unable to obtain reliable domestic market sales information for
Chinese producers upon which to estimate normal values and, in any event, such pricing would be
distorted and not in the ordinary course of trade for reasons elaborated below.
41. Evraz Canada has, therefore, estimated nonnal values pursuant to subsection 19(b) of SIMA
on the basis of its own cost of production of the goods, a reasonable amount for administrative
selling and other costs, and a reasonable amount for profit, adjusted for known differences in
factors of production between Canadian and Chinese producers. The supporting product costing
infonnation is provided at Confidential Exhibit 6-1, and the calculated section 19 normal values
for the Chinese exporters are provided at Confidential Exhibit 6-2.
42. Normal value calculations have been provided for longitudinally and helically welded large
diameter line pipe across a range of outer diameters accounting for all of Evraz Canada's
production in Canada in 2015, and for which the domestic industry experienced substantial losses
of sales and/or revenue to imported Subject Goods. Notably, all tubular goods for use in oil and
gas pipelines are of "X" grade (specifically X-42 and higher), and production costs do not vary
materially within the X-grade and even between the X-grade and lower A and B grades. In
addition, separate normal values have been calculated for each quarter in 2015, 1 and, when there
l Nonnal values, as well as export prices and margins of dumping, were calculated on quarterly basis in order to reduce the distortions caused by aberrational month-to-month data resulting from extremely small volumes of production (in the case of normal values) and imports (in the case of export prices).
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were no production data for a given quarter, the normal value has been calculated using the
combined quarterly data for the other quarters for which data were available.
43. Given that the material inputs for Canadian and Chinese-produced line pipe are similar and
are available and traded globally, no adjustment was made for material costs. With respect to direct
labour costs, monthly mean wage data provided by the International Labour Organization ("ILO")
was used in order to account for wage differences between China and Canada. Specifically,
according to the latest ILO data, the Chinese monthly mean wage was 18.21 percent of the
Canadian monthly mean wage in 2013.2 This adjustment factor was applied to I 00 percent of the
labour costs.
44. In addition, Evraz adjusted half of both overhead and SG&A costs by the lLO labour rate
(i.e., applied the 18.21 percent adjustment factor to 50 percent of overhead and SG&A costs with
a resulting calculation of9.11 percent, and added this to 50 percent of overhead and SG&A, which
resulted in a grand total rate of 59.11 percent). Based on the infonnation reasonably available to
Evraz Canada, Evraz Canada believes that both of these calculations are conservative. With respect
to the overhead, [
]. With respect to the SG&A,
publicly available financial infonnation of the known Chinese exporters of the subject goods
shows that the SG&A rate for all of these exporters ranged between 5.88 percent and 25 percent
of the cost of goods sold. See Public Exhibit 6-5. [
2 Public Exhibit 6-3, Labour Adjustment Rate. Exchange rate used for the calculation of the labour adjustment rate is derived from the Bank of Canada at Public Exhibit 6-4. 3 Confidential Exhibit 5-1, Evraz Income Statement.
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45. Financial expenses have been conservatively excluded from the cost-build up.
46. In order to calculate a protit rate, the Complainant surveyed publicly available profit
information of the known Chinese exporters of the subject goods as identified in section 2.F
above. 4 Of the ten known exporters, publicly available profit infom1ation was not reasonably
available for six companies (i.e. BSG, Huludao, Shinestar, LST, Threeway and TPCO). Two of
the four remaining companies, PCK and Shengli, reported losses.5 Accordingly, Evraz Camada
derived the weighted average profit rate from the operating pro tit of the remaining two companies,
namely Baosteel and Yulong Steel Pipe, and obtained a rate of 4.53 percent of their cost of goods
sold. Evraz Canada therefore used this rate as a basis for calculating the Chinese amount for profit
for section 19 normal values. See Public Exhibit 6-5.
ii, Japan
47. Similar to the calculation of nonnal values for China, Evraz Canada has estimated nom1al
values for Japanese exporters pursuant to subsection 19(b) of SIMA on the basis of its own cost of
production, a reasonable amount for administrative selling and other costs, and a reasonable
amount for profit, adjusted for known differences in factors of production between Canadian and
Japanese producers. The supporting product costing infonnation is provided at
Confidential Exhibit 6-1, and the calculated section 19 nonnal values for the Japanese exporters
are provided at Confidential Exhibit 6-13.
48. Here again, normal value calculations have been provided for longitudinally and helically
welded large diameter line pipe across a range of outer diameters accounting tor all of Evraz
Canada's production in Canada in 2015, and for which the domestic industry experienced
4 Public Exhibit 6-5, Profit Survey of the Known Chinese and Japanese Subject Goods Exporters. 5 See Public Exhibits 6-6,2014 Annual Report ofPCK, and Public Exhibit 6-7,2014 Annual Report ofShengli Oil & Gas Pipe Holding Ltd.
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substantial losses of sales and/or revenue to imported Subject Goods. Notably, all tubular goods
for use in oil and gas pipelines are of '"X" grade (specifically X-42 and higher), and production
costs do not vary materially within the X-grade and even between the X-grade and lower A and B
grades. In addition, separate normal values have been calculated for each quarter in 2015,6 and,
when there were no production data for a given quarter, the normal value has been calculated using
the combined quarterly data for the other quarters for which data were available.
49. Again, as for the Chinese section 19 nonnal value estimates, because the material inputs
tor Canadian and Japanese-produced line pipe are similar and are available and traded globally,
no adjustment was made tor material costs.
50. With respect to direct labour costs, as was done for China, monthly mean wage data
provided by the JLO was used in order to account for wage difference between Japan and Canada.
Specifically, according to the latest ILO data, Japanese monthly mean wage was 86.78 percent of
Canadian monthly mean wage in 2013.7 This adjustment factor was applied to 100 percent of
labour costs.
51. In addition, Evraz adjusted half of both overhead and SG&A costs by the ILO labour rate
(i.e., applied the 86.78 percent adjustment factor to 50 percent of overhead and SG&A costs with
a resulting calculation of 43.39 percent, and added this to 50 percent of overhead and SG&A,
which resulted in a grand total rate of 93.39 percent). Based on the infonnation reasonably
available to Evraz Canada, Evraz Canada believes that both of these calculations are conservative.
With respect to the overhead, [
6 Normal values, as well as export prices and margins of dumping, were calculated on quarterly basis in order to reduce the distortions caused by aberrational month-to-month data resulting from extremely small volumes of production (in the case of nom1al values) and imports (in the case of export prices). 7 Public Exhibit 6-3, Labour Adjustment Rate. Exchange rates used for the calculation of the labour adjustment rate are based on the exchange rates published by the Bank of Canada at Public Exhibit 6-4.
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]. With respect to the
SG&A, publicly available financial infonnation of the known Japanese exporters of the subject
goods shows that the SG&A rate for all of these exporters was approximately 10 percent of the
cost of goods sold. See Public Exhibit 6-5. [
52. Financial expenses have been conservatively excluded from the cost-build up.
53. In order to calculate profit rate, the Complainant surveyed publicly available profit
information of the known Japanese exporters of the Subject Goods as identified in section 2.F
above. 9 Of the five known exporters, publicly available profit infonnation was not reasonably
available for two companies (i.e., Nishimura Koki Co., Ltd. and Osaka Tokushu Kokan Mfg. Co.,
Ltd.). Evraz Canada therefore calculated a weighted average profit rate based on the financial data
of the remaining three companies, namely JFE, NSSMC and Marui chi, and obtained a profit rate
of7.16 percent of their costs of goods sold. Evraz Canada therefore used this rate as an appropriate
representation of the Japanese domestic profit of the subject goods. See Public Exhibit 6-5.
C. Section 20 Normal Value Analysis
i. China as a Non-Market Economy
54. China operates as a non-market economy in the steel sector, including in the production of
line pipe. This absence of an open and free market economy results in a situation where the prices
for line pipe are substantially detennined by the Govemment of China and those prices are not
'Confidential Exhibit 5-1, Evraz Income Statement. "Public Exhibit 6-5, Profit Survey of the Known Chinese and Japanese Subject Goods Exporters.
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substantially the same as they would be if they were determined in a competitive market. As such,
normal values should be determined using the methodologies provided under s. 20 of SIMA.
55. In determining whether domestic prices are substantially determined by the government of
an exporting country under investigation, the Agency will consider whether:
• the government or a government body sets minimum andior maximum price levels;
• the government or a government body sets absolute pricing; • the government or a government body sets recommended or guidance pricing at
which it is expected that sellers will adhere to within a margin of appreciation; • government or regulatory bodies establish prices levels and regulate and enforce
price levels; and, • govemment-owned or controlled enterprises set the price of their goods in
consultation with the govemment or as a result of government-mandated pricing policies and, because of their market share or dominance, become price-leaders in the domestic market. 10
56. The Agency will also consider whether the govemment indirectly determines pricing
through mechanisms that can involve the supply or price of inputs used in the production of the
Subject Goods or by influencing the supply of Subject Goods in order to affect their price. In
particular, the President will consider whether:
• the govemment controls import and export levels through licensing, quotas, duties, or taxes to maintain domestic prices at a certain level;
• the govemment subsidizes producers by providing direct financial subsidies or low-priced inputs in order to maintain selling price;
• the govemment purchases goods in sufficient quantities to raise the domestic price of the goods or sells stockpiled good to put downward pressure on prices;
• the govemment uses taxation or other policies to regulate the level of profits that a company can eam, which will affect selling prices; and,
• the government regulates or controls production levels or the number of producers or sellers permitted in the market in order to affect domestic prices. 11
1° Final Determination Statem(!nt oj'Reasonsfor Certain Steel Piling Pipe (November 15, 2012) at para. 57. 11 Ibid. at para. 58.
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57. These factors have been examined by the Agency in respect of the steel pipe sector. The
CBSA has conducted five investigations involving closely-related Chinese OCTG and other
carbon steel pipe products and has detennined that SL\JA s. 20 conditions were found to exist:
• Certain Steel Piling Pipe (20 12), • Certain Pup Joints (2011 ), • Certain Oil Country Tubular Goods (201 0), • Certain Carbon Steel Welded Pipe (2008), and • Certain Seamless Carbon or Alloy Steel Oil and Gas Well Casing (2008).
58. The GOC's pervasive intervention in these sectors as described in these case, provides
significant evidence that SIMA s. 20 conditions exist in the steel industry in China, including the
line pipe industry. Indeed, the Agency has consistently found the SIMA s. 20 factors to exist and
the considerations from those prior cases are equally applicable to the production ofSubject Goods
in this case. Leaving aside this substantial existing evidence, the Complainant have obtained
further evidence demonstrating SIMA s. 20 conditions apply in respect of the Chinese line pipe
sector.
I) GOC Industrial Policies: Various Measures Used to Indirectly Determine Domestic Prices
59. Over the past ten years, the GOC has promulgated a number of industrial policies in the
steel sector and, more particularly, the steel pipe sector, that result in the GOC indirectly
detennining pricing.
60. On July 8, 2005, the GOC promulgated Development Policies for the Iron and Steel
Indust1y - Order of the National Development and Reform Commission (No. 35) (the "NSP"),
which had a number of key objectives focused around the control and management of the steel
sector in its contribution to China's economic and social development. 12 In particular, the NSP
12 Government of China, Development Policies for the Iron and Steel Industry~ Order r~lthe National Development and Rcjimn Commission (No. 35), Ariicle I, Public Exhibit 6-14.
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called for a significant structural adjustment of the steel sector by 2020. 13 The Agency has
previously found the major objectives of the NSP to be:
• The structural adjustment of Chinese domestic steel industry; • Industry consolidations through mergers and acquisitions; • The regulation of technological upgrading with new standards for the steel
industry; • Measures to reduce material and energy consumption and enhance environmental
protection; and, • Government supervision and management in the steel industry. 14
61. The GOC continued to issue directives throughout the late 2000s that sought to realize the
objectives of the NSP. For example, in 2006, the State Council promulgated the Notice on
Accelerating Structural Adjustment on Industries with Excessive Production Capacity, which
implemented restrictions on new iron and steel projects and encouraged the elimination of outdated
production capacity. 15 In 2007, the National Development and Refonn Commission released the
Emergency Notice Concerning Accelerating Srructura/ Adjusrment of Industries, prohibiting
investment in new projects or "renovation" of existing projects that have high energy
consumption. 16
62. In 2009, the GOC General Office of the State Council promulgated the Blueprint for the
Adjustment and Revitalization of the Steel Indust1y (the "2009 Revitalization Plan"), which was
the GOC's response to the global financial crisis. The 2009 Revitalization Plan recognized serious
issues with the Chinese steel industry aggravated by the "spill-over and spreading ... effect of the
financial crisis" including "blind investment based on misperception of market demands and
overexpansion of aggregate capacity," "weak ... innovation," "poor geographic location of
l.l !hid. 14 Final Determination Statement ofReasonsfiJr Certain Ga/nmi::ed Steel Wire (August 6, 2013) at para 86. Sec also Final Determination Statement of Reasons for Certain Steel Piling P1jJe (November 15, 2012) at para 68. 15 Final Determination Statement f~(ReasonsfiJr Certain Steel Piling Pipe (November 15, 2012) at para 73. 16 Ibid. at para 75.
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production capacity," "low concentration rate," "weak ... resource reserve," and "disorder in
circulation markets." 17 As the Agency noted in Certain Steel Piling Pipe, the plan included the
following major tasks:
• Maintain the stability of the domestic market and improve the export environment;
• Strictly control the total output of steel and accelerate the process of eliminating what is backward (obsolete);
• Enhance enterprise reorganization and improve the industrial concentration level; • Spend more on technical transformation and promote technical progress; • Optimize the layout of the steel industry and overall arrangements of its
development; • Adjust the steel product mix and improve the product quality; • Maintain stable import of iron ore resources and rectify the market order; and, • Develop domestic and overseas resources and guarantee the safety of the
industry. 18
63. The Agency concluded in Certain Steel Piling Pipe " { t} he 2009 plan is an acceleration of
the major objectives of the 2005 policy."19
64. More recently, the GOC promulgated two Five-Year Plans in 2011: one dealing with the
steel sector generally and one dealing specifically with the steel pipe industry. The GOC's Ministry
of Industry and lnfonnation Technology released the 121" Five-Year Plan: Iron and Steel ("2011
Steel Development Plan") on November 7, 2011. 20 The goals of the 2011 Steel Development Plan
are:
• increased mergers and acquisitions to create larger, more efficient steel companies;
• restrictions on steel capacity expansion; • upgrading of steel industry technology; • greater emphasis on high-end steel products; and,
17 Government of China, Blueprint for the At{justment and Rel'itali::ation of the Steel Industry at 2, Public Exhibit 6-15. "Final Determination Statement oj'Reasonsjo1· Certain Steel Piling PijJe (November 15, 2012) at para 78. See also Final Determination Statement of Reasonsfbr Certain Gal\·mzi:ed Steel Wire (August 6, 20 13) at para 87. 19 Final Determination Statement q{Reasonsfor Certain Steel Piling Pipe (November 15, 2012) at para 79. See also Final Determination Statement of Reasons/or Certain Galnuli=ed Steel Wire (August 6, 2013)at para 88. 2° Final Determination Statement of Reasonsjbr Certain Ga/nmi::ed Steel Wire (August 6, 2013 )at para 90; Final Determination Statement ofReasonsfor Certain Steel Piling Pipe (November 15, 2012) at para 81.
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• directed relocation of iron and steel companies to coastal areas.21
65. The new item in the 201 I Steel Development Plan that distinguishes it from previous plans
is a minimum requirement for steel production, which was put in place to eliminate smaller
producers in the market.22 The Plan sought to consolidate the steel industry such that the top ten
steel producers composed 60% of total steel output. 23 As the Agency noted in previous steel
investigations, " { t) his 20 I I plan is the next development stage of GOC plans aimed at achieving
this long-range 2020 target."24 The measures under the 201 I Steel Development Plan are:
• Improve the industry management system. This would include the GOC's Criterion for the Production and Operation of the Steel Industry (Steel Operations Standards) released in 2010;
• Create an environment for fair competition, strengthen and improve macro adjustment and control;
• Regulate the production and operation of the steel industry; • Standardize the operation of the industry; • Strengthen the macro guidance of the policy; • Promote international exchange and co-operation; • Improve industry infonnation flow, capital flow and material flow. Support
enterprise groups to establish and improve the infonnation system in different regions; and,
• Improve planning by regional authorities of industries to develop the steel industry, combine the regional mergers and reconstruction, and eliminate obsolete construction. Related enterprises should put forward the planning scheme corresponding to the foregoing plan. The China Iron and Steel Industry should assist and put forward advice on the policy.25
66. In short, the 2011 Steel Development Plan demonstrates that the GOC's heavy regulation
of steel capacity results in the Chinese steel industry being under the purview of the GOC.
67. The Steel Pipe Branch Association, an organization supervised by the State-owned Assets
Supervision and Administration Commission of the State Council and an organization previously
21 Final Determination Statement ofReasonsfbr Certain Gah'ani::ed Steel Wire (August 6, 20 13) at para 90; Final Determination Statement of Reasons for Certain Steel Piling Pipe (November 1St 2012) at para 81. 21 Final Determination Statement ofReasonsfor Certain Steel Piling Pipe (November 15, 2012) at para 82. " Ibid. at para 82. 24 Ibid. 25 Ibid. at para 85.
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considered by the Agency to be "government," released the more specific 12th Five Year Plan for
the Steel Pipe Indus II)' ("20 II Steel Pipe Plan") on June 23, 20 II Y' Under the previous Five-Year
Plan, the steel pipe sector experienced rapid growth with the construction of new facilities allowing
the "industry to shift production to higher value pipe products, such as submerged arc welded pipe,
high frequency resistance welded pipe, oil country tubular goods ( OCTG) and line pipe.'m The
result of this expansion was excess production capacity, intensified market competition, backward
production, and low industry concentration.28
68. The 20 II Steel Pipe Plan, covering the period 20 ll-20 15, directed a maximum output of
steel pipe at 67-75 million tonnes and estimated excess capacity to be 15 million tonnes.29 The
Plan further states that the top 20 pipe producers are to be responsible for more than 60% of
production, with concentration achieved through merges and acquisitions. 30 As the Agency
previously noted "{t}hese GOC objectives are likely to cont1iet with the commercial interests of
steel pipe producers by affecting production volumes, competition and ultimately prices."31
69. Unsurprisingly, Chinese line pipe producers are plagued with the same excess capacity as
the rest of the steel pipe industry. In 2012, one article reported that in the line pipe sector, "the
severe pressure of overcapacity is like being bom down by the weight of Mount Taishan."32 More
recently, one article found capacity utilization for line pipe producers to be just under 76% and
another article reported seamless line pipe capacity utilization to be at just over 67%.JJ Indeed,
"'Ibid. at para 88. 27 Ibid. at para 89. 2H Ibid. 29 Ibid. at para 90. 30 Ibid. at para 91. 31 Ibid. at para 92. 31 Tianjin Shiming Yuweiye Steel Trade Co., Ltd., "L245 Line Pipe's Severe Overcapacity Pressure Like Being Bora Down by the Weight of Mount Taishan" (7 June 2012), Public Exhibit 6-16. 33 Chinapipe.nct, "Steel Pipe Industry's Excess capacity Problem Got Worse: Seamless Steel Pipe Production's Capacity utilization is only 67.14%" (28 April 20 13) Public Exhibit 6-17.
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Hebei Steel Pipe Factory, a line pipe producer issued a report on April I, 2013 entitled "The
Fundamental Reasons as to Why Line Pipe Capacity is in Excess."34 In that report, Hebei Steel
Pipe Factory decried the GOC steel development policies that have led to the disastrous excess
line pipe capacity in China.
70. There is no doubt that line pipe production is one of the steel sectors targeted by the excess
capacity policies.
7!. Lastly, on October 15, 2013, the GOC put in force the Directives on Resolving Severe
Excess Capacity (the "2013 Directives"), which targeted the excess capacity problems faced by
the steel sector and several other key industries in China.35 Under the 2013 Directives, the GOC
set out eight major measures:
• Prohibit projects aimed at increasing capacity; • Reorganize existing projects; • Remove older steelmaking capacity so as to eliminate production; • Promote mergers and restructurings; • Exploit efficient domestic demand and focus on improving the demand structure; • Consolidate the larger international market and expand on foreign investment
cooperation; • Encourage and promote technological innovation; and, • Implement market-based policies.36
72. In the 2013 Directives, the GOC holds steady the position that it must resolutely control
increases in capacity in order to resolve the problem of excess production capacity. 37
73. The 2013 Directives provide a number of indirect mechanisms to influence the supply of
goods and, in tum, affect the price of those goods. First, the Directives set up a capacity quota.
One of the proposed measures is the reduction of iron and steel capacity from 976 million tonnes
34 I-Iebei Steel Pipe Factory, "Most Fundamental Reasons to Why Line Pipe Capacity is in Excess" (1 Apri12013), Public Exhibit 6-18. 35 People.com.cn; Opinions of State Council issued Directit·es on Resoh·ing Se,·erely Excess capacity Problems, GuoFa (2013) No. 41, Public Exhibit 6-19. 36 Ibid. 37 Ibid.
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to 80 million tonnes.38 Second, the 2013 Directives provide a policy measure of implementing
preferential tax policies to promote mergers and restructuring.39 Lastly, the 2013 Directives also
propose increasing the government's role as a user of steel to absorb the excess capacity through
public projects and government-invested projects. 40
74. The Implementation lvleasures .fi·om the Hunan Provincial Government on Resolving the
Problem a./Severe Overcapaci(v provides a more recent example of how Chinese provinces are
implementing the 2013 Directive.41 Implemented in May 2014, Hunan province sets out policies
such as encouraging enterprises to "go abroad" by actively participating in trade promotion
activities and increasing credit and financial support for freight costs.
75. These measures all substantiate the fact that the GOC is utilizing mechanisms to indirectly
affect steel, and more particularly line pipe, pricing in China.
2) GOC Ownership and Control of Line Pipe Producers and Input Suppliers
76. The GOC also controls pricing through state-owned steel manufacturers and their
subsidiaries in both the line pipe sector and in the inputs sector.
77. First, as the Agency has previously noted, the top steelmaking companies in China are
largely state-owned. Table 1 sets out the top ten Chinese steel producers in 2012. These mills
represent a combined output ofjust under 46% of China's steel production. Of these ten producers,
eight are state-owned enterprises. In effect, this means that over one third of all of China's steel
production is sourced in state-owned enterprises.
"Ibid., s. 3, para. 3. " !bid., s. 5, para. 6. 40 Ibid., s., s. 5, para. 3. 41 The People's Government ofi-Iunan Province, Implementation Measures from the Hunan Provincial Government on Resolving the Problem of Severe Overcapacity, XiangZhengFa (20 14) No 15 (4 May 2014), Public Exhibit 6-20.
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Table 1 China's Top 10 Steel Producers in 2012 and Status as State-Owned Enterprise."
78. These state-owned enterprises produce flat steel products and billets, and in tum provide
these inputs to line pipe producers in China. The GOC can use its control and ownership to affect
the price of these input supplies and in tum affect the pricing of line pipe. Indeed, the GOC has
often pressured these state-owned mills to avoid cutbacks in bids to maintain economic growth,
which consequently drives steel input pricing downward.43
79. In addition to controlling steel input suppliers, the GOC owns or controls a number ofline
pipe producers, including but not limited to: Anshan Iron & Steel Group; Baosteel Group/Baoshan
Iron & Steel; China National Petroleum Corporation/CNOOC; Wuhan Iron & Steel Group/Wuhan
Wugang Group. Some reports have estimated that 50% of line pipe manufacturers in China are
state-owned enterprises.44 TI1e significant market share and sheer number of government-owned
line pipe producers likely allows the GOC to impose and influence pricing in the market, just as it
does with steel production more broadly, driving the price of steel as it sees fit.
42 Reuters, "FACTBOX ~China's I 0 biggest steel mills in 20 12" (January 31, 20 13), Public Exhibit 6-21; StateOwned Steel Enterprises, Public Exhibit 6-22. 43 Final Determination Statement of Reasonsfor Certain Gall'llni=ed Steel Wire (August 6, 20 13) at para 93. " Shangdong Steel Pipe Co., Ltd, "Private line pipe companies reaching an end?", Public Exhibit 6-23.
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80. Lastly, the GOC is a significant purchaser ofline pipe as the ultimate owner ofPetroChina,
China's dominant oil and natural gas pipeline transporter.45 Thus, the GOC possesses the ability to
influence the prices of line pipe through purchases of line pipe by PetroChina.
81. In sum, the GOC's high degree of control of steel input suppliers, line pipe producers, and
line pipe purchasers strongly demonstrate its control ofline pipe pricing in the Chinese market.
3) GOC Import and Export Duties
82. As the Agency has previously noted, the GOC maintains a number of export controls on
raw materials used in the production of steel.46 These measures limit or prevent the export of raw
materials, create an increase supply of these goods in the Chinese domestic market, and cause
downward pressure on domestic prices.
83. Additionally, as of July 31, 2014, the GOC has implanted tariffs and import taxes on 78
steel products that are produced in the domestic marketY The taxes are applied on finished steel
materials that are re-exported after further domestic processing. The products subject to this tariff
include key line pipe inputs such as hot-rolled coil.
4) Massive Subsidization of the Chinese Steellndustry. Including Line Pipe Producers
84. As set out in more detail in Section 7 and Annex A, the GOC engages in massive
subsidization of the line pipe sector. As recently as November 2014, reports indicated that
"govemment subsidization played a major role in "beautifying" the financial statement for many
enterprises. Taking line pipe producer Valin Steel, for example, the net profit for HI 2014 was
45 "Guizhou News, "Pipeline Company's Monopolizes 'Three Barrels of Oil': [sit facing a Split''" (10 October 2013), Public Exhibit 6-24; PetroChina Company Limited, "About PetroChina", Public Exhibit 6-25; Sina Finance, "PetroChina Monopolizes the Transportation of Natural Gas: Accused oflncreasing Gas Price" (13 April 2013), Public Exhibit 6-26. 46 Final Determination Statement of Reasons for Certain Ga/l'(mi:::ed Steel Wire {August 6, 2013) at para. 96. 47 SteelFirst, "China to impose tax on steel imported for re-export" (14 July 2014 ), Public Exhibit 6-27.
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19.01 million RMB. However, the amount of government subsidization it received during that
period was 79.41 million RBM- 4.17 times its net profit."4R
5) Domestic Price Analysis
85. Sufficient information with respect to world market prices for line pipe is available, albeit
limited, for comparison with Chinese domestic line pipe prices. The Complainant has gathered the
best information available on Chinese line pipe prices.
86. Metal Expert collects and reports on seamless and welded Chinese line pipe prices as well
as prices from other jurisdictions, although it does not report the data on a per diameter basis. The
reported domestic selling prices in China for November and April2014 are replicated in Table 2.
Table 2 Metal Expert Home Market Chinese Pricing in USD/tonne."
87. Based on this information, domestic pricing of line pipe across all grades and production
methods in China ranged from $61 0/tonne to $700/tonne during the last quarter of 2014.
88. When compared with the pricing of line pipe in other markets sold on a similar basis (i.e.
FOB or CFR) as reported by Metal Expert (see Table 3), the Chinese prices are in every instance
lower than others are. For example, for Grade B Seamless line pipe, Chinese pricing is anywhere
from 7% to 50% lower than the pricing in other markets. For Seamless Grade X65, the Chinese
43 Tianjin Guanghengrun Steel Co., "(X42 Line Pipes) Local Governments Don't Dare to be Bold and ResoluteSeeking for Stability" (18 November 2014), Public Exhibit 6-28. See also, TianJin TianYiXingLong Iron & Steel Trade Co., Ltd., Government Subsidization is the Miraculous Medicine to Curing DeficiL< Experienced by X60 Line Pipe Enterprises" (20 August 2014), Public Exhibit 6-29. 49 Metal Expert, "World Pipes Markets" (January 2015), Confidential Exhibit 6-30.
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home market pricing is 52% lower than pricing in Japan. And for Welded Grade X42, the Chinese
pricing is 20% to 23% below the pricing in the United States and Japan.
Table 3 Metal Expert Line Pipe Pricing (EXW FOB or CFR basis) in USD/tonne.50
Country Grade Nov Dec Q4 2014 2014 2014
i USA I Seamless GrBc i }190 1
1 1180 l 1190 1
1
Middle East Seamless Gr B 1 680 i 680 ]}@ -. --. : Japan~--. Seamless Gr B .1250 _:___j1250_· _I 126~_! JaE.,~"---~- Seamless X65 . I 1450 .. ..;J 45Q __ ~J 1450 .. ~
f USA i WeldedX42 1760 · ! 760 · I 760 .· .· I [Japan __ ....... \,\1~~~~);;'!:2, __ lz2.Q._ ____ L7?Q ........ l7JQ ..... J
6) Conclusions
89. The pervasive, wide ranging, and material GOC measures have no doubt resulted in
si6'11ificant influence on the Chinese steel industry and more particularly the line pipe sector. The
conditions described ins. 20(a) of the SIMA therefore exist in the sector and domestic prices are
substantially determined by the GOC. The domestic selling prices of line pipe are not substantially
the same as they would be in a competitive market. As such, the Agency should initiate a s. 20
investigation.
ii. Surrogate Normal Value
90. Normal values for China should be determined based on domestic selling prices or on the
full costs of goods plus profits as the conditions of s. 20 of the SIMA exist in the line pipe sector
in China. Pursuant to SIMAs. 20(l)(c), normal values may be calculated based on surrogate
country data.
91. Evraz Canada has provided ex-mill domestic market pricing in the US, EU and Russia for
welded large diameter line pipe collected and reported by Metal Bulletin Research ("MBR") as
50 Ibid.
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appropriate for surrogate pricing data based on the information currently and reasonably available
to the Complainant. See Confidential Exhibit 6-31. In particular, the markets for large diameter
line pipe in the US, EU and Russia are each comparable to the Chinese market. 51 In addition, the
MBR data provide quarterly pricing for longitudinally welded line pipe for the US, EU and Russian
market, and also helically welded line pipe for the US and EU market. As such, the MBR data
allow for sufficiently specific nonnal values. Moreover, given that the MBR data represent ex-mill
sales prices, no adjustments were necessary.
92. Given the above, the Complainant has estimated nonnal values with reference to the
average of applicable quarterly large diameter line pipe prices as published by MBR. Specifically,
the Complainant used the average price of the US, EU and Russian markets for longitudinally
welded line pipe, and average price of the US and EU markets for helically welded line pipe.
Additionally, the prices in the MBR report are reported in U.S. dollars or Euro per tonne. As such,
the Complainant has converted the prices to Canadian dollars using the quarterly average exchange
rates provided by the Bank of Canada. Details of the calculations of these surrogate nonnal values
pursuant to s. 20 of SIMA are provided at Confidential Exhibit 6-31.
D. Export Price
93. There is a significant discrepancy in the data reported as VFD in the Statistics Canada data,
and the available data on exports from the China and Japan, e.g., HS Codes 7305.11, 7305.!2 and
7305.19. The amount of this differential, even using annual average exchange rates, is in the range
of the costs one would expect to be associated with CIF charges. The evidence therefore indicates
that these data have likely been reported on Canadian customs documents on a delivered basis
51 See CONFIDENTIAL Exhibit 8-17 at 12, 14, which shows the market demand in China for LSAW and HSAW line pipe in 20 ll was approximately just over 4.4 million tonnes, whereas the demand in the CIS region were over 4.12 million tonnes, and the demands in the NAFTA and EU regions were around 2 million tonnes.
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rather than FOB China or Japan point of direct shipment. Accordingly, the estimated export prices
for both subject countries have been based on Chinese and Japanese export data. See Public
Exhibit 6-32.52
94. The Chinese and Japanese tariff codes distinguish between longitudinally welded line pipe
and helically welded line pipe. 53 However, they do not breakout welded line pipe at 24" in outside
dimneter,54 and as such, export data are provided for all exports of welded line pipe exceeding 16"
in outside diameter. That said, based on Evraz's experience, the differences in sizes in outside
diameters do not result in significant differences in pricing and costs per tonne. Equally
importantly, Canadian import data, which breaks welded line pipe out at 24", show that a vast
majority of the Chinese and Japanese imports ofline pipe over 16" are in fact over 24" in outside
diameter. See Public Exhibit 6-35. As such, export prices reported in the Chinese and Japanese
export data constitute the most reliable and accurate source of export prices for the subject imports.
E. Margins of Dumping
95. Based upon the analysis discussed above, Chinese subject goods have been dumped at
margins of dumping ranging from [ ]% to [ ]'Yo using s. I 9 nonnal values, and [ ]%
to [ ]% using s. 20 nonnal values. Confidential Exhibits 6-36 and 6-38 provide a detailed
breakdown of all the margins calculated for each benchmark product.
96. Based upon the analysis discussed above, Japanese subject goods have been dumped at
margins of dumping ranging from [ ]% to [ ]% for the significant MODs, using s. 19 nonnal
values. Confidential Exhibit 6-37 provides a detailed breakdown of all the margins calculated for
each benchmark product.
52 See also Public Exhibit 6-33 for the Chinese HS codes and Public Exhibit 6-34 for the Japanese HS codes for the definition of the products surveyed for the export price determination. 53 !hid. 54 Ibid.
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7. Subsidization
97. The Complainant hereby requests that the Agency initiate a countervailing duty
investigation and have provided evidence of countervailable subsidies to Chinese producers and
exporters of subject goods on a pro!,'l'am-by-program basis in Annex A.
8. Demonstrating Injurv
A. In,jury
98. The dumped and subsidized subject goods from China and the dumped line pipe from Japan
have caused very material injury to the domestic industry. This injury is evidenced by the
significant increase in import volumes from the Subject Countries, the rampant undercutting,
depression and suppression of domestic industry prices by the Subject Goods and the resulting
impact on the domestic industry. In particular, Evraz Canada has suffered a decline in its market
share, sales volumes (as detailed in Confidential Exhibit 8-2), profits, productivity, capacity
utilization, return on investments and employment numbers. Further, the dumped and subsidized
Chinese and dumped Japanese large diameter line pipe are threatening to cause material injury, as
set out in more detail below.
99. Confidential Exhibit 8-1 provides the apparent Canadian market, showing Evraz
Canada's consolidated domestic shipments (i.e., domestic sales from Canadian production), as
well as imports by major import source. Canadian sales data are taken from
Confidential Exhibit 5-1. Import volumes and values are based on Statistics Canada import
55 As of the date of the filing of this Complaint, import data for December 2015 from Statistics Canada were not available. As a result, 2014 December import volumes and values were used as a proxy of2015 December import volumes and values to construct lull year 2015 import data. Import data for January to November 2015 are based on actual import data provided by Statistics Canada.
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i. Volume Effects of Dumped and Subsidized Imports
100. In both real and relative terms, the increase of subject imports has been nothing short of
mass1ve over the relevant period tor this Complaint. As demonstrated m
Confidential Exhibit 8-1, imports from China and Japan have grown from 37,746 tonnes, or
( ] percent of the estimated apparent Canadian market in 2013, to 71,009 tonnes, or [
percent of the estimated apparent Canadian market in 2014, to an estimated 142,481 tonnes, or
( ] percent of the estimated apparent Canadian market in 2015.
101. During the same period, domestic sales from domestic production declined precipitously,
from [
[
] tonnes, or [
] tonnes, or [
] percent of the estimated apparent Canadian market in 2013, to
] percent of the estimated apparent Canadian market in 2015.
102. Put another way, subject imports almost quadrupled in absolute terms and [
] relative to the total apparent market between 2013 and the first nine months of2015,
while domestic sales from domestic production decreased to [ ] of their absolute
levels and the market share relative to the total apparent market [
during the same period.
l
103. By any standard, these volume effects have been devastating to Evraz's profitability. As
discussed below, this massive displacement of domestic sales by imports of subject goods can be
directly linked to losses by Evraz Canada of major RFPs to dumped and subsidized import pricing.
For example, as set out in detail in Confidential Exhibit 8-2, [
], Evraz Canada lost a total of [ ],
representing more than [ ] in sales revenue. [
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].56 Notably [
].
104. Evraz Canada further believes these recent massive import volumes of subject goods
warrant an examination as to whether the conditions of section 42(\)(b) of SIMA apply, which
would lead to the imposition of duties from the date of initiation of the CBSA investigation in this
matter. Evraz Canada will provide additional evidence and argument on this issue in due course.
ii. Undercutting, Depression and Suppression of Prices
I 05. The evidence in this Complaint, particularly in the account-specific allegations provided
herein, demonstrates that significant undercutting by dumped and subsidized subject goods in the
bidding processes has caused Evraz Canada to significantly decrease its prices ([
]) in order to remain
competitive in these processes. Even after decreasing its pricing, Evraz Canada has lost significant
sales to unfairly traded imports from China and Japan. Confidential Exhibit 8-2 contains the
account-specific evidence oflost sales and lost revenue by Evraz Canada to dumped and subsidized
imports of subject goods.
I 06. Large diameter line pipe products are sold on a specific project or bid basis, and the pricing
oflarge diameter line pipe products would therefore vary from project to project. As such, average
unit selling prices across multiple projects and bids need to be carefully examined in order to
56 See Confidential Exhibit 8-2. Attachment.
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properly assess the relevance and significance of such data. In this regard, what is most telling is:
(I) the relationship of Evraz's average unit selling price to the average unit values of subject
imports (and in this regard the data, as summarized in Table 4 below, show that [
)); and (2) the relationship ofEvraz's
selling prices to Evraz's costs (and in this regard the data show [
Table 4: Average Unit Values
Evrao Canada sales and production data, Confidential Exhibit 5-I
I 07. More specifically, in 2013, the average unit sales values for Evraz Canada's domestic sales
from domestic production of like goods stood at [
imports from Japan was [
] per tonne. The average unit value of
].
108. In 2014, the average unit values of imports from both Japan and China showed modest
increases from their 2013 levels, standing at $1,413 per tonne and $1,312 per tonne, respectively.
Notably, however, by 2014, [
]. Also notably, the unit values for subject imports
57 Confidential Exhibit 5-1, Evraz Income Statement.
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from Japan and China were significantly lower than the unit values for non-subject imports, which
stood at $2,027 per tonne in 2014.
109. In 2015, the average unit values of imports of subject goods from China and Japan have
quite simply plummeted, dropping in the case of Japan by 13 percent compared to 2014 to S I ,233
per tonne and dropping by 4 percent in the case of China to $1,265 per tonne. This very si1,,>ni ficant
drop in average unit values for subject imports stands in contrast with an increase in the average
unit import value from non-subject imports, from $2,027 per tonne in 2014, to $2,051 per tonne in
2015. The massive drop in the average unit values of subject imports also corresponds with the
period of most dramatic growth in volumes of subject imports. Specifically, subject import
volumes increased from 71,009 tonnes in 2014, or [ ] percent of the total apparent market
estimated for large diameter line pipe, to an estimated 142,481 tonnes or [ ] percent of the
total apparent market in 2015.
110. During this same period, Evraz Canada's average sales value from domestic production
[
]. At the same time, Evraz Canada's domestic sales volumes
[
]. Notably, [
]. The gravity of this situation for Evraz Canada is made evident by the company's
financial perfonnance over the same period, as well as by the implications tor Evraz Canada's
future financial performance discussed further below.
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iii. Impact of Subject Goods on the State of the Domestic Industry
I) Profits
Ill. Confidential Exhibit 5-l contains the income statement for Evraz Canada's production
and sale of like goods. The data provided in the income statement demonstrate that while Evraz
Canada's financial perfonnance [
]. Moreover, as detailed in Confidential Exhibit 8-2 and immediately below,
Evraz Canada [
] Evraz's very recent and significant investments made towards upgrades dedicated
to Evraz Canada's Canadian production oflarge diameter line pipe and to upstream steelmaking
are now also at stake.
2) Production
112. As demonstrated by Confidential Exhibit 8-1, Evraz Canada's production has [
]in2015.
113. Regarding Evraz Canada's Canadian production capacity for like goods, in late 2013,
Evraz Canada [
], Evraz Canada's Canadian production capacity for
large diameter line pipe was [ ] tonnes ([ ] short tons) in 2013 and [ ] tonnes
([ ] short tons) in 2014 and 2015. This translates into capacity utilization rates of[ ]
percent, [ ] percent and [ ] percent for each of2013, 2014 and 2015 respectively. By any
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standard, [
].
3) Capacity
114. This [
]. Indeed, a significant portion of the volume from
] described in detail in Confidential Exhibit 8-2, which Evraz
Canada lost to dumped and subsidized subject imports, would have been produced [
]. Without this volume, [
l
4) Return on Investments
I I 5. The massive lost sales volumes and significant price effects caused by dumped and
subsidized imports also jeopardize the very significant investment made by Evraz Canada to
improve the efficiency and increase the capacity of Evraz Canada's large diameter line pipe
production at its Regina facility. At the end of2014, based on Evraz Canada's [
] combined with the absolute need to reduce costs to be able to
compete with low-priced imports for new significant pipeline projects on the horizon in Canada
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Evraz Canada approved an investment program in its Regina facility that included an approximate
] upt,>Tade to Evraz Canada's large diameter line pipe production line. With this
investment, Evraz Canada's expects to achieve production cost savings as well as an increase in
production capacity for large diameter line pipe of approximately [
] this would increase the production capacity tor
large diameter line pipe of Evraz Canada's Regina facility to approximately [
], Evraz Canada's total Canadian production capacity for
like goods would be [ ] tonnes. [
]. However, the simple reality is that
Evraz Canada's total sales volumes in 2015 of[ ] tonnes (of which [ ] tonnes
was for domestic sales), which are also increasingly less profitable sales, is [
].
116. Moreover, on October 13, 2015, Moody's Investors Service placed Evraz Canada's Ba3
senior secured notes under review for downt,>Tade. In doing so, Moody's stated that Evraz North
America, Evraz Canada's parent company, continued to "struggle with challenging market
conditions with 2015 evidencing weaker capacity utilization rates and meaningful price
deterioration." See Public Exhibit 8-3. This downgrade will [
].
5) Employment
!1 7. As discussed above, the [
].
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iv. Additional Evidence of Causation: Account-Specific Allegations
118. The Complainant has provided account-specific allegations, detailing evidence of material
injury through lost sales, price suppression, and price depression. See Confidential Exhibit 8-2.
This infonnation serves to corroborate the correlational market share evidence and relative average
price infonnation discussed above by providing direct examples of the devastating commercial
impact to Evraz Canada by dumped and subsidized subject goods at an account-specific level.
119. Notably, these account-specific allegations demonstrate that Evraz Canada has suffered
material injury and will continue to suffer material injury. Evraz Canada has suffered a loss of
critical orders, which has already [ ].
Evraz Canada has also suffered severe pricing pressure that has forced, and will continue to force,
Evraz Canada into the unenviable position of having to decide between (I) competing with the
subject goods [ ] and (2) forgoing the business-critical
volumes associated with those sales entirely. Evraz Canada [
]. Each of these are [
].
v. Summary
120. The injury factors discussed above demonstrate that unfairly priced imports of subject
goods from both China and Japan have caused significant injury to the domestic large diameter
line pipe industry in Canada. There has been a significant increase in the volume of imports of
subject goods, both in absolute tenns and relative to the production and consumption of the like
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goods in Canada. Moreover, the effect of the dumped and subsidized goods trom China and the
dumped goods from Japan has been to significantly undercut, depress and suppress the prices of
Canadian-produced large diameter line pipe. As a result, the impact of the presence of the subject
goods in Canada has been that Evraz Canada's profits have declined significantly, along with its
production, capacity utilization, employment, Canadian sales volumes and values, and domestic
market share, particularly in 2015. Evraz Canada has also been [
]. Evraz Canada has provided infonnation on an account-specific basis that
demonstrate injury to the domestic industry through lost sales volumes, price depression, and price
suppresswn.
121. In combination with the average pricing data, the evidence of a causal connection between
dumped and subsidized imports of subject goods from China, dumped imports of subject goods
from Japan, and material injury suffered by Evraz Canada is indisputable. The average unit values
of the subject goods are [
] and there has been significant decrease in the average
unit values of the subject goods in 20 I 5 when the volume of subject goods increased massively.
B. Threat of Injury
I 22. Dumped and subsidized large diameter line pipe from China and dumped large diameter
line pipe from Japan pose an imminent and foreseeable threat of injury to Evraz Canada over the
next I 8 to 24 months. Given the standard lead-time between RFPs and delivery for subject goods,
most of which are completed over a two-year period, threat of injury should be evaluated over a
18- to 24-month forward-looking basis rather than on a 12- to IS-month forward-looking basis.
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123. This imminent and foreseeable threat of injury is evidenced based on a number of factors,
including:
• the significant rate of increase in imports of dumped and subsidized subject goods, signifying a likelihood of continual increased imports into Canada of dumped and subsidized subject goods;
• the particular vulnerability of the domestic industry that produces subject goods;
• the export orientation, freely disposable capacity, and imminent increase in capacity of subject good producers;
• the inability of other export markets to absorb any increase in subject goods;
• the likelihood that significant price undercutting of domestic like goods will continue, resulting in further price depression and suppression; and
• the likelihood of injury, which is already impacting the domestic industry.
i. Significant Rate of Increase in Imports of Subject Goods
124. As discussed further above in relation to the injury currently suffered by Evraz Canada,
there has been a significant increase in the volume of subject goods imported into the Canadian
market from both China and Japan, both in absolute tenns and relative to the consumption in
Canada oflike goods from 2013 through 2015. Confidential Exhibit 8-1 shows that imports from
subject countries have grown from 37,746 tonnes, or [ ] percent of the estimated apparent
Canadian market in 2013, to 71,009 tonnes, or [ ] percent of the estimated apparent Canadian
market in 2014, to an estimated 142,481 tonnes, or [ ] percent of the estimated apparent
Canadian market in 2015. Clearly, given this inexorable increase in the volume of imports of
subject goods from both China and Japan, imports of subject goods can be expected to continue to
grow over the next 18-24 months if SIMA duties are not put in place.
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125. Indeed, Canada was the number one destination for Chinese welded line pipe from January
to November 2015,58 During the first II months of20 15, Canada was the single largest destination
for welded line pipe over 16" in OD from China, taking in 121,828 tonnes, as evidenced in the
Chinese export data compiled by GTIS in Public Exhibit 8-4. According to the Canadian import
data from Statistics Canada, approximately 80.88 percent of the imports of Chinese welded line
pipe over 16" in OD were over 24" in OD over the same period (see Public Exhibit 6-35), which
translates into 98,534 tonnes of Chinese exports oflarge diameter line pipe based on the Chinese
export data. These volumes are particularly devastating in the context of overall consumption of
line pipe in the Canadian market, as compared to other countries, 59 signalling particular
vulnerability to further increased volumes of subject goods over the next 18 to 24 months.
126. As for the subject imports from Japan, it is a well-known fact that the Canadian market is
"a target region for Japanese {line pipe} mills."60 During 2015, Canada was the second largest
export market for Japanese welded line pipe over 16" in 0Ds. 61 The total volume of Japanese
subject imports into Canada increased by more than 50 percent from 2013 to 2014, before
increasing by almost 130 percent from 2014 to 2015 at 77,543 tonnes (see Confidential Exhibit
8-1). These increasing Japanese exports to Canada, coupled with decreasing exports to markets in
which there has been a significant Chinese presence, demonstrates that Japanese exporters, faced
with competition from Chinese exporters in these markets, are increasingly looking to Canada to
offload excess production of subject goods.
58 Confidential Exhibit 8-4, GTJS, China Export Data. See also Steel Business Briefing 2015, Yuelin Dai "China's Welded Pipe Output, Exports Down Amid Summer Lull" (August 15, 2015), Confidential Exhibit 8-5. 59 See "M13R Welded Linepipe & OCTG Market Tracker" (December 22, 2015) Confidential Exhibit 8-6 at page 4 where the Canada market consumed only 393,000 tonnes of welded LSAW and HSAW line pipe in 2014, whereas the United State market consumed 708,000 tonnes during the same time period. r.o See "MI3R Welded Linepipe & OCTG Markel Tracker" (January 29, 2016) Confidenthd Exhibit 8-7 at page I. 61 Public Exhibit 8-4, GTJS Japanese Export Data.
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127. Confirming the clear pattern of increasing exports to Canada observable from the data,
MBR as recently as on December 22, 2015 reported that " { s} uppliers in {Japan and China} are
targeting the large Canadian pipeline projects, especially the offshore west-coast lines ... year-to-
date October 2015 arrivals amounted to 75kt oflarge-diameter linepipe from Japan and 66kt from
China. The tonnage from China represents an increase of 30kt from the same period in 2014."62
Given this increase in volume, and decrease in pricing of subject goods discussed below, MBR
presciently noted that "it is only a matter of time before producers are petitioning for linepipe
investigation on the over-24" OD sizes" from Japan and China. 63
ii. The Domestic Industry Currently is Particularly Vulnerable to Imports of Subject Goods
A) Further Loss of RFPs and [ l
128. The apparent market table at Confidential Exhibit 8-1 shows that [
].
Notwithstanding this [ ] in demand, subject imports more than doubled, from
71,009 tonnes in 2014 to an estimated 142,481 tonnes in 2015.
129. In light of the current market conditions and the injury already suffered, Evraz Canada
[ ]. Evraz Canada currently foresees [ ] opportunities tor large
diameter line pipe [ ] which are crucial to Evraz
Canada's [
] these opportunities represent
62 See "MBR Welded Linepipe & OCTO Market Tracker" (December 22, 2015) Confidentinl Exhibit 8-6 at page 5. 63 !bicl.
43
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130. Although [ ], Evraz Canada has already suffered the
effects of significant price depression and expects to be pressured further to lower its prices going
forward. [ ], Evraz Canada has [
].
131. Evraz Canada expects that these [
l:
132. [
] Evraz Canada initially quoted a price of ] but has since been
forced to reduce its price to [ ] to compete with dumped and subsidized imports
from China and dumped imports from Japan. Evraz Canada's price reduction already represents a
loss of ] and Evraz Canada expects to [
]. Moreover, Evraz Canada expects that [
l
133.
a price of[ ] at that time. Since then, [
offshore imports to bring Evraz Canada's price down to [
] reduction equivalent to approximately [
44
] and Evraz Canada quoted
]lower priced
], which represents a [
]. At [ ] USD/tonne, Evraz
Canada a I ready expects [
projected fully burdened costs which are [
NON-CONFIDENTIAL
J compared to Evraz Canada's
Evraz Canada expects [
]. Evraz Canada has received market intelligence indicating that Japanese mills were
pricing similar pipe [
134.
has already suffered a Joss of approximately [
].
]. Evraz Canada
] as a result of the competition it is
facing from unfairly traded Chinese and Japanese large diameter line pipe. (
this dumped and subsidized pipe to force Evraz Canada to lower its price from [
to [ ]. Evraz Canada has already [
]. Moreover, at a price of [
135.
J As noted above, Moody's has put Evraz Canada on a credit rating
wanning as of October 2015, [
].
45
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B) Further loss on Investment Expected
136. As discussed, Evraz Canada had made a major investment in its Regina large diameter line
pipe production facilities in 2014. Evraz Canada had hoped that expanded production capabilities
and the improved efficiencies in the large diameter line pipe production process stemming from
this investment would make the Regina mill even more competitive in the industry. However, the
continued increase in volumes of imports of subject goods coupled with the continued decrease in
pricing of subject goods from China and Japan has not pennitted, and will not pennit, Evraz
Canada to compete on an even-playing field. SIMA duties are required to ensure fair competition
that will allow Evraz Canada to achieve reasonable returns on its investment.
iii. Japan and China have Freely Disposable and Growing Capacity, which will Encourage Exports of Dumped and Subsidized Goods to Canada
137. The global industry is currently facing a situation of chronic overcapacity.64 One of the
drivers of this situation is the illogical capacity expansions taking place in non-OECD countries,
spurred by government subsidization.65
138. In 2011, China was estimated to have a steelmaking capacity of 863.3 million tonnes.66
Between 2011 and 2014, China's capacity continued to grow to an estimated 995.6 to I ,007 million
tonnes.67 The GOC has acknowledged a "total overcapacity" problem as recently as July 2014 due
to the "senselessly expanding" of Chinese steel capacity. 68 This chronic and excess capacity is a
64 Organization for Economic and Co-Operation and Development, "Excess capacity in the global steel industry: The current situation and ways forward" (January 2015), Public Exhibit 8-8. 65 Organization for Economic and Co-Operation and Development, "Excess capacity in the global steel industry: The current situation and ways forward" (January 2015), Public Exhibit 8-8. 66 Organization for Economic and Co-Operation and Development, "2013 Developments in Steelmaking Capacity of Non-OECD Economies, Public Exhibit 8-9. 67 Organization for Economic and Co-Operation and Development, "2013 Developments in Steelmaking Capacity of Non-OECD Economies, Public Exhibit 8-9. "'"How to Deal with the Four Industries' Severely Excess Production Capacity", (August I, 2014), Public Exhibit 8-10.
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direct result of the massive and prolonged campaign of steel industry subsidization by the GOC .6''
The Chinese domestic steel pipe market is unprofitable, with supply significantly exceeding
demand. The GOC's 12'11 Five-Year Plan for the Steel Pipe Industry stated that "the {Chinese}
steel pipe industry's average profit has hit a historical low point, even lower than the general steel
industry's average profit level" by mid-2011. 70 By 2014, the problem in the Chinese steel pipe
industry has worsened to an even greater extent:
In recent years, newly added steel pipe assembling units aggravated the problem of production capacity, which caused the imbalance between the steel pipe industry's structure and the product's structure; and the situation of disorderly competition and low enterprise revenue. 71
139. Japan has also expanded its steelmaking capacity in recent years. A December 2011
Organization for Economic Cooperation and Development ("OECD") report found that Japan's
steelmaking capacity had been steadily increasing since 2005, and was expected to continue
increasing into 2014. Altogether, this represents a total capacity increase of 9.5 million tonnes,
from 124.1 million tonnes in 2005 to 133.6 million tonnes in 2014.72
140. Production has not kept up with the expansion in steelmaking capacity. Over the same
period of2005 to 2014, while steelmaking capacity expanded, Japan's steelmaking production fell
almost 2 million tonnes, from 112.5 million tonnes in 2005 to 110.7 million tonnes in 2014.73 The
result is a I 0% increase in excess capacity.
69 Organization for Economic Co-Operation and Development, "Excess capacity and risks of trade friction cloud the outlook for the global steel industry" (December 12, 2014), Public Exhibit 8-ll. See also Economic Policy Institute & Stewart and Stewart, "Surging Steel Imports Put up to Half a Million US Jobs at Risks" (May 13, 2014) at 36-38, Public Exhibit 8-12. 70 12th Five-Year Plan for the Steel Pipe Industry" (June 14, 2011), Public Exhibit 8-13. 71 "The Steel Pipe Industry Must Become Accustomed to the New Conditions" (March 31, 2014), Public Exhibit 8-14. 71 Organization for Economic and Co-Operation and Development, "Regional capacity" (December 20 II), Public Exhibit 8-15. 73 World Steel Association, "Crude Steel Production", Public Exhibit 8-16.
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141. The excess and [,'TOWing capacity problem plaguing the steel sectors in China and Japan
are likewise a persistent issue in the line pipe sector. Meta!Bulletin sets out the current capacity
for large diameter line pipe producers in China and Japan producing LSAW and HSA W large
diameter line pipe. That data show that China's capacity to produce large diameter line pipe is
approximately 9.2 million tonnes and Japan's capacity is approximately 2.6 million tonnes.
Table 5: Production Capacity of Chinese and Japanese Line Pipe Producers ('000 tonnes)"
74 MetaiBulletin, The Five Year Strategic Outlook for the Global Large-diameter Linepipe Market (2014) at 166, 206, Confidential Exhibit 8-17. 75 Nishimura Koki operates as a subsidiary ofNSSMC as of November 30, 2010 (See Bloomberg Business, Company Overview of Nishimura Koki Co., Ltd., Public Exhibit 8-18) and consist of i20,000 tonnes ofNSSMC's I ,200,000 tonnes production capacity.
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142. To estimate capacity utilization, Meta!Bulletin reports production forecasts of LSAW and
HSA W line pipe for Chinese large diameter line pipe producers. While Meta!Bulletin does not
report a Japan-specific forecast, Meta!Bulletin forecasts the other-Asia production (which includes
Japan) to be flat or declining through to 2017. As such, it is reasonable to assume Japanese output
is more or Jess flat through to 2017, using the most recent actual HSAW and LSAW Japanese
output data of 7. 7 million tonnes reported by Meta!Bulletin. The resulting large diameter line pipe
production estimate for 2015 through 2017 is reproduced at Table 6.
Table 6 Forecast Production Output ('000 tonnes)76
2015 2016 2017
143. The combined capacity and output data reveal that China and Japan have massive excess
capacity. As Table 7 shows, Chinese and Japanese large diameter line pipe producers currently
operate at less than 60% capacity and utilization is expected to fall by 3 percentage points by 2017
to 56%. The excess capacity from these dismal utilization rates is at a staggering 4.9 million tonnes
-which will grow to 5.2 million tonnes by 2017 -and represents [ ] the total
apparent market for large diameter line pipe in Canada in 2015.
76 Meta!Bulletin, The Five Year Strategic Outlook for the Global Large-diameter Linepipe Market (20 14) at 186, 224-225, 231, Confidential Exhibit 8-17.
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Table 7 Estimated Combined Excess Capacity for Japan and China
2015 2016 2017 Capacity ('000 tonne8) 11,936 '·. H,936 ! 11;9361 Production ('000 tonnes) 7,015 6,870 I 6,720 1
1 Excess CapacitJ(<ooo tonnes) 4;921 i 5,066 1 5,216 • Capacity Utilization(%) 59% • 58% • .56% 1 Excess CapaCitY(%) • ·. · · i 41% : 42% l 44%
144. The fact that China has over 310 facilities with either active or pending API 5L certification
and that Japan has additional facilities with active or pending certifications than those surveyed by
MetalBulletin underscores the fact that the above data are extremely conservative and likely
underestimate line pipe capacity and excess capacity in China and Japan. 77 An OECD report has
also suggested that Chinese steelmaking capacities are larger than estimated, corroborating the
MetalBulletin data of underestimated Chinese line pipe capacity. 78
145. These facts, combined with the sudden and massive increase in the volume of subject
imports from China and Japan between 2013 and 2015, underline the fact that China and Japan
have significant unused capacity to flood the Canadian market with dumped and subsidized line
pipe several times over.
146. Despite existing excess capacity, Chinese and Japanese producers continue to add more
capacity. In China, steelmakers have invested in new steel making production capacities in
Xinjiang, a raw resource rich region. 79 Additionally, other Chinese companies are also increasing
their steelmaking capacities, including Baosteel who has commissioned the building of two 5,050
m3 blast furnaces. 80 In the case of Japan, NSSMC and JFE are planning to increase their
77 API Certification List, Public Exhibit 8-19. 78 OECD, "Excess Capacity in UJe Global Steel Industry and the Implications of New Investment Projecl''" (2015) at 18, Public Exhibit 8-20. 79 Ibid at 15. 80 !hid.
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steelmaking capacities. JFE Corporation acquired a 5% stake in a Vietnamese steel company,
Fonnosa Plastics, in July 2015. JFE plans to invest $10 billion to assist Formosa Plastics in
increasing its steelmaking capacity to 22 million tons. 81 NSSMC explicitly stated in its 2013
Annual Report that it plans to achieve 60-70 million tons of overall steel production capacity
within the next 5-l 0 years.82
147. Based on the above, the freely disposable and increasing capacity of Chinese and Japanese
large diameter line pipe producers will lead to an increase in exports of the dumped and subsidized
line pipe into Canada in the next 18 to 24 months.
iv. Market Conditions will Encourage Increased Exports to Canada
1) Chinese Market Conditions Encourage Exports
148. Demand for Chinese large diameter line pipe is far below production. One explanation for
this low demand is that the Chinese economy has experienced decelerated growth in recent years;
a trend that is predicted to continue into 2017.83 Worried about China's decelerated growth, the
GOC has undertaken a number of measures to boost its economy.84
149. On August 11, 2015, China's central bank, a GOC entity, devalued its currency by 2%, the
biggest one-day fall since 1994.85 The GOC tightly controls the value of the Chinese Yuan. Before
this sudden devaluation, the GOC has seen to it that the Yuan sharply raised in value over the last
81 DealStreetAsia, "Japan's JFE Steel mulls $242m investment in Vietnam-based Formosa Plastic project" (26 July 2015) at I, Public Exhibit 8-21. "Nippon Steel & Summitomo Metal Corporation, "Annual Report 2013" (2013) at 6-7, Public Exhibit 8-22. 83 The World Bank, "China is Adjusting to Slower Economic Growth, Says New World Bank Report" (1 July 2015) at 1, Public Exhibit 8-23. 84 The Wall Street Journal, China Moves to Devalue Yuan (II August 20 15) at I, Public Exhibit 8-24. 85 The Globe and Mail, China devalues yuan by 2'Yo, sees biggest one-day fall since 1994 (I 1 August 2015) at I, Pnblic Exhibit 8-25.
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I 0 years.86 Arguably, the GOC's currency devaluation move is an attempt to increase Chinese
exports, boosting the economy when other measures have proven ineffectiveP
150. While many Canadian industries will be negatively affected by increased Chinese exports,
Steel Business Briefing has predicted that the Yuan's devaluation will have a particular devastating
effect on the overseas steel industry. 88 The article specifies that "{i}n the short tenn, the yuan
devaluation should make Chinese steel makers more competitive in the seabome market."89
151. Chinese line pipe producers will be encouraged to export their products in the next 18 to
24 months as demand for line pipe is far below production and due to struggling home market
prices. While the line pipe industry in China has been in a downtum since 2013, there was some
belief that a number of pipeline infrastructure projects will come online in 2015 and raise demand
to approximately 4.3 million tonnes.90 Even with demand at 4.3 million tonnes, as described above,
Chinese capacity to produce line pipe is far greater than market demand.
152. That said, the future of some of the large pipeline projects relied upon by Meta!Bulletin to
forecast demand are now in question. More recent repmis suggest that the cancellation of a number
of significant oil and gas transmission projects could result in a more significant reduction in the
demand for line pipe in China. China National Petroleum Company, China's main pipeline
developer, has halted new pipeline construction since the fourth quarter of 2013.91 While there
have been some reports that China's fifth west-to-east gas pipeline may begin soon, approval is
8" The Wall Street Journal, China Moves to Devalue Yuan (II August 2015) at 4, Public Exhibit 8-24. 87 Ibid. 88 Steel Business Briefing, "Special report: Yuan devaluation poses problems for EU steel" (20 August 2015) at 2, Confidential Exhibit 8-26. 89 Ibid. •w Metal Bulletin, "MBR Welded Linepipc & OCTO Market Tracker" (30 April2014), Confidential Exhibit 8-27. '"Steel Business Briefing, "China's Chu Kong squeezed by delays of new pipeline in2013" (I April2014), Confidential Exhibit 8-28; Steel Business Briefing, "Lower Investment and comtption hit China energy pipe demand" (25 March 2014), Confidential Exhibit 8-29.
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still needed for the final design and the projects timing remains uncertain.91 There has been no
progress on a proposed $26 billion pipeline to be constructed by Sinopec. 93 Thus, there is a real
possibility that demand could be lower than what Meta!Bulletin predicts.
153. Despite this reduction in demand, the GOC encourages steelmakers to maintain, if not
increase, their current level of production. In fact, an article published on December 15, 2015
suggests that "local {Chinese} govemment approval was needed before steelmakers could make
any large cuts in production"Y4
154. Importantly, pricing in the Chinese market is reported to be at an all-time low. According
to Metal Bulletin, LSA W line pipe grade API 5L X60 remains at an all-time lowY5 The benchmark
price has been unchanged tor three consecutive months and are half the value they were tour years
ago.'>6 As discussed in greater detail below, the opportunity tor higher pricing in export markets
like Canada encourages Chinese producers to focus on the export market and abandon the domestic
market.
155. With the home market unable to absorb the volume from the extraordinary capacity and
with pricing at all-time lows, China will be forced to export the dumped and subsidized line pipe
to more attractive markets such as Canada. Exports represent the only option tor subject line pipe
producers to address excess production and production capacity.
92 See also production data in Platts, "Pipemakers adapt to oil price plunge" (30 January 20 15), Confidential Exhibit 8-30. "'Steel Business Briefing, "China's Chu Kong squeezed by delays of new pipeline in 2013" (I April2014), Confidential Exhibit 8-28; Steel Business Briefing, "Lower Investment and corruption hit China energy pipe demand" (25 March 2014), Confidential Exhibit 8-29. "'Steel Business Briefing 2015 (15 December 2015), Confidential Exhibit 8-31. 95 Metal Bulletin, "MBR Welded Linepipe & OCTO Market Tracker" (30 April2015), Confidential Exhibit 8-27. 96 Ibid.
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2) Japan Has No Home Market Demand
156. Japan has very limited oil resources and relies almost solely on imports to meet
consumption needs. Limited domestic oil resources have translated to making Japan the third
largest net oil importer in the world.97 Therefore, there is virtually no domestic need for subject
line pipe produced by NSSMC and JFE. The USITC has confirmed that" {t}he Japanese CWLDLP
{"Certain Welded Large Diameter Line Pipe"} industry is export-oriented with virtually no home
market demand"98 and "Japanese energy companies have actively pursued upstream oil and natural
gas projects abroad, and provide construction for energy projects worldwide. Japan is a major
exporter of energy - sector capital equipment."99
157. JFE, the exporter with the largest line pipe capacity in Japan, has stated in its March 2014-
2015 fiscal year update that it plans to "enhanc{ e} the company's production capability, a task
that has been undertaken since the last medium tenn. Also, JFE Steel aims to increase its steel
sales ... overseas, and is focusing on improving profitability to raise its rate of sales (ROS) to I 0%
in the fiscal year ending March 2018 ... "{emphasis added}. 100
158. Since the Japanese home market has virtually no demand for subject goods, Japanese
producers and exporters will be forced, and indeed are already exporting massive volumes of
dumped and subsidized line pipe into markets such as Canada.
'!7 USITC, Certain Welded Large Diameter Line Pipe ji·om Jopan (Second Rel'ie1t~, 731-T A-919, September 2013, Public Exhibit 8-32. 98 USITC, Certain Welded Large Diameter Line Pipe Ji'om Japan (Second Reviell'), 731-T A-919, September 2013, Public Exhibit 8-32. 99 USJTC, Certain Welded Line Pipe Ji'om Korea and Turkey (Preliminary Determination), 701-T A-524-525, 731-T A-1260-1261, December 2014, Public Exhibit 8-33. 100 JFE Holdings' Financial Results for Fiscal Year 2014 ended March 31, 2015, Public Exhibit 8-34.
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3) Soft Global Market Demand
159. Global demand for line pipe is expected to remain weak in the next 18 to 24 months.
Meta!Bulletin reports that demand for line pipe with an outside diameter of between 22" and 30"
will fall from 4.524 million tonnes in 2014, to 4.459 million tonnes in 2015, to 4.351 million tonnes
in 2016, and further to 4.343 million tonnes in 2017. 101 This represents a reduction in demand of
4% between 2014 and 2017. Moreover, the recent collapse in oil prices has created concern among
end users ofline pipe who will be forced to delay or cancel projects due to the reduced profitability
of their pipeline initiatives. 102 As such, the reduction in demand could be greater than what
Meta!Bulletin previously forecasted.
160. In light of this decrease in demand, there is little prospect for other markets to absorb any
increase in exports of line pipe from subject country producers.
4) Canada Remains an Attractive Market for Subject Line Pipe and Has Little Ability to Absorb any Increase in Imports
161. As with the subject country demand and global demand, little growth is expected in the
Canadian market and, therefore, there is little likelihood that the Canadian market could absorb an
increase of dumped and subsidized imports from the Subject Countries. Indeed, as with the demand
globally and in Subject Coun!Iies, Meta!Bulletin reports that demand for line pipe with an outside
diameter of22" to 30" will fall by 4.7% between 2014 and 2017. Meta!Bulletin reports that demand
will fall from 150,000 tonnes in 2014, to 148,000 tonnes in 2015, to 144,000 thousand tonnes in
2016, and even further to 143,000 tonnes in 2017. 103
101 Meta!Bulletin, Strategic Prospects for the Global Transmission Linepipe Market (2014) at 120, Confidential Exhibit 8-35. 102 Metal Bulletin, "Outlook for 2015" (2015), Confidential Exhibit 8-36. 103 Meta!Bulletin, Strategic Prospects for the Global Transmission Linepipe Market (2014) atl9l, Confidential Exhibit 8-35.
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162. End users use line pipe for gathering oil and gas from the point of production, as well as
for distributing oil and gas to consumers. Demand for line pipe, therefore, is partially correlated
with oil and gas exploration. In this respect, the Petroleum Services Association forecasts for 2015
a decrease in wells drilled of 53 percent, down from 11,193 wells in 2014 to 5,320 wells. 104
Nevertheless, 5,320 new wells represents significant activity compared to other markets and
provide many opportunities for sales of Chinese line pipe.
163. Even with these demand estimates, the relative pricing of line pipe between Canada, and
China and Japan makes Canada an attractive market for exports of dumped and subsidized line
ptpe.
164. The average unit value of line ptpe 111 the Canadian market, as reported in
Confidential Exhibit 8-1, is approximately $[ ] (or USD [ ] using the 2014 annual
average exchange rate of 1.10 CAD to USD) per tonne in 2014 while Chinese home market prices
in 2014, as reported in Table 8 below vary from USD 655 to USD 770 per tonne, or [ ]
percent lower than prevailing average prices in Canada. As for Japan, no Japanese home market
prices are available, as the country has virtually no home market. Thus, even in a slow market, the
pricing in Canada will continue to attract Chinese and Japanese exports of subject goods.
Table 8 Metal Expert Home Market Chinese Pricing in USD/tonne. 105
Grade 2014 ! Seam]ess GrB ' 689 ·
Seamless X 65 755 I WeldedX:42 655 -1 ~~~lde!l__)(SL__Lll()__ ___ j
J().j Petroleum Services Association of Canada, "20 15 Canadian Drilling Activity Forecast Update" (April 30, 2015), Confidential Exhibit 8-37. '"'Metal Expert, "World Pipes Markets" (January 2015), Confidential Exhibit 8-38. Data calculated using an average of the quarterly reported prices.
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v. The Government of China and Japan Actively Encourage Exports of Dumped and Subsidized Subject Goods to Relieve Excess Capacity
165. The GOC's key policy to resolve the overcapacity issue is a mandate tor producers to
export their steel products. The GOC's 12'11 Five-Year Plan tor the Steel Pipe Industry ("12'11 FYP")
provides, as one of its main objectives, " {to} export I 0 million tons of steel pipe ... having a steady
average annual increase of 9.0%" so that 18 percent of China's seamless pipe production and II
percent of China's welded pipe production becomes exported. 106 The GOC's 12'11 FYP, the overall
purpose of which is to alleviate China's severe overcapacity problem, thus directs the Chinese
industry to export increased production into other markets as a way to resolve the chronic excess
capacity aft1icting China's domestic market. In a more recent announcement, the GOC restated its
policy goal of "transferring" excess domestic production and "promot { ing) the export of
domestic ... products." 107
166. Far from relieving excess capacity, however, the GOC' s policies have led to the perverse
result of actually incentivizing Chinese producers to further expand their capacity. Chinese media,
as recently as in August 2014, reports that the Chinese steel industry continues to vigorously and
irrationally expand its production capacity despite an already severe level of unused capacity. 108
167. In Japan, the 2015 Income Tax Refonn now offers tax incentives for corporations to invest
in new production facilities, which means that Japanese steelmaking capacity will likely increase
going forward. Specifically, these incentives include a 30'Yo special depreciation or 3% tax credit
on acquisition cost. 109 The two subject goods producers and exporters in Japan have already made
plans to expand and benefit from these tax incentives. JFE specified in its 2015 business plan that
106 12th Five-Year Plan for the Steel Pipe Industry"' (June 14, 20 II), Public Exhibit 8-13. 107 Pcople.com.cn; Opinions of State Council Issued Directives on Resolving Set·erely Etcess capacity Problems, GuoFa (2013) No. 41, Public Exhibit 6-19. 108 Ibid. '0
'1 PWC, Japan Corporate Tax Credits and Incentives, Public Exhibit 8-39.
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it "will make capital investments worth 650 billion yen over the next three years". 110 NSSMC
plans to invest more than double this amount, up to S 1,350 billion yen over the next three years. 111
vi. Potential Impact of the Subject Goods on the Prices of the Like Goods
168. Subject exporter's aggressive pricing will continue to exert a strong downward pressure on
the pricing of like goods, [
]. Subject Goods have significantly undercut Evraz Canada's
pricing in Canada and there are clear instances of lost sales accounts [
J where customers have chosen unfairly priced subject goods.
169. As discussed further above regarding the injury currently suffered by Evraz Canada,
average unit values of subject imports from Japan fell trom $1,413 per tonne in 2014 to $1,233 per
tonne in 2015, a fall of almost 15 percent. 112 Subject imports from China also fell from 2014 to
2015, from $1,312 per tonne to $1 ,265 per tonne respectively. 113 There is no reason to believe that
this trend will not continue. In fact, MBR forecasted as recently as on December 22, 2015 that
export prices for Chinese welded LSA W line pipe are forecast to fall from an average ofUSD 710
per tonne in December 2014 to USD 490 per tonne by Q2 of2016, representing over a 30 percent
decrease. 114 Export prices for Japanese line pipe are also forecast to fall even more dramatically,
from USD 1,550 per tonne in December 2014 to USD 490 per tonne by Q2 of2016, representing
an astonishing 316 percent decrease. 115
110 JFE Group, Fil\h Medium-Term Business Plan (April23, 2015), Public Exhibit 8-40. 111 Nippon Steel & Sumitomo Metal, 2015 Annual Report, Public Exhibit 8-41. !t:?. Confidential Exhibit 8-1! Economic Indicators. 113 Confidential Exhibit 8-1, Economic Indicators. 114 See "MBR Welded Linepipe & OCTG Market Tracker" (December 22, 20 15) Confidential Exhibit 8-6 at page 2. 115 Ibid.
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vii. The Imposition of Antidumping or Countervailing Measures by the Authorities of a Country other than Canada
170. A number of countries have imposed anti-dumping or countervailing duties on line pipe from China and Japan as well as for seamless and welded tubular products, which can be made on the certain of the same equipment as line pipe. Table 9 below outlines these measures.
Table9 Anti-Dumping and Countervailing Duty Measures in Place. Source: World Trade Organization, Semi-annual Reports of the Committee on Anti-dumping Practices under Article 16.4 of the Agreement
Country Subject Investigation and Actions Imposing Country Measure Affected
I Brazil i China
I Brazil I China ·. ! Ha:simposed an AD dutyoidine pipes less thari5" iri OD frorilCliinaoil April ..
[European I China i ~~~~ .. ~~osed an AJ)~uty on seamless pipes and tubes of iron and steel ·~j''-' Union I (including line pipe) from China on October 6, 2009. _ .•. Mexico. China }l~~·illlposeclanAD duty on seiiml<JSS;ste.el.ttiliing (inchidinglinepipe}from I
· .Cbma on February 25;il.Oll. , ~-Mexico : Japan I Has i~posecl anA[) duty on seamless steel tubing from Japan on November II,~~ ' I I i~~~O ;~e order was continued on November II, 2005 and again on November
l :Unil.ed i-Cliina j Has iJIWosed8fiAD dutyoricert~fil circular welded carbon qllalitysteeLline -_States . ~-____lril'e fujm Cl:iina ori MaYB,2b09. 'The order was contiin10d oii April23, 2014. ··. 1
United ! China i Has imposed an AD duty on certain seamless carbon and alloy steel standard, I
l ~::t~ci I Japan ~~~·.:::s~~::~~:;;o~,~~:fa';:~~~~~!;~~~~;linepipefr6mJapari·/ I "states jon December 6, 2001. The order .was continued on Oct~ei29, 20J3. .· I runited I' Japan -T-Has imposed an AD duty on certain carbon and alloy seamless line and -~ i States I pressure pipe over 4.5 inches from Japan on June 26, 2000. The order was L_ 1 continued on October II, 20 II. ~-~ I Jnclia : China & 1 Safeguard measures on tubular products . .
1
. . .. . ~an _ I -~--'----~ With Respect to Other Steel Pipe and Tubular Products
r Chin• . . ; Japan .. j Has 1m posed iin AD duty on certain alloy-steelseanlless tubes and pipesfor
I C~;o~bia :l, China . \ ~~!';o7:~u;;;ad~~~~~~e:~~ .. :::c: :~:ounn~~~l;~ ~~~ode . ·.• .· · I 1~~·---. ~.--··-~·-·173Q4.29.00.00 from China onJan.u.a..•·~_ll,,2012. . . . i .European· i China i Has imposed ail AD duty on certain welded rubes and pipeS of iron or non-alloy I Unlon l~~-- I steelfrc:>Jn china. R.eVlewofthlsorderc6rrunencedonDecemberl9,2013. .
!Peru. J Ch:n•_j~o~s:~;~~e~h~~a~ ~~;:~~~a~~,n2~~~bes and pipes made fromhot-rolledsteel.'
r Tur~ey i China i !iaSJmr>;'sedan Ail dutyonwelded stamless steeltnbes, ptpes andprofiles I . . . . , frnm China on h'!arch 15, 2013. . .... ·.·.·· . . . ... ----1 !united r China ' I Has imposed an AD duty on the OCTO from China on May 21' 20 I 0. This was. .I
-~- i extended on Apnl7, 2015. -·-·-· i China ·. f Ha~irllposedan AI) dUty on ce~iu weldedcarb()n qualify steel pipe fro01 . . ,
'-"'="-··~-~---J- Chma on July 22,2008; and contmued the order on December4, 2013. · J
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United Japan 'fias imposed~n AD~duty on certain carbon steel butt-weld pipe fittingsfro1~ States Japan on February 10, 1987. The order was continued on Aprill5, 2011. !
. Russia I China & fHas imposed a global SG measure on pii)es nnd tubes of stainless steel on~~ ·~• -~~__l~nn __ I August23, 2012. ..
Ukraine China & Has imposed a global SG measure on casing and pump-compressor seamless ... Japan_ ...... -~steelpip_l' Qll_l!Jly~3,20Q_8_,~ Th"()r~er\vn_Sc(!ntinue~gntvlarcl1~7,_:ZO_l5, _
171. For China, of particular significance is the United States International Trade Commission
("USITC") decision to continue its order against circular welded carbon quality steel line pipe
from China. 116 The continuation of this order, together with the existing order against Certain
Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe ji·om China means that the
entire range of subject goods from China is subject to anti-dumping and countervailing duty
measures in the United States. 117 The experience of the domestic industry in recent years shows
the result of these orders: increasing volumes of subject goods from China at decreasing prices.
With these orders in place, diverted subject goods that would have been destined to the U.S. market
will continue to accelerate the rise in volumes and fall in prices.
172. For Japan, the United States currently has an anti-dumping order in place tor Certain
Welded Large Diameter Line Pipe ("CWLDLP") with the product scope including "certain welded
carbon and alloy line pipe, of circular cross section and with an outside diameter greater than 16
inches, but less than 64 inches, in diameter, whether or not stenciled." 118 This project description
includes the entirety of the subject goods alleged in this complaint. The United State anti-dumping
order was first imposed on December 6, 2001, where the U.S. Commission unanimously decided
that the U.S. industry was materially injured by the dumping of Japanese produced CWLDLP. In
116 USITC, Circular Welded Carbon Quality Steel Line Pipe ji'om China, Investigation No. 70 1-TA-455 and 731· TA-1149 (Review) (May 201), Public Exhibit 8-42. 117 USlTC, Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipeji·om China, Inv. Nos. 701-TA-469 and 731-T A-1168 (Final), Public Exhibit 8-43. 118 USITC, Certain Welded Large Diameter Line Pipeji·om Japan (Second Review), 731-T A-919, September 20 13 at 5, Public Exhibit 8-32.
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both of the First and Second Review of this order, 2007 and 2013 respectively, the Commission
determined that revocation of the order would likely lead to continuation or recurring of material
injury to the U.S. domestic industry. 119 The fact that the United States remains the third largest
export market for the Japanese producers for large diameter line pipe speaks to the strength of
Japanese export directed industry for line pipe. 120
173. The absence of anti-dumping and countervailing duty protection in Canada and the
presence of export barriers on line pipe and other seamless and welded tubular products creates a
strong encouragement for Chinese and Japanese large diameter line pipe producers to direct
exports to Canada and exacerbate the injury already sustained by the domestic industry.
viii. The Magnitude of the Dumping and Subsidization
174. As set out in Section 6 and its exhibits, exporters and importers of subject goods result to
substantial dumping margins in order to secure orders for large diameter line pipe in Canada. For
China, the Evraz Canada estimates subject goods are dumped at margins of dumping ranging from
]% to [ ]% using s. 19 normal values. Specifically, Evraz Canada finds that all of the
Chinese benchmark products were dumped at more than significant level throughout 2015. For
Japan, Evraz Canada estimates that subject goods are dumped at significant margins of dumping
ranging from [ ]% to [ ]'Yo of dumping margin. As with China, all the Japanese benchmark
products were dumped throughout 2015, and all the mar1,>ins of dumping were significant. Based
on the magnitude of these margins, the threat posed by the dumped subject goods is real.
1" US!TC, Certain Welded Large Diameter Line Pipe ji'<nn Japan (Second Re1'im~, 731-TA-919, September 2013 at 5, Public Exhibit 8-32. '"' Public Exhibit 8-4, GTIS Japan Export Data.
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ix. Conclusion
175. For all of the reasons noted above, Evraz Canada submits that dumped and subsidized line
pipe from China and Japan constitutes a foreseeable and imminent threat to the production in
Canada of! ike goods.
9. Conclusion
176. Subject imports from China at dumped and subsidized prices and subject imports from
Japan at dumped prices have caused injury to the domestic industry producing large diameter line
pipe in Canada. Evraz Canada has suffered lost sales, price depression and price suppression, lost
revenues, reduced gross margins, reduced profitability, loss of market share, loss of employment,
reduced returns on investment, and underutilization of capacity.
177. Production in Canada oflarge diameter line pipe is further threatened with material injury.
This threat is based on: evidence of the significant rate of increase of dumped and subsidized
imports; the substantial increase in freely disposable capacity in the subject countries and its
impact on other markets; the significantly lower subject country prices; existing inventories in
Canada; the substantial margins of dumping and subsidization; and the number of trade cases
against Chinese line pipe and similar goods, in other jurisdictions, particularly the United States.
178. Evraz Canada therefore submits that the dumping and subsidization of subject goods
originating in or exported from China and the dumping of subject goods from Japan has caused
material injury to domestic production of like goods, and further threatens to cause additional
material injury if not remedied.
179. Accordingly, Evraz Canada hereby requests that the President of the Canada Border
Services Agency initiate an investigation into the injurious dumping and subsidization of these
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subject goods originating in or exported from China and an investigation into the injurious
dumping of these goods originating in or exported from Japan.
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ANNEX A: Line Pipe from China is Subsidized
1. Introduction: Line Pipe from China is Subsidized
180. The Chinese steel industry, and steel pipe industry in particular, is notoriously subsidized
by the GOC. In fact, in numerous previous cases, the Agency has found that the GOC has provided
massive government subsidies to this industry for steel tubular goods such as OCTO, carbon steel
welded pipes, seamless casings, piling pipes, and pup joints.
181. It is no secret that the Chinese line pipe producers and exporters have also received massive
subsidies from the GOC. The China SIN OPEC Corporation ("SIN OPEC"), a parent of a Chinese
line pipe producer Shashi Steel Pipe Works,t 2t acknowledges in its 2014 Annual Report that it has
received over RMB 3.165 billion, 2.368 billion, and 2.814 billion of government grants alone in
2014, 2013, and 2012, respectively. 122 Shengli Oil & Gas Pipe Holdings Ltd., another line pipe
producer,t 23 reported in its 2015 Interim Report that it received over RMB 2 million in government
grants for the first six months of 20 15.t24 Hunan Valin Iron & Steel Group Co., Ltd. and WSP
Holdings Ltd. are holding companies of two large line pipe producers and exporters.t 25 Hunan
Valin reported receiving over RMB 175 million government grants in its 2014 financial
statement.t 26 The company broke down the types of grants it received in 2014, which included
almost 8.5 million for energy saving and 131.4 million in tax refunds designated for full utilization
121 Shashi Steel Pipe Works, President's Speech, Public Exhibit 7-A-1. 122 Sinopec, 2014 Annual Report at 4, Public Exhibit 7-A-2. 123 Shengli Oil & Gas Pipe Holdings Ltd., Product Infonnation, Public Exhibit 7-A-3. 124 Shengli Oil & Gas Pipe Holdings Ltd., 2015 Interim Report at 38, Public Exhibit 7-A-4. 125 See Hengyang Valin Steel Tube Co., Ltd., Company Introduction, Public Exhibit 7-A-5, 1-Iengyang Valin Steel Tube Co., Ltd., Products: Line Pipe, Public Exhibit 7-A-6, WSP Holdings Limited, About Us, l'ublic Exhibit 7-A-7, and WSP Holdings Limited, Products Overview, Public Exhibit 7-A-8. 126 Hunan Valin Steel Co, Ltd., 2014 Annual Report at 141, Public Exhibit 7-A-9; See also WSP Holdings Limited, Form 20-F at section F-15, Public Exhibit 7-A-10.
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of resources. 127 Another company, Chu Kong Pipe, who proclaimed that it is the largest Chinese
LSA W steel pipe producer, simply states in its 2014 Annual Report:
"{o}ur Group is capable of manufacturing subsea pipes and drilling platform for offshore projects and is being classified under the Offshore Engineering Equipment Industry .. .in the 12th Five-Year Plan. We are benefited and supported by China's strategic policies and received supports by policy banks and insurance institutions in China. We have maintained good relationships with and have obtained medium-tenn loans and credit facilities from the China Development Bank, the Export-Import Bank of China, and the China Export & Credit Insurance Corporation.'' 128
182. In consideration of the foregoing, the fact that the Chinese line pipe producers and
exporters are being subsidized by the GOC is undisputable. Specifically, reasonably available
infonnation leads the Complainant to believe that the Chinese large diameter line pipe producers
and exporters have been receiving largely the same countervailable subsidies provided to the
Chinese producers and exporters of OCTG, welded pipes, seamless casings, piling pipes, and pup
joints. This is not a coincidence. As such, the Complainant respectfully requests that the Agency
fully investigate the subsidy programs that the Agency already found to be countervailable in prior
tubular cases.
183. In the paragraphs that follow, the Complainant provides the best available infonnation it
has regarding various Chinese subsidy programs that have already been found to be
countervail able by the Agency. In addition, the Complainant identified and included a number of
subsidy programs that have not been countervailed by the Agency before. Generally, these Chinese
subsidy programs fall in the following broad categories:
• provision of goods and services by the GOC at less than fair market value; • preferential loans provided by the state-owned-banks;
127 Hunan Valin Steel Co, Ltd., 2014 Annual Report at 141, Public Exhibit 7-A-9. 128 Chu Kong Petroleum and Natural Gas Steel Pipe Holdings Limited Overcoming Headwind Sailing Ahead-Annual Report 2014 at 19, Public Exhibit 7-A-11.
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• preferential export guarantee and insurance provided by the GOC; • preferential national income tax policies; • preferential sub-national income tax policies; • preferential indirect taxes and other governmental charges and fees; and • various !,>rants provided by the national and sub-national authorities.
2. Provision of Goods and Services at Less Than Fair Market Value bv the GOC
A. Provision of Goods and Services, and Purchase of Goods by the State-owned enterprises ("SOEs") at Less Than Fair Market Value
184. One of the defining characteristics of the Chinese steel industry is that a substantial share
of the industry is government controlled, as demonstrated by the US Congressional Research
Service study, which found all but one major Chinese steel producers to be state-owned. 129 "By
the end of 2009, eight of the 10 largest Chinese steel groups were 1 00-percent owned and
controlled by the Chinese government, while 16 of the top 20 steel !,>TOups were 1 00-percent owned
and controlled by the government. More than 95 percent of the production of the top 20 steel
!,>TOups was subject to some government ownership."130
185. Policy guidelines have also been used by the GOC to further strengthen its control over the
steel industry. For example, "Shagang {the only major Chinese steel producer found to be privately
owned by the US Congressional Research Service study} follows the guidelines that govern other
Chinese steel companies; business expansion programs must be approved by the central and/or
local government; the local government collects a portion of its value added taxes; and the top
management personnel ofShagang are Communist Party Members." 131
12'> R. Tang, US Congressional Research Service, China's Steel Industry and Its Impact on the United States: Issues for Congress, September 21, 20 I 0 at 7. l'ublic Exhibit 7-A-12. 130 Industry Today, Chinese Steel Industry: China Deploys State Power to Dominate Global Steel Industry, Public Exhibit 7-A-13. 131 R. Tang, US Congressional Research Service, China's Steel Industry and Its Impact on the United States: Issues for Congress, September 21, 20 I 0 at 7-8, Public Exhibit 7-A-12.
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186. The pervasive government influence- by direct government ownership and by other means
such as guidelines and appointments of the Communist Party Members as decision makers in the
companies- plays a vital role for the GOC, as this influence is a mechanism by which the GOC
implements its policy objectives. As an expert report puts it, the "massive degree of state
ownership allows the government to exercise extensive control over the steel industry and to direct
steel producers to act in ways that further governmental aims, such as maximizing tax revenue and
employment." 132
187. A case in point is CNOOC K.ingland Pipe, a Chinese line pipe producer and exporter133
that is 51% owned by CNOOC, 134 a self-proclaimed "mega-state-owned company operating under
the control of the {SASAC) of the State Council of the {PRC) ." 135 CNOOC demonstrated that it
has the same goals as the state, rather than profit maximization, when it stated in its 2014 Annual
Report that the company has been developing "in line with the Second Leap Forward Development
Program" 136
188. Hunan Valin Group, an ultimate holding company (through its subsidiary Hunan Valin
Iron & Steel Group) 137 of a line pipe producer and exporter Hengyang Valin Steel Tube Co.,
Ltd., 138 is also an SOE operating under the SASAC's authority, 139 carrying out the GOC policy
132 Industry Today, Chinese Steel Industry: China Deploys State Power to Dominate Global Steel Industry, Public Exhibit 7-A-13. l3l CNOOC Kingland Pipeline Ltd., Company Introduction, Public Exhibit 7-A-14. IJJ CNOOC Kin gland Pipeline Ltd., CNOOC Kin gland Pipeline Ltd. Boosts Overseas Sales of ERW Pipes, March 4, 2008, Public Exhibit 7-A-15. " 5 CNOOC, 2014 Annual Report at 8, Public Exhibit 7-A-16. 136 !hid. 137 China Daily, Hunan Valie Iron and Steel Group Co., Ltd., January 29,2012, Public Exhibit 7-A-17. 138 Hengyang Valin Steel Tube Co., Ltd., Products: Line Pipe, Public Exhibit 7-A-6. '-'"China Daily, Hunan Valie Iron and Steel Group Co., Ltd., January 29,2012, Public Exhibit 7-A-17.
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objectives. For example, it has signed a number of agreements with China Resource Corporation,
yet another SOE under the SASAC, "in order to implement the central government policy." 140
189. In essence, the GOC effectively controls the SOE steel producers through government
ownership, i.e., majority share ownership, and authority, i.e., guidelines and appointment of
decision makers in the companies, and uses this influence to fultil its national policies. Simply put,
the Chinese SOE steel producers, including the line pipe producers, are "government" in a sense
prescribed by the SIMAs. 2. As such, purchasing any goods and services from, and selling of any
goods to an SOE constitute financial contribution within the SIMA s. 2(1.6)(c). Such financial
contribution includes, but is not limited to: ( l) purchases by SOE line pipe producers and exporters
from its affiliates or non-affiliated SOE suppliers; (2) sales made by SOE line pipe producers and
exporters to its affiliates or non-affiliated SOE consumers; (3) purchases by non-SOE line pipe
producers and exporters from SOE suppliers; and (4) sales made by non-SOE line pipe producers
and exporters to SOE consumers.
190. Such government provided or purchased goods or services confer benefits equal to the
difference between the actual amount transacted and the fair market value of the transacted goods
or services under the SIMR ss. 35.2 and 36. In addition, these benefits are de jure and de facto
specific to the steel industry within the meaning of the SIMA ss. 2(7.2) and (7.3), given that the
government provision and purchase at issue are limited to the steel industry.
191. In consideration of the foregoing, the Complainant respectfully requests that the Agency
carefully investigate all transactions involving SOEs at either or both ends of the bargain. That
said, the Complainant notes that such subsidization through SOE-provided goods and services is
140 Hunan Valin Steel Co., Valin Group Signed Strategic Cooperation Agreement with China Resources Corporation, March I, 2012, Public Exhibit 7-A-18.
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the most rampant in the fonn of government provision of steel inputs to the line pipe producers.
As such, the Complainant provides further details in this regard below.
i. Provision of Steel Inputs by the SOEs at Less than Fair Market Value
192. As described above, the GOC, through its numerous raw steel producing SOEs and national
policies governing the steel industry, has distorted the market for steel inputs that are used in the
production and exportation of line pipe. The distortive effects of the GOC' s intervention through
the SOEs are best illustrated by the Agency's prior Findings. Specifically, the Agency detennined
that s. 20 conditions exist in the flat-rolled steel sector in China in the expiry reviews of Flat Hot-
rolled Steel Sheet and Stripfi'om China, 141 and Steel Plates fi'om China. 142 Such flat-rolled steel
products are primary inputs of welded line pipe. Likewise, the Agency in OCTG.fi'om China also
found that "SOE crude steel producers account for a significant proportion of crude steel
production in China," and that "a number of GOC industrial policies in relation to the Chinese
steel industry would likely have a material impact on the prevailing price of billets in China."143
Such billets are used for the production of seamless line pipes.
193. Much of these steel inputs are provided directly and indirectly by the SOEs. In this regard,
the Agency found in Welded Pipes .fi'om China that SOEs supply 79% of the hot-rolled steel
purchased by welded pipe producers. 144 Given that the subject welded pipe in that case and welded
line pipe are produced using the essentially the same flat-rolled steel inputs, the Complainant
believes that a vast majority of the steel inputs used by the Chinese welded line pipe producers are
also procured from SOEs. With respect to the inputs for seamless line pipes, the Agency previously
141 Expiry Review Determination Regarding Certain Flat Hot-rolled Carbon and Alloy Steel Sheet and Strip Originating in or Exported/rom Bra::il, the People's Republic of China, Chinese Taipei, India, South .!{/hat and Ukraine, RR-2010-001, Apri115, 2011. l·t1 Expby Ret•iew Determination Statement ofReasons fOr Certain Hot-Rolled Steel Plate (September 7, 20 12). 143 Final Determination Statement of Reasonsfbr Certain Oil CouniiJ' Tubular Goods (March 9, 20 I 0). 144 Final Determination Statement £~/'Reasonsfhr Certain Carhon Steel Welded Pipe (August 5, 2008).
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found that "SOE crude steel producers account for a significant proportion of crude steel
production in China." 145 The Complainant notes that there is nothing to suggest that the SOEs'
predominance in the Chinese crude steel supply has diminished since this finding. To the contrary,
as demonstrated in the US Congressional Research Service study and other expert reports quoted
above, most of the Chinese steel industry remains in the GOC' s control.
194. A direct result of the government's predominance in the Chinese steel industry has been
felt in the price of steel inputs that are less than the price that would have prevailed in the free
market. Notably, the Agency previously found that hot-rolled steel sheets and billets in China were
provided to the Chinese tubular producers and exporters at less than fair market value in OCTG
.fi'om China (input materials provided by the government at less than fair market value), Welded
Pipes fi'om China (hot-rolled steel provided by government at less than fair market value), and
Piling Pipesfi·om China (steel and hot-rolled steel input materials provided by government at less
than fair market value), and countervailed these as subsidies. 146
195. In addition, the Agency found that the GOC provided steel inputs for less than fair market
value for the production of other steel products, such as steel gratings (input materials provided by
government at less than fair market value) and stainless steel sinks (cold-rolled stainless steel sheet
provided by the government at less than fair market value). 147
196. Notably, the U.S. Department of Commerce ("US DOC") found that the GOC provided
hot-rolled steel inputs at less than adequate remuneration to the Chinese welded line pipe producers
145 Final Determination Statement ofReasonsfiJr Certain Oil Count/)! Tubular Good\' (Afarch 9, 201 0). 146 Final Determination Statement q/Reasonsfor Certain Oil Count!)' Tubular Goods (March 9, 2010); Final Determination Statement of Reasons for Certain Carbon Steel Welded Pipe (August 5, 2008); Final Determination Statement of Reasons for Certain Steel Piling Pipe (November 15, 20 12). 147 Final Determination Statement of Rewums in Steel Grating (May 7, 20 ll ); Final Determination Statement of Reasons in Stainless Steel Sin/c, (May 9, 2012).
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specifically, 148 as well as other producers of other steel-using products (namely producers and
exporters of drill pipes, rectangular pipes and tubes, steel gratings, steel wheels, wind towers, lawn
groomers, high pressure cylinders, wire decking). 149 In addition, the USDOC also found that the
GOC provided other steel inputs such as steel billets ( OCTG ji-om China, Seamless Pipe .fi"om
China, Steel Cylinders.fi·om China) and !,'Teen tubes (Drill Pipes .fl-am China) at less than adequate
remuneration. The Australian Antidumping Commission also found that the GOC provided hot-
rolled steel at less than adequate remuneration (Hollow Structural Sections .fi-om China). 150 In
consideration of the foregoing, the Complainant believes that the Chinese line pipe producers and
exporters are, in particular, receiving steel inputs, flat hot-rolled steel, steel plates, and billets, at
less than fair market value.
197. Direct and indirect provision of steel inputs by the Chinese SOEs constitutes a financial
contribution in the fonn of govemment provision of goods within the meaning of the SIMA s.
2(1.6)(c). The steel inputs provided by the SOEs confer benefits equal to the difference between
148 The United States Department of Commerce, issues and Decision .Nfemorandwnfor the Final Determination: Circular Welded Carbon Quality Steel Line Pipe ji·om the People's Republic of China, C-570-936, November 17, 2008, Public Exhibit 7-A-19. 149 The United States Department of Commerce, Issues and Decision.A1emorandum/(J1·the Final Determination: Drill Pipe fi'om the People's Republic iJ(China, C-570-966, Public Exhibit 7-A-20; The United States Department of Commerce, Issues and Decision lv!emorandwnfor the Final Determination: Light-walled Rectangular Pipe and Tubefi'om the People's Republic of China, C-570-915, Public Exhibit 7-A-21; The United States Department of Commerce, Issues and Decision Memorandum/or the Final Determination: Certain Steel Gratingji·om the People's Republic of China, C-570-948, May 28,2010, Public Exhibit 7-A-22; The United States Department of Commerce, Issues and Decision A1emormulumfbr the Final Determination: Certain Steel Wheelsfimn the People's Republic of China, C-570-974, Public Exhibit 7-A-23; The United States Department of Commerce, Issues and Decision Alemorandumjbr the Final Determination: Utility Scale Wind TowersjiYmt the People's Republic of China, C-570-982, December 17,2012, Public Exhibit 7-A-24; The United States Department of Commerce, Issues and Decision Jvfemorandumfor the Final Determinmion: Certain Tow-behind Lawn Groomers and Certain Part.'l· Thereoffi'Om the People's Republic of China, C-570-940, June 12, 2009, Public Exhibit 7-A-25; The United States Department of Commerce, Issues and Decision lvfemorandumjhr the Final Determination: High Pressure Steel Cylindersfi-cJm the People's Republic of China, C-570-978, April30, 2012, Public Exhibit 7-A-26; and The United States Department of Commerce, issues and Decision lvfemorandumfor the Final Determination: Wire Deckingji·om the People's Republic of China, C-570-950, June 3, 2010, Public Exhibit 7-A-27. 150 Australian Anti-dumping Commission, Report to the lllinister No. 177: Certain Hollow Structural Sections Exportedfi'om the People's Republic of China, the Republic()[ Korea, Malaysia, Taiwan and the Kingdom of Thailand, June 7, 2012, at 223-228 Public Exhibit 7-A-28.
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the actual price paid and fair market price. The Complainant notes that the Agency previously
found the Chinese domestic prices of flat hot-rolled steel products, steel billets and green tubes to
be substantially int1uenced by the GOC, and as a result, such prices could not be used as benchmark
fair market prices. The Complainant believes that this approach is warranted in the current case as
well, given the GOC's predominant int1uence in and control of the steel sector.
198. In addition, provision of steel inputs is specific within the meaning of the SIMA ss. 2(7 .2)
and/or 2(7.3) as only a limited number of industries, namely the industries that use steel inputs as
input of production, receive benefits of this subsidy.
B. Provision of Land and/or Land Use Rights for Less Than Adequate Remuneration
ii. Provision of Land for Less Than Adequate Remuneration Within the Economic and Technology Development Zone for Less Than Adequate Remuneration
199. According to the regulations, 151 enacted under the State Pr~ferential Policies for
Supporting State-level Economic and Technology Development Zones, 152 the price of land usage
rights in the Economic and Technology Development Zones ("ETDZs") may be reduced by RMB
I 0,000 to 50,000 per hectare depending on the scale of an investment and other factors. Once
recognized by the province or the municipality as a high-tech project, the allowable land price
deduction is increased to between RMB 30,000 to 60,000 per hectare. The list of the ETDZs in
which this program applies is enumerated by the Ministry of Commerce ("MOFCOM"). 153
151 Ministry of Land and Resource• of tl1e People's Republic of China, Public Notice Issued by tile State's Land Resources i\1inistJy on 'Technical Standards for Calculating the Land Sell Price for the PwyJose (~/'Seiling Stateowned Construction Land Usage Rights", November 20,2012, Public Exhibit 7-A-29. 151 Ministry of Land and Resources of the People's Republic of China, Public Notice on the Technical Evaluation• and Standards for the Selling Price of State-owned Construction Land Use Rights and Pilot Implementations, General Office of tile Minisuy of Land and Resources { 20 I 3/ No 20, Public Exhibit 7-A-30. 151 Ministry of Commerce of the People's Republic of China, List of National Economic and Technology Development Zones, Public Exhibit 7-A-3 I.
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200. The Complainant has identified the following potential Chinese line pipe producers to be
located within the enumerated ETDZs:
• Qingdao Kwayt Co., Ltd., advertised to be a producer and seller of API 5L X70 seamless line pipe is reportedly located in the "Qingdao Economic and Technical Development Zone"; 154
• Hebei Zhongdeli Seamless Steel Pipe Manufacturing Co., Ltd, Heibei Yuancheng Industry Co., Ltd., and Hebei Changfeng Steel Tube Manufacturing Group Co., Ltd., Chinese certificate holders of API 5L, are located in the Economic and Technical Development Zone of Cangzhou City; 155
• Kunshsan Pearl Machinery Industry Co., Ltd., a Chinese certificate holder of API 5L, is located in the Economic Technical Development Zone ofKunshan City; 156
• Tianjin De Hua Petroleum Equipment Manufacturing Co., Ltd., a Chinese certificate holder of API5L, is located in the No. 42 Economic and Technology Development Area ofTianjin city; 157 and
• Wan Chi Steel Pipe (Qinhuangdao) Co., Ltd., a Chinese certificate holder of API 5L, is located in the Economic and Technological Development Zone ofQinhuangdao city; 158
201. Information reasonably available to the Complainant does not allow the Complainant to
identify all the Chinese producers located within the ETDZs. However, given that many Chinese
line pipe producers are located within the ETDZs, the Complainant believes that many more
Chinese line pipe producers could also be located within such zones, and thereby benefit from the
preferential land use rights.
202. Provision of land use rights is a financial contribution in the form of provision of goods
within the SIMAs. 2(1.6)(c). Pursuant to the SJMR s. 36, benefits conferred equal the difference
between the fair market value of the land use rights and the actual price paid to the govemment,
i.e., discounts between RMB I 0,000 and RMB 60,000 per hectare provided to the companies
154 Made in China.com, Company Marketing Webpage for Qingdao Kwayt Co., Ltd., Public Exhibit 7-A-32. 155 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 156 Ibid. 157 Ibid. 158 Ibid.
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setting up within the ETDZs. This program is geographically specific under the SIMAs. 2(7.2)(a),
as the ETDZs are clearly designated and defined.
iii. Provision of Land for Less Than Adequate Remuneration by Jiangsu Province
203. According to the Policy Adjustment Goals and Lowering Land Standards, 159 eligible
priority development projects can obtain land for a transfer fee no less than 70% of the minimum
price. In other words, the authorities in Jiangsu province may provide land at discount, as low as
30% below the minimum price otherwise allowed.
204. There are close to 50 APL 5L certified Chinese producers located in Jiangsu province,
according to the list of API 5L holders provided by the API. 160 By virtue of their location, they
would be eligible to benefit from the Provincial policy that allows transfer of land use at 70% of
the minimum price or higher.
205. Provision of land use rights is a financial contribution in the fmm of provision of goods
pursuant to the SIMA s. 2(1.6)(c). Pursuant to the SIMR s. 36, benefits conferred equal the
difTerence between the fair market value of the land rights and the actual price provided by the
government, i.e., as much as 30% of the minimum price. Based on the infom1ation reasonably
available, the discounts are provided to the "priority development projects," and as such, this
program appears to be de jure and/or de facto specific within the SIMA ss. 2(7.2)(a) and/or 2(7.3).
159 Department of Land and Resources of Jiangsu Province & Jiangsu Development and Refonn Commission, Puh!ic Notice Pertaining to the Implementing the Adjustment Standards of the Lmt'est Selling Price of Industrial Land Use, LGTZF {2009} Na 175, Public Exhibit 7-A-34. "'"American Petroleum Institute, API Standard API-5!. Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33.
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iv. Provision of Land for Less Than Adequate Remuneration within the Wuxi High-tech Development Zone
206. Wuxi New District is a PRC state-level industrial park located in Wuxi city. 161 It is
composed of eight development zones, of which the Wuxi National High-tech Development Zone
and Wuxi Singapore Industrial Park are the two main ones. 162
207. In particular, Wuxi National High-tech Development Zone is the crown jewel of the Wuxi
New District, as it is a state-level high-tech development zone approved by the State Council.
Accordingly, Hong Kong based NGO Globalization Monitor reports that the Zone is "enjoying
various preferential treatment from the state and local government." 163 A case in point is the
Preferential policies for encouraging foreign investors make investments in lzigh-teclmologies
ente1prises in the Wuxi National High-tech Development Zone, which provides that certain
enterprises in the Zone could benefit from the following preferential land policies:
• Exemption from the land-use fee for the first I 0 years of investment;
• Land price reduction by I 0%; and
• Exemption from land deed tax. 164
208. In order to qualify, the enterprise must designated as a "high-tech enterprise filling the gap
in the domestic market," or an "enterprise with large scale potential."165
209. Provision of discounted land use rights is a financial contribution in the fonn of provision
of goods pursuant to the SIMAs. 2(1.6)(c). Pursuant to the SIMR s. 36, benefits confetTed equal
to the difference between the fair market value of the land rights and the actual price provided by
161 Globalization Monitor. Wuxi New District. Public Exhibit 7-A-35. t(J:! Ibid. 163 Ibid. 164 New District ofWuxi Municipal People's Government Management Committee & \Vuxi National High-tech Industrial Development Zone Management Committee, Preferential Policiesfor Wuxi HTDZ: Preferential Policies fbr Encouraging Foreign Invested Ente1prises Invest in Neu' and High Teclmologv Enterprises, January 1998, Public Exhibit 7-A-36. 165 Ibid.
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the government. This pro!,>ram is geographically specific under the SIMA s. 2(7.2)(a), as Wuxi
National High-tech Development Zone is clearly designated and defined.
210. A number of Chinese line pipe producers are known to be located within the Wuxi New
District. For example, Wuxi SP Steel Tube Manufacturing Co., Ltd and Wuxi Nanfang Steel Co.,
Ltd. are located within the Wuxi New District, where as Wuxi Seamless Oil Pipe Co., Ltd. is
located within the "High & New Technology Industrial Development Zone" in Wuxi city.t 66 Based
on the foregoing consideration, the Complainant believe that the Chinese line pipe producers and
exporters may have received benefits under this program.
C. Provision of Electricity at Less Than Fair Market Value
211. According to the study by the US Energy Infonnation Administration ("USEIA"), "{t}he
National Development and Refonn Commission {"NDRC"}, a department of China's State
Council, is the primary policymaking, planning, and regulatory authority in the energy sector" in
China.t 67 "The NEA {or the National Energy Administration}, linked with the NDRC, is charged
with approving new energy projects in China, setting domestic wholesale energy prices, and
implementing the central government's energy policies." ti>S In addition, the NDRC also
detennines the price that coal companies should receive from power producers, i.e., cost of
electricity. t69
212. The result of these government interventions, - based on policy objectives, not market
principles- and in particular the government-set electricity price, has highly distorted electricity
price in China. For example, the USEIA found that the "{h}igh coal prices in 2011 and lower
'"'American Petroleum Institute, API Standard AP!-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. "'7 United States Energy Infonnation Administration, China, February 4, 2014 at 5, Public Exhibit 7-A-37. 168 Ibid. !M Ibid. at 32-33.
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government-controlled power tariffs contributed to financial losses for electric generators." 170 In
other words, electricity generators were forced to sell electricity at a lower price, despite the spike
in the cost of producing electricity.
213. In addition, it has also been found that the NDRC sets different electricity rates from one
region to another. 171 In this regard, the US DOC verified in Lightweight Thermal Paperfi'om China
that electricity rate in one city differed from that of another city. 172 The US DOC also found that
the provision of electricity at less than adequate remuneration to be countervailable in 19
investigations, including investigations of steel tubular goods like OCTG, seamless pipes, and drill
pipes from China. 173
170 Ibid. 171 Global Times, NDRC to Increase Electricity Prices in Five Provinces, May 18,2011, Public Exhibit 7-A-38. See also The United States Department of Commerce, Issues and Decision }Jemorandumfor the Final Determination: Lightll'eight Thermal Paper }Tom the People's Republic of China, C-570-921, September 25, 2008, at 22 Public Exhibit 7-A-39. 172 The United States Department of Commerce, Issues and Decision AfemorandumjOr the Final Determination: Lighll\'eight Thermal Paper }Tom the People's lie public of China, C-570-921, September 25, 2008, at 22 Public Exhibit 7-A-39. 173 The US DOC found GOC's provision of electricity to be countervailable in the following investigations: The United States Department of Commerce, Issues and Decision 1\IemorandumjOr the Final Determination: Drill Pipe fi'om the People's Republic of China, C-570-966, Public Exhibit 7-A-20; The United States Department of Commerce, Issues and Decision Aiemorandumfor the Final Determination: Certain Steel Gratingfi·om the People's Republic of China, C-570-948, May 28,2010, Public Exhibit 7-A-22; The United States Department of Commerce, [<;sues and Decision A4emorandumfor the Final Determination: Certain Steel Wheels from the People's Republic of China, C-570-974, Public Exhibit 7-A-23; The United States Department of Commerce, Issues and Decision iV!emorandumfor the Final Determination: Utility Scale Wind Towers from the People's Republic (~{China, C-570-982, December 17, 2012, Public Exhibit 7-A-24; The United States Department of Commerce, lssues and Decision JV!emorandumfOr the Final Determination: High Pressure Steel Cylindersf;-cJm the People's Republic of China, C-570-978, April30, 2012, Public Exhibit 7-A-26; The United States Department of Commerce, Issues and Decision }v/emorandumJOr the Final Determination: Wire Deckingfhnn the People's Republic q{China, C-570-950, June 3, 20l0, Public Exhibit 7~A~27; The United States Department of Commerce, b;sues and Decision Afemorandwnfhr the Final Determination: Pre-stressed Concrete Steel Wire Strandfi·om the People's Republic of China, C-570-946, May 14, 20 I 0, Public Exhibit 7-A-40; The United States Department of Commerce, Issues and Decision 1\rfemorandumfor the Final Determination: Certain Kitchen Appliance Shelving and Racksfi·om the People's llepublic of China, C-570-942, July 20,2009, l'ublie Exhibit 7-A-41; The United States Department of Commerce, Issues and Decisionlvfemormulumfhr the Final Determination: Certain Oil Country Tubular Goodsf;·om the People's llepuhlic of China, C-570-944, November 23,2009, Public Exhibit 7-A-42; The United States Department of Commerce, Issues and Decision Memorandum fOr the Final Determination: Galwmi:ed Steel Wireji·om the People's Republic of China, C-570-976, March 19, 2012, l'ublie Exhibit 7-A-43; The United States Department of Commerce, Issues am! Decision lvfemorandumjhr the Final Determination: Lightweight Thermal Paperfi·om the People's llepuhlic of China, C-570-921, September 25, 2008, Public Exhibit 7-A-44; The United States Department of Commerce, Issues and Decision .Memorandum for the Final Determination: Certainlvfagnesia Carbon Bricksfi·om the People's Republic r>{China, C-570-955, July 26, 2010, Public Exhibit 7-A-45; The United
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214. Provision of electricity is a financial contribution in the fonn of provision of goods within
the meaning of the SIMAs. 2(1.6)(c), to the extent that the Chinese producers or exporters procure
their electricity from the government and/or state-owned electricity providers. To this end, the
Institute of Energy Economics of Japan found that 90% of the Chinese power generation is
provided by the central and local Chinese government owned companies. 174 Given the
predominance of the government electricity suppliers in China and the Agency's countervailable
findings in previous steel tubular goods cases, the Complainant believe that the Chinese line pipe
producers and exporters likely procure electricity from such government suppliers.
215. The benefit is the amount of difference between the actual electricity rates paid and the fair
market value as provided by the SIMR s. 36. Given that the NDRC and NEA are state-level
authorities, the fair market benchmark is to be determined within China. In addition, China's
provision of! ow cost electricity is geographically specific to the regions where the NDRC granted
a preferential electricity rate under the SIMAs. 2(7.2)(a).
D. Provision of Government Assets at Less Than Fair Market Value through Privatization
216. According to the Agency's Finding in OCTG .fi·om China, "within the past ten years,
several of the cooperative exporters had changed their ownership status from that ofSOEs to either
States Department of Commerce, Issues and Decision Aiemorandumfor the Final Determination: Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe jhnn the People's Republic of China, C-570-957, September 10,2010, Public Exhibit 7-A-46; The United States Department of Commerce, Issues and Decision Aiemorandum for the Final Determination: Certain Coated Paper Suitable fOr High-quali~y Print Graphics Using Sheet-fed Pressesfi'om the People's Republic of China, C-570-959, September 20,2010, Public Exhibit 7-A-47; The United States Department of Commerce! bisues and Decision Alemorandwn for the Final Determination: Multilayered Wood Flooringfi'om the People's Republic of China, C-570-971, October II, 2011, Public Exhibit 7-A-48; The United States Department of Commerce, Issues and Decision lvfemorandumfbr the Final Determination: Cl}'stalline Silicon PhotoFoltaic Cells, Whether or Not Assembled into Modules,ji·om the People's Republic of China, C-570-980, October 9, 2012, Public Exhibit 7-A-49; and The United Stales Department of Commerce, ls·sues and Decision kfemorandumjOr the Final Determination: Drawn Stainless Steel Sinks from the People's Republic IJ(China, C-570-984, February 19, 2013, Public Exhibit 7-A-50. 174 Chun Chun Ni, The Institute of Energy Economics of Japan, China's Electric Power Industry and Its Trend, April 2006, Public Exhibit 7-A-51.
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Foreign Invested Enterprises ("F!Es") or private limited enterprises. Information received further
indicated that, during this time, China's state-owned oil companies shitled their focus toward core
businesses and moved to divest themselves of peripheral operations such as production ofOCTG.
The CBSA ascertained that, during the privatization process for one of the cooperative exporters,
the majority of the government-owned assets had been distributed to company employees at no
cost." 175 The Agency found this program to be countervailable.
217. The Agency's investigation of subsidy in the fonn of government provision of assets is
warranted with respect to the Chinese line pipe producers and exporters. For example, Shengli
Oilfield Freet Petroleum Equipment Company ("Shengli Freet"), a line pipe producer, was
previously an SOE, owned by the China's state-owned oil company Sinopec Corp since its
establishment in 1964 until May 2005, when it was "restructured according to the modern
corporate system." 176 As such, the Complainant believes that Shengli Freet could have benefited
from the government provided assets during its privatization, similarly to the Agency's Finding in
OCTG.from China.
2 I 8. Provision of assets constitutes a financial contribution pursuant to the SIMA s. 2( 1.6)( c).
The benefits equal to the difference between the actual price paid and the fair market value of the
assets. This program is specific in law orland in fact under the SIMA ss. 2(7.2)(a) and/or 2(7.3),
since the provision of assets were given to certain SOEs undergoing privatization.
t'ls Final Determination Statement ofReasonsfor Certain Oil CounfTJ' Tubular Goods (March 9, 2010). 176 Shengli Oilfield Freet Petroleum Co., Ltd., Company Profile, Public Exhibit 7-A-51.
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3. Preferential Loans Provided bv the GOC and State-owned Banks {"SOBs")
A. Preferential Loans and Financing Provided by the GOC through the SOBs
219. The GOC provides preferential loans through its policy SOBs, as well as the so-called
"commercial" banks to the enterprises and industries in line with its policy objectives. Such policy
objectives are contained in the national and provincial Five-year plans, industrial plans, catalogues
of encouraged industries, and other Jaws and re!,'lJlations, and many of these instruments target the
steel industry. 177 For example, the Agency found in Welded Pipe .fi"om China that "under the
'Encouraged Investment Industries' is the development and application of modern hot-rolled broad
band (wide strip) steel rolling; the production of oil well pipe for petroleum exploration; high
pressure boiler pipe for power stations and steel pipe used in the long distance transportation of oil
and gas." 178 Likewise, the 121h Five-year Plan enumerates certain "Iron & Steel" as one of the "key
fields of development of manufacturing."179
220. The existence of the state-Jed preferential loans is well established. The Agency found and
countervailed in Copper Tube ji·om China and Unitized Wall Modulesji·om China such preferential
loans. 180 In Fasteners .fi"om China, the Agency found that the preferential loans are also
implemented by sub-national Chinese govemments, based on the" {p )rovincial budget documents
submitted by the GOC ... {indicating} that low-interest or discount loans may be available in China
to companies based on their export activities." 181
221. Chief among the Chinese SOBs mandated to carry out the GOC policy objectives are the
banks in which the GOC has a controlling ownership interest, namely Agricultural Development
177 The People's Republic of China's 12'" Five-year Plan at 6-9, Public Exhibit 7-A-53. 178 Final Determination Statement qj'Reasons for Carbon Stee/1Ve/ded Pipe (August 5, 2008). 179 The People's Republic of China's 12'" Five-year Plan at 6-9, Public Exhibit 7-A-53. tHo Final Determination Statement of Reasonsfor Copper Tube (December 3, 20 13); Final Determination Statement ofReasonsfor Certain Unitized Wall Modoles (October 25, 2013). 181 Final Determination Statement ofReasonsfOr Carbon Steel and Stainless Steel Fasteners (December 24, 2004).
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Bank of China ("ADBC"), Bank of China ("BOC"), China Constmction Bank ("CCB"), and
Industrial and Commercial Bank of China ("ICBC"). China Development Bank ("COB"), and the
Export Import Bank of China ("EXIM bank"). 1H2
222. Among them, the ADBC, COB, and EXIMbank are considered "wholly state-owned," and
each of these banks has a distinct policy mandate. 183 The ADBC is mandated to support
development of a!,,'Ticulture and mral areas; the COB is mandated to support large infrastmcture
projects, among others; and the EXIM bank is mandated to support exports and key imports. 184
Given that these three banks are mandated to carry out government policies rather than profit, it is
not surprising that they report directly to the State Council. 185 In fact, these banks were found to
"frequently rely on the State Council's directives in establishing their operational priorities."186 In
addition, the GOC's cabinet appoints the board of directors and senior officers of these three
banks. 187
223. The non-wholly owned SOBs (also known as equitized SOBs) namely BOC, CCB, and
ICBC, were all once fonnerly wholly state-owned as well until they were recently equitized. 188
Although the ostensible intent of equitizing these banks was to "create the space and the
incentives ... to operate ... as a for-profit commercial bank with less interference from China's
central government," the GOC essentially continues to run these banks through the "board of
directors and senior officers ... {who} are generally appointed in some fashion by the central
govenunent." 1H9 In fact, senior bank officers of all of China's banks are members of the Chinese
182 M. Martin, Congressional Research Service, China's Banking System: Issues for Congress, February 20,2012, at 2-4, Public Exhibit 7-A-69. 181 Ibid. at 2. '"'Ibid. 185 Ibid. 186 !hid. I 87 Ibid. 188 Ibid. at 3. 189 !hid.
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Communist Party ("CCP") and are appointed by the CCP. 190 The officers are also assigned ranks
in the Chinese government's hierarchy. 191
224. The board of directors of the equitized SOBs are appointed by the GOC because it is the
majority shareholder of each. 192 The last piece of the organ that constitutes Chinese banks'
governance stmcture is the board of supervisors, whose role is "to monitor the financial activity,
risk management and risk control of the banks, as well as the performance of the board of directors
and the senior officials of the bank." 193 The supervisors too are usually appointed by the CCP. 194
In this background of the GOC's total control over the key decision making personnel, some
commentators maintain that "China's banks continue to operate as direct tools of the Chinese
government." 195
225. In addition, the SOBs dominate the Chinese banking market. Specifically, the wholly-
owned policy banks account for 8% of the market, whereas the equitized banks account for another
49.2%. 196 Equally importantly, the GOC maintains absolute control over the remaining financial
industry through its regulatory measures. In addition to the traditional monetary instnnnents
generally available to the financial regulators elsewhere in the world, the GOC's regulators are
equipped with power to set the benchmark interest rates for RMB-denominated deposits and loans,
and to allocate credit limits to the Chinese banks. 197 In other words, the GOC has the authority to
set loan interest rates of the Chinese banks, regardless of the state ownership (although note that
the banks are allowed to offer interest rates within a certain range above and below the
190 Ibid. at 26. 191 Ibid. 192 Ibid. at 26-27. 193 Ibid. at 27. 194 Ibid. 195 ibid. t% !hid. at 7. 197 Ibid. at 9.
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government-set benchmark). Also, remember that the CCP appoints officials, senior officials, and
the board of supervisors of all banks in China. 198
226. One of the purposes of the GOC's tight grip over its financial industry is to provide targeted
benefits to certain enterprises or industries. "{T} he Chinese banks are constrained by various
circumstances that periodically require that the banks acquiesce to external pressures" and "{t}he
central government at times will pressure the banks to align their credit allocation along with
national economic policy." 199 Tellingly, a draft Guideline issued by the China Banking Regulatory
Commission ("CBRC") to the "commercial" banks contained a "requirement that the bank
'support national policies on industrial transformation and environmental protection, protect and
save resources, and promote sustainable development of the society. "'200
227. Massive discount loans provided to the targeted few is so serious that it created an absurd
phenomenon. Recipients of heavily discounted loans turnaround and re-lend the loans at a higher
interest rate to smaller banks. According to the deputy director of the National Economic Research
Institute (under the China Refonn Foundation) Wang Xiaolu,21n " { s }ome State-owned enterprises
get bank loans at low interest rates and then offer it as a loan to small banks in order to reap an
interest margin".
228. Based on the foregoing information, the Complainant believes that all banks in China, and
especially the SOBs (whether or not they are wholly-owned), are the "government" within s. 2 of
the SIMA. Specifically, all Chinese banks: (I) are required to support the national policies; (2) ran
by the senior officers, officers, and board of supervisors appointed by the CCP; and (3) follow the
198 Ibid. at 26-27. 199 Ibid at 27. 200 !hid at 27-28. 101 Global Times, China to encourage increased private investment in banking sector, June 28,2012, Public Exhibit 7-A-54.
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operational guidelines set by the GOC, including the setting of loan interest rates. In the case of
the SOBs, the GOC's control is ensured by its ability to appoint the board of directors.
229. The loans provided by the Chinese banks, especially the SOBs, therefore constitute
financial contribution in the fonn of direct transfer offunds within the SIMAs. 1.6(a). The benefits
equal the difference between the interest actually paid and the interest that would have been
incurred for a comparable non-guaranteed commercial loan under the SIMR s. 29( 1 ).
230. The SOBs have specific mandates and these mandates are carried out in conjunction with
the govemment policies. As such, these loans are de jure and/or defi:tcto specific within the SIMA
s. 2(7.2)(a) and/or 2(7.3). Likewise, the so-called Chinese "commercial" banks are also required
by law to support the GOC's national policies. For this reason, the Complainant also believes that
these loans are de jure or de .facto specific to the enterprises and industries targeted by the national
policies within the SIMA s. 2(7.2)(a) and/or 2(7.3). Specifically, as mentioned above, the 12'"
Five-year Plan stipulates certain "Iron & Steel" to be among the key fields of development, and
the list of the encouraged industries explicitly lists "steel pipe used in the long distance
transportation of oil and gas." Given these national policies promoting the steel industry, the
Complainant believes that the Chinese banks, especially the SOBs, support the steel industry in
order to comply with the requirement to support such national policies.
The Agency found preferential loans provided by a SOB to be countervailable in Copper Tube
.fi"om China and Unitized Wall Modules .fi"om China. Evidence also suggests that the Chinese line
pipe producers have benefited from preferential loans from the Chinese banks, in particular the
SOBs. For example, Chu Kong Pipe, a Chinese line pipe producer, reported in its 2014 Annual
Report that "{w}e are benefited and supported by China's strategic policies and received supports
by policy banks and insurance institutions in China. We have maintained good relationships with
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and have obtained medium-tenn loans and credit facilities from the China Development Bank, the
Export-Import Bank of China, and the China Export & Credit Insurance Corporation."202
B. Export Seller's Credit Provided by the Export-Import Bank of China
231. As described above, the EXIM bank is wholly-owned by the GOC and reports directly to
the State Council. In addition, senior officers, officers, and supervisors of the EXIM bank are
appointed by the CCP, as with all other banks in China. Since the bank is wholly-owned by the
GOC, its board of directors is also appointed by the GOC. In these considerations, the EXIM bank
is the "government" within the meaning of the SIMAs. 2, and the Agency indeed previously found
this to be the case in Unitized Wall Modulesfi·om China.2113
232. According to the bank's website, the EXIMbank provides "export seller's credit," which
"refers to loans provided to an exporter to finance its export of manufactured or purchased
mechanical and electronic products, complete sets of equipment, and high- and new-tech products
as well as the provision of labor services."2114 The EXIMbank further states that the "{e)xport
seller's credit program provided by China Eximbank is not profit-oriented" and "{t)he credit is
provided for the purpose of lending strong government support in line with relevant national,
industrial, foreign trade and fiscal policies."205
233. Given that this pro!,'fam is "not profit-oriented," and is provided to support national policies,
it is not surprising that the credits are being provided at sub-commercial interest rates. According
to the loan document published by the EXIMbank's Qingdao city branch, in May 2013, annual
201 Chu Kong Petroleum and Natural Gas Steel Pipe Holdings Limited---- Overcoming Headwind--- Sailing Ahead Annual Report 2014 at I 9, Public Exhibit 7-A-11. 203 Final Determination Statement of Reasonsfbr Uniti::ed Wall Alodules (October 25, 20 13). ""The Export Import Bank of China, Export Seller"s Credit, Public Exhibit 7-A-55. 205 Ibid.
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interest rate applicable for this program are lower than interest rates on 'commercial loans. ' 206 This
document also demonstrates that the losses from such sub-commercial loans are entirely paid by
the government, in stating that all losses are undertaken by the national treasury.207
234. Many Chinese line pipe producers have been designated to be "high and new technology
enterprises" ("HNTEs"), which suggests that these companies would be eligible to receive benefits
under this program for exports of"high- and new-tech products." For example, Shijiazhuang Great
Wall Welded Pipe Equipment Co., Ltd. identifies itself as a "high and new technology enterprise
specialize in ... manufacture of' various steel pipes. 208 Likewise, WSP Holdings Ltd, a parent
company of a line producing Wuxi Seamless, reports that it is a HNTE, and that it has renewed
this status until the end of 2013.209 Hengyang Steel Tube, another line pipe producer, calls itself a
"national high and new technology enterprise."210 Shandong Shengli Steel Pipe Co., Ltd. also
proclaims itself to be a "Shandong Province high-tech enterprise."211 In addition, the Agency also
found that a Chinese OCTO exporter received benefits under the Liaoning High-tech Products &
Equipment Exports Interest Assistance grant, ostensibly as the exporter exported a "high-tech
product. "212
235. Credits provided by the EXIMbank constitute financial contribution in the fonn of direct
transfer of funds within the SIMAs. 1.6(a). The benefits equal the difference between the interest
actually paid and the interest that would have been incurred for a comparable non-guaranteed
commercial loan under the SIMR s. 29(1 ).
206 Qingdao Economic and Trade Bureau, Notice Pertaining to the Foreign Trade Enfi.!Jprises ·Financing Research Requirements, May 22, 2013, Public Exhibit 7-A-56. 207 Ibid. 20' Great Wall Equipment, About Us, Public Exhibit 7-A-57. 209 WSP Holdings Limited, Fonn 20-F, at21, Public Exhibit 7-A-10. 210 Cardofcom, Company Introduction ofHengyang Valin Steel Tube Co., Ltd., Public Exhibit 7-A-58. 211 Shandong Shengli Steel Pipe Co., Ltd., About Us, Public Exhibit 7-A-59. 212 Final Determination Statement ofReasonsfor Certain Oil Count!)' Tubular Goods (March 9, 201 0).
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236. In order to receive the "export seller's credit," the recipient must have actual or anticipated
exportation or export earnings. As such, this program is a prohibited subsidy and is specific under
the SIMAs. 2(7.2)(b). To this end, the Agency already found this program to be countervailable
in Certain Unitized Wall Modules.fi·om China.213
C. Export Buyer's Credit Provided by the Export-Import Bank of China
237. The EXIM bank also provides "export buyer's credit,"214 which refers to "medium and
long term credit provided to foreign borrowers to finance their imports of Chinese products,
technologies and services ... It is designed to facilitate foreign importer's payment at sight of
commercial contracts to Chinese exporters."215 This program constitutes an indirect subsidy in the
form of export financing provided to the importer or purchaser as provided by the SIMA Handbook
pp. 553-556.
238. The "expert buyer's credit" amount appears to grow year after year. In its 2014 Annual
Report, EXIM bank acknowledged that "{i}n 2014, the newly signed export buyer's credit
amounted to RMB53.612 billion with disbursement of RMB59.443 billion. The year-end
outstanding {sic} registered RMB222.295 billion, an increase of RMB32.527 billion over the
previous year."216
239. Credits provided by the EXIMbank constitute financial contribution in the form of direct
transfer of funds within the SIMAs. 1.6(a). The benefits equal the difference between the interest
actually paid and the interest that would have been incurred for a comparable non-guaranteed
commercial loan under the SIMR s. 29(1 ). In addition, this program is specific within the definition
:m Final Determination Statement r~lReasonsfor Uniti:=ed Wall Aiodules (October 25, 2013). 214 The Export Import Bank of China, Export Buyer's Credit, Public Exhibit 7-A-60. 215 Ibid. 216 The Export Import Bank of China, 2014 Annual Report at 22, Public Exhibit 7-A-61.
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of a prohibited subsidy under SIMA s. 2(7 .2)(b) because the recipient must have actual or
anticipated exportation or export earnings.
D. Import Credit Provided by the Export-Import Bank of China
240. According to the EXIM bank's website, one of its loan programs is an import credit
program. 217 This credit facility is provided for "importing resources, and technology and
equipment."218 Credit for resources importation refers to loans designed to finance resources
imports by the Chinese companies. Credit for importing technology and equipment is designed to
finance importation of technology and equipment by the Chinese companies.219
241. To be eligible tor an import credit for resources importation, an applicant must be a
manufacturer or an import agent importing resources mainly for intemal use or for domestic sales,
with yearly imports exceeding USD $10 million. 220 To be eligible for an import credit for
technology and equipment importation, an applicant must be a Chinese company registered with
the Chinese Administration of Industry and Commerce. Once these thresholds are satisfied, the
EXIMbank appears to have discretion to decide whether an applicant ultimately qualifies for this
program. For example, with respect to the import credit for technology and equipment importation,
the bank must be satisfied, inter alia, that: the applicant have demonstrated "sound management
and operation, reliable credit standing and good debt servicing capacity," and; "the supporting
requirements on the projects are satisfied, with favourable estimates on economic retums and
reliable capacity of loan repayment."221
117 The Export-Import Bank of China, Brieflntroduction, Public Exhibit 7-A-62. 118 The Export-Import Bank of China, Import Credit, Public Exhibit 7-A-63. 219 Ibid. 220 Ibid. :m Ibid.
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242. The Complainant believes that Chinese Line pipe producers are eligible for this program
because they receive this subsidy through importing line pipe parts, such as sheet metals, before
manufacturing and exporting the line pipe to China for sale.
243. Credits provided by the EXIM bank constitute financial contribution in the fonn of direct
transfer of funds within the SIMAs. 1.6(a). The benefits equal the difference between the interest
actually paid and the interest that would have been incurred for a comparable non-guaranteed
commercial loan under the SIMR s. 29(1 ).
244. Import credit for importation of resources is de jure specific within the meaning of the
SIMA s. 7.2(a), in that the prospective borrowers are limited to the manufacturers and import
agents with annual resource imports exceeding USD $10 million, and who uses imported resources
for internal use or for domestic sales. In the case of technology and equipment import credit, this
pro!,'Tam may be de .facto specific by virtue of the bank's exercise of discretion.
E. Onlending Support Provided by the Export-Import Bank of China through Loan Guarantees or Loan Repayment
245. According to the EXIM bank's website, "onlending" refers to loans from foreign
governments or international financial institutions. Such onlending will be provided for the
Chinese companies, but the GOC will either provide a guarantee or commit to "shoulder the
responsibility of repayment" if the borrower (i.e., the recipient Chinese company) fails to repay.222
The EXIMbank stipulates that the onlending loans are provided for businesses that carry out state
industrial policy, projects in key sectors including energy conservation, projects in west, central
and northeast regions, restmcturing of the national economy, and for importation of advanced
equipment and technology.223
222 The Export-Import Bank of China, Onlending Loans of Foreign Governments and International Financial Institutions, Public Exhibit 7-A-64. 223 Ibid.
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246. In addition, the EXIM bank states that the terms and conditions of on! ending loans are
"preferential with its long maturity and low interest rate."224 In addition, "{c}redit tenns of the
loan by foreign government and international financial institutions are the most favourable among
the nation's extemal debts, with its grant element mostly greater than 35 per cent".225
24 7. The EXIM bank explains that the Chinese government acts as a representative of the
recipient Chinese companies in dealing with the foreign lender.226 By this mechanism, the EX!M
bank effectively provides loans directly to the Chinese companies. As such, these loans constitute
financial contribution in the form of direct transfer of funds within the SIMAs. 1.6(a). The benefits
equal the difference between the interest actually paid and the interest that would have been
incurred for a comparable non-1,'11aranteed commercial loan under the SIMR s. 29(1 ).
248. This program is de jure specific within the SIMAs. 7.2(a) to the industry that are specified
in the state industrial policy or designated to be "key sectors," which would include the steel
industry enumerated by the GOC to be one of its "pillar industries."227 In addition, this pro1,>Tam is
further specific in that the benefits are limited to particular enterprises that import "advanced
equipment and technology."
F. Trade Financing Services Provided by the Export-Import Bank of China
249. According to the EXIM bank's website, it provides various financing and credit facility
services such as packing loans, export bill purchases, letter of credit opening, letter of guarantee
opening, inward bill advance, delivery against guarantee, factoring, and forfeiting to the
exporters.228 The stated objective of these programs is "to fultill its duties entrusted by the state".229
22-t Ibid. 225 Ibid. 226 Ibid. 227 Financial Times, Hu Rejects Calls to Reform State's Role, November 8, 2012, Public Exhibit 7-A-65. 2" The Export and Import Bank of China, Trade Financing, l'nblic Exhibit 7-A-66. 229 !hid.
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According to the bank's 2014 Annual Report, "trade finance maintained a strong momentum of
growth. Throughout the year, the Bank handled trade finance transactions worth USD45.655
billion, up by 19.12% year-on-year." 230 Details of the services offered under this program include
the following:
• Packing loans: financing provided by the bank to an exporter for exporter's pre-shipment operational activities;
• Export bill purchases: financing by the bank to the exporter after goods are delivered against export document as collateral;
• Letter of credit opening: issuance of import Jetter of credit without collecting the full
amount of caution money;
• Export factoting: financing and payment collection management provided by the bank to the exporter after goods are delivered, through a transfer of accounts receivable to the bank;
• Discount of export commercial invoices: purchase of accounts receivable by the bank in the fonn of discount with recourse;
• Import factoting: bank provides services such as collecting payment of accounts receivable and credit standing investigation to the overseas exporters; and
• Forfeiting: facility in which the bank buys without recourse the usance drafts or promissory notes that are held by the exporter and accepted by other banks.231
250. These financing services constitute financial conttibution in the fonn of direct transfer of
funds within the SIMA s. 1.6(a). The benefits equal the difference between the interest actually
paid and the interest that would have been incurred for a comparable non-guaranteed commercial
Joan under the SIMR s. 29(1 ). This program is specific within the meaning of the SIMA s. 7 .2(b ),
in that the companies must export in order to be eligible under the program.
G. Preferential Loans and Other Financial Services Provided by the Export-Import Bank "Going-out" for Outbound Investments
251. The GOC first established the "Go-out" strategy during the I O'" Five-year Plan (eftective
in between 200 I and 2005), in where it was listed as one of the four main development
230 The Export and Import Bank of China, 2014 Annual Report at28, Public Exhibit 7-A-61. 231 The Export and Import Bank of China, Trade Financing, Public Exhibit 7-A-66.
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strategies.D2 This strategy has been embodied in the 12111 Five-year Plan, and as such, continues to
be in etlect to date. Specifically, s. 2 of Chapter 52 of the 12'11 Five-year Plan is titled "Speeding
up the implementation of the 'Go out' strategy"233 This section provides that "China will increase
its ability of comprehensive all-round consideration, optimize the cross-agency coordination
system, and enhance the guidance and services to enforce the 'going out' strategy."234 Moreover,
"China's overseas investment promotional system will be improved to increase the level of
investment facilitation for enterprises to invest overseas.235
252. The EXIM bank's 2014 Annual Report states that "overseas Chinese enterprises
development loans were launched {in 2014}, which created a more comprehensive and integrated
mechanism for conducting policy based businesses to support the "going global" efforts of Chinese
companies"236 An earlier media report also echoes that the EXIM bank has played a central role
in the "going-out" strategy.237 The bank explains that its primary policy objective in carrying out
this strategy is "the promotion of forei!,>TI trade and diplomacy by capitalizing domestic exporters
and exporting credit to potentially profitable foreign projects." With this objective, the bank reports
that it was "able to provide preferential loans with very flexible payment schedules at less than
half the interest offered by any of the commercial banks.'ms
253. In particular, the Chinese steel industry is widely reported to have been the key industry
promoted to "go-global" by the GOC. Specifically, China made a plan to "relocate some {steel
sector} factories and encourage more {steel sector} companies to invest in overseas projects" to
032 Ting Xu, China Brief Volume II Issue 17, Destination Unknown: Investment in China's 'Go Out' Policy, September 16,2011, Public Exhibit 7-A-68. 233 The People's Republic of China's 12th Five-year Plan at 56-57, Public Exhibit 7-A-53. 234 !hid. at 56-57. 235 Ibid. at 56-57. ""The Export Import Bank of China, 2014 Annual Report at33, Public Exhibit 7-A-61. 237 Caijing.com.cn, China's Policy Banks, September 9, 2009, Public Exhibit 7-A-71. 238 Ibid.
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combat overcapacity, according to an ofticial of the NDRC.239 Likewise, the deputy director of the
Ministry of Industry and lnfonnation Technology ("MilT") also stated that "to support steel
companies in their 'going-out' strategy will be a key task for the MIIT."2411 In light of the foregoing,
the Complainant believes that the EXIMbank's "going-out" financing scheme is de jure and/or de
facto specific to the steel industry according to the policy objectives that encourages steel industry
to "go-out."
254. In addition, preferential loans constitute financial contribution in the fonn of direct transfer
offunds within the SIMAs. 1.6(a). The benefits equal the difference between the interest actually
paid and the interest that would have been incurred for a comparable non-guaranteed commercial
loan under the SIMR s. 29(1). The program is specific within the SIMAs. 7.2(b) because the
enterprise must export to be eligible for this prof,'!'am.
H. Discounted Loans for Export-oriented Enterprises
255. According to the Circular 58 of the People's Bank a,[ China, it provides preferential loans
to certain "honorable enterprises for collection of export receipts of foreign exchange."241 This
program is designed to encourage large-scale enterprises to export, provided that they meet the
following criteria: (I) their annual export value reached $200 million; (2) their ratio of exports to
foreign exchange is above 85%, and; (3) their ratios of surrendered verification fonns of export
receipts are above 80%.242
2J<J China Daily USA, Steel Firms to Relocate Capacity Abroad, November 27,2013, Public Exhibit 7-A-72. 240 lhid. 041 The People's Bank of China, the State Administration of Foreign Exchange, the Ministry of Foreign Trade and Economic Cooperation and the State Administration of Taxation, Circular Concerning Printing and Distributing Detailed Rules on Rewarding and Punishment Concerning Prol'isional Regulations o\'er Examination of Export Collections of Foreign Exchange, YinFa (2000) No 58, Public Exhibit 7-A-73. 242 Ibid.
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256. Preferential loans provided to the "honorable enterprises" constitute financial contribution
in the fonn of direct transfer of funds within the SIMAs. 1 .6(a). The benefits equal the difference
between the interest actually paid and the interest that would have been incurred for a comparable
non-guaranteed commercial loan under the SIMR s. 29( I).
257. This program is specific within the meaning of the SIMA s. 2(7 .2)(b ), as the designation
of an "honorable enterprise" is granted only to those that meet certain export threshold. In addition,
a number of Chinese steel pipe producers are known to have received "honorable enterprise"
designations, such as Guangzhou Mayer Corp.243 and Baosteel.244 As such, these subject goods
producers and exporters would be eligible to receive discounted loans under this program.
4. Preferential Export Guarantee and Insurance Provided bv the GOC
A. Export Guarantees Provided by the GOC
258. According to the EXIM bank's website, the "International Guarantee" service refers to
various types of letters of guarantee issued to overseas creditors or beneficiaries that commit to
fulfill the obligations stated in the letter of guarantee when the debtor fails to service a debt.145 The
guarantee is stated to be provided for the "export of Chinese-made ... high- and new-tech products"
among others. 246 A number of Chinese line pipe producers are known to be high- and new-
technology enterprises. These producers include Shengli Oil Field Freet,247 Shijiazhuang Great
Wall Equipment,248 Hengyang Steel Tube,249 and WSP Holdings Ltd.250 as described above. The
Agency also found that a Chinese OCTO exporter received benefits under the Liaoning High-teclz
243 Guangzhou Mayer Corp., Ltd., About Us, Public Exhibit 7-A-74. 244 Baosteel, Public Acknowledgement, Public Exhibit 7-A-75. 245 The Export Import Bank of China, Intermediary Business, Public Exhibit 7-A-76. 246 Ibid. 247 Shengli Oilfield Freet Petroleum Co., Ltd., Company Profile, Public Exhibit 7-A-52. ' 48 Great Wall Equipment, About Us, Public Exhibit 7-A-57. ' 49 Cardofcom, Company Introduction ofHengyang Valin Steel Tube Co., Ltd, Public Exhibit 7-A-58. 2511 WSP Holdings Limited, Fom1 20-F at 2 I, Public Exhibit 7-A-10.
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Products & Equipment Exports Interest Assistance grant, ostensibly as the exporter exported a
"high-tech product. "251
259. Provision ofloan guarantees constitutes a financial contribution in the fonn of contingent
transfer of liabilities within the meaning of the SIMAs. 2(1.6)(a). Pursuant to SIMR s. 31.1, the
benefit from the government-provided loan guarantee is the present value of the difference
between the interest and administrative fees actually paid, and the interest and administrative fees
that would have had to been pay in the absence of the guarantee. In addition, this program is
specific under the SIMAs. 2(7.2)(b), as the guarantee is provided only for export sales.
B. Preferential Export Credit Insurance Provided by the China Export and Credit Insurance Corporation, Including Grants Provided by the GOC to Cover Export Credit Insurance Fees
260. According to the China Export & Credit Insurance Corporation's ("SINOSURE") website,
SINOSURE is a "state-funded policy-oriented insurance company ... established for promoting
China's foreign trade and economic cooperation."252 Its business mandate is to "fully support
... the development of foreign trade and economic cooperation" through "means of insurance
service for foreign trade and investment."253 Specifically, "SINOSURE is mandated, in accordance
with the Chinese government's diplomatic, international trade, industrial, fiscal and financial
policies, to promote Chinese exports of goods, technologies and service ... by means of export
credit insurance against non-payment risks.'m4 Given that China is the world's largest providers
of export credits, the exposure growth of the total insured amount as compared to the premium
Given that the mandate of the SINOSURE is to carry out the GOC policy objectives, rather
than to maximize profit, it is not surprising that SINOSURE's export credit insurance portfolio is
251 Final Determination Statement ofReasons.fbr Certain Oil Country-· Tubular Goods (March 9, 2010). 252 China Export and Credit Insurance Company, Company Protile, Public Exhibit 7-A-77. 253 Ibid. 254 Ibid.
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highly risky. Premium earnings are negligible and have grown less than the total insured amount.
Specitically, the SINOSURE insured USD $275 million in 2002 for a premium ofUSD $5 million,
which provides a sums insured to premium ratio of 55. By 2011, this ratio has tripled, with sums
insured of USD $25.39 billion compared to a mea_!,'fe premium of USD S 15 I million. 255
Furthennore, by 2013, SINOSURE's export credit insurance has increased exponentially to USD
327 billion.256
Table 1: Overview of Performance over the Past 10 Years (unit USD 10 milliou)257
! Item i 2011 2010 2009 I 2008 2007 2006 2005 2004 I 2003 I 2002 I
I Sums I 2,538.9 I I ,964.3
, I ! 295.7 1212.1 157.1
I i 1,166 ! 6?7 - I '96 3 133 1 27.5
I insured I I - .:> I .) ·
I
'P . I i 13.6 12.8
! I 1 re~ruum 1 15_1 13.1 9.9 5 4.4 1.9 I 1 0.5 I wntten i I ! I
I Claims 12.8 lu I 1 I 1
I
I paid 9.3 5 5.2 3.8 1.1 1 o.7 I I I
262. In financial tenns, increasingly risky insurance portfolio has increased SINOSURE's
potential losses. Specifically, SINOSURE's total premium earnings were less than the total claims
paid and the operating expenses between 2007 and 20 II, which is the entire period tor which the
Complainant was able to procure SINOSURE's financial intorn1ation. In total, premiums earned
by SINOSURE from 2007 to 201 I were RMB 2.4 billion less than the claims paid and expenses
incurred for operations. Taking income taxes paid into account, SINOSURE's premium earnings
were less than the breakeven point in all years from 2007 to 2011, with a total shortfall of almost
RMB 3.5 billion. Although the 2015 OECD repmi stated that it is "misleading in a rapidly
expanding business to compare claims paid in one year with the same year's premium income,''258
255 China Export and Credit Insurance Company, 2011 Annual Report at 12, Public Exhibit 7-A-78. 256 OCED. Working Party on Export Credits and Credit Guarantees (March 16, 2015) at 2, Public Exhibit 7-A-67. 257 China Export and Credit Insurance Company, 2011 Annual Report at 12, Public Exhibit 7-A-78; SJNOSURE's 20 I I Annual Report is the latest the Complaint could locate online. 258 OCED, Working Party on Export Credits and Credit Guarantees (March 16, 2015) at 8, Public Exhibit 7-A-67.
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the amounts above for 2007 to 2011 suggest that Sinosure, as a whole is likely not self-sustainable.
Additionally, the OECD report stated "Sinosure received a capital injection from state funds
amounting to CNY 20 billion (equal to around USD 3.2 billion) in 2012".259
Table 2: Profitability of the SINOSURE's Insurance Business (RMB)
' 2011* ' 2010**
Net profit 847,613,000 695,566,000
Net premiums earned (A) 3,587,256,000 4,425,626,000
Claims paid (B) 3,456,497,000 4,025,474,000
Gross profit from insurance 130,759,000 I 4oo,ts2,oaa 1 business (A·B)
Total expenses Including claims 3;627,765,000 4,213,809,000
paid (D) Premium after operating
*40,509,000 211,817,000 expenses (A-D)
! Income tax (E) . 3321920,000 336,481,000
1 Gross profit from insurance I minus all other expenses (A~D·E) -373,429,000 i ·124,664,000
' *See SINOSURE s 2011 Fmancwl Statements.-60
**Sec SJNOSURE's 2010 Financial Statcmcnts.261
***Sec SINOSURE's 2009 Financial Statcments.262
**** Sec SINOSURE's 2008 Financial Statcmcnts.263
2009***
458,126,000
1,147,801,000
1,214,270,000
' ·66,469,000
1,734,687,000
·586,886,000
"219,094,000
1 -367,792,ooo
ZOOS'"*** 2007*****
~1,615,249,000 43,431,000
2,223,056,000 1,892,725,000
3,428,878,000 1,776,183
·1,205,822,000 1,890,948,817
3,987,488,000 2,151,976,000
I -1,764,432,000 ·259,251,000
207,264,000 151,806,000
·1,971,696,ooo I ·41l,o57,ooo
Total
429,487,000
13,276,464,000
12,126,895,183
1,149,568,817
15,715,725,000
·2,439,261,000
809,377,000
i ·3,248,638,000
i *****Sec SINOSURE's 2007 Financial Statcmcnts.264 --------------------------------~~
263. Government provision of export credit insurance is a financial contribution in the fonn of
the government provision of services within the meaning of the SIMAs. 2(1.6)(c). The amount of
the benefit is the amount contributed by the GOC into the SINOSURE's insurance program, either
in the fonn of premium support or in the reimbursement of operating expenses and losses pursuant
to the Agency's practice provided in the SIMA Handbook at 665-668. In addition, this program is
specific under the SIMAs. 7.2(b), since it is granted only for export sales.
264. The Chinese steel industry has been reported to have benefited from the S!NOSURE's
export insurance services. For example, S!NOSURE guaranteed bond repayment obligation of
259 Ibid. 260 Ibid. 161 China Export and Credit Insurance Company, 2010 Annual Report, Public Exhibit 7-A-79. 161 China Export and Credit Insurance Company, 2009 Annual Report, Public Exhibit 7-A-80. "'3 China Export and Credit Insurance Company, 2008 Annual Report, Public Exhibit 7-A-81. 164 China Export and Credit Insurance Company, 2007 Annual Report, Public Exhibit 7-A-82.
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USD $149 million owed by Hebei Iron & Steel in 2013, a parent of a line pipe producing subsidiary
Hebei Iron & Steel. 165 In 2011, SINOSURE reported that it also "executed the Strategic
Cooperation Agreement with Anshan Iron and Steel Group Corporation"166 which owns steel pipe
producing subsidiary Angang SteeJ.167
5. Debt-to-equity Swaps bv China's Asset Management Companies
265. According to the Agency's Finding in Seamless Casing.fi'om China, "{t)he debt-to equity
swap is one of the most significant measures used in the financial restructuring of China's {SOEs}
and {SOBs). Pursuant to the Regulation of Assets Management Companies ... the State Council
of the {PRC} established four asset management companies (AMCs) that were directed to
purchase certain non-performing loans from {SOBs) including the {BOC, ICBC, CCB and the
ABC}. According to the Regulations of Asset Management Companies, the AMCs are supervised
and managed by the People's Bank of China, China's Ministry of Finance, and the China Securities
Regulatory Commission. The four AMCs are China Orient AMCC (paired with the BOC), China
Huarong AMC (paired with the ABC), China Xinda AMC (paired with the CCB) and Great Wall
AMC (paired with the ABC).
266. One of the authorized business activities for the management of non-perfonning loans
purchased by the AMCs is the debt-to-equity swap ... The Regulation of Asset Management
Companies (2000) set forth that the State Economic and Trade Commission (SETC) would
recommend companies to the AMCs for debt-to-equity swap consideration and that, ultimately,
any plans or agreements related to a specific debt-to-equity swap required final approval from the
265 Steel Orbis, Handan Steel Produces 30,000 MT ofXSO Line Pipe Steel in Jan-feb, March 8, 2013, Public Exhibit 7-A-83. "'''China Export and Credit Insurance Corporation, 2011 Annals Highlights, Public Exhibit 7-A-84. ='-67 Angang Steel Company Limited, Summary of Core Business, Public Exhibit 7-A-85.
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State Council. Based on the infonnation available, 580 SOEs were officially approved for debt-to-
equity swaps with AMCS."268
267. It has been reported that the Chinese steel industry has been among the pnmary
beneficiaries of debt-to-equity transactions. According to one report, " { s} ince 2000, 37 different
Chinese steel companies have benefited from debt-to-equity swaps worth at least $8.4 billion as
part of the government's plan to restmcture and consolidate the steel industry. Two of China's
largest steel producers, Shanghai Baosteel and Anshan, both benefited from this process. In both
cases, non-performing loans to the company were transferred from {SOBs) to {SOB AMCs}. The
{AMCs} then exchanged the debt for shares in the companies. The OECD reported that these
transactions involved 'substantial reductions in debt loads in return for restructuring arrangements
whose details have not been fully revealed."269 Notably, both Baosteel270 and Anshan Iron & Steel
Group271 produces line pipe through their respective subsidiaries.
268. Debt-to-equity swap constitutes financial contribution in the tonn of a direct transfer of
funds or liabilities, and government forgiveness of amounts owed under the SIMA ss. 2(1.6)(a)
and (b). Benefit to the recipient is conferred to the extent that the equity infusion is inconsistent
with the usual investment practice of private investors in PRC. The Agency has found this program
to be countervailable and that two Chinese seamless casing exporters received benefits.272
268 Final Determination Statement qf Reasons for Seamless Casing (August 5, 2008). '""Wiley Rein & Fielding LLP, The China Syndrome: How Subsidies and Government Intervention Created ti1e World's Largest Steel Industry, July 2006, Public Exhibit 7-A-105. 270 Baoshan Iron & Steel Co., Ltd., Baosteei Pipe & Tube: Create Value for Customers, June 9, 2006, Public Exhibit 7-A-132. 271 Angang Steel Company Limited, Summary of Core Business, Public Exhibit 7-A-85. 2i2 Final Determination Statement qfReasonsj(Jr Seamless Casing (August 5, 2008).
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6. Debt Forgiveness bv the GOC
269. According to the USDOC's finding in Seamless Pipe fi'om China,273 the GOC forgave
debts of Xi gang Group, a subsidiary line pipe producer of Hunan Valin Group, 274 now known as
Jiangsu Valin-Xigang Special Steel Co., Ltd.275 Specifically, it was found that "Xigang Group and
Resources Steel underwent loan restructuring since December II, 200 I" and that " {a }pproval for
forgiveness of debt occurred in 2005, 2006, 2007, and 2008."276
270. In addition, the US DOC found that the GOC also forgave debts ofTianjin Pipe Corporation
("TPCO"). In this instance, "TPCO reported that in 2006 and 2008 it settled claims related to loans
that continued to be outstanding after a debt-to-equity transaction occurring in 20 II. TPCO settled
debt held by China Orient Asset Management Corporation and Cinda ... Forgiveness of part of the
debt occurred in 2006, and approval for forgiveness of the remainder of the debt occurred in
2008."277 As with Xi gang Group, TPCO is a Chinese line pipe producer.278
271. Debt forgiveness is a financial contribution in the form of govemment forgiveness of
amounts otherwise owing or due pursuant to the SIMA s. 2( 1.6)(b ). Benefit is the amount of the
debt forgiven under the SIMR s. 27.1. The debt forgiveness appears to be de .facto specific to a
limited number of enterprises, in that it was not widely available or by the exercise of the granting
authority's discretion under the SIMAs. 2 (7.3). The debts forgiven at any time between 2004 and
273 The United States Department of Commerce, Issues and Decision Memorandum for the Final Determination: Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe from the People's Republic of China, C-570-957, September 10,2010, Public Exhibit 7-A-46. 274 Jiangsu Valin-Xigang Special Steel Co., Ltd., Product Catalogue: Line Pipe, Public Exhibit 7-A-134. 275 Jiangsu Valin-Xigang Special Steel Co., Ltd., Introduction, Public Exhibit 7-A-133. 276 The United States Department of Commerce, Issues and Decision Memorandum for the Final Detem1ination: Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe from the People's Republic of China, C-570-957, September 10,2010, at 27-28, Public Exhibit 7-A-46. 277 Ibid at 27-28. 278 Tim1jin Pipe Corporation Enterprise, Inc., Tianjin Pipe (Group) Corporation: Products, Public Exhibit 7-A-135.
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the end of 2013 are non-recurring in nature, and as such, should be allocated over an appropriate
average useful life not exceeding I 0 years.
7. Income Tax Benefits Provided bv the GOC
A. Preferential Income Tax Benefits for Foreign Invested Enterprises
272. The GOC provides numerous preferential income tax measures to F!Es. According to the
Agency's prior Finding, an enterprise is considered to be foreign-invested where 100% of shares
of the foreign investor enterprise is foreign-owned and located outside China.279 However, non-
wholly foreign owned F!Es may also be considered to be "F!Es" if the granting authority allows.280
273. Infonnation reasonably available to the Complainant does not allow the Complainant to
identify all the Chinese subject good producers and exporters that could qualify as FIEs. However,
the Complainant believes that at least some Chinese line pipe producers and exporters are indeed
FIEs. Chinese line pipe producers such as Faray Petroleum Steel Pipe Co., Ltd. and Shengli Oil
Field Freet Petroleum Steel Pipe Co., Ltd are examples of non-wholly foreign owned F!Es
producing line pipe; they are stated to be joint ventures between Chinese and foreign investors.281
274. In addition, the Agency found in prior cases that some Chinese steel pipe producers and
exporters did in fact qualify as FIEs and benefited under various F!Es specific programs. For
example, the Agency found that a number of Chinese exporters of OCTG, welded pipe and pup
joints received benefits from preferential tax policies provided to the F!Es.282
:n9 Final Determination Statement ofReasonsfor Seamless Casing (August 5, 2008). 28° For example, see Fi11al Determination Statement qfReasonsjbr Carbon Steel Welded Pipe (August 5, 2008) at 80 under the Program "Preferential Tax Policies for Enterprises with Foreign Investment Established in Special Economic Zones (excluding Shanghai Pudong Area)." 081 Shengli Oillield Freet Petroleum Steel Pipe Co., Ltd., Corporate Profile, Public Exhibit 7-A-86; Faray Petroleum Steel Pipe Co., Ltd., About Us, Public Exhibit 7-A-87. 282 Final Determination Statemelll of Reasonsfor Certain Oil Counti:V Tubular Goods (March 9, 20 l 0); Final Determination Statement ofReasonsfor Carbon Steel Welded Pipe (August 5! 2008); Final Determination Statement of Reasons in Pup Joints (March 12, 20 12).
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275. Preferential income tax policies provide financial contribution in fonns of revenue forgone
(in the case of tax exemption or reduction) or direct transfer offi.mds (in the case of tax refunds)
within the meaning of the SIMA s.2(1.6)(a) and (b), respectively. Recipients of these programs
obtain benefits in the amount equal to the government revenue foregone or the refunds provided
pursuant to the SIMR s. 27 and 27.1. These programs are limited in law to a particular enterprise
pursuant to paragraph 2(7.2)(a) of SIMA, i.e., foreign-invested enterprises. The following are the
specific preferential tax policies for the FlEs that the Complainant believes to have been made
available to the Chinese line pipe producers and exporters.
v. Income Tax Reduction for FIEs Designated as HNTEs and Located in Designated Areas
276. According to the Agency's finding in Seamless Casing.fi·om China, the GOC provides a
reduced corporate income tax rate of 15% to F!Es recognized as HNTEs and established in the
designated new and high-tech industrial development zones.283 "This program was established
under the Rules for the Implementation of the Income Ta.;; Law of the People's Republic of China
for Enterprises with Foreign Investment and Foreign Enterprises ("FIE Income Tax Law"), which
was promulgated on June 30, 1991, and came into effect on July I, 1991. The program was
established to absorb investment in special economic zones (SEZs) and designated areas to take
the lead in their economic development. The program is administered by the State Administration
of Taxation and local tax authorities."2R4 The Agency found this program to confer countervailable
subsidies in Seamless Casing.fi·om China.m
277. The Complainant believes that the Chinese line pipe producers benefit from this program.
For example, Shandong Shengli Steel Pipe Co., Ltd - a I 00%-owned subsidiary of a company
2113 Final Determination Statement of Reasonsfor Seamless Casing (August 5, 2008). :!S.J- Ibid. 285 Ibid.
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incorporated in the Cayman islands ~ proclaims itself to be a "Shandong Province high-tech
enterprise," 286 and it has production facilities in Urumqi high-tech development zone and
Canquanpu Industrial Park, which are two designated areas under this program.287 On its face,
Shengli Steel Pipe Co., Ltd. appears to be a FIE, designated as a high-tech enterprise by the
Provincial authority, that is located within a designated zone. Such Chinese line pipe producers
and exporters would be eligible under this program.
vi. Reduced Tax Rate for Productive FIEs Scheduled to Operate for a Period not Less Than Ten Years
278. According to the Agency's finding in OCTG ji·om China, " { t} his program was established
in the {FIE Income Tax Law), which was promulgated on April9, 1991, and came into effect on
July I, 1991. This program was established in order to encourage foreign investment. The granting
authority responsible for this program is the State Administration of Taxation and the program is
administered by local tax authorities.
279. Under this program, from the year an FIE begins to make a profit, they may apply for and
receive an exemption from income tax in the first and second years and a 50% reduction in the
third, fourth, and fifth years of profitable operation. Should an FIE cease its operation following a
period of less than I 0 years, that enterprise will be responsible for repaying the amount of tax that
has been reduced or exempted under this program.
280. The pro1;ram was tenninated when the Income Tax Law of the People's Republic of China
for Enterprises came into effect on January I, 2008. However, according to Article 57 of the
Income Tax Law of the People's Republic of China for Enterprises and the Notification of the State
Council on Carrying out the Transitional Preferential Policies concerning Enterprise Income Tax,
186 Shandong Shengli Steel Pipe Co., Ltd., About Us, Public Exhibit 7-A-88. " 7 Shandong Shengli Steel Pipe Co., Ltd., Brief Introduction of Xinjiang Subsidiary, Public Exhibit 7-A-89.
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Guo Fa (2007), No. 39, enterprises currently receiving the benefits under this program as of
January I, 2008, can continue to receive the relevant preferential treatments set forth in the
previous tax laws and administrative regulations until the end of the fifth profitable year."288 Since
the fifth year beginning January I, 2008 ends on December 31, 2012, qualifying Chinese FIEs
could have benefited under this program in the fonn of reduced tax payable in 2013 (based on the
2012 tax retum filed in 2013).
281. In fact, Shengli Oil & Gas Pipe Holdings Ltd., a parent of a line pipe producer Shengli
Steel Pipe Co., Ltd., unequivocally states that it utilized this program for the tax year 2012 in its
2013 Annual Report:
{a} s a foreign invested enterprise, Shandong Shengli (being the major operating entity and a wholly-owned subsidiary of the Group) is eligible for certain tax holidays and concessions, namely, twoyear exemption from PRC entemrise income tax starting from 2008, which was the Group's first profitable year and followed by a 50% deduction on PRC entemrise income tax for the three years from 2010 to 2012.289
282. The Agency found this program to be countervailable in Certain Stainless Steel Sinks.fi·om
China. 290
vii. Income Tax Refund for Re-investment of FIE Profits by Foreign Investors
283. According to the Agency's finding in Seamless Casing.fi·om China, " { t} his program was
established in the {FIE Income Tax Law}, which was promulgated on April9, 1991, and came
into effect on July 1, 1991. This program was established in order to encourage foreign investors
to reinvest profits into businesses in China. The authorities responsible for administering this
program are the State Administration of Taxation and the local tax offices.
288 Final Determination Statement ofReasonsfbr Certain Oil CountJ)' Tubular Good...,- (March 9~ 2010). '" Shengli Oil & Gas Pipe Holdings Ltd., 2013 Annual Report at 18, Public Exhibit 7-A-70. 29° Final Determination Statement of Reasons in Stainless Steel Sinks (May 9, 20l2).
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284. Article I 0 of the FIE Income Tax Law identifies that any foreign investors who directly
reinvest their after tax profit into the organization from which they received the profit from, or use
the profits to establish a new foreign enterprise, will be refunded 40% of the tax paid on the profit
amount directly invested. Moreover, "where a foreit,'l1 investor directly reinvests profits to
establish or expand export oriented enterprises or advanced technology enterprises, 100% of the
income tax paid on the reinvested profit will be refunded."291 The foreign-owned Chinese line pipe
producers and exporters would be eligible under this program. The Agency found this program to
be countervailable in Certain Unitized Wall Modules fiwn China. 292
viii. Preferential Tax Policies for Foreign Invested Export Enterprises
285. According to the Agency's Finding in Seamless Casing.fi·om China, "{t}his program was
established in the {FIE Income Tax Law) ... to expand foreign economic cooperation. The
authorities responsible for administering this program are the State Administration of Taxation
and local tax authorities.
286. Under this program, export oriented enterprises invested in and operated by foreign
businesses may pay a reduced income tax rate of 15% if their annual output value of all export
products amounts to 70% or more of the output value of the enterprise's products for that year.
Export oriented enterprises in the SEZs and ETDZs and other such enterprises subject to enterprise
income tax at the rate of 15% that qualify under the abovementioned conditions, shall pay
enterprise income tax at the tax rate of I 0%."293
287. As explained above, Chinese line pipe producers such as Shandong Shengli Steel Pipe Co.,
Ltd are F!Es located in a SEZ, and as such, would be eligible to receive benefits under this
:m Final Determination Statement of Reasons for Seamless Casing (August 5, 2008). 2(1.:! Final Determination Statement ofReasunsjbr Uniti:::ed Wall Jv!odules (October 25, 2013). 293 Final Determination Statement ofReasonsfor Seamless Casing (August 5, 2008).
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program. The Agency found this program to be countervailable in Laminated Flooring .fi"om
China.294
ix. Preferential Tax Policies for the R&D of FIEs
288. According to the Agency's Finding in Seamless Casing from China, "{t}his program was
established in the Circular of the State Administration of Taxation on the Issues Related with the
Offset Taxable Income on Technology Development Fee for Foreign Investment Enterprises (Guo
Simi Fa (1999) No. 173 ... This program was established to encourage the research and
development of enterprises. The authorities responsible for administering this program are the
State Administration of Taxation and local tax authorities.
289. Under this program, certain foreit,'ll investment enterprises may offset their taxable income
by 150% of their R&D expenses for the same year, not to exceed the taxable income tor the year."
The foreign-owned Chinese line pipe producers and exporters would be eligible under this
program.
290. The Agency found this program to be countervailable and that a cooperative Chinese
seamless casing exporter to have used this program in Seamless Casing from China. The agency
also found this program to be potentially countervailable in OCTG from China.295
x. FIEs and Foreign Enterprises which have Establishments or Places in China and arc Engaged in Production or Business Operations Purchasing Domestically Produced Equipment
29 I. According to OCTG from China, " { t} his program was established in the Circular of the
Ministry of Finance and State Administration of Taxation Concerning the Issue of Tax Credit for
Business Income Tax for Homemade Equipment Purchased by Enterprises with Foreign
294 Final Determination Statement of Reasons for Laminate Flooring (June 16, 2005). ::.95 Final Determination Statement of Reasons for Certain Oil Coun/1)1 Tubular Goods (March 9, 2010).
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Investment and Foreign Enterprises (Cai Shui Zi (2000) No. 49), which came into force on July I,
1999. This program was established to attract foreign investment and support technology
innovation. The granting authmity responsible tor this program is the State Administration of
Taxation and the program is administered by local tax authorities.
292. Under this program, 40% of the expenses incurred by certain FlEs and foreign enterprises
on purchasing domestically produced equipment are deducted from the increment of income tax
of that year compared to the previous year. The deducted portion shaJlnot exceed that year's total
increment of income tax, and in the case where the total increment of income tax is less than 40%
of such expenses; the exceeding part of the deductible expenses can be deducted from the next
year's increment of income tax. Such postponement of deductibility shall not last for more than
five years."296 The foreign-owned Chinese line pipe producers and exporters would be eligible
under this program.
293. Moreover, this program is specific as it is a prohibited import substitution subsidy under
the SIMAs. 2(7.2)(b), in addition to being specific to the FIEs under the SIMAs. 2(7.2)(a). The
agency also found this program to be countervailable in OCTG from China.297
xi. Preferential Tax Policies for Enterprises with FIEs Established in Special Economic Zones ("SEZs") Excluding Shanghai Pudong Area
294. According to the Agency's Finding in Welded Pipe fi'om China, "{t}his program was
established in the {FIE Income Tax Law} ... in order to absorb foreign investment, expand the
'open-up policy' and enhance development in {SEZs}. The granting authority responsible for this
program is the State Administration of Taxation and the program is administered by local tax
authorities.
296 Final Determination Statement ofReasonsfor Certain Oil Counfl)' Tubular Goods (March 9, 2010). 297 /hid.
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295. Under this program, non-wholly foreign owned FlEs established in SEZs and Foreign
Enterprises (wholly foreign owned FlEs) established in SEZs engaging in production or business
operations shall pay income tax at a reduced rate of 15%."298 As explained above, Chinese line
pipe producers such as Shandong Shengli Steel Pipe Co., Ltd are FlEs located in a SEZ, and as
such, would be eligible to receive benefits under this program.
296. The Agency found that this program conferred countervailable subsidies to a cooperative
Chinese exporter in Pup Jointsfi·om China.299 The Agency also found this program actionable in
Welded Pipe fi"om China.
xii. Preferential Income Policies for FIEs Established in Open Coastal Cities or SEZs in Old Urban Cities
297. According to the Agency's Finding in Seamless Casingfi·om China, "{t}his prO!,'TUm was
established in the {FIE Income Tax Law) ... in order to encourage foreign investment in Economic
and Technical Development Zones (ETDZs) in open coastal cities and encourage some districts to
take the lead in development. The authorities responsible for administering this program are the
State Administration of Taxation and local tax offices.
298. Under this program, FIEs of a productive nature established in coastal economic open
zones or in the old urban districts of cities where the SEZs or the ETDZs are located shall pay
income tax at a reduced rate of24%."300
299. Based on the reasonably available infonnation, the Complainant identified that a number
of Chinese line pipe producers and exporters are located in such ETDZs. For example, Kunshan
Pearl Machinery Industry Co., Ltd. is located in an ETDZ in Kunshan, which is among the
:!iJB Final Determination Statement(~( Reasonsfor Carbon Steel fVdded Pipe (August 5, 2008). 299 Final Determination Statement of Reasons in Pup Joints (March 12, 20 12). 30° Final Determination Statement of Reasons fOr Seamless Casing (August 5, 2008).
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designated areas under this program.301 In addition, this company is founded by a Taiwanese pipe
producer, Far East Machinery Co., Ltd. 302 Northern Steel Pipe is also located in ETDZs in Hai
Cheng, 303 which are also among the designated areas under this program. 30• This company is also
known to be a Sino-Hong Kong joint venture. 305 Such foreign-invested Chinese line pipe
producers located in the designated zones would be eligible for this program.
xiii. Preferential Income Policies for Technology Intensive or Knowledge Intensive FIEs Established in Open Coastal Cities or SEZs in Old Urban Cities
300. According to the Agency's Finding in Seamless Casing.fi'om China," { t} his program was
established in the {FIE Income Tax Law} ... to further utilize foreign capital, introduce foreign
advanced technology and equipment and accelerate industry stmctural adjustment. The authorities
responsible for administering this pro!,'Tam are the State Administration of Taxation and local tax
authorities.
30 I. Under this program, production oriented enterprises with foreign investment established in
the coastal economic open zones, SEZs, and in the old urban districts of municipalities where
ETDZs are located and which are engaged in technology intensive and knowledge intensive
projects, may receive a reduced income tax rate of 15%."306
302. As noted above, a number of Chinese line pipe producers are known to be located within
ETDZs in the designated municipalities. To the extent that these enterprises are also classified as
"technology intensive" or "knowledge intensive," they would be eligible to receive a heightened
301 !hid. 301 FEMCO, Kunshan Pearl Machinery, Public Exhibit 7-A-90. 303 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 304 Final Determination Statement of Reasons for Seamless Casing (August 5, 2008). 305 Liaoning Northern Steel Pipe Co., Ltd., Introduction, Public Exhibit 7-A-91. 306 Final Determination Statement of Reasonsfhr Seamless Casing (August 5, 2008).
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reduction of income tax rate, from 24% to 15%, under this program. The Agency found this
program to be countervailable in Laminated Flooring.fi·om China.307
xiv. Local Income Tax Exemptions and Reductions in SEZs and Other Designated Areas
303. According to the Agency's Finding in Welded Pipe fi'om China, "{t}his program was
established in the {FIE Income Tax Law} ... to provide preferential tax treatment to FIEs to
accelerate the development oflocal economies. The granting authority responsible for this program
is the State Administration of Taxation and the program is administered by local tax authorities.
304. Under this program, any FIE that operates in an industry or undertakes a project encouraged
by the State may receive an exemption or reduction in local income taxes."308 As such, this
prot,'fam is de jure specific to the enterprises undertaking the encouraged projects within the
meaning of the SIMAs. 2(7.2)(a), in addition to being specific to the FIEs.
305. A list of the Chinese API SL certificate holders show a large number of the certificate
holders to be within a specially designated "parks," "zones," or "areas." 3119 The Complainant
believes that all such enterprises are eligible to receive benefits under this program. In addition,
the Agency previously found this program to be countervailable and that a Chinese welded pipe
exporter to have benefited from this program. 3!0 The Agency also found this program to be
countervailable in Certain Seamless Carbon or Alloy Steel Oil and gas Well Casing.fi·om China. 311
307 Final Determination Statement of Reasons j(Jr Laminate Flooring (June 161 2005). 308 Final Determination Statement c~fReasonsfOr Carbon Steel Welded Pipe (August 5, 2008). 309 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 31° Final Determination Swtement of Reasons for Carbon Steel Welded Pipe (August 5, 2008). 311 Final Determination Statement ofReasonsfhr Seamless Casing (August 5, 2008).
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B. Other Preferential Income Tax Policies Provided by the National Government
306. As with preferential income tax policies geared specifically to gamer foreign investments,
the GOC also provides numerous other preferential income tax policies for the purpose of carrying
out various other national policies. These preferential income tax policies constitute financial
contribution in the form of government revenue forgone within the meaning of the SIMA s.
2( 1.6)(b ). Recipients of these programs receive benefits in the amount equal to the amount
foregone pursuant to the SIMR s. 27.1. In addition, the GOC limits these benefits to particular
enterprises and/or industries by various manner in order to carry out the corresponding national
policy imperatives. These mechanisms are further elaborated for each program below.
xv. Income Tax Reductions for the Enterprises Designated as "High and New Technology Enterprises"
307. Paragraph 2 of Article 28 of the PRC's Corporate Income Tax Law ("CIT Law") 312
provides that High and New Technology Enterprises ("HNTE") are subject to a reduced income
tax rate of 15%, 10% lower than the regular CIT rate of 25% set out by Article 4 of Law.m
According to the Agency's Finding in OCTO .fi'om China, this program came into eftect as of
January I, 2008. The granting authority responsible for this program is the State Administration
of Taxation and the program is administered by local tax authorities.314 Only certain enterprises
designated by the State to be HNTEs benefits from the reduced income tax rate.
308. It is an established fact that the Chinese line pipe producers and exporters are HNTEs and
benefit from the reduced income tax. For example, WSP Holdings Ltd- the parent company of
Wuxi Seamless, a main Chinese steel producer- reported in its Form 20-F submitted to the United
312 KPMG, PRC Corporate Income Tax Law, Public Exhibit 7-A-92 at 8. 311 Ibid, al4. 3l4 Final Determination Statement ofReasonsjbr Certain Oil Coun!IJ Tubular Goods (March 9, 20 l 0).
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States Securities and Exchange Commission for the year ending 2012 that it '"enjoy { s} a
preferential tax rate of 15%" by virtue of being an HNTE, and that it has renewed this status until
the end of2013.315 In addition, the Agency countervailed this program against the Chinese OCTG
producers after finding that '"four of the cooperative exporters have received benefits under this
progrmn."316
309. The reduced tax rate of 15% is granted only to particular enterprises designated as HNTEs.
As such, this program is de jure specific within the meaning of the SIMAs. 2(7.2)(a). In OCTG
.fi'om China, the Agency found this program to have conferred countervailable subsidy benefits.
xvi. Preferential Tax Policies for Domestic Enterprises Purchasing Domestically Produced Equipment for Technology Upgrading Purpose
3 I 0. According to the Agency's Finding in OCTG from China, '"{t }his program was established
in the Circular Concerning Printing and Distributing Interim Measures on Business Income Tax
Credit Applicable to Technological Transfonnation Domestic Equipment Investment (Cui Simi Zi
(1999) No. 290), which came into force on July I, 1999. This program was established to
encourage domestic investment and support the technology upgrading of enterprises. The granting
authority responsible for this program is the State Administration of Taxation and the program is
administered by local tax authorities.
311. Under this program, for all enterprises with investment on the technological transfonnation
projects confonning to the State Industrial Policy in the nation, 40% of the expenses on purchasing
domestically produced equipment shall be deducted from the increment of income tax ofthat year
compared to the previous year. In the case where the total increment of income tax is less than
315 WSP Holdings Limited, Fom1 20-F, Public Exhibit 7-A-10 at 21. 316 Final Determination Statement (~( Reasons.fbr Certain Oil Country Tubular Goods (March 9, 20 I 0).
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40%, of such expenses, the exceeding part of the deductible expenses can be deducted from the
next year's increment of income tax. Such postponement of deductibility shall not last for more
than five years. "317
312. This program appears to be de jure specific under the SIMAs. 2(7.2)(a), as the benefits are
limited to the projects designated as "technological transfonnation projects."
313. The Agency found this program to be countervailable in Seamless Casing.fi·om China and
OCTG fi'om China. The Agency found that a number of cooperative Chinese seamless casing and
OCTO exporters have received benefits under this program. 318
xvii. Preferential Tax Policies for FIEs Established in the Pudong Area of Shanghai
314. According to the Agency's Finding in Seamless Casing.from China, "{t}his program was
established in the {FIE Income Tax Law} ... in order to encourage foreign investment in the SEZs
of the Pudong Area of Shanghai. The authority responsible for administering this program is the
State Administration of Taxation.''319 That said, " { u }nder this program, FIEs, FEs, joint-venture
DIEs and single-investor DIEs established in the SEZs of the Pudong New Area of Shanghai shall
pay income tax at a reduced rate of 15%."320
315. The Complainant has identified a number of Chinese line pipe producers located in the
Pudong area, including Shanghai Third Navigation ASP Steel Pipe, 321 and Sino-American
Shanghai Pacific Pipe. 322 Such Chinese line pipe producers would be eligible under this pro1,>ram.
317 Ibid. 318 Final Determination Statement of Reasons for Certain Oil CountJ}' Tubular Goods (March 9, 2010). Jt!J Final Determination Statement l~{ Reasons for Seamless Casing (August 5, 2008) at 65-66. "
0 Ibid. at 65-66. J2l American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 312 Ibid.
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316. The reduced tax rate of 15%, is limited to particular enterprises located in Pudong New
Area within the jurisdiction of the j,'Tanting authority, namely all of China, and therefore it is
geographically specific within the meaning of the SIMA s. 2(7.2)(a). The Agency found this
program to be potentially actionable Stainless Steel Sinks fi"om China. 323
xviii. Income Tax Refund Where Profits Re-invested in SEZs and Other Designated Areas of Guangdong Province
317. According to the Agency's Finding in Welded Pipeji·om China, "{t)his program was
established in the Regulations on Special Economic Zones in Guangdong Province ... to encourage
the reinvestment of profits into businesses located in the SEZs of Guangdong province. The
granting authority responsible for this program is the State Administration of Taxation and the
program is administered by local tax authorities.
318. Under this program, businesses that reinvest profits derived in the SEZs of Guangdong
province for a period of five years or longer are eligible to receive a refund of the income tax
already paid on the profit that was reinvested. "324
319. Chinese line pipe producers are known to be located within the SEZs of Guangdong
province, including the following companies:325
• Guangzhou Juyi Steel Pipes Co., Ltd. located in Sanlian Industrial Park in Guangzhou city, Guangdong;
• Guangzhou Steel Pipe Mill Co., located in Huangpu Industrial District in Guangzhou city, Guangdong; and
• Tai Feng Qiao Metal Products Co., Ltd. located in Jiedong Economic Development Testing Zone in J ieyang city, Guangdong.
320. Such Chinese line pipe producers would be eligible to receive benefits under this program.
323 Final Determination Statement of Reasons in Stainless Steel Sinks (May 9, 2012). 324 Final Determination Statement of Reasons for Carbon Steel Welded Pipe (August 5, 2008). 315 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33.
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32 I. This program is provided by the State Administration of Taxation with a national
jurisdiction, but is limited to particular enterprises located in the SEZs ofGuangdong province. As
such, this program is geographically specific under the SIMAs. 2(7.2)(a). The Agency found this
program to be countervail able in Cooper Pipe Fittings .fi·om China.326
xix. Preferential Tax Policies in the Western Region
322. According to the Agency's Finding in Welded Pipe from China, "{t}his program was
established for DIEs and FIEs in the Circular of the Ministry of Finance, State Administration of
Taxation and General Administration of Customs on the Preferential Tax Policy of Development
of the Western Region ... in order to encourage investment in the western region of China. The
granting authority responsible for this prot,>Tam is that State Administration of Taxation and the
program is administered by local tax authorities.
323. Under this program, DIEs in industries classified in the encouraged category in the Guiding
Catalogue for Industrial Structure Regulation ... and FIEs classified in the encouraged category in
the Guideline Catalogue for Foreign Investment Industries and the Guideline Catalogue of the
Advantageous Industries in the western Central and Western Regions for Foreign Investment, and
who are located in the western region and other specified locations are eligible for a preferential
income tax rate of 15%." 327 This program is limited to a particular enterprise classified as
"encouraged" located in a specific geographic area, and for this reason, it is specific within the
meaning of the SIMAs. 2(7.2)(a).
324. A list of Chinese API 5L certificate holders shows that there are many API 5L certificate
holders located in the following provinces, 328 as found by the Agency in the Certain Seamless
326 Final Determination Statement ofReasonsjOr Copper Tube (December 3, 2013). 327 Final Determination Statement <~f Reasonsfhr Carbon Steel Welded Pipe (August 5, 2008). "'American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, l'ublic Exhibit 7-A-33.
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Carbon or Alloy Steel Oil and Gas Well Casing fi'om China investigation to be provinces
designated as "western region": 329 Shanxi province; Jilin Province, Heilongjiang province, Anhui
province; Hubei province, Sichuan province; Shaanxi province; Inner Mongolia; and Guangxi -
Southeast330 Since some of these provinces, such as Jilin and Heilongjiang, are geographically
located in the northeast rather than the western region of China, Evraz encourages the CBSA to
conduct further investigations as to whether companies producing and exporting subject goods in
these provinces benefited from this program, as many companies had in the Carbon Steel Welded
Pipe investigation.
325. The Agency found this program potentially actionable in OCTG fi'om China and Piling
Pipe.fi·om China. 331
C. Preferential Income Tax Policies Provided by Sub-national Governments
326. One of the hallmarks of the centrally planned economy like that of China's is that centrally
set national policies "flow down" to the sub-national governments. In this regard, Hong Kong's
Constitutional and Mainland Affairs Bureau states that "{the National Five-year Plan} serves as
the blueprint and action agenda for national development and the work basis of government
agencies at alllevels."332 As such, these Five-year Plans are implemented at various levels of the
government, namely at "national, provincial/municipal and individual specific project" levels. 333
329 CBSA Final Determination Statement of Reasons for Carbon Steel Welded Pipe (February 22,2008) at pg 68; Here, the Agency found that the following regions constitute the "western region" in Welded Pipe from China: Shanxi province, Jilin province, Heilongjiang province, Anhui province, Jiangxi province, Henan province, Hubei province, Hunan province, Chongqing municipality, Sichuan province, Guizhou province, Yunnan province, Tibet autonomous region, Shaattxi province, Gansu province, Ningxia Hui autonomous region, Qinghai province, Xinjiang Uygur autonomous region, Inner Mongolia autonomous region, and Guangxi Zhuang autonomous region. 310 American Petroleum Institute, API Standard APl-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 331 Final Determination Stmcment of Reasons fOr Certain Oil CountJy Tubulat Goods (March 9, 2010); Final Determination Statement of Reasons/or Certain Steel Piling Pipe (November 15, 20 12). 332 Constitutional and Mainland Affairs Bureau of the Government of the Hong Kong Special Administrative Region, The HKSAR's Work in Complementing the National 12'" Five-year Plan. Public Exhibit 7-A-93. J)) !hid.
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327. A case in point is local tax policies aligned with preferential tax policies provided by the
national government. Like their national counterparts, local authorities provide preferential tax
policies with a view to carry out the national policies. These tax policies could take the fonn of
tax exemptions or reductions that constitute a financial contribution within the meaning of
government revenue forgone under the SIMAs. 2(1.6)(b ). On the other hand, tax refunds constitute
a financial contribution within the meaning of direct transfer of funds under the SIMAs. 2( 1.6)(a).
In both cases, recipients of these preferential income tax policies receive benefits in the amount
equal to the amount foregone or refunded pursuant to the SIMR ss. 27 and 27. I. In addition, these
programs are designed to target particular enterprises or industries pursuant to the corresponding
national policies, as further elaborated below for each program.
xx. Income Tax Refund for Enterprises Located in Tianjin Jinnan Economic Development Area
328. According to the Agency's Finding in OCTG.fi·om China, "this program was established
by governments at the local level to provide income tax refund for domestic invested enterprises"
("DIEs"), "located in Tianjin Jinnan Economic Development Area. The granting authority
responsible for this pro!,'Tam is the Management Committee of Tianjin Jinnan Economic
Development Area. Under this pro!,'Tam, DIEs may apply for and receive income tax refunds up to
50%, of the income tax paid to the local government."334 The Agency in that case found this
program to be countervailable and also found that "one of the cooperative exporters has received
benefits under this program:ms
329. Tianjin Jinnan Economic Development Area is a home to a thriving steel processing
industry. It IS reported that there are 55 compames 111 the "machinery industry," including
334 Final Determination Statement ofReasonsfhr Certain Oil CountJ}' Tubular Goods (March 9, 2010). m Ibid.
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producers of oil pipe casing and drills, which together process five million tons of steel per year. 336
Tianjin Delma Petroleum Equipment Manufacturing Co., Ltd., a self-proclaimed operator of"one
of the largest oilfield pipes and equipment production plants in China," 337 is one of such
companies. 338 This company produces line pipe, 339 and it advertises of having export clients,
including those in Canada.340 Tianjin Delma Petroleum Equipment Manufacturing Co., Ltd., and
other Chinese line pipe producers located in Tianjin Jinnan Economic Development Area, would
therefore be eligible to receive income tax refunds under this program.
330. The income tax refund is granted only to particular enterprises located in Tianjin Jinnan
Economic Development Area, namely the domestic invested enterprises. As such, this program is
de jure specific within the meaning of the SIMAs. 2(7.2)(a).
xxi. Accelerated Depreciation on Fixed Assets in Binhai New Area of Tianjin
331. According to the Agency's Finding in OCTG from China, "{t}his program was established
in the Notice of the Ministry of Finance and the State Administration of Taxation on the Relevant
Preferential Enterprise Income Tax Policies for Supporting the Development and Openness of
Binhai New Area ofTianjin, Cai Simi (2006) No. 130, which came into effect as of July I, 2006.
This program was established in order to promote the development of the Binhai New Area of
Tianjin. The authorities responsible for administering this program are the Department of Public
Finance ofTianjin Municipality, the State Taxation Bureau ofTianjin Municipality and the Local
Taxation Bureau ofTianjin Municipality.
33'' China Knowledge, Tianjin Jinnan Economic Development Area, Public Exhibit 7-A-94. 337 Tianjin Dehua Petroleum Equipment Manufacturing Co., Ltd., Company Profile, Public Exhibit 7-A-95. 338 Tianjin Del111a Petroleum Equipment Manufacturing Co., Ltd., Contact Us, Public Exhibit 7-A-96. 339 Tianjin Del111a Petroleum Equipment Manufacturing Co., Ltd., Products; Line Pipe, Public Exhibit 7-A-97. 340 Tianjin Del111a Petroleum Equipment Manufacturing Co., Ltd., Company Profile, Public Exhibit 7-A-95.
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332. Under this program, enterprises located in the Binhai New Area of Tianjin are eligible to
reduce the depreciation period of eligible fixed assets (excluding houses and buildings) by up to
40%."341 Tianjin Pipe Group Corporation is a major line pipe producer located in Tianjin Binhai
New Area, 342 and such Chinese line pipe producers would be eligible to receive benefits under this
program. In addition, The Agency found this program to be countervailable and that Chinese
tubular producers received benefits under this program in both OCTO trom China and Seamless
Casing from China.343
333. This program is limited to a particular enterprise located in the Binhai New Area, itself
located within the jurisdiction of the granting authority, namely the municipality of Tianjin. As
such, this program is de jure specific within the meaning of the SIMAs. 2(7.2)(a).
8. Exemption or Reduction of Indirect Taxes and Other Governmental Charges and Fees
334. The GOC also provides numerous subsidies in fonn of exemption or reduction of indirect
taxes, tariffs, and other govemment charges and fees. The exemptions and reductions of such taxes,
tariffs, and charges and fees constitute a financial contribution in the form of govemment revenue
foregone under the SIMAs. 2(1.6)(b). The benefits equal to the difference between the amount
that would have been otherwise payable, and the amount actually paid pursuant to the SIMR s.
27.1 (2). The mechanism by which the granting authotities target these subsidies in order to carry
out discrete policy objectives vary trom program to program, and is further described in detail
below for each program.
341 Final Determination Statement ofReasonsfor Certain Oil Count1y Tubular Goods (March 9, 2010). 342 Tianjin Pipe Group Corporation, Company Profile, Public Exhibit 7-A-98. 343 Final Determination Statement (~(Reasonsjbr Certain Oil Cowwy Tubular Goods (March 9, 2010); Final Determination Statement of Reasons fOr Seamless Casing (August 5, 2008).
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A. Value-added Tax ("VAT") Reduction and Exemption for Recycled Products
335. In November 20I I, the GOC reduced or eliminated VAT burdens on enterprises that
recycle waste resources ostensibly for the purpose of promoting environmentally friendly
industrial manufacturing. 344 This policy was implemented through a document entitled "Circular
on Adjustmelll of VAT Treatment to Products and Serl'ices Output through Comprehensive
Utilization of Resources (caishui (2011) No. 115)," released by the State Administration of
Taxation and Ministry of Finance on November 20 I I. 345
336. Under this prot,'fam, there are three eligible classes of products and services. Under the
tirst, including products such as electricity and certain chemicals, the entire VAT is exempted.
Under the second, including products such as certain fiberboards and cardboards, 80% of VAT is
refunded upon collection. Under the last, which includes "{a} collection of metals ... produced
with the use of industrial wastes," 50% of VAT is refunded upon collection. 346 Since the
authorizing document lists a number of products for which the VAT exemption and reduction
apply, this program is de jure specific pursuant to the SIMAs. 2(7.2)(a).
337. Baosteel, a major Chinese line pipe producer, advocates that the "so-caHed 'discarded
substance' is also a resource, a secondary resource generated from production process."347 To this
end, the company boasts that it "produced 12.94 million tons of all kinds of industrial solid
secondary resource, among which I 2. 72 million tons were used in a comprehensive way with a
utilization rate of98.32%."348 Of this amount, "2.9I million tons were returned to production for
use, accounting for 22.48% of total solid secondary resource ... {and} realizing RMB I ,024 million
344 China Briefing, China Expands Tax Incentives to Promote Circular Economy, November 28, 2011, Public Exhibit 7-A-99. 145 !hid. 146 Ibid. 147 Baosteel Group Co., Developing Recycle Economy, Public Exhibit 7-A-100. 148 Ibid.
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of replacement profit."349 Such Chinese line pipe producers would be eligible to receive VAT
reduction tor sales of the metal products using the industrial wastes.
B. VAT Refunds under the Foreign Trade Development Fund Program
338. According to the USDOC's finding in Welded Carbon Quality Steel Line Pipe from China,
this program "was established on September 14,2004 by the 'Circular of the Ministry of Finance
and State Tax Administration on Printing and Distributing the Regulations on Relevant Issues with
Respect to Expansion of VAT Deduction Scope in the Northeast Areas.' The Huludao State Tax
Administration administers the pro!,>ram. Under the program, VAT taxpayers that are members of
the equipment manufacturing, petrochemical, metallurgical, shipbuilding, automobile, and
agricultural products industries may deduct VAT for purchases of fixed assets from the VAT for
sales of finished goods. The cap for such VAT deductions is the incremental increase in VAT
liability from the previous year. According to Article 2 of the 'Circular of the Ministry of Finance
and State Tax Administration on Printing and Distributing the Regulations on Relevant Issues with
Respect to Expansion of VAT Deduction Scope in the Northeast Areas,' the VAT exemption is
limited to finns located in the northeast region of the PRC."350
339. This program is de jure specific within the meaning of s. 2(7.2)(a), since the benefits under
this pro1,>ram are limited to a member of the enumerated industries, which include metallurgical
industry. Moreover, this program is also de jure specific as it is geographically limited to the
northeast region of China.
)41) /hid. 350 The United States Department of Commerce, Issues and Decision Aiemorandum fhr Final Determination: Circular Welded Carbon Quality Steel Line Pipe.fi"om the People's Republic of China, C-570-936, November 17, 2008, Public Exhibit 7-A-19.
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340. This pro!,'fam was countervailed by the USDOC, as a Chinese line pipe producer Huludao
Steel Pipe was found to have received benefits under this pro!,'fam.351
C. Exemption of Tariff and Import VAT for the Imported Technologies and Equipment
341. According to the Agency's Finding in OCTG.fi-om China," {t )he exemptions of tariffs and
import VAT is provided for and administered in accordance with the Circular a./the State Council
Concerning the Adjustment in the Taxation Policy a./Import Equipment ... to further expand
foreign capital utilization, attract technologies and equipment from abroad, promote structural
adjustments in industry and technological advancement and to maintain the sustained, rapid and
healthy development of the national economy. The granting authorities responsible for this
program are the Ministry of Finance and the General Administration of Customs, and the program
is administered by local provincial and municipal customs branches.
342. Under this program, enterprises meeting certain eligibility criteria may apply for exemption
from tariffs and VAT on imported equipment and its related technologies, components and parts.
The enterprise must receive approval of its application from the appropriate authority and,
subsequently, that application is submitted to the local officials who verify that the documents
presented are adequate and that the imported items are not listed in the catalogues of commodities
that are not eligible for tax exemptions."353 The Agency found this program to be countervailable
and that Chinese exporters of OCTG received benefits under this program.353
343. As stated in the Agency's Finding in Seamless Casing.fi·om China, this program is specific
to the state-owned-enterprises.354 As such, Chinese SOE line pipe producers would be eligible to
351 Ibid. 352 Final Determination Statement of Reasons for Certain Oil Counll)' Tubular Goods (March 9, 201 0). 353 Ibid. 354 Final Determination Statement ofReasonsjbr Seamless Casing (August 5, 2008) at 53.
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receive benefits under this program, given that many major line pipe producers are state-owned,
including CNOOC Kingland Pipe and Hengyang Valin Steel Tube as described above, and
Baosteel. 355
D. VAT Exemptions for State-authorized Enterprise Technical Centers
344. According to the Chu Kong Pipe's website, the GOC recognized Cho Kong as the first
"State-authorized Enterprise Technical Center," and granted preferential policies such as
exemption of import VAT on imported goods.356 Other Chinese line pipe producers with nationally
recognized technical centers, such as TPC0,357 would therefore also be eligible to receive VAT
exemptions on imports.
345. This program is de jure specific under the SIMAs. 2(7.2)(a) as it is only given to companies
recognized by the national-level authorities as "Technical Centers."
E. VAT Refunds for FIEs Purchasing Domestically-Produced Equipment
346. According to the USDOC's finding in Wire Decking.fi·om China, "the GOC refunds the
VAT on purchases of certain domestic equipment to F!Es if the purchases are within the
enterprise's investment amount and if the equipment falls under a tax-free category."358 This
program was established by the Notice ()/the State Administration ()/Taxation Concerning the
Trial Administrative Measures on Purchase ()/ Domestically-Produced Equipment by FIEs
(GUOSHUIFA (1999) No. 171).
347. "Article 3 specifies that this program is limited to F!Es with completed tax registrations
and with foreign investment in excess of25 percent of the total investment in the enterprise. Article
355 Baosteel, Public Acknowledgement, Public Exhibit 7-A-75. m. Panyu Chu Kong Steel Co., Ltd., Company News: PCK was Selected as the First 'National Recognized Corporate Technical Center' in the Industry, Public Exhibit 7-A-101. 357 Tianjin Pipe Group Corporation, R&D Center, Public Exhibit 7-A-102. 35R The United States Department of Commerce, l\·sues and DecisionJ\4emorandumfor the Final Determination: Wire Decking.fi·om the People's Republic of China, C-570-950, June 3, 20 I 0, Public Exhibit 7-A-27.
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4 defines the type of equipment eligible for the VAT exemption, which includes equipment falling
under the Encouraged and Restricted B categories listed in the Notice of the State Council
Concerning the Adjustment of Taxation Policies for Imported Equipment (No. 37 (1997)) and
equipment for projects listed in the Catalogue of Key Industries, Products and Technologies
Encouraged for Development by the State."359
348. This program is de jure specific within the meaning of the SIMAs. 7.2(a) in that only the
FIEs are eligible. In addition, the program is further restricted to enterprises purchasing such
equipment falling under the "Encouraged" and "Restricted B" category, or purchased for projects
listed as a key industry encouraged by the state.
349. The Agency found in Welded Pipe .fi'om China that "under the 'Encouraged Investment
Industries' is the development and application of modem hot-rolled broad band (wide strip) steel
rolling; the production of oil well pipe for petroleum exploration; high pressure boiler pipe for
power stations and steel pipe used in the long distance transportation of oil and gas."360 Given that
there are foreign invested Chinese line pipe producers, as mentioned above, and line pipe
production falls within the "Encouraged Industries," such enterprises would be eligible to receive
benefits under this program.
F. Import tariff and VAT exemptions for FIEs and certain domestic enterprises using imported equipment iu encouraged industries
350. Under this pro1,>ram, enterprises meeting the eligibility criteria ... may apply for exemption
from tariffs and VAT on imported equipment and its related technologies, components, and
parts."361 According to the Agency's Finding in Laminated Flooring.fi'om China, { t} he immediate
VAT exemption provided under this program is administered in accordance with the Circular of
359 Ibid. JM Final Determination Statement of Reasons for Carbon Steel Welded Pipe (AugustS, 2008). 36 l Final Determination Statement ofReasonsfor Laminate Flooring (June 16, 2005).
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the State Council Concerning the Adjustment in the Taxation Policy a./Import Equipment. Article
12 of the Measures a./the People's Republic of' China on Control Over and Taxation for Import
and Export Goods a./Enterprises with Foreign Investment provides for preferential reductions and
exemptions of tariffs and taxes on imported equipment as provided for in the circular."362
351. In this regard, the Agency found that "in order for a domestic invested enterprise (DIE) to
be eligible for tariff and VAT exemptions on imported equipment, the domestic investment project
the equipment relates to must be listed in The Current Catalogue of Key Industries. Products and
Technologies The Development of Which is Encouraged by the State (Provisional). In addition,
the equipment must be tor the applicant's own use and the value of the equipment must be within
the total amount of investment in the domestic project. Finally, any type of equipment that is
imported and listed in The Directo1y o.f'Jmported Commodities o.l Non- Tax Exemption to be used
in Domestic Invested Projects is not eligible for the exemptions under this program.
352. In order for an FIE to be eligible for tariff and VAT exemptions on imported equipment,
the foreign investment project that the equipment relates to must relate to the projects listed in the
Guideline Catalogue for Foreign Investment Industries under the encouragement category or the
restricted B category. In addition, the equipment must be for the applicant's own use and the value
of the equipment must be within the total amount of investment in the foreign project. Finally, any
type of equipment that is imported and listed in The Direct01y of Imported Commodities of Non-
Tax Exemption to be used in Foreign Invested Projects is not eligible tor the exemptions under
this program."363
353. As shown above, the line pipe industry is enumerated as one of the encouraged industries,
and as such, the Chinese line pipe producers would be eligible to benefit under this pro),,'ram.
36:! Ibid. 363 Ibid.
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354. In addition, this program is de jure specific, as the benefits under this program is available
only to the applicants within the enumerated "encouraged."364
G. VAT and Income Tax Exemption/Reduction for Enterprises Adopting Debt-to-Equity Swaps
355. According to the Agency's Finding in Welded Pipe Fom China, "{t}his program was
established in the Notice on the Tax Policies for Debt-to-equity Swap Enterprises, Cai Simi (2005)
No. 29 ... in order to exert further efforts for the debt-to-equity work and support the refonn of
enterprises. The granting authority responsible for this program is the State Administration of
Taxation.
356. Under this program, enterprises adopting debt-to-equity swaps, pursuant to the debt-to-
equity swap agreement signed between the enterprise and a financial asset management company,
are exempted from paying value-added tax and/or consumption tax."365
357. As the Agency found in that case, this program is "limited, in Jaw, to a particular enterprise,
pursuant to paragraph 2(7.2)(a) of SIMA."
H. Tariff and Value-added Tax (VAT) Exemptions on Imported Materials and Equipment in SEZs and other Designated Areas Located in Guangdong Province
358. According to the Agency's Finding in Welded Pipesfi·om China, "{!}his program was
established in the Regulations on Special Economic Zones in Guangdong Prorince ... 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.
}(J-t !hid,
JbS Final Determination Statement qf Reasonsjbr Carbon Steel TVelded Pipe (August 5, 2008).
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359. Under this program, machinery and equipment, spare parts, raw and semi-processed
materials, means of transportation and other capital goods necessary tor production that are
imported by enterprises in SEZs shall be exempted from import duties."366 The Agency found this
program to be countervailable in Welded Pipes.fi·om China.
360. According to the list of API5L certificate holders in China, there are 31 API 5L certificate
holders located in specially designated zones, parks and areas. 367 Such Chinese line pipe producers
would be eligible to benefit under this program.
361. In addition, this program is de jure specific within the meaning of the SIMA s. 2(7.2)(a),
as the benefits under this program are limited to particular enterprises located within designated
areas.
I. VAT Exemptions for Central Region
362. According to the USDOC's finding in Seamless Pipe .fi·om China, a Chinese line pipe
producer Hengyang 368 reported of receiving VAT refunds on purchases of equipment by
Hengyang Valin and Hengyang MPM.369 The US DOC explained that " { t} he GOC state { d} that
eligibility for this program is extended to nonnal VAT tax payers that participate in any of eight
industries, including the metallurgy industry, the equipment manufacture industry, and new and
high technology industry. The GOC also identified location as a requirement for the program,
which is extended to 26 municipalities of six provinces in the Central Region of the PRC."370
366 Ibid. 367 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic o[
China, Public Exhibit 7-A-33. 368 Hengyang Valin Steel Tube Co., Ltd., ProducL" Acid Resistance Line Pipe, Public Exhibit 7-A-103. 369 The United States Department of Commerce, Issues and Decision Afemorandumjbr the Final Determination: Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure PipejhJJn the People's Republic q[China, C-570-957, September 10,2010, Public Exhibit 7-A-46. 370 Ibid.
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363. This program is de jure specific, since the benefits under this program is limited to a
particular enterprise within the enumerated list of industries and designated geographic areas. As
such, Chinese line pipe producers located in the designated areas would be eligible to receive
benefits under this program. In fact, the US DOC found that this program was used by Hengyang,
a known Chinese producer and exporter of line pipe.
J. Refund of Land Transfer Fees
364. According to the Agency's Finding in OCTG.fi·om China, "this program was established
by governments at the local level to provide refunds ofland transfer fees to enterprises located in
the Jinnan Development Zone ofTianjin City. The granting authority responsible for this program
is Jinnan Branch Bureau of Tianjin National Land and Resource Administration Bureau.''371 The
Agency found this pro1,'!'am to be countervailable and that a Chinese OCTG producer received
benefits under this program. 372 As mentioned above, Tianjin Delma Petroleum Equipment
Manufacturing Co., Ltd. is located in one of the designated Development Zones within Tianjin
city, and such Chinese line pipe producers would be eligible to receive benefits under this program.
365. This program is de jure specific within the meaning of the SIMAs. 2(7.2)(a), as the benefits
under this program is limited to particular enterprises located in the designated areas, i.e.,
Development Zones, within the jurisdiction of the I,'Tanting authority, namely Tianjin city.
K. Exemption of Local Miscellaneous Taxes for FIEs
366. According to the USDOC's finding in Drill Pipe .fi'om China, the "local tax authorities
exempt all FlEs and foreign enterprises from the constmction tax and education fee surcharges"
pursuant to the Circular Concerning Temporm:v Exemption .fi'om Urban Maintenance and
371 Final Determination Statement ofReasonsjbr Certain Oil Count!)' Tubular Goods (March 9, 2010). 37' Ibid.
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Construction Tax and Additional Education Fees for Foreign:fimded and Foreign Enterprises
(Guo Shui Fa (1994) No. 38)."
367. "The construction tax is based on the amount of product tax, VAT, and/or business tax
actually paid by the taxpayer. For taxpayers located in urban areas, the rate is seven percent; for
taxpayers located in counties or townships, the rate is five percent; and for taxpayers located in
areas other than urban areas, counties, and townships, the rate is one percent. Regarding the
education fee surcharge, F!Es pay only one percent of the actual amount of the product tax, VAT,
and business tax paid, whereas other entities pay four percent of that amount."373 The US DOC
found this program to be countervailable in a number of CVD investigations against China,
including in Drill Pipes.fi'om China.374
368. As explained above, Chinese line pipe producers, such as Shandong Shengli Steel Pipe
Co., Ltd, are F!Es, and as such, would be eligible to receive benefits under this program.
369. In addition, this program is de jure specific within the meaning of the SIMAs. 2(7.2)(a),
as it is limited to F!Es and FEs.
9. Grants Provided bv the National and Sub-national Authorities in of the GOC
A. Grants for Funding Research, Science and Technology Related Activities
3 70. As the Agency found on numerous occasions in the past, the Chinese govemment provides
a significant amount of grants for promoting research, science and technology of the Chinese steel
373 The United States Department of Commerce, Issues and Decision J\1emorandumfbr the Final Determination: Alwninum Extrusion[l·om the People's Republic of China, C-570,968, March 28, 2011, Public Exhibit 7-A-104. 374 The US DOC also found this program to be countervailab1e in The United States Department of Commerce, Issues and Decision Memorandum for the Final Determination: Aluminum Extrusionfi·om the People's Republic f~( China, C-570,968, March 28,2011, Public Exhibit 7-A-104, The United States Department of Commerce, Issues and Ded'}ion Afemorandttm fOr the Final Determination: Certain Kitchen Appliance Sheh·ing and Racksji·om the People's Republic of China, C-570-942, July 20, 2009, Public Exhibit 7-A-4, and The United States Department of Commerce, Issues and Decision .N!emorandumfor the Final Determination: Certain Coated Paper Suitable for High-quality Print Gmphics Using Sheet-fed Pressesfi'om the People's Republic of China, C-570-959, September 20, 2010, Public Exhibit 7-A-47.
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and steel pipe industries. 375 These grants constitute a financial contribution in the fonn of direct
transfer of funds within the meaning of SIMAs. 2( 1.6) (a). Benefits of these programs equal to the
amount of the grant pursuant to the SIMR s. 27. Precise mechanisms used by the GOC to target
these !,'Tants to a particular enterprise in line with the relevant national policy varies from program-
to-program, as are described below for each program.
xxii. R&D Assistance Grant
371. According to the Agency's Finding in OCTG.fi·om China, "this program was established
by governments at local level to encourage and support enterprises in developing new technologies
and products, to promote energy savings, to enhance product quality, to improve export structure,
and to cultivate and develop high-tech industries and new pillar industries."376 The Agency found
this program to be countervailable and that a cooperative Chinese OCTG producer received the
grants.
3 72. Earlier cases establish that this R&D Assistance Grant is provided in various parts of China,
as the Agency found the same program to have been granted by different authorities in different
places, namely in Wuxing District377 and Jiangmen City.378 R&D conducting Chinese line pipe
producers and exporters, such as Oilfield International Trading ("Oilfield")379 located in J iangmen
City,380 would be eligible to receive this !,'Tant.
373. The R&D Assistance Grant is specific in law pursuant to the SIMA s. 2(7.2)(a), as the
recipients are limited to certain companies enumerated in the granting authority. To quote the
375 Wiley Rein & Fielding LLP, The China Syndrome: How Subsidies and Government Intervention Created the World's Largest Steel Industry, July 2006, Public Exhibit 7-A-105. 376 Final Determination Statement C?[Reasonsjbr Certain Oil Counfl)' Tubular Goods (March 9, 2010). 377 Final Determination Statement ofReasonsjiJr Carbon Steel Welded P1j1e (August 5, 2008) at 73. 378 Final Determination Statement (~f Reasons for Certain Aluminum Extrusions (March 3, 2009). 379 Oilfield International Trading, Products: Oil Special Pipe & Accessories, Public Exhibit 7-A-106. 380 Oilfield International Trading, Company Profile, Public Exhibit 7-A-107.
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Agency in Welded Pipe .fi'om China, this program was limited to "major scientific research and
technology enterprises" listed by a local Science & Technology Bureau381
xxiii. National Innovation Fund for Technology Based Firms
374. According to the Agency in Unitized Wall Modules .fi'om China, "this program was
administered by the Beijing Municipal Commission of Development and Refonn ... to support
innovations in the Beijing manufacturing industry." 382 The Agency found this program to be
countervailable and that a Chinese exporter received benefits under this program. l83
375. This program appears to be de jure specific within the meaning of the SIMAs. 2(7.2){a),
as it is limited to the enterprises designated to be "technology based finns." Shandong Xinyuan
Steel Pipe Manufacturing Co., Ltd. is a "large steel pipe manufacturing enterprise" (including API
SL seamless line pipe) by its own account, which has "successively for twenty years is a
'technology-based enterprise. '"384 Such Chinese line pipe producers would be eligible to receive
funding under this program.
xxiv. Provincial Scientific Development Plan Fund
376. The Agency in Aluminum Extrusions .fi'om China found that the "projects launched by
{non-state-owned-enterprises}, which boast intellectual properties and good marketing prospects,
can be included in the projects that enjoy the support of the {Yunnan} province's special funding
such as the Provincial Scientific Development Plan Fund," pursuant to the Notions Concerning
Accelerating the Growth of the Non-state-owned Economy.385 In addition, the Agency concluded
that "{t}his program does not appear to be limited to the province of Yunnan as, in the current
JXJ Final Determination Statement of Reasons/Or Carbon Steel Welded Pipe (August 5, 2008). 382 Final Determination Statement ofReasonsfor Uniti=ed Wall Aiodules (October 25, 2013). 383 Ibid. 384 East Resources, Marketing Webpage ofShandong Xinyuan Steel Pipe Manufacturing Co .• Ltd., Public Exhibit 7-A-108. 385 Final Determination Statement qf Reasonsfor Certain Aluminum Extrusions (March 3, 2009).
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investigation, a cooperative exporter located in a different province received awards under this
program."386 The Agency found this program to be countervailable and that a Chinese exporter
received benefits under this pr01,>ram.
377. Based on the infonnation available from the Agency's prior Finding, and reasonably
available public sources, this program does not appear to have any detailed eligibility criteria.
Instead, it appears that the local authorities exercise their discretion to decide whether an applicant
"boasts intellectual properties and good marketing prospects." In this consideration, it appears that
the Chinese line pipe producers and exporters could also be eligible to benefit from this program.
xxv. Special Supporting Fund for Commercialization of Technological Innovation and Research Findings
378. According to the Agency's finding in Piling Pipes .fi'om China, a Chinese steel pipe
producer Huludao City Steel Pipe Industrial Co., Ltd. ("HLD") acknowledged receiving a !,>rant
under this program. The Agency found this program to be countervailable. No further details about
this program were provided by the respondent exporter or the GOC in Piling Pipes.fi'om China.
379. HLD is also an API 5L certified387 producer and exporter of line pipe.388 An appropriate
amount of benefits under this program found to have been provided to HLD in Piling Pipes fi·om
China should therefore be properly attributed to the company's line pipe production.389 In addition,
given that a Chinese line pipe producer qualified and receive benefits under this pro1,>ram, the
Complainant respectfully requests that the Agency carefully investigate whether other line pipe
producers and exporters also received this funding.
386 lhid. 387 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 388 Huludao City Steel Pipe Industrial Co., Ltd., About Us, Public Exhibit 7-A-109. 389 Final Determination Statement of Reasonsjbr Certain Steel Piling Pipe {November 15, 20 12).
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xxvi. Venture Investment Fund of Hi-tech Industry
380. According to the Australian Anti-dumping Commission's finding in Aluminum Extrusions
from China, this program is established in the Circular ofChongqing People's Govemment Office
on Temporary Administration Measures on Venture Investment Fund of High-tech Industry in
Chongqing.390 The so-called "venture investment funds" are provided to certain companies located
in the High-tech Zone or the High-tech Park of the new Northem District. 391 "In addition, the
program must meet the following conditions:
• have a leading technological position in its field, and sufficient expertise to enter the industrialisation development phase (industrialisation programs with intellectual property rights are given priority);
• the products must be of high quality and have potential economic benefit to the collective development of the Chongqing High-tech Industry Zone;
• the department supporting the program must have good credit, excellent operation mechanisms and strong innovation abilities;
• the enterprise must have good legal standing; and • the total investment must be RMB I 00 million or more."392
38 I. This program is geographically specific to the enterprises in the High-tech Zones and High-
tech Parks within the meaning of the SIMAs. 2(7.2)(a).
382. There are identified line pipe producers and exporters located in Chongqing. Such Chinese
line pipe producers and exporters would be eligible to qualify under this program.
xxvii. National High-Tech R&D Program (Also Known as the 863 Program)
383. According to the Ministry of Science and Technology ("MOST") website regarding this
program,393 the objectives of the 863 Program are: (I) to boost innovation capacity in the high-
tech sectors to gain a foothold in the world arena; (2) to strive to achieve breakthrough in key
390 Australian Anti-dumping Commission, Report to the Jvfinister No, 148: Certain Aluminum Extrusions Exported to Australia fi"om the People's Republic of China, April 15, 20 I 0, l'ublic Exhibit 7-A-11 0. 391 Ibid. 392 ibid. m The Ministry of Science and Technology of the People's Republic of China, National High-tech R&D Program (863 Program), l'ublic Exhibit 7-A-111.
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technical fields that concem the national economic lifeline and national security; and (3) to achieve
"leap-frog" development in key high-tech fields in which China enjoys relative advantages or
should take strategic positions. To this end, the GOC channels govemment investment capital in
the fonn of research J,'l'ants to eligible research institutions, 12% of which are private enterprises. 394
Specifically, research institutions focussed in the following fields are supported under the proJ,'l'am:
o key technologies for the construction of China's infonnation infrastructure;
• development of key biological, agricultural and phannaceutical technologies;
o to master key new materials and advanced manufacturing technologies to boost industrial competitiveness; and
o key technologies for environmental protection, resources and energy development.
384. Producers of steel products are known to have benefited ±rom the research fund under the
863 Program. For one, the MOST itself advertised "{t}he super strength steel study {that}
improved the perfonnance of traditional carbon steel" as one of the "China's 863 ProJ,'l'am
Harvested."395 In addition, Baosteel indicates that it has undertaken a "State 863 Program" through
a research institution it jointly founded with a local university.396 As such, the Chinese line pipe
producers like Baosteel would be eligible to receive grants under this program.
385. In addition, this program is de jure specific within the meaning of the SIMAs. 2(7.2)(a) in
that the eligible applicants are limited to the applicants with focus on one of the four enumerated
technology fields.
B. Export Promotion Grants
386. As the Agency found on numerous occasions in the past, the Chinese govemment provides
a significant amount of grants for promoting exports of the Chinese steel products. These J,'l'ants
YJ.t Insight at Pacific Community Ventures & the Initiative for Responsible Investment at Harvard University, Case Study 13: National High-tech R&D (863) Program, January 2011, Public Exhibit 7-A-112. 395 The Ministry of Science and Technology of the People's Republic of China, China Science and Technology Newsletter, September 30,2004, Public Exhibit 7-A-113. 3"" Baosteel, Social Responsibility: Value Creation, Public Exhibit 7-A-114.
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could take a fonn of certain "awards" provided to those who meet certain threshold ( eg. export
perfonnance target), or granted for specific export-related purpose ( eg. to cover the costs of export
market marketing). All such grants share one common feature that they are all export contingent
grants, and as such, are prohibited and specific export subsidy under the SIMA ss. 2 and 2(7.2)(b).
In addition, these grants constitute financial contribution in the fonn of direct transfer of funds
under the SIMAs. 2(1.6)(a) and provide benefits in the amount of the grant under the SIMR s. 27.
xxviii. Export Assistance Grant
387. According to the Agency's Finding in Welded Pipe.fi"om China, the "Export Assistance
Grant" refers to cash grants provided to small and medium-sized enterprises ("SMEs"), who export
products into foreign markets. "This program was established in the Circular o.fthe Trial Measures
o.fthe Administration of international Market Development Funds (Cai Qi No. 467, 2000)."397 The
program came into force on October 24, 2000 with purposes of supporting the development of
Chinese SMEs in the competitive international markets, reducing the enterprises' business risks,
and promoting national economy development.398 Once the funds are receive, they are to be used
for the following purposes: "(i) holding or participating in overseas exhibitions, (ii) providing
accreditation fees for quality management system, environment management system or tor the
product, (iii) promoting international market, (iv) exploring a new market, (v) holding training
seminars and symposiums, and (vi) bidding overseas."399
388. The Agency found this program to be countervailable and that the Chinese steel pipe
exporters received benefits under this program in Welded Pipes.fi'om China,400 and OCTG.fi·om
397 Final Determination Statement of Reasonsfhr Carbon Steel Welded Pipe (August 5, 2008), 398 Ibid. 399 Ibid. 4oo Ibid.
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China.401 In addition, Chinese line pipe producers also appear to be eligible to receive this export
assistance grant. For example, Jiangsu Chang Bao Steel Tube Co. Ltd ("Jiangsu") is both a Chinese
API SL line pipe producer and is listed in the Shenzhen SME Board,402 who also is advertised to
be an exporter.403 Such Chinese line pipe producer and exporters would be eligible to receive this
export assistance grant.
xxix. Export Brand Development Fund
389. According to the Agency's Finding in Aluminum Extrusionsfi·om China, this program was
established pursuant to the Notice on Issuing Directive on Supporting the Development of Name
Brands for Export.404 The Notice provides that "the state shall arrange a special item under the
heading 'export brand development fund' to support enterprises in building up their independent
brands and nurture and develop name brand exports." The Agency found this program to be
countervailable and that a Chinese exporter received benefits under this program in Aluminum
Extrusions.fi·om China.405
390. Although the Complainant is unable to verify whether any Chinese line pipe exporters in
fact received benefits under this program based on the reasonably available infonnation, there is
nothing that would preclude these exporters from receiving benefits under this program.
401 Final Determination Statement ofReasonsfor Certain Oil Count1y Tuhu!ar Goods (March 9, 2010). "" Jiangsu Chang Baa Steel Tube Co., Ltd., About Us, Public Exhibit 7-A-115. 403 Ibid. 404 Final Determination Statement of Reasons for Certain A lwninwn Extrusions (March 3, 2009). 405 Ibid.
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xxx. Grants for Export Activities
391. According to the Agency's Finding in Pup Jointsfi·om China, the GOC provides "grant for
market promotion and trade development."406 This program was countervailed by the Agency, as
the !,>rants were found to have been granted to a Chinese producer of pup joints407
392. Although the Complainant is unable to verify whether any Chinese line pipe exporters in
fact received benefits under this program based on the reasonably available infonnation, there is
nothing that would preclude these exporters from receiving benefits under this program.
xxxi. Grants for Top Ten Privately-owned Export Enterprises ofTianjin for the Year of 2008
393. According to the Agency's Finding in OCTG.fi·om China, "enterprises located in Tianjin
city and elected as 'Top Ten Privately-owned Export Enterprise ofTianjin for the Year of 2008'
may receive grants from the local government. The granting authority responsible for this program
is the Government of Tianjin City."408 The Agency found this program to be countervailable in
OCTG fi'om China, as these grants were found to have been granted to a cooperative OCTG
producer.'09
394. Major Chinese line pipe producers and exporters are located in Tianjin city as shown in the
list of the API 5L certificate holders.4 10 Such Chinese producers and exporters of line pipe would
be eligible to receive benefits under this program. Among many, TPCO stands out as particularly
notable. 1t was once the "largest manufacturer of tubular goods in technology and scale in China,"
and it continues to be among the "China's top 500 enterprises and top 500 manufacturers."411 The
406 Final Determination Statement(~( Reasons in Pup Joints (March 12. 20 12). 407 Ibid. 408 Final Determination Statement of Reasonsjbr Certain Oil CountiJ' Tubular Goods (March 9, 201 0). 409 Ibid. 410 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 411 Tianjin Pipe Group Corporation, Company Profile, Public Exhibit 7-A-98.
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company's products recognized as "Famous Chinese Product" and "Renowned Chinese Export
Commodity," and the brand "TPCO" was recognized as a "well-known Chinese trade mark."412
xxxii. Local and Provincial Government Reimbursement Grants on Export Credit Insurance Fees
395. According to the USDOC's finding in Steel Wheels.fi·om China, "Hangzhou and Fuyang
City Governments and the Government of Zhejiang Province reimbursed {the respondent
companies in that case} during the POI for export credit insurance fees the companies paid in2008
and 2009. {The respondent companies} report that {they} did not submit an application to receive
the funds. Instead, the companies reported the fees it paid for export credit insurance to local
authorities."413 The USDOC found this program to be countervailable in Steel Wheels.fi·om China,
as well as in Pre-stressed Concrete Steel Wire Strand.fi"om China.414
396. Chinese API 5L line pipe certificate holders, such as CNOOC Kingland Pipeline Co., Ltd.
and Ningbo Jun Cheng Corp, are located in Zhejiang province.415 Such Chinese line pipe producers
would be eligible for this grant.
xxxiii. Special Fund for Fostering Stable Growth of Foreign Trade
397. According to the Agency's Finding in Stainless Steel Sinks .fi·om China, " { t} his program
was established in 2009 and was valid for one year to help exporters survive the financial and
economic crisis in the world market. This program provided benefits in the form of marketing
assistance. The granting authorities responsible for this program are the Department of Finance
and the Department of Foreign Trade and Economic Cooperation of Guangdong Province. This
412 Ibid. 413 The United States Department of Commerce, Issues and Decision Memorandum for the Final Dctennination: Certain Steel Wheels from the People's Republic of China, C-570-974, Public Exhibit 7-A-23. 414 Ibid. 415 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33.
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program is implemented by the Municipal Bureau of Foreign Trade and Economic Cooperation
and the Bureau of Finance."416
398. Chinese line pipe producers, such as Guangzhou Steel Pipe Mill Co., Ltd., Panyu Chukong
Steel Pipe Co., Ltd., Tai Feng Qiao Metal Products Co., Ltd., Zhongshan Walchamp Steel Pipe,
and Guangzhou Juyi Steel Pipes Co., Ltd are located in Guangdong province.417 Such Chinese line
pipe producers would be eligible for this grant.
xxxiv. Liaoning High-Tech Products & Equipment Export Interest Assistance
399. According to the Agency's Finding in OCTG.fi"om China, "this program was established
by govemments at the local level to provide financial support to enterprises of high-tech products
or the equipment manufacturing industry in Liaoning province. The !,>ranting authority responsible
for this program is the Liaoning Economic Commission."418 The Agency found this program to be
countervailable and that a Chinese OCTG producer received benefits under this program in OCTG
.fi"om China.
400. Liaoning province is home of some of the most prominent Chinese line pipe producers and
exporters. For example, Huludao City Steel Pipe companies are located in Huludai city of Liaoning
province. Angang Steel Company, whose 67.25% of ownership is controlled by Anshan ]ron and
Steel Group,419 who is in turn 67.2% controlled the SASAC,420 is also located in Anshan city of
Liaoning province.421 These line pipe producers, along with 12 other known producers of line pipe
416 Final Determination Statement of Reasons in Stainles,\· Steel Sinks (May 9, 2012). 417 American Petroleum Institute. API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 418 Final Determination Statement of Reasons fOr Certain Oil Count!}' Tuhu!ar Goods (March 9, 2010). 4 t9 Angang Steel Company Limited, Summary of Core Business, Public Exhibit 7-A-85. 420 Ansteel, Ansteel: Shareholders, Public Exhibit 7-A-116. 421 Angang Steel Company Limited, 2013 Annual Report, Public Exhibit 7-A-117.
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producers located in Liaoning province, would all be eligible to receive benefits under this
program.
C. Environmental Grants
40 I. The GOC also provides numerous grants ostensibly tor environmental purposes. These
grants are financial contribution in the fonn of direct transfer of funds within the meaning of the
SIMAs. 1.6(a), conferring benefits in the amount of the h'fant pursuant to s. 27 of the S!MR. The
manner by which these grants are targeted to the Chinese line pipe producers vary from program-
by-program, as described in more detail below.
xxxv. Emission Reduction and Energy-saving Award
402. According to the Agency's finding in OCTG .fi"om China, the Emission Reduction and
Energy-saving Award is "administered by the Jiangsu Environmental Protection Department. The
source of funding is the Finance Department of J iangsu Province. This program is intended to
support the emission-reduction work of major pollutants and the program came into force in
September 2008". 422 As such, this program is de jure specific within the meaning of the SIMA s.
2(7 .2)(a), in that the program is limited explicitly to the "major pollutants." The Agency found this
program to be countervailable and that a Chinese OCTG exporter received benefits under this
403. Jiangsu province is home to numerous known and potential Chinese producers or exporters
of API 5L line pipe.423 The API's list of API 5L certificate holder also shows a large number of
certificate holders located in Jiangsu province.424 In particular, given that an OCTG producer was
found to have received benefits under this program, the Complainant believes that the line pipe
422 Final Determination Statement of Reasonsfhr Certain Oil CountJT Tubular Goods (March 9, 2010). 423 List of Known Exporters, Confidential Exhibit 2-1. 424 American Petroleum Institute, API Standard API-SL Certified Companies Located in the People's Republic of China. Public Exhibit 7-A-33.
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producers in Jiangsu province would therefore be eligible to receive benefits under this program
as well.
xxxvi. 2009 Energy-saving Fund in Jiangsu Province
404. The Agency found in OCTG fi'om China that " { t} his program was established by
governments at the local level to promote energy savings. The granting authority responsible for
this program is the Department of Foreign Trade & Economic Cooperation of Jiangsu."425 The
Agency held that this program was countervailable in the OCTG.fi'om China case because one of
the exporters was found to have received benefits under this program.426
405. Jiangsu province is home to numerous known and potential Chinese producers or exporters
of API 5L line pipe.427 The API's list of API 5L certificate holder also shows a large number of
certificate holders located in Jiangsu province.428 In particular given that an OCTG producer was
found to have received benefits under this program, the Complainant believes that the line pipe
producers in Jiangsu province would therefore be eligible to receive benefits under this progTam
as well.
xxxvii. Environment Protection Award in Jiangsu Province
406. This award "was established to provide financial assistance to enterprises for
environmental protection. The administrative authority responsible for this program is the
Environmental Protection Bureau of Jiangsu Province. The granting authority is the Jiangdu
4~5 Final Determination Statement ofReasonsfbr Certain Oil Country Tubular Goods (March 9, 2010). 426 Ibid. 427 List of Known Exporters, Confidential Exhibit 2-1. 408 American Petroleum Institute, API Standard API-5L Certilied Companies Located in the People's Republic of China, Public Exhibit 7-A-33.
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Finance Bureau."429 The agency in OCTG .fi"om China found this program to be countervailable
and that a Chinese OCTO exporter received benefits under this program.430
407. Jiangsu province is home to numerous known and potential Chinese producers or exporters
of API 5L line pipe.431 The API's list of API 5L certificate holders also shows a large number of
certificate holders located in Jiangsu province.432 In particular, given that an OCTO producer was
found to have received benefits under this pro~o;ram, the Complainant believes that the line pipe
producers in Jiangsu province would therefore be eligible to receive benefits under this program
as well.
xxxviii. 2007 and 2008 Energy-saving Grant in Changzhou City
408. "{T} his pro!,'fam was established by govemments at the local level to promote energy
savings. The granting authority responsible for this program is the Changzhou Economic & Trade
Commission.''"33 The agency in OCTG fi"om China found this program to be countervail able and
that a Chinese OCTO exporter received benefits under this program.434
409. Changzhou city is home to numerous known and potential Chinese producers or exporters
of API 5L line pipe. 435 The API's list of API 5L certificate holder also shows a large number of
certificate holders located in the Changzhou city. 436 In particular, given that an OCTO producer
was found to have received benefits under this program, the Complainant believes that the line
42 '> Final Determination Statement t~{Reasonsfbr Certain Oil Country Tubular Goods (March 9, 2010). 430 Ibid. 4
" List of Known Exporters, Confidential Exhibit 2-1. 432 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 433 Final Determination Statement of Reasons for Certoin Oil Country Tubular Goods (March 9, 2010). 414 Ibid. 435 List of Known Exporters, Confidenti:tl Exhibit 2-1. 4"' American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of
China, Public Exhibit 7-A-33.
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pipe producers in Jiangsu province would therefore be eligible to receive benefits under this
program as well.
xxxix. Water Saving Enterprise
410. According to the Agency, "this program was established by governments at the local1evel
to encourage the development of water-saving technologies. The granting authority responsible
for this program is Changzhou Water Conservancy Bureau.''437 The agency in OCTG.fi·om China
found this program to be countervailable and that a Chinese OCTO exporter received benefits
under this program.438
411. Changzhou city is home to numerous known and potential Chinese producers or exporters
of API 5L line pipe.439 The API's list of API 5L certificate holder also shows a large number of
certificate holders located in the Changzhou city.440 In particular, given that an OCTO producer
was found to have received benefits under this program, the Complainant believes that the line
pipe producers in Jiangsu province would therefore be eligible to receive benefits under this
program as well.
D. Other Grants
xl. Innovative SME Grants
412. According to the Agency's Finding in Unitized Wall Modules .fi'om China, a Chinese
respondent reported of having received benefits under this program.44 t In addition, the Agency
found that "the granting authority responsible for this prO,b'Tam is the Ouangdong Department of
Finance and the program is administered by the Ouangdong Small and Medium-sized Enterprise
437 Final Determination Statement(~( Reasonsfhr Certain Oil Coun!IJ Tubular Goods (March 9, 20 l 0). 438 Ibid. 419 List of Known Exporters, Confidential Exhibit 2-1. ""American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. "' Final Determination Statement of'Reasonsfbr Uniti=ed Wall Modules (October 25, 20 13).
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Bureau. This program was established to encourage small and medium-sized enterprises to
perfonn technical innovations and product innovations and to increase employment." The Agency
found this program to be countervailable."442
413. The US DOC also found and countervailed what appears to be the same grant program for
"innovative" SMEs in another region of China in Steel Gratings ji-om China.443 Specifically, the
USDOC found that the Ningbo Zhenhai Development and Refom1 Bureau of the Ningbo city,
Zhejiang province awarded "Innovative Small- and Medium-sized Enterprise Grant 2008."444
414. Based on this infom1ation, the Complainant believes that grants for innovative SMEs may
be a national level program, implemented through local authorities. In any case, the Complainant
identified potential Chinese line pipe producers located in two places where this program was
found to have been conferred, namely Guangdong province and Zhenhai district ofNingbo city:
there are five known potential line pipe producers in Guangdong;445 and Ningbo Jun Cheng Metal
Pipe Co., Ltd., a holder of API 5L certificate,446 which is also a known producer and exporter of
the subject goods, 447 is located in Zhenhai district of Ningbo city. 448 As such, based on the
infonnation reasonably available, the Complainant believes that the Chinese line pipe producers
would be eligible to receive benefits under this pro1,>ram.
415. Government grant is a financial contribution in the tonn of direct transfer of funds pursuant
to the SIMAs. 2(1.6)(a). The benefit is in the amount of the grant pursuant to the SIMR s. 27. On
442 /bid. 443 The United States Department of Commerce, Issues and Decision Memorandum for the Final Determination: Certain Steel Grating from the People's Republic of China, C-570-948, May 28,2010, Public Exhibit 7-A-22. 444 Ibid. 445 List of Known Exporters, Confidential Exhibit 2-1. 446 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 447 Ningbo Jun Cheng Metal Pipe Co., Ltd., Products: API 5L Pipe, Public Exhibit 7-A-118. 448 Ningbo Jun Cheng Metal Pipe Co., Ltd., Group Prolile, Public Exhibit 7-A-119.
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its face, this program appears to be de jure specific under the SIMAs. 2(7.2)(a) in that the grants
are provided only to certain SMEs designated to be "innovative."
xli. Allowance to Pay Loan Interest in Support of Small and Medium Sized Businesses
416. The Agency found in Stainless Steel Sinks.fi·om China that a Chinese respondent "received
an allowance from the local government in support of small and medium sized businesses. This
program came into effect in 2010 and the funds were provided to help reduce interest payments on
commercial bank loans. The program was provided and administered by the Economic and Trade
Office of the Huangpu govemment in Zhongshan city, Guangdong Province. The granting
authority is the Zhongshan Municipal government."449 The Agency found this program to be
countervailable, and that a Chinese exporter received benefits under this program.
417. Govemment payment of companies' loan interest is a financial contribution in the form of
direct transfer of funds or liabilities, and confers benefits in the amount of the interest paid. On its
face, this program appears to be provided to the enterprises located in Huangpu district, given that
the grant is disbursed by the Huan1,rpu govemment. Since the granting authority is the Zhongshan
city govemment, and only the particular enterprises located in a limited geographic area within the
city, namely Huangpu district, appear to qualify under this pro.!,'Tam, this program is believed to be
de jure specific within the meaning of the SIMAs. 2(7.2)(a).
xlii. Enterprise Innovation Award of Qishuyan District
418. According to the Agency's Finding in OCGT.fi·om China, "this program was established
by govemments at the local level to encourage and support enterprises to develop high-tech
products. The granting authority responsible for this program is the Qishuyan District Government
4-1 9 Final Determination Statement of Reasons in Stainless Steel Sinks (May 9, 20 12).
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ofChangzhou."450 The Agency found this program to be countervailable and that a Chinese OCTO
producer received benefits under this program in OCTG.fi'om China.
419. This grant is a financial contribution in the fonn of direct transfer of funds, and confers
benefits in the amount of the grant. On its face, this grant appears to be de jure specific within the
meaning of the SIMAs. 2(7.2)(a), since the program is limited to the certain enterprises developing
"high-tech products."
420. The Complainant identified Changzhou Yuanyang Steel Tube Co., Ltd. to be a line pipe
producer,451 located in east Qishuyan,452 and advertising that Canada is its "{t)arget market."453
The Complainant believes that Changzhou Yuan yang Steel Tube and other line pipe producers or
exporters located within Qishuyan district would be eligible to receive benefits under this program.
xliii. Jiangdu City Industrial Economy Performance Award
421. According to the Agency's Finding in OCTG.fi'om China, " { t} his program was established
to encourage industrial enterprises to speed up technological transfonnation, product development
and brand building. The administrative authority responsible for this program is the Jiangdu
Economic and Development Commission. The granting authority is the Jiangdu Finance
Bureau."454 In OCTO trom China, the Agency found this program to be countervail able and that a
Chinese OCTO producer received benefits under this pro1,rram in OCTG.fi'om China.
422. This grant is a financial contribution in the fonn of direct transfer of funds, and confers
benefits in the amount of the grant. This grant appears to be de jure specific within the meaning of
the SIMA s. 2(7.2)(a), since the program appears to be limited to certain "industrial enterprises."
45° Final Determination Statement t~( Reasonsfor Certain Oil Count!)' Tubular Goods (March 9, 201 0). 451 Changzhou Yuanyang Steel Tube, Product Introduction: Brieflntroduction, Pnblic Exhibit 7-A-120. 452 Changzhou Yuanyang Steel Tube, Contact Us, Public Exhibit 7-A-121. 453 Changzhou Yuanyang Steel Tube, Sales Network, Public Exhibit 7-A-122. 454 Final Determination Statement of Reasons for Certain Oil Country Tubular Goods (March 9, 201 0).
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In addition, this program also appears to be de facto specific within the SIMAs. 2(7.3)(d), in that
only the enterprises selected by the granting authority, by exercise of its discretion, would be
eligible to receive benefits.
423. The Complainant identified a Chinese subject goods producer in Jiangdu city, namely
Yangzhou Lontrin Steel Tube.455 Such line pipe producers and exporters in Jiangdu city would be
eligible to receive benefits under this program.
xliv. Gaocun Government Grant
424. According to the Agency's Finding in OCTG.fi·om China, this program "was established
in the Notice abolll Allocation of Government Reward, Gao Zheng Fa (2008), No. 7, which was
issued on June 20, 2008. This program was established to increase employment and promote the
local economy. The granting authority responsible for this program is the Gaocun Town People's
Government. "456 The Agency found this program to be countervailable and that a Chinese OCTO
exporter received benefits under this program in OCTG .fi'om China.
425. This grant is a financial contribution in the form of direct transfer of funds, and confers
benefits in the amount of the grant. This grant appears to be de facto specific within the meaning
of the SIMAs. 2(7.3)(d), in that only the enterprises selected by the granting authority by exercise
of its discretion would be eligible to receive benefits.
xlv. Wendeng Government Grant
426. According to the Agency's Finding in OCTGfi·om China, "this program was established
by governments at the local level to provide a one-time grant. The granting authority responsible
for this program is the local Wendeng government."457 The Agency found this program to be
455 The Simdex Steel Tube Manufacturers Worldwide Guide, Yangzhou Lontrin Steel Tube, Public Exhibit 7-A-123. 456 Final Determination Stateme111 ofReasonsfor Certain Oil Count1y Tubular Goods (March 9, 2010). 457 Ibid.
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countervailable and that a Chinese OCTG exporter received benefits under this program in OCTG
_fi-om China.
427. This grant is a financial contribution in the fonn of direct transfer of funds, and confers
benefits in the amount of the grant. This grant appears to be de facto specific within the meaning
of the SIMAs. 2(7.3)(d), in that only the enterprises selected by the granting authority by exercise
of its discretion would be eligible to receive benefits.
xlvi. Grant for key enterprises in equipment manufacturing industry of Zhongshan
428. According to the Agency's Finding in Welded Pipes from China, this program "was
established in the Notice of Issuing Method for Detennination of Key Enterprises in Equipment
Manufacturing Industry ofZhongshan, Zhong Fu (2005) No. 127. The objective of the program is
'promoting the strategy of industrial strong city and enterprise string city, promoting the transition
of the stmcture of industrial enterprises towards higher level and moderate orientation to heavy
industry, and elevating the industrial competitiveness and development level." The granting
authority responsible tor this program is the Municipal Economic and Trade Bureau of Zhongshan.
429. The benefit provided under this program is in the fonn of grants and is limited to enterprises
in the equipment manufacturing industry located in Zhongshan City."458 The Agency found this
program to be countervailable and that a Chinese welded pipe producer received benefits under
this program in Welded Pipes.fi·om China.
430. This grant is a financial contribution in the fonn of direct transfer of funds, and confers
benefits in the amount of the grant. This f,'TUnt appears to be de jure specific within the meaning of
458 Final Determination Statement ofReasonsfor Carbon Steel Welded Pipe (August 5, 2008).
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the SIMA s. 2(7.2)(a), in that the authorizing document explicitly limits the program to the
"equipment manufacturing industry."
43 I. The Complainant identified at least one line pipe producer located in Zhongshan city,
namely Zhongshan Walchamp Steel Pipe,459 and believes that this company, along with other line
pipe producers and exporters in Zhongshan city, would be eligible to receive benefits under this
program.
xlvii. Superstar or Famous Enterprise Grant
432. In Certain Aluminum Extrusions.fi"om China, the Agency found that "under this pro1,rram,
enterprises located in certain cities and selected as 'Superstar Enterprises' may receive grants from
the local government. In order to qualify for a 'Superstar Enterprise' total annual sales of the
superstar enterprise have to reach a certain threshold. The granting authority responsible for this
program appears to be the local municipal govemment."460 The Agency found this program to be
countervailable and that a Chinese exporter received benefits under this program.
433. This grant is a financial contribution in the fonn of direct transfer of funds, and confers
benefits in the amount of the grant. This grant appears to be de jure and de .facto specific within
the meaning of the SIMA ss. 2(7.2)(a) and 2(7.3)(d) respectively, in that the authorizing document
explicitly limits the program to cettain enterprises designated to be "superstar" enterprises.
xi viii. Awards to Enterprises Whose Products Qualify for "Well-Known Trademarks of China" or "Famous Brands of China"
434. According to the Agency's Finding in Aluminum Extrusions.fi·om China, "{t}his program
appears to be established by the State level government and administered by both the provincial
459 Zhongshan Walchamp Steel Pipe Company Ltd., Contact Us, Public Exhibit 7-A-124; Zhongshan Walchamp Steel Pipe Company Ltd., Survey of the Company and Products, Public Exhibit 7-A-125. 46° Final Determination Statement f~{ Reasonsjhr Cerrain .. Huminum Extrusions (March 3, 2009).
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and local authorities. According to a document obtained through CBSA research, entitled Notions
Concerning Accelerating The Growth q/the Non-State-Owed Economy ("NSOEs .. ), published by
the Yunnan provincial government, the provincial government shall grant a one-time award to
NSOEs whose products are qualified as 'Well-known Trademarks of China' or 'Famous Brands
of China,' or are listed among the most famous export commodities identified by the state trading
authority. In addition, should an enterpiise qualify as a well-known trademark or famous brand of
the province, a one-time award will be granted by local authorities." The Agency further explained
that {t}his program does not appear to be limited to the province of Yunnan as ... one of the
cooperative exporters located in a different province received awards under this program."461
435. Confinning the Agency's Finding, a Chinese line pipe producer Shengli Oilfield Freet
Petroleum Co., Ltd. reports in its website that it was "awarded the title of Shandong Famous
Brand,"462 likely from the provincial govemment of Shandong. In the USDOC's finding in Steel
Gratings .fi"om China, a "famous brand" grant was countervailed and found to have been provided
in Zhenhai district of Ningbo city in Zhejiang province.463 In Pre-stressed Concrete Steel Wire
Strand .fi"om China, the USDOC found this same famous brand grant in Xinyu city, Jiangxi
province.464 The Australian Antidumping Commission in Toilet Paper.fi"om China found that this
program was indeed established at the state level by the MOFCOM. 465
461 Ibid. "'2 Shengli Oilfield Freet Petroleum Co., Ltd., Company Profile, Public Exhibit 7-A-52. 463 The United States Department of Commerce, Issues and Decision Memorandum for the Final Detennination: Certain Steel Grating from the People's Republic of China, C-570-948, May 28,2010, Public Exhibit 7-A-22. 464 The United States Department of Commerce, Issues and Decision Memorandum for the Final Determination: Pre-stressed Concrete Steel Wire Strand from the People's Republic of China, C-570-946, May 14,2010, Public Exhibit 7-A-40. 465 Australian Anti-dumping Commission, Im·estigation into the Alleged Stthsidisation a_{ Certain Toilet Paper Exportedfi·om the People's Republic a_{ China: Preliminwy Report on Existence o_f Countcrvailahle Subsidies, September 2008, Public Exhibit 7-A-126 at 102.
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436. This grant is a financial contribution in the fi:mn of direct transfer of funds, and confers
benefits in the amount of the grant. This grant appears to be de jure specific within the meaning of
the SIMA s. 2(7.2)(a), in that the authorizing document explicitly limits the program to the
"equipment manufacturing industry."
xlix. Repaying Foreign Currency Loan by Returned VAT
437. According to the Agency's Finding in Seamless Casing from China, "{t}his program was
established in the Notice of the Ministry of Finance and the State Administration of Taxation on
Continuing the Policy of Repaying Foreign Currency Loans (Incurred prior to December 3I, 1994)
by Retumed VAT During the 'Tenth Five-Year' Period, Cai Qi (2002), No. 268, which was
published on September 10, 2002. The 'Tenth Five-Year' period covers the five years from 2001
to 2005. The authorit{ies} ... responsible for administering this program are the Ministry of
Finance and the State Administration ofTaxation."466
438. Under this program, industrial enterprises are eligible to receive VAT refund if the
enterprise had outstanding foreign currency loans as of December 31, 1994, and the refund can be
used to repay the outstanding foreign currency loans. The amount of the VAT refund shall not
exceed 12% of the total amount of the principal and interests payment for the foreign currency
loan in any given year." The Agency in Seamless Casing from China found this prOl,'Tam to be
countervailable and that a Chinese seamless casing exporter received benefits under this program.
439. Although the program was officially discontinued in 2005, it is submitted that the VAT
refund under this program is a non-recuning grant to pay for financing expenses incurred by the
recipients, not for operating expenses related to the line pipe. As such, to the extent that any line
pipe producers received the VAT refund, benefit should be allocated to the POI, provided that the
466 Final Determination Statement of Reasons for Seamless Casing (August 5, 2008) at page 57.
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POI is within the appropriate allocation period (AUL not exceeding ten years as prescribed by the
SIMR ss. 27(c) and 27.1 (2)). In addition, the Agency in Seamless Casing from China found this
program to be de jure specific within the SIMA s. 2(7.2)(a), and that this prO!,>ram to be
countervailable.
I. Special Fund for Fostering Stable Growth of Foreign Trade in 2009
440. The Agency found that this program is "administered by the Beijing Commerce
Commission. This pro!,>ram was established to support export sales."467 As this is a one-time !,>rant
received in 2009, without any apparent restrictions as to the use (i.e., the recipient need not use the
grant for operating expenses or acquiring fixed assets), the grant is to be amortized based on the
useful life of the assets up to maximum often years pursuant to the SIMR s. 27(c).
441. In the Certain Unitized Wall Modules case, the Agency found this program to constitute a
financial contribution under SIMAs. 2(1.6)(a) through a direct transfer offunds. The Agency also
found that the benefit equal to the amount of the grant provided. Given that the purpose of this
program is "to support export sales," it appears that the program is specific as a prohibited subsidy
under the SIMAs. 2(7.2)(b). The Agency in Unitized Wall Modulesfi'om China found this program
to be countervailable and that a Chinese exporter received benefits under this program.
li. Award of Taxpayers in Yanghang Industrial Park
442. According to the Agency's Finding in Metal Bar Gratingfi·om China,468 "{t}his pro!,'Tam
appears to be established by governments at the local level and was established to provide grants
to taxpayers located in Yanghang Industrial Park. The administrative authority responsible for this
program is identified as Yanghang Entetprise Development Co." Grants constitute financial
467 Final Determination Statement qfReasonsfor Uniti::ed Wall Alodu/es (October 25, 2013). 46H Final Determination Statement <~{Reasons in Steel Grating (May 7, 2011).
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contribution in the fonn of direct transfer of funds under the SIMA s. 2( 1.6)(a). Benefit is the
amount of the grant under the SIMR s. 27. The Agency found this program to be countervailable
and that a Chinese exporter receive benefits under this program.469
443. Huaye International Investment Co., Ltd. is a Chinese line pipe producer or exporter,470
reportedly located inside Yanghang Industrial Park.471 Such Chinese companies would therefore
be eligible to receive grants under this program.
10. Various Additional Subsidies
444. The Agency have also considered and found a number of these additonal subsidies
countervailable in previous cases. In the Complainant's opinion, these subsidies cannot tit into the
broad categories of programs, discussed above. As such, the manner of how these prOk,'Tams meet
the financial contribution, benefits, and specifies requirements within the SIMA, varies from
program-by-program. These requirements will be discussed within each program below.
A. Various Subsidies Provided in Liaoning Province Under the Five Points and One Line Development Strategy
445. The "Five Points and One Line" development strategy is a program established in Several
Opinions of the People's Government of Liaoning Province on Encouraging the Extended
Opening-up of the Coastal Development.472 This development strategy is expected to boost the
economy ofNortheast China's Liaoning Province.473 The "five-points" refer to the following tive
economic zones that are all located along the coastal line of Liaoning Province: (I) Dailan
Chanxing Island Lin Gang Industrial Zone; (2) Liaoning (Yingkou) Coastal Industrial Base
469 Ibid. 470 Huaye International Investments Co., Ltd., Steel Product: Pipe, Public Exhibit 7-A-130. 471 Too Too Trade, Company Product Marketing \Vebpage ofHuaye Shanghai Steel processing Center, Public Exhibit 7-A-131. 472 Final Determination Statement ofReasonsjhr Certain Oil Country Tubular Goods (March 9, 201 0). 473 China Daily, 'Five Points, One Line' Strategy Guiding Light for Liaoning, March 9, 2007, Public Exhibit 7-A-127.
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(including Panjin Marine Building and Repairing Industrial Park); (3) Liaoxi Jinzhou Bay Coastal
Economic Zone (including the Jinzhou Xi Hai Industrial Park and Huludao Bei Gang Industrial
Park); and (4) Liaonin Dandong Industrial Park; (5) Dailan Hua Yuan Kou Industrial Park. 474 The
"One Line" refers to a coastal road that connects the "five-points," which symbolizes economic
integration along the Liaoning coastal line.475 Industries targeted in these developments receive
specific subsidies in the following forms;
• refund of value added taxes, business taxes, enterprise income taxes, personal income taxes, and house taxes paid in 2005 within the five selected areas;
• reduction of income tax from 25% to 15% for the enterprises established in the five selected areas that also qualify as a high and new technology enterprises;
• exemption of income taxes for two years from the initial profit-making year for the domestically funded high and new enterprises newly established in the five selected areas;
• provision of preferential guarantees;
• provincial level financing at discounted interest on preferential loans for certain projects;
• special financial aid for certain marketing expenses to the "foreign trade export" enterprises;
• establishment of"Foreign Trade Development Fund for the Northeast Old Industrial Base" to be spent for acquiring intellectual property rights, improving exported products, conducting R&D, among others;
• exemption from all administrative and institutional enterprise charges at the Provincial level;
• potential preferential loans from the State and/or private financial institutions made under
the Provincial guideline for the banks to "energetically push the development of key projects in the five major areas; and
• heightened refund rates for the enterprises located inside designated "flying lands," to be
set up within Liaoxi Jinzhou Bay Coastal Economic Zone.
446. In the past, the Agency found this program to be countervailable and that a Chinese OCTG
exporter received benefits under the "Five Points and One Line" program.476 This appears to be
474 Ministry of Commerce of PRC, Speech by the Governor of Liaoning Province, April 24, 2007, Public Exhibit 7-A-128. 475 China Daily, 'Five Points, One Line' Strategy Guiding Light for Liaoning, March 9, 2007, Public Exhibit 7-A-127. 476 Final Determination Stateme1ll ofReasons }Or Certain Oil Cottnl!}' Tubular Goods (March 9, 201 0).
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also true for the Chinese line pipe producers and exporters. For example, Huludao City Steel Pipe
Industrial Co. Ltd ("HLD") produces line pipe and the company is located in Beigang Industrial
Zone,477 which is known to be a part of Liaoxi Jinzhou Bay Coastal Economic Zone, one of the
"five-points."m Therefore, HLD and other line pipe producers operating in the designated area
would be eligible to receive various fonns of subsidies under the "Five Points and One Line"
program.
447. The provincial government of Liaoning provides financial contribution through the Five
Points, One Line program. Preferential refunds, loans and special funding schemes constitute
direct transfer of funds under the SIMA s. 1.6(a). Exemptions and reductions of income taxes,
other taxes, and charges/fees constitute government revenue foregone under s. 1.6(b ). Preferential
guarantees constitute contingent transfer of liabilities under s. 1.6(a).
448. In the cases of refunds, and exemptions and reductions of amount otherwise owed to the
government, the benefits conferred equal to the amount of the grant, and the amounts exempted or
reduced under the SIMR ss. 27 and 27 .I. Loans and financial schemes provided at discounted rates
confer benefits in the amount equal to the difference between the interest rate actually charged and
interest rate that would have been charged on a comparable commercial non-guaranteed loan
pursuant to the SIMR s. 29(1). Preferential loan guarantees, similarly, confer benefits in the
amount equal to the difference between the interest rate actually charged in respect of the
guaranteed loan and interest rate that would have been charged on a non-guaranteed loan under
the SIMR s. 31.1 (I). In addition, the Five Points and One Line prot,>Tam is specific in law within
477 Huludao City Steel Pipe Industrial Co., Ltd., About Us, Public Exhibit 7-A-109. 47H The Government of Liaoning Province, Se,·eral Policy Suggestions oft he People~'i Government of Liaoning Province on Encouraging Coastal Jvfcu·or Development Regions to Expand Opening-up to the Owside World, January 23, 2006, Public Exhibit 7-A-129.
!55
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the meaning of the SIMA s. 2(7.2)(a), gtven that these subsidies are limited to a particular
enterprise located in designated geographic areas.
B. The "Torch Project"
449. According to Provision (I) of the 2010 official document on the Torch Project "The
Ministry of Science and Technology's National Torch Plan on Key High-tech Enterprises'
Management Approach", the main goal of the Torch Project is to support the development of the
State's new high-tech industry. 479
450. The eligibility of this program is contained in the High-tech Enterprise Management
Approach, which provides, inter alia, that the enterprise must be recognized as a "high and new-
tech enterprise" within the "high and new-tech fields getting key supports from the State" (Article
I 0(2)). 480 Once qualified, the companies would receive the following preferential measures:481
• preferential tax: o income tax rate is reduced to 15% for the qualified companies located in a SEZ; o income tax rate is reduced to I 0% for the qualified companies located in a SEZ and
whose export sales exceed 70%, of its sales; o income tax is exempted for the first two years beginning from the new
establishment in a SEZ; • financial support:
o special loan for scientific and technological development; o priority financial support from the New Product Program; o financial support from the Chinese Torch Foundation and the Chinese Scientific
and Technological Development Foundation; and o special construction loan in the new- and high-tech development zones.
451. As discussed above, for example, WSP Holdings Ltd - the parent company of Wuxi
Seamless, a main Chinese steel producer - reported in its Fonn 20-F submission to the US
""Ministry of Science and Technology of the People's Republic of China, Administration of Key High-tech Enterprises under the National Torch Project, April 25, 2011, Public Exhibit 7-A-136. 480 Ministry of Science and Technology of the People's Republic of China, Notice on the Issuance of the Administrative Measures for Determining New High-tech Enterprises, April28, 2008, Public Exhibit 7-A-137. 481 Wenzhou Municipal Sci- Tech Bureau, National Torch Program of China, Public Exhibit 7-A-138.
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Securities and Exchange Commission in 2012 that the enterprise is a HNTE and as such benefit
from a preferential tax rate of 15%.
452. The financial support programs under the "Torch Project" is a financial contribution within
the meaning of the SIMAs. 2( 1.6)(a) through a direct transfer of funds. Preferential tax schemes
are government revenue forgone under the SIMAs. 2( 1.6)(b ). For both types of subsidies, benefits
are measured in pursuant to the SIMR s. 27, i.e., the amount of the financial support and the amount
forgone by the GOC. The "Torch Project" is defacto specific to particular enterprises designated
as HNTEs.
453. The Agency found a grant titled "Scientific and Technological Projects Which Passed
Appraisal and Certification in Zhuji City" countervailable in Copper Tube fi'om China. The
Complainant notes that the Agency found this grant has been funded through the "Project of
National Torch Program," and respectfully requests that the Agency fully investigate the full scope
of the subsidies provided under the 'Torch Project."
C. There arc Numerous Other Chinese Subsidies Programs the Agency found Countcrvailabic in Previous Cases:
454. In addition to the programs identified above, numerous other Chinese export contingent
grants were previously investigated and countervailed in Canada, as well as in other jurisdictions.
In the vast majority of these investigations, the GOC and the exporters simply decided not to
cooperate, and made it impossible for the investigating authority to detern1ine the
countervailability of such programs. In light of this history of lack of cooperation by the GOC and
the Chinese respondents, the Complainant respectfully request that the Agency initiate
investigations of the following programs as line pipe producers and exporters are eligible to receive
these subsidies, based on the information available. The Complainant asks that the amount of
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subsidy be calculated under ministerial specification pursuant to s. 30.4(2) of the SIMA in the
event that the GOC and the Chinese respondents fail to cooperate again:
Programs Case where found Program Description Countervailable
2007 Technology OCTG ji'om China482 Based on the information available, this program Innovation Award was established by local Chinese governments to
promote technology innovation and energy savings. The granting authority responsible for this program is the Changzhou Economic & Trade Commission
2008 Water-saving OCTG ji'om Chinam Based on the information available, this program Technique Assistance was established by governments at the local level
to encourage the development of water-saving technologies. The granting authority responsible for this program is Changzhou Water Conservancy Bureau.
Science and OCTG fi'om China484 This program was established to provide benefits Technology Award to enterprises for dedication to technology
development. The granting authorities responsible for this program are the Jiangdu Finance Bureau and the Jiangdu Science and Technology Bureau.
Wengeng Government OCTG ji'om China485 Based on the information available, this program was established by governments at the local level to provide a one-time grant. The granting authority responsible for this program is the local W endeng_government.
Changzhou OCTG ji'om China486 Based on the information available, this program Technology Plan was established by governments at the local level
to encourage enterprises in developing new technologies. The granting authority responsible for this program is Changzhou Science and TechnologyBureau.
Financial Subsidy OCTG ji'Ofn China487 One of the cooperative exporters in OCTG from China reported receiving a financial subsidy from the provincial government, but stated that it has no knowledge or details of this program. The granting authority is identified as the Finance Department of Jiangsu Province.
482 Final Detem1ination Statement of Reasons for Certain Oil Country Tuhular Goods (March 9, 20 10). '"'Ibid. 484 Ibid. 485 Ibid. 486 Ibid. 487 Ibid.
158
1 Grant for Market I Promotion and Trade I development
I OCTG fi·om Clzina488 I .
I
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II Based on the infonnation available, this prob>ram
was established by governments at the local level I to encourage the development and expansion of \ trade and markets for local industries. The 1 granting authority responsible for this program is
~-..,-\1-t=.h:.::e _l)ongying District Finance Bureau. I Grant Provided for 1 Fastenersfi"om China489 I The GOC provtdes b'fants to enterpnses satlsfymg
I
1 Export Performance 1 1 specified export criteria, or to assist in expanding
I. and Employing I I export sales. I ~C~o_m~m~o_n~VV~o_r_k_e_rs-:--+-~~~--~~--~-----+~~--------~-----~--~~~--~---___jl I Training Program for j Aluminum Extrusions 1 This program appears to be administered by I Rural Surplus Labour I fi"om China490 I municipal authorities. According to information , Force Transfer I I submitted by one of the cooperative exporters, the 1 Employment
1
program is provided in the lmplemental Scheme \,
1
of Training Program for Rural Surplus Labor ,
1 Force Transfer Employment of Taishan City from
Innovative Experimental
Welded Pipefi"om I China491
' ' Enterprise Grant I I 1 . I
I I
f
State Key Technology I Seamless Casingfi"om Renovation Projects China492
Supportive fund I Seamless Casingfi·om provided by the ' Clzina493
government of Xuyi county, Jiangsu Province
Tax preference available to companies
4RS !Ind.
I I Stainless Steel Sinks fi·om ' China494
1
2005 to 2009, and is administered by the Labour and Social Security Bureau of Taishan City.
1
1 Qualified enterprises are entitled to receive funds from the local government for providing training to the rural sur Ius labor force.
I This prob>ram was established to promote the technology development of Zhejiang province.
I The granting authority responsible for this program is the Science and Technology
1 Department of Zhejiang Province. \ Enterprises appears to be selected based on their I perfon~ance. . . 1 Enterpnses recetve grants from Xuy1 government I if all criteria are met: (1) they are located in the 1 Industrial Zone ofXiyu county; (2) they have over ,
1
· RMB 3 million investment on fixed assets; and (3) the project is non-polluting and non-
1 combustible. The enterprise of grant is based on j tax paid by the company. 1 This program was established in the Law of the 'j' PRC Income Tax (2007) and came into effect on . January I, 2008. The program objectives are to
~ 89 Final Determination Statement <?f Reasonsfbr Carhon Steel and Stainless Steel Fa.'l'teners (December 24, 2004). 49° Final Determination Statemenr of Reasons for Certain Aluminum Extrusions (March 3, 2009). 491 Final Determination Statement of Reason..,·j'or Carbon Stee/JVelded Pipe (August 5, 2008). 492 Notice ofConclllsion ofReim·estigationfiJr Certain Seamless Casing and Oil Country Tubular Goods (November 7, 20 II). 493 Ibid. 494 Final Determination Statement (~f Reasons in Stainless Steel Sinks (May 9, 20 12).
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r:--~-~--'7.' ,---·-----,--;--~ ~--~----c-,----:c---,
I that operate at a small I reduce the burden on enterprises making small
1 profit I profits and to maintain job opportunities. The I I granting authority responsible for this program is
'\ I the Ministry of Finance and the State
i Administration of Taxation. It is administered by I local tax authorities.
International market fund for small and medium sized export companies
Export Subsidy and Product Innovation
1 Subsidy · Exemption of Special
Land Tax and Land Use Fees in SEZs and
I Other Designated
. Areas
I Stainle'{~ Steel Sinksfi'om China4 h
1 Thermoelectric Coolers I and Warmers from
China496
1 Welded Pipefi·om I China497
I
1 This program was established in a document titled 1 "Measure Cai Qi (2010) No 87" in .ord~r to. · provide support for export compames Identified as
SMEs. The funds are provided for developing international markets including overseas exhibitions, certification of enterprise management system, various product certifications, foreign patent applications, promotional activities in international markets, electronic business, foreign advertisement and trademark registration, international investigation, bid (negotiations) abroad, enterprise training, foreign technology, and brand acquisition, etc. Benefits granted to an enterprise under this program shall not exceed 50% of the total
1 expenditure paid by the enterprise. This program is administered jointly by the Ministry of Finance and Ministry of Commerce. I
1 This appears to be an export contingent grant ~ program. I
I This program appears to be an exemption or · reductiOn of specwl and tax use fees lnmted to
particular enterprises located in designated areas.
D. The Agency found additional programs potentially actionable in the Preliminary Determination of Certain Carbon ami Alloy Steel Line Pipe fi·om China
455. Finally, in the Preliminary Determination of the Certain Carbon and Alloy Steel Line Pipe
Originating in or Exportedfi·om the People's Republic of China case ("SD Line Pipe"), the Agency
495 Ibid. 4% Final Detennination Statement of Reasonsjbr Thermoelectric Coolers and Warmers. 4n Final Determination Statement of Reasons for Carbon Steel Welded Pipe (August 5, 2008).
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found additional programs potentially countervailable. Specifically, the Agency stated that there
is "sufficient reason to believe that these programs may constitute actionable subsidies provided
by the GOC and that the exporters and producers of the subject goods benefit from these
programs". 498 Evraz also respectfully requests that the Agency initiate investigations of the
following programs:499
Program Type of Program I Corporate Income TaX.~emption and/or 1 Reduction in SEZs andotlier Designated Areas
I 1 l SpecialEC()nop.Uc Zcine(§~Z) arid I Other Designated Area£ Incentives l
I I
' 2 I Preferential Costs of Services and/or Goods
Provided by Government or State-owned
1 Special Economic Zone (SEZ) and I Other Designated Areas Incentives
I, Enterprises (SOEs) in SEZs and Other Designated
Areas i
~~~~~~~~~~~=-~~~~~~-+~~~~~~~~~~~~ 3 I LminFrm11LoChlFiriarice, Bureau · I Special Economic Zone (SEZ}and · ..
1 Other :Designated Areas Incentives
4 I' Loans and Interest Subsidies provided under the ! Special Economic Zone (SEZ) and Northeast Revitalization Program [ Other Designated Areas Incentives I
. 5 I Advanced Science/Technology Enterprise Grant I Grants and GrantEgujvalerits j I . . . . I ! /6 . Allowance to Pay Loan Interest (Zhongshan City, ' Grants and Grant Equivalents i Guangdong) 1
L~-~Ass}stance for Technologylnnovation -R&D ·-1 Grants-and Gran:tEquivalentS [ 1 Project ! ·
; . . I i . . --···--··---r -~-·~-.. ~~--~-~
I : I :::~:::::~:,:::~::::,::,m j :::: ::::::::::: I
: 10 : ::::,'" Qi,lmy~ Diitciot Eo,imomo•"' ; Gmot>Ood Gc<oi Eq"'"""'"l
l ___ _t:t.ec~-io_n~F~n-d--(1-ia_n~gs~)------·- -----~·-------: ·---· --·- .. ----------- J 498 Prelim in my Dete11nination Statement of Reasons for Certain Carbon and Alloy Steel Line Pipe (September II, 2015) at para 105. 499 Ibid at Appendix I - Description of Identified Programs And Incentives.
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jn l Energy~sayingTechnology Renovation Fund -I Grants and Grant Equivalents -1 -_ -_ -- - --- - - - --~
i Enterprise Technology Centers 1 Grants and Grant Equivalents I I I
j Grants and Grant Equivalents ~ r:::-~-------· ~-~~~~-__j
lt3
h4 I Ftind. for UrbariPublic Utilities -·
[Government ofShijiazhuang City Export Award ( Grants and Grant Equivalents i 15 ··l Granf-'-CbangzhouCityKeySupportinglndtistry I Grants and GrmitEqtiivalents ~
I Upgradihg SpeCiaJFurid · I ; -- - - --= ~-~~-~---~-_:._~~ - - ~-~-_:-~
16 1 Grant- Changzhou Five Major Industries i Grants and Grant Equivalents '[ ' Development Special Fund i r
17 i G.i"3nt=- Cleaningcproductioil Qiuilified Enterprise ; Grants and Grant EquivalentS I r Reward · 1 -~
18 ( Grant- Financial Subsidies from- Wei Hai City tGrants and GrantEquivalents , Gao Cun Town Government
i 19 l Gn1nt- Jiangsu Pt'oyince Finance Supporting 1 Grants rmd GrarifEquivalents ' :Fund ' 1
. . ~-~-~ --------~----·-1 rwrorant- Large Taxpayer Award . . !Grants and Grant Equivalents I I I I !
! 21 I Grant~PatentApplieationA:ssistance rarants andGrap.tEquiyalerits
22 I Grant- Provincial Foreign Economy and Trade • 1 Development Special Fund
\23 ) Gt"irnt.2-Provisional Industry Promotion Special . I Furid . .. . . . ..
~-Grants and Grant Equivalents
i Grants and Grant Equivalents
1~24 I Grant- Resources Conservati;n and Environment ~ Grants and Grant Equivalents I 1 _jProtection Grant L ··-···-···j\ 125. ! Grarit~StateServiceindustr)'Deve!o]JilientFund i Grants and GrantEquivalerits.-
1.~~ l g~:R~ ~~~:~dJo~~~o:~~~:~v~1~~Lfi;~nd for · : g;:~: :~ g;:~~ ~~~:~:;::~·~s ---11 i I. TlrihuLake I . . . f 28 I Grants for Encouraging the Establishment of i Grants and Grant Equi,;alents ~ b.t~:~;E~~;ln:e:~:::ea~~qu_a:e:~-w-it~--~:1 Grants and Grant Equivalents· •- --d
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NON-CONFIDENTIAL
30 ' Grants for International Certification Grants and Grant Equivalents
1 31 · i Grantsuhder the InformationTechnology Program Grants and Grant Equivalents jofFeicheng ·
l . '
32 Guangdong- Hong Kong Technology Grants and Grant Equivalents Cooperation Funding Scheme
' i '
Guaranteed Growth Fund l \ l..,.___!
34 l Interim Measures of Fund Management of ' Allowance for Zhongshan Enterprises to Attend , Domestic and Overseas Fair (Zhongshan)
. -- ~ ' i Grants and Grant Equ!Val;-en~t~s ~~ [ Grants and Grant Eq-uivalents I
if 35 _ : _ Iritematio11al.Market 'Fund for Export Companies I Grants' and Grant Equivalents
r (JiangmenCity) · : ; \ - ' 1 ~~-· - i ·.. ~~.c._~~~~~~-....:....-~+,.-.. -~-~-- ~~~--~ 1 36 !Modem Service Grant i Grants and Grant Equivalents . !
i • 37 1 MunicipalGovemi11ent'- Exhihition Grant I· Grants and Grant Equ1valen!S :
f 39 j Municipal Goveiruhent- InsuranceFee-.Grarit i Grants and Grant Equivalents --~l
40 1· Provincial Government- Equipment Grant ! Grants and Grant Equivalents
. I ~---+ ·. . . . . .. . . . ... : 41 1 Reduction in LandU~eFees, Land Rental Rates,
i · aridl.and Purchase Prices ' . ' ;
I Grilrits and GrarifEquivalents j-
flc-_4_2_, Refund from Government for Participating in ----ro;;Jtls~an~d~G~r~aJtl_E_qtJ'j\;-;_]e~n~ts -------1
. Trade Fair (Foshan)
I 43
I
R.eimbutsenierit of Anti-dumping and/or ·countetVailihg Legal Expenses by the Local Gcnrel11ments · · · ·
L-.~-
163
Grants and Grant EquivalentS
------------
NON-CONFIDENTIAL
.----~----,--- ~ -----~ ---~-- ~------·' -----------~--- ---~" --··-------··"-·-·- --~-~~~------····- ----1 44 1 Reimbursement of Foreign Affairs Services · Expenses (Foshan)
I
.-----------·-------- ---~---------------
. Grants and Grant Equivalents
<h>nt< ~d Ck'"t f4W<OI~=] ! Grants and GrantEquivalents .. ·_. :
I
145 : Subsidy foi the Technology Development ~ ')' - -
~~k--~--~---~·-· . _.:___ .. i 46 . Supporting Fund for Non-refundable Export Tax
I Loss on Mechanical & Electrical Product and I High-tech Product (Jiangmen City)
I I I 1
: I I 47·-t Technical Rc:movation LoanJtitereSt Discaurit' - --_. ·· •.•. l. Gnmts and Grant Equivalents . -~1,1 I I Fund · ·· . . . I . I I
'! 48 \ Water Fund Refund/Exemption 2008 l Grants and Grant Equivalents ~ I I
i-----+==-~~~---~,..-,-=o,---o:------:-c=-----=c-~ i .49 , D@TaxJ3XeiilptiorisFotLandTransfe1Ted
! through Merger orRestiucfuring . ! Piefefentil!l Tax Progranis
'I Exemption from City Maintenance and ! Preferential Tax Programs
i I . .........,
I
I 1 Construction Taxes and Education Fee Surcharges
1
)_
I for FIEs
! Pre---=f~er-:-e.,.-n'ti'""al:-:T~:~:a~xcc·P:cr~o-,-grc-a""m-s·~-~~~~1 i -· 51 : Muili\;ipa1 G()vi:J:nritent -Preferential Tax ; Program ; I
r 52 I' Stamp Tax Exemption on Share Transf~s under - i Preferentiai Tax Programs ~ 1
Non-tradable Share Reform I \
153 .I Two Free, Three Half Tax Exemptions for-ti};;··- .... '1
,
1
Pref~tml T~ '""=' "" -"1 · I Productive FIBs
!54 1 Relief from Duties and Taxes on Imported ·--~Relief from Duties and Taxes on I Material and Other Manufacturing Inputs I Inputs, Materials and Machinery I
55 Utilities Provided byGoyenlinent at Less thari Fair I RelieffromDuii(:g and Taxes on - l , Market Value _ · ji11puts, MaterialsahdMachinery 1 ; - - _- \ - 1
1--:::--::----i~ . ------~----~---~---~------~--r---~---· - ----~~~
, 56 I Exemptions for SOEs from Distributing Dividends [ Equity Programs .
\ l to the State l I L ___ L _____________ ~---···--~---------------~ ____ .l ______________________________ j
164