statement of reasons · 2020. 12. 30. · statement of reasons concerning the initiation of...

GM 2020 IN

OTTAWA, December 31, 2020

STATEMENT OF REASONS

Concerning the initiation of investigations into the dumping and subsidizing of

CERTAIN GRINDING MEDIA

ORIGINATING IN OR EXPORTED FROM INDIA

DECISION

Pursuant to subsection 31(1) of the Special Import Measures Act, the Canada Border Services

Agency initiated investigations on December 17, 2020, respecting the alleged injurious dumping

and subsidizing of certain grinding media originating in or exported from India.

Cet Énoncé des motifs est également disponible en français.

This Statement of Reasons is also available in French.

_______________________________

Trade and Anti-dumping Programs Directorate

TABLE OF CONTENTS

SUMMARY ................................................................................................................................................. 1

INTERESTED PARTIES .......................................................................................................................... 1

COMPLAINANT ...............................................................................................................................1 TRADE UNIONS ..............................................................................................................................2 EXPORTERS ....................................................................................................................................2 IMPORTERS ....................................................................................................................................2 GOVERNMENT ...............................................................................................................................2

PRODUCT INFORMATION .................................................................................................................... 3

DEFINITION ....................................................................................................................................3 ADDITIONAL PRODUCT INFORMATION ...........................................................................................3 PRODUCTION PROCESS ..................................................................................................................4 PRODUCT USE ................................................................................................................................5

CLASSIFICATION OF IMPORTS ........................................................................................................6

PERIOD OF INVESTIGATION ............................................................................................................6

LIKE GOODS AND CLASS OF GOODS ................................................................................................ 7

THE CANADIAN INDUSTRY ................................................................................................................. 7

STANDING ......................................................................................................................................7

CANADIAN MARKET .............................................................................................................................. 8

EVIDENCE OF DUMPING ...................................................................................................................... 9

NORMAL VALUES ..........................................................................................................................9 EXPORT PRICE .............................................................................................................................12

ESTIMATED MARGINS OF DUMPING .............................................................................................13

EVIDENCE OF SUBSIDIZING .............................................................................................................. 13

CBSA’S CONCLUSION .................................................................................................................16

ESTIMATED AMOUNT OF SUBSIDY ...............................................................................................16

EVIDENCE OF INJURY ......................................................................................................................... 17

CBSA’S CONCLUSION – INJURY .................................................................................................21

THREAT OF INJURY ............................................................................................................................. 21

CBSA’S CONCLUSION – THREAT OF INJURY ...............................................................................25

CAUSAL LINK – DUMPING/SUBSIDIZING AND INJURY/THREAT OF INJURY .................... 26

CONCLUSION ......................................................................................................................................... 26

SCOPE OF THE INVESTIGATIONS ................................................................................................... 26

FUTURE ACTION ................................................................................................................................... 27

RETROACTIVE DUTY ON MASSIVE IMPORTATIONS ................................................................ 28

UNDERTAKINGS .................................................................................................................................... 28

PUBLICATION ........................................................................................................................................ 29

INFORMATION ....................................................................................................................................... 29

APPENDIX – DESCRIPTION OF IDENTIFIED PROGRAMS ......................................................... 31

Trade and Anti-dumping Programs Directorate 1

SUMMARY

[1] On October 27, 2020, the Canada Border Services Agency (CBSA) received a written complaint from Magotteaux Limitée (Magotteaux) (hereinafter, “the complainant”), alleging that

imports of certain grinding media (GM) originating in or exported from India are being dumped

and subsidized. The complainant alleged that the dumping and subsidizing have caused injury

and are threatening to cause injury to the Canadian industry producing like goods.

[2] On November 17, 2020, pursuant to paragraph 32(1)(a) of the Special Import Measures Act (SIMA), the CBSA informed the complainant that the complaint

was properly documented. The CBSA also notified the Government of India (GOI) that a

properly documented complaint had been received. The GOI was also provided with the non-

confidential version of the subsidy complaint and was invited for consultations prior to the

initiation of the subsidy investigation, pursuant to Article 13.1 of the Agreement on Subsidies

and Countervailing Measures.

[3] On December 16, 2020 consultations were held between the Government of Canada and the GOI via videoconference. During the consultations, the GOI made representations with

respect to its views on the evidence presented in the non-confidential version of the subsidy

complaint. A written copy of the GOI’s remarks regarding the complaint was submitted on the

same day. The CBSA considered the written representations made by the GOI in its analysis.

[4] The complainant provided evidence to support the allegations that GM from India has been dumped and subsidized. The evidence also discloses a reasonable indication that the

dumping and subsidizing have caused injury and are threatening to cause injury to the Canadian

industry producing like goods.

[5] On December 17, 2020, pursuant to subsection 31(1) of SIMA, the CBSA initiated investigations respecting the dumping and subsidizing of GM from India.

INTERESTED PARTIES

Complainant

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

Magotteaux Limitée

601 rue Champlain

Magog, QC J1X 2N1


[7] Magotteaux is a subsidiary of Magotteaux International S.A. (the Magotteaux Group), with its headquarters located in Belgium. The Magotteaux Group have production facilities

around the world, including the Magog facility in Canada, and can produce a wide range of GM,

including cast and forged, low and high chromium, as well as ceramic grinding beads.1

[8] Magotteaux was incorporated in Quebec and has been in operation since 1979. The Magog facility is the only GM production facility in Canada under the Magotteaux Group and

produces iron cast grinding media exclusively.2

[9] Magotteaux is the only known producer of GM in Canada.3

Trade Unions

[10] According to the complainant, persons employed in the production of GM in Canada are not represented by a trade union.4

Exporters

[11] The CBSA identified 11 potential exporters of the subject goods from CBSA import documentation and from information submitted in the complaint. All of the potential exporters

were asked to respond to the CBSA’s Dumping Request for Information (RFI) and Subsidy RFI.

Importers

[12] The CBSA identified 3 potential importers of the subject goods from CBSA import documentation and from information submitted in the complaint. All of the potential importers

were asked to respond to the CBSA’s Importer RFI.

Government

[13] Upon initiation of the investigations, the GOI was sent the CBSA’s Government Subsidy RFI.

[14] For the purposes of these investigations, the GOI refers to all levels of government, i.e., federal, central, provincial/state, regional, municipal, city, township, village, local,

legislative, administrative or judicial, singular, collective, elected or appointed. It also includes

any person, agency, enterprise, or institution acting for, on behalf of, or under the authority of

any law passed by, the government of that country or that provincial, state or municipal or other

local or regional government.

1 Exhibit 2 (NC) – Grinding Media Complaint, paras. 6-11. 2 Exhibit 2 (NC) – Grinding Media Complaint, Exhibit 1 – Affidavit of Plant Manager, paras. 3&6. 3 Exhibit 2 (NC) – Grinding Media Complaint, para. 12. 4 Exhibit 2 (NC) – Grinding Media Complaint, para. 69.


PRODUCT INFORMATION

Definition5

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

Chrome cast iron grinding media in spherical (“ball”) or ovoid shape, with a diameter of

12.7 millimetres (½ inch) to and including 76.2 millimetres (3 inches) within tolerances

of 5 percent (5%), with an alloy composition of 10 percent or more (≥ 10% of total mass)

chromium (“Cr”) content and produced through the casting method, originating in or

exported from India.

Additional Product Information6

[16] For greater clarity, the product definition does not cover:

Grinding media produced through the forging or stamping method; and

Chromium cast iron grinding media with an alloy composition of less than 10 percent chromium (< 10% of total mass).

[17] Within the mineral processing industry, a range of grinding conditions or environments exists and each of these mill environments presents particular conditions for grinding media that

require the application of specific physical and chemical properties for optimum grinding media

performance. Size and chemical composition of grinding media are two important factors

influencing a grinding’s wear resistance and performance in a ball mill.

[18] Size of the grinding media depends on the mill feed size (particle size of material supplied to the mill) and achieved degree of fineness (size and percentage of required class size

material at the exit of a ball mill). Grinding media are typically spherical in shape.

[19] GM are normally produced using a metal alloy composed mostly of steel scrap and alloys such as chromium. The chromium content of grinding media is another key component to the

grinding media’s performance and affects the grinding media’s wear resistance against abrasion

and corrosion, as well as the level of hardness of the grinding media.

[20] GM normally encompasses an alloy composition of 10 percent or more chromium content, with typical thresholds that do not exceed 35% chromium. The chromium content of

GM is measured by testing the total chemical composition of the alloy with a spectrometer,

determining the percentage of chromium to the total mass of the alloy.

5 Exhibit 2 (NC) – Grinding Media Complaint, paras. 16-18. 6 Exhibit 2 (NC) – Grinding Media Complaint, paras. 17-22, and Exhibit 1 – Affidavit of Plant Manager, paras. 4-

10.


[21] Production of GM in Canada focuses on the market segment of greatest demand which is 1” to 1 ½” grinding balls of 15% to 18% chromium content. There are no international technical

standards applicable to grinding media.

Production Process7

[22] The production of GM normally has seven main steps, which entails: (1) segregation of scrap metal, melting and preparation of the alloy; (2) preparation of the sand casts; (3) pouring of

alloy and sand casting; (4) breaking of the casts; (5) heat treatment; (6) quenching; and (7)

quality control.

1. Segregation of scrap metal, melting and preparation of the alloy

[23] GM is produced using steel scrap metal as the main raw material input, consisting of iron and a variety of alloys. A high Cr content is preferable when pricing of this raw material is

competitive, otherwise, mixed scrap is used, and the Cr content adjusted by adding ferrochrome

(FeCr).

[24] The scrap metal is prepared and loaded into the electric induction melting furnace to be melted down to a “liquid state” available for pouring. Once molten, the alloy composition is

tested and adjusted through the addition of other metals, principally FeCr, in order to achieve the

correct chemical composition. For each batch, the chemical composition of the alloy is tested

with a spectrometer and corrective additions are made until the alloy`s chemical composition

falls within the desired tolerance range.

[25] The molten metal is then transferred to hand ladles where the degassing process is done. After degassing, slag is skimmed off from the molten metal. The batch is then transferred into

the pouring tank, a heated tank located above a casting line from which the alloy is poured into

the sand casts.

2. Preparation of the sand casts

[26] First, the sand mould, in which the liquid alloy will be poured, is shaped through an automated process. The moulds are created by pouring a green sand mix into a moulding

chamber using compressed air. The sand is then squeezed between a ram and a swing, which are

provided with a set of matching pattern plates that can be changed depending on the grinding

media size to be produced.

3. Pouring of alloy and sand casting

[27] Next, the liquid alloy, having been transferred to the pouring tank, is poured through the pouring sprue, a hole on the top of the sand mould left by the pattern impressions. The alloy then

fills the inner cavities shaped in the right ball sizes by the pattern plates. Once poured, there is a

“cool down” period, allowing the alloy to cool down and solidify within the cavities, leaving a

set of solid metal balls connected by metal sprues.

7 Exhibit 2 (NC) – Grinding Media Complaint, paras 23-46.


4. Breaking of the casts

[28] Once the metal alloy has solidified back to a solid shape, the sand mould with the solid metal balls inside, is transferred into the first of two rotary breaking drums. In the first “shake-

out” drum, the sand mould is broken, and the sand taken out of the process, leaving only the

metal grinding balls and pouring sprue. The balls and the sprues are then transferred to a second

“breaker” drum to separate the balls from one another and break the sprues connecting each ball.

The balls are then transferred into containers for another cooling period between 24-48 hours.

5. Heat Treatment

[29] After cooling, the balls are moved to the heat treatment process. The balls move by conveyor to a furnace, which evenly and uniformly heats the balls to a specified temperature

dependent upon required hardness.

6. Quenching

[30] Once the heat treatment is completed, the grinding balls are quenched by placing the batch in a bath filled with a polymer-based quenching fluid. This involves the controlled cooling

of a metal from a high temperature to a cooler temperature to facilitate the formation of the

desired microstructure and physical properties. This thermal shock creates a stress inside the

balls, making them achieve a hardness level measured on the Rockwell C scale using a

durometer.

7. Quality control

[31] Finally, quality tests such as metallurgical microscopic observations, experimental ball mills test, impact testing, and hardness tests are carried out to determine if the hardness of the

balls is within the acceptable range. The balls are then packaged, ready to be shipped to

customers.

Product Use8

[32] GM are used to crush or grind material in a grinding mill. The type of mills in which this takes place are generally called ball mills, which are a facility in which a grinder is operated to

crush mineral ore or raw materials. In the mining industry, the grinding process is the first step in

the extraction of the ore from the mineral substrate in which it is found. Grinding mills are used

for the comminution of iron ore, gold, copper, or other types of ores. In the cement industry, the

grinding mill is essential to the comminution of limestone and other raw materials used in the

production of cement and clinker.

8 Exhibit 2 (NC) – Grinding Media Complaint, paras. 47-52.


[33] A ball mill is a cylindrical device used in grinding (or mixing) materials like ore, chemicals, water, or cement production raw materials. Ball mills rotate around a horizontal axis,

partially filled with the material to be ground plus the grinding medium, with or without the

addition of water (i.e., wet or dry mill conditions). The internal cascading effect caused by the

rotation of the material to be ground with the grinding media causes the material to be reduced to

a powder or slurry. Ball mills are designed to operate continuously, fed at one end with the

material to be ground and the grinding media, and discharging the ground material at the other

end.

[34] In the mining industry, dry grinding mills are primarily used when the downstream preparation process requires dry material, or in order to save water resources in dry

environments. However, wet grinding is generally the norm in the Canadian mining and cement

industries.

[35] Ball mills can grind various ores and other materials either wet or dry. There are two kinds of ball mills, grate type and overflow type, due to different ways of discharging material.

Different ball mills will require different types of grinding, each material having its own specific

properties and advantages.

Classification of Imports

[36] The allegedly dumped and subsidized goods are normally classified under the following tariff classification numbers: 7325.91.00.10 and 7325.91.00.90.

[37] The listing of tariff classification numbers is for convenience of reference only. The tariff classification numbers include non-subject goods. Also, subject goods may fall under

tariff classification numbers that are not listed. Refer to the product definition for authoritative

details regarding the subject goods.

Period of Investigation

[38] The complainant submitted that an appropriate period of investigation (POI) for the CBSA to investigate the alleged dumping and subsidizing of subject imports is from July 1, 2019

to June 30, 2020.9 It is during the period that the complainant alleged it has been materially

injured by the presence of dumped and subsidized goods in the Canadian market.

[39] The CBSA typically selects a POI that covers a twelve-month period that ends within three months of the date of initiation of an investigation. As a result, the CBSA has selected a

POI from October 1, 2019, to September 30, 2020, for the purposes of the dumping and subsidy

investigations.

9 Exhibit 2 (NC) – Grinding Media Complaint, para. 86.


LIKE GOODS AND CLASS OF GOODS

[40] Subsection 2(1) of SIMA defines “like goods” in relation to any other goods as goods that are identical in all respects to the other goods, or in the absence of any identical goods,

goods the uses and other characteristics of which closely resemble those of the other goods.

[41] In considering the issue of like goods, the Canadian International Trade Tribunal (CITT) typically looks at a number of factors, including the physical characteristics of the goods (such as

composition and appearance), their market characteristics (such as substitutability, pricing,

distribution channels and end uses), and whether the domestic goods fulfill the same customer

needs as the subject goods.

[42] The complainant stated that like goods are those goods described in the product definition. That is, domestically produced GM, which meets the product definition. Therefore, it

does not include domestically produced goods which are specifically excluded from the product

definition. The complainant also submits that subject goods and like goods form a single class of

goods.

[43] After considering questions of use, physical characteristics and all other relevant factors, the CBSA is of the opinion that domestically produced GM, that is of the same description as

subject goods, are like goods to the subject goods. Further, the CBSA is of the opinion that the

subject goods and like goods constitute only one class of goods.

THE CANADIAN INDUSTRY

[44] The complaint includes data on domestic production and on domestic sales of GM for domestic consumption.10

[45] The complainant accounts for all known domestic production of like goods.

Standing

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

a. the complaint is supported by domestic producers whose production represents more than 50% of the total production of like goods by those domestic producers who

express either support for or opposition to the complaint; and

b. the production of the domestic producers who support the complaint represents 25% or more of the total production of like goods by the domestic industry.

[47] As the complainant represents all known production of like goods in Canada, the CBSA is satisfied that the standing requirements pursuant to subsection 31(2) of SIMA have been met.

10 Exhibit 1 (PRO) – Grinding Media Complaint, Table 5 – Estimation of the Total Canadian Market for Subject

Goods and like subject goods.


CANADIAN MARKET

[48] The complainant, using Statistics Canada data, estimated the total volume of imports of GM from India and all other countries for 2017 to August 2020.11

[49] The tariff classification numbers for GM include both subject and non-subject goods. As such, the complainant made a number of adjustments in an effort to remove non-subject goods.12

[50] The CBSA conducted its own analysis of imports of the goods based on CBSA’s import data, which demonstrated similar trends and volumes with respect to imports of GM compared to

information provided in the complaint.

[51] Detailed information regarding the volume and value of imports of GM and domestic production cannot be divulged for confidentiality reasons. The CBSA, however, has prepared the

following table to show the apparent Canadian market for like goods, using the CBSA’s

estimates of imports and the complainants’ estimates of domestic production for domestic

consumption. 13

Table 1

CBSA’S ESTIMATE OF APPARENT CANADIAN MARKET

(EXPRESSED AS A % OF TOTAL VOLUME)

2017 2018 2019 Jan-Sept

2020

POI (Oct 1,

2019- Sept

30, 2020)

Domestic Industry 88.2% 78.2% 56.5% 45.7%* 50.4%*

Imports from India 4.8% 21.7% 43.3% 54.0% 49.3%

Imports from other

countries 7.0% 0.1% 0.2% 0.3% 0.3%

Total Imports 11.8% 21.8% 43.5% 54.3% 49.6%

Total Apparent Canadian

Market 100% 100% 100% 100% 100%

* The figures were estimated based on the first half of 2020 production and prorated for 9 months

(Jan – Sept 2020) and 12 months of the period of investigation (Oct 2019 – Sept 2020), respectively.

[52] The CBSA will continue to gather and analyze information on the volume of imports as part of the preliminary phase of the dumping and subsidizing investigations and will refine these

estimates.

11 Exhibit 1 (PRO) – Grinding Media Complaint, Confidential Attachment 12 – Statistics Canada Analysis 7325

imports to Canada, 2017-Aug 2020. 12 Exhibit 1 (PRO) – Grinding Media Complaint, Confidential Attachment 12 – Statistics Canada Analysis 7325

imports to Canada, 2017-Aug 2020. 13 Exhibit 11 (PRO) – Complaint Analysis – Table 4.


EVIDENCE OF DUMPING

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

importers in Canada.

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

production of the goods, a reasonable amount for administrative, selling and all other costs, and a

reasonable amount for profits.

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

resulting from the exportation of the goods.

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

Normal Values

Complainant’s Estimates14

[57] The complainant submitted that subject goods imported from India are typically quoted in the quarter preceding the sale. Accordingly, for purposes of estimating margins of dumping, the

complainant compared the export price estimated for a given quarter to the normal value

estimated for the preceding quarter. On that basis, the complainant estimated quarterly normal

values for Q1 2019 to Q2 2020 and estimated quarterly export prices for Q2 2019 to Q3 2020.15

[58] The complainant submitted that they were unable to obtain any information regarding domestic selling prices of like goods in India. As a result, the complainant was unable to estimate

normal values on the basis of section 15 of SIMA.16

[59] Consequently, the complainant estimated normal values using a constructed cost approach based on the methodology in paragraph 19(b) of SIMA, calculated based on the

aggregate of estimates of the cost of production of the subject goods, a reasonable amount for

administrative, selling and other costs, and a reasonable amount for profits. The complainant’s

estimated normal value, based on the methodology in paragraph 19(b) of SIMA, was constructed

as detailed in the following paragraphs.17

14 Exhibit 2 (NC) – Grinding Media Complaint, paras. 87-137. 15 Exhibit 2 (NC) – Grinding Media Complaint, paras. 91-93. 16 Exhibit 2 (NC) – Grinding Media Complaint, para. 87. 17 Exhibit 2 (NC) – Grinding Media Complaint, para. 88.


[60] The complainant estimated quarterly costs of production including raw materials, labour, and energy costs from Q1 2019 to Q2 2020, on the basis of pricing information obtained from

third party publications SteelMint and TradeMap, the complainant’s own raw material volume

recipes, and publicly available financial information from two major GM producers in India i.e.

AIA Engineering Ltd. (AIAE) and Welcast Steels Ltd. (Welcast).

[61] Respecting raw materials, the complainant submitted that GM with 15% Cr content accounted for the vast majority of subject goods imported into Canada, and concluded that

material costs estimated for 15% Cr GM reasonably reflects the raw material costs of the subject

goods. Accordingly, the complainant utilized 15% Cr GM as a benchmark to estimate raw

material costs. The primary raw materials utilized in the production of GM include steel scrap,

ferrochrome, and carbon.18

[62] In order to estimate the cost of steel scrap and ferrochrome, the complainant used pricing information published by SteelMint, stating that SteelMint is the only major price assessment

database to provide domestic prices including steel scrap and ferrochrome in India. Respecting

carbon, the complainant was unable to obtain publicly available pricing information within India.

As a result, the complainant utilized carbon import prices into India as published by TradeMap,

to calculate quarterly average import prices.

[63] The complainant’s methodology for estimating quarterly total material costs was to take the quarterly price of steel scrap, ferrochrome, and carbon and multiply them by the multiples

representing the consumption rate of raw materials required to produce 1 metric tonne (MT) of

15% Cr GM.19

[64] Regarding labour, the complainant estimated labour costs based on publicly reported financial and cost information for the two Indian GM producers, AIAE and Welcast.

[65] The complainant estimated labour costs based on the employee benefits expenses reported in AIAE and Welcast’s annual reports.20

[66] Factory overhead expenses were not reported directly in the Indian producers’ financial statements, instead other expenses were reported and a breakdown of the other expenses was

provided in the notes to the financial statements. Most of the other expenses reported are general,

selling, and administrative expenses (GS&A), with the exception of power and fuel.

[67] The complainant estimated energy costs based on the power and fuel expenses reported in AIAE and Welcast’s annual reports.

18 Exhibit 2 (NC) – Grinding Media Complaint, Exhibit 62 – raw material volume recipes 19 Exhibit 2 (NC) – Grinding Media Complaint, Table 6 – Main raw material quantities for E15R grinding ball

recipe 20 Exhibit 2 (NC) – Grinding Media Complaint, Exhibit 70 – annual report for Welcast & Exhibit 71 annual report

for AIAE.


[68] The complainant estimated costs of production for each quarter from Q1 2019 to Q2 2020 by adding the material costs, labour costs, and energy costs for their respective quarters. It is

noted that the complainant did not include depreciation/amortization expenses within the costs of

production, and instead included them in the GS&A and other expenses.

[69] The complainant estimated an amount for GS&A expenses, financial and other expenses, and an amount for profit based on publicly available financial and cost information for AIAE and

Welcast.

[70] The GS&A and other costs estimated by the complainant included finance costs, depreciation and amortization expenses, and other expenses, exclusive of power and fuel,

reported in both Indian producers’ annual reports.

[71] The amount for profits was estimated by dividing each producer’s profit before tax by their respective total costs, including the cost of production, GS&A, and other expenses. The

complainant then calculated a weighted average amount for profit for the two producers

combined, based on their respective revenue from operations.

CBSA’s Estimates

[72] The CBSA agreed with the complainant that a quarter lead time was reasonable for purposes of comparing available market pricing with imports into Canada and utilized this

approach when analyzing the data.

[73] The CBSA conducted its own research and was unable to find domestic pricing information for GM in India and, therefore, was unable to estimate normal values following the

methodology described in section 15 of SIMA. Generally, the CBSA found the complainant’s

normal value estimates to be reasonable and representative for the purposes of initiation, and

followed a similar approach in estimating normal values using the methodology of paragraph

19(b) of SIMA.

[74] The complainant provided one single normal value for each quarter during its analysis period, based on the costs associated with 15% Cr GM. The CBSA agrees that GM with 15% Cr

content would account for the vast majority of the subject goods imported into Canada during the

review period, as such, the CBSA found the material costs estimated by the complainant for each

quarter to reasonably represent the material costs of the subject goods shipped to Canada during

that period.

[75] Respecting other cost components including labour, overhead, GS&A and finance expenses, and an amount for profits, the CBSA chose not to use the complainant’s estimates. The

aforementioned costs and an amount for profits were instead estimated based on the CBSA’s

own research and analysis.


[76] As previously mentioned, the complainant included depreciation and amortization expenses within its GS&A estimate. As a result, factory overhead was underestimated and the

calculated GS&A ratio was overestimated. Further, the GS&A ratio and amount for profits as

estimated by the complainant were calculated as percentages of the material cost or the full cost,

instead of on the basis of cost of production or cost of goods sold.

[77] In addition, the complainant based its estimates on the annual reports of AIAE and Welcast for the fiscal years ending March 31, 2019 and March 31, 2020. However, the CBSA

was able to locate AIAE’s publicly available quarterly reports up to September 30, 2020.21 The

CBSA found that AIAE’s consolidated financial information also included financial results for

parties including AIAE, Welcast and Vega USA, who may all have been involved in the

production and/or sales of the subject goods to Canada, and therefore, provided a better

representation of the cost estimates of the subject goods.

[78] Lastly, AIAE’s financial information provided on a consolidated basis also included information of production and sales quantity in MTs, which enabled the CBSA to estimate

average costs of materials, labour, and overhead on a per unit basis (i.e. CAD/MT) for each

quarter.

[79] For comparison purposes, the CBSA calculated quarterly average material costs based on AIAE’s consolidated financial information and found that the quarterly material costs estimated

by the complainant were lower than AIAE’s material costs. As AIAE’s material costs included

materials for both subject and non-subject goods (such as cast linings), the CBSA accepted and

found it representative to use the complainant’s estimated material costs for the purpose of

estimating its paragraph 19(b) normal values.

[80] Respecting GS&A, financial expenses, and an amount for profits, the CBSA estimated amounts based on AIAE’s consolidated financial results.

Export Price

[81] The export price of goods sold to an importer in Canada is generally determined in accordance with section 24 of SIMA as being an amount equal to the lesser of the exporter’s sale

price for the goods and the price at which the importer has purchased or agreed to purchase the

goods adjusted by deducting all costs, charges, expenses, and duties and taxes resulting from the

exportation of the goods.

[82] The export prices estimated by the complainant were based on publicly available monthly import data obtained from Statistics Canada, under the tariff classification numbers

7325.91.00.10 and 7325.91.00.90, for the period of April 1, 2019 to August 31, 2020, adjusted

by the complainant in an effort to remove non-subject goods.

21 http://aiaengineering.com/fiancial_reports/Unaudited_Reports_for_quarter_ending30Sep2020.pdf, and

http://aiaengineering.com/finances/pdf/AIAIPresentationSep2020.pdf

http://aiaengineering.com/fiancial_reports/Unaudited_Reports_for_quarter_ending30Sep2020.pdfhttp://aiaengineering.com/finances/pdf/AIAIPresentationSep2020.pdf


[83] The complainant estimated average quarterly prices based on the weighted average declared value for duty per MT for each quarter, from Q2 2019 to Q3 2020. The complainant

assumed that the import data provided by Statistics Canada were on FOB basis and in order to

estimate export prices on an ex-works basis, the quarterly average prices were adjusted by

deducting freight costs estimated by the complainant.22

[84] In estimating export prices, the CBSA used the value for duty and quantity reported in the Facility for Information Retrieval Management (FIRM) data for each individual shipment

imported during the period of October 1, 2019 to September 30, 2020. Some data was adjusted

by the CBSA to correct errors and to remove non-subject imports from the database based on its

review. The CBSA estimated quarterly export prices on the basis of the total declared value for

duty during a quarter and the total declared quantity during the same quarter, to determine

weighted average export prices during each quarter.

Estimated Margins of Dumping

[85] The CBSA estimated the margin of dumping for India by comparing the estimated normal values with the estimated export prices. Based on this analysis, it is estimated that GM

imported into Canada from India was dumped by 38.8%, expressed as a percentage of the export

price.

EVIDENCE OF SUBSIDIZING

[86] In accordance with section 2 of SIMA, a subsidy exists where there is a financial contribution by a government of a country other than Canada that confers a benefit on persons

engaged in the production, manufacture, growth, processing, purchase, distribution,

transportation, sale, export or import of goods. A subsidy also exists in respect of any form of

income or price support within the meaning of Article XVI of the General Agreement on Tariffs

and Trade, 1994, being part of Annex 1A to the World Trade Organization (WTO) Agreement

that confers a benefit.

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

a. practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities;

b. amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not

collected;

c. the government provides goods or services, other than general governmental infrastructure, or purchases goods; or

22 Exhibit 2 (NC) – Grinding Media Complaint, Exhibit 67 – Freight quote.


d. the government permits or directs a non-governmental body to do anything referred to in any of paragraphs (a) to (c) above where the right or obligation to do the thing is

normally vested in the government and the manner in which the non-governmental body

does the thing does not differ in a meaningful way from the manner in which the

government would do it.

[88] A state-owned enterprise (SOE) may be considered to constitute “government” for the purposes of subsection 2(1.6) of SIMA if it possesses, exercises, or is vested with, governmental

authority. Without limiting the generality of the foregoing, the CBSA may consider the

following factors as indicative of whether the SOE meets this standard: 1) the SOE is granted or

vested with authority by statute; 2) the SOE is performing a government function; 3) the SOE is

meaningfully controlled by the government; or 4) some combination thereof.

[89] If a subsidy is found to exist, it may be subject to countervailing measures if it is specific. A subsidy is considered to be specific when it is limited, in law or in fact, to a particular

enterprise or is a prohibited subsidy. An “enterprise” is defined under SIMA as also including a

“group of enterprises, an industry and a group of industries”. Any subsidy which is contingent, in

whole or in part, on export performance or on the use of goods that are produced or that originate

in the country of export is considered to be a prohibited subsidy and is, therefore, specific

according to subsection 2(7.2) of SIMA for the purposes of a subsidy investigation.

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

there is exclusive use of the subsidy by a limited number of enterprises;

there is predominant use of the subsidy by a particular enterprise;

disproportionately large amounts of the subsidy are granted to a limited number of enterprises; and

the manner in which discretion is exercised by the granting authority indicates that the subsidy is not generally available.

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

[92] The complainant alleged that subject goods have been subsidized and maintained that exporters/producers of subject goods have received countervailable subsidies from various levels

of the GOI, including central and state levels of government.23

23 Exhibit 2 (NC) – Grinding Media Complaint, para. 138.


[93] In alleging that actionable subsidies were applicable to the subject goods imported from India, the complainant relied extensively on a subsidy finding conducted by Brazil’s

Subsecretariat of Trade Defense and Public Interest (SDCOM), respecting chrome-alloyed

and/or iron grinding media from India.24 This document served as the principle basis for the

complainant to support its allegations that Indian grinding media producers/exporters benefited

from countervailable subsidies.

[94] The complainant also relied on a WTO panel report respecting Indian export related measures,25 previous CBSA’s subsidy investigations regarding certain Carbon Steel Welded Pipe

and certain Polyethylene Terephthalate Resin, US Department of Commerce and European

Commission subsidy investigations, publications issued by the central and state governments of

India, and other publically available information.

[95] The complainant identified 15 subsidy programs which may have conferred benefits to the producers/exporters of the subject goods in India, and in turn resulted in the actionable

subsidizing of exports of subject goods to Canada.26

[96] The CBSA reviewed the information provided in the complaint, and also conducted its own research with respect to Indian subsidy programs, in order to gather complete and up-to-date

information on certain incentive schemes offered by the central and state governments of India.

[97] The CBSA also reviewed the relevant decision documents for the investigations referred to by the complainant.

[98] Generally speaking, the CBSA’s examination of the reference material provided in the complaint provided support for the complainant’s allegations that grinding media originating in

or exported from India has been subsidized. On the basis of its analysis, the CBSA determined

that in respect of one program identified by the complainant there was not sufficient evidence

regarding the applicability of the subsidy program to producers of GM (i.e. Program Sales Tax

Deferral).

[99] The CBSA also found one program identified by the complainant appeared to be generally available (i.e. Program Deductions under the Income Tax Act). Further, some of the

program names identified by the complainant were modified by the CBSA. Finally, based on its

own research, the CBSA identified two subsidy programs which were not identified by the

complainant (i.e. Programs Pre-shipment and Post Shipment Export Financing and Incentives for

Micro, Small & Medium Manufacturing Enterprises).

24 Exhibit 2 (NC) – Grinding Media Complaint, Exhibit 73 – Brazil SDCOM, Ordinance Secint N. 247, March 28,

2019. 25 https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds541_e.htm 26 Exhibit 2 (NC) – Grinding Media Complaint, Appendix A: Subsidies – India.

https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds541_e.htm


[100] As a result, the CBSA will investigate a total of 16 Indian subsidy programs. The 16 subsidy programs were grouped into the following six categories:

I. Relief from Duties and Taxes on Materials and Machinery II. Grants and Grant Equivalents

III. Preferential Loans and Loan Guarantees IV. Subsidy Programs Provided by the State Government of Gujarat V. Subsidy Programs Provided by the State Government of Maharashtra

VI. Subsidy Programs Provided by the State Government of Tamil Nadu

[101] The CBSA’s analysis revealed that the alleged subsidy programs constitute potential financial contributions by the GOI that may have conferred benefits to producers/exporters of

GM. In addition, the programs were further examined and were considered to be potentially

specific either in law or in fact within the meaning of subsections 2(7.2) and 2(7.3) of SIMA.

The description of the identified programs are found in the Appendix.

[102] If information becomes available during the investigation process that indicates that exporters/producers of subject goods may have benefited from any of the alleged programs or

any other programs during the POI, the CBSA will request complete information from the GOI

and exporters/producers of subject goods to pursue the investigation of the program.

CBSA’s Conclusion

[103] Sufficient evidence is available to support the allegations that GM originating in or exported from India have been subsidized. In investigating these programs, the CBSA has

requested information from the GOI, exporters and producers to determine whether

exporters/producers of subject goods received benefits under these programs and whether these

programs, or any other programs, are actionable subsidies and, therefore, countervailable under

SIMA.

Estimated Amount of Subsidy

[104] In order to estimate an amount of subsidy, the complainant relied on the information provided in the Brazilian subsidy finding, which concluded in March 2019. In this regard, the

complainant submitted that AIAE and its subsidiary Welcast accounted for 88% of the total

production of grinding media in India,27 and the amount of subsidy determined by the Brazilian

authority for AIAE enables a reasonable and sufficient estimate for purposes of the complaint,

especially since the product definition of the goods subject to the Brazilian finding is a subset of

the goods subject to the complaint.

27 Exhibit 2 (NC) – Grinding Media Complaint, para 150.


[105] The complainant submitted that AIAE received countervailable subsidies from six of the 15 alleged subsidy programs identified by the complainant and the amount of subsidy

determined by the SDCOM was US $84.74/MT. As such, the complainant’s estimated quarterly

amounts of subsidy ranged from 7.02% to 8.53% of the export price.

[106] The CBSA estimated the amount of subsidy conferred on exporters of the subject goods by comparing the estimated weighted average full costs of the subsidized goods with the

estimated weighted average export prices. The CBSA’s methodologies to estimate the full costs

and the export prices for India are the same as those discussed above in the dumping section.

[107] It is the CBSA’s understanding that subsidies have the effect of lowering the cost of production of goods which allows exporters to pass-through the subsidy benefits in reducing the

selling price of those goods to Canada. Therefore, the CBSA is satisfied that the exporter’s

ability to sell subject goods to Canada at prices substantially below their estimated costs supports

the complainants’ allegations that the imported goods are subsidized.

[108] The CBSA’s analysis of the information indicates that subject goods imported into Canada during the period of October 1, 2019 to September 30, 2020, were subsidized and that

the estimated amount of subsidy is 11.5% of the estimated export price of the subject goods.

EVIDENCE OF INJURY

[109] The complainant alleges that the subject goods have been dumped and subsidized and that such dumping and subsidizing have caused and are threatening to cause injury to the

domestic industry producing like goods in Canada.

[110] SIMA refers to material injury caused to the domestic producers of like goods in Canada. The CBSA has concluded that GM produced by the domestic industry are like goods to the

subject goods from India.

[111] In support of their injury allegations, the complainant provided evidence of an increase in the volume of imports of the subject goods, price depression and price suppression, lost sales,

price undercutting, lost market share, impacted financial results, and capacity underutilization,

reduction in employment.

Volume of Dumped and Subsidized Imports28

[112] The import data provided by the complainant demonstrates a significant increase in the volume of subject goods imported from India between 2017 and H1 2020. From 2017 to 2018,

imports of subject goods increased by over 330%. From 2018 to 2019, imports of subject goods

increased by another 90%. If importation levels remain constant between H1 and H2 2020,

subject imports will have increased by 1,140% from 2017 to 2020.

28 Exhibit 2 (NC) – Grinding Media Complaint, paras. 174-180 and Exhibit 12: Statistics Canada Analysis.


[113] From 2017 to H1 2020, the size of the domestic market remained stable. In terms of share of the domestic market, in 2017, subject good imports from India represented 4.8%. This figure

rose to 20.3% in 2018, 41.8% in 2019 and 52.9% in H1 2020. This can be contrasted with the

domestic producer’s share of the Canadian market, which stood at 88.3% in 2017. This figure

declined to 79.7% in 2018, 58.0% in 2019 and 47.0% as of H1 2020, representing a decrease in

market share held by the domestic producer of 41.3% since 2017.

[114] From the above data, it can be concluded that the dramatic increase in subject good imports from India correlates with the loss of market share held by the domestic producer. The

CBSA’s estimates of import volumes confirm the trends alleged by the complainant, displaying

an increase in imports of subject goods of 896% since 2017.

[115] In summary, based on the CBSA’s estimates and analysis of import volumes, the CBSA finds the complainant’s claim of increased import volumes to be reasonable and well supported.

The increase was substantial in both absolute and relative terms.

Price Depression and Price Suppression29

[116] The complainant’s data suggests that subject goods have caused price depression in the domestic market. Imported subject goods have gained market share by leveraging low prices that

both undercut and depress domestic producer pricing. According to the complainant, the low-

priced subject goods have caused sales to be made at declining prices, resulting in lost revenue

and decreasing levels of profitability.

[117] According to the complainant, competition against allegedly dumped and subsidized goods has resulted in a trend of decreasing quarterly price offerings to its customers since late

2017. In the complaint, there are multiple examples where the domestic producer had to

significantly decrease their prices to retain sales.30

[118] Based on the CBSA’s analysis of information contained in the complaint, as well as the CBSA’s estimates and analysis of imports, the CBSA finds the complainant’s claims of price

depression and price suppression to be reasonable and well supported. As such, the CBSA finds

that this injury factor is reasonable, well supported, and linked to the volume of imports of

allegedly dumped and subsidized goods.

Lost Sales31

[119] The complainant alleges that throughout each quarter of the analysis period, imports of subject goods have undersold the complainant’s domestic pricing, resulting in lost sales to their

two largest customers. 32

29 Exhibit 2 (NC) – Grinding Media Complaint, paras 181-203, and Exhibit 11: Import and Market Tables. 30 Exhibit 2 (NC) – Grinding Media Complaint, Table 34 – Domestic pricing, Exhibit 34 and Exhibit 39. 31 Exhibit 2 (NC) – Grinding Media Complaint, paras. 204-218. 32 Exhibit 1 (PRO) – Grinding Media Complaint, Confidential Exhibit 11 and 16.


[120] Based on the information provided in the complaint, the CBSA finds the allegation of lost sales to be reasonable, well supported, and sufficiently linked to imports of allegedly dumped

and subsidized goods.

Price Undercutting33

[121] The complainant submitted that the prices paid by its domestic customers for subject goods are below the prices offered by the complainant. The complainant further submitted that

the pricing gap between its sales of grinding media to domestic customers, which have not been

influenced by the allegedly dumped and subsidized subject goods versus the offering prices

made to the aforementioned domestic customers that have switched to imported subject goods is

significant.

[122] Where the allegedly dumped and subsidized goods compete with domestically produced grinding media, pricing systematically dictates that the sale to be awarded to the imported

subject goods. The domestic producer cannot reduce its pricing enough to attempt to recover its

customers.

[123] Evidence provided by the complainant identified a significant pricing gap between the price of grinding media offered to domestic customers that have not sourced imported subject

goods from India versus those domestic customers that have been influenced by the allegedly

dumped and subsidized subject goods. Since Q1 2019, the pricing difference has ranged from

0.56% to 13.70%, when compared to pricing offered to domestic customers who have not been

influenced by the subject goods.

[124] Based on the above and the CBSA’s analysis of the information contained in the complaint, the CBSA finds the claim of price undercutting to be reasonable, well supported, and

sufficiently linked to imports of allegedly dumped and subsidized goods.

Lost Market Share34

[125] The complainant alleges that they have lost domestic market share as a result of the importation of the allegedly dumped and subsidized subject goods from India.

[126] Based on import data supplied by the complainant, imported subject goods from India have been increasing their market share of the domestic industry since 2017. Between 2018 and

2019, it is estimated that importation of the subject goods increased in volume by 90.5%.

Through the first half of 2020, imports of subject goods from India continued to increase,

allowing for an estimate for full-year data representative of a 38.9% increase over 2019. In total,

the volume of importation of subject goods from India is estimated to have increased by 1,040%

since 2017.

33 Exhibit 2 (NC) – Grinding Media Complaint, paras. 219-224. 34 Exhibit 2 (NC) – Grinding Media Complaint, paras. 225-231.


[127] The complainant provided data on their domestic and export sales of grinding media from 2017 through H1 2020. The data demonstrated a trend of decreasing domestic sales throughout

the abovementioned periods.

[128] The CBSA’s data indicates that, between 2017 and the first nine month of 2020, the market share of the domestic industry decreased from 88.2% to 45.7%, while during the same

period, the market share of the subject imports increased significantly from 4.8% to 54.0%.

During the POI, the market shares held by the domestic industry and the subject imports were

50.4% and 49.3%, respectively.

[129] Based on the above and the CBSA’s analysis of the information contained in the complaint, the CBSA finds the claim of lost market share to be well supported, and the CBSA is

of the opinion that this injury factor is reasonable and sufficiently linked to the volume of

imports of allegedly dumped and subsidized goods.

Impacted Financial Results35

[130] The complainant submits that its financial performance has been adversely impacted by a significant decrease in domestic sales.36

[131] The complainant stated that domestic sales declined steadily from 2017 to H1 2020 and noted that profit margins have experienced a decline as a result of pressure imposed by the

subject goods. Gross margins on domestic sales fell between H1 2018 and H1 2019, while

experiencing a steep decline between H1 2019 and H1 2020.

[132] Based on the evidence provided by the complainant, the CBSA finds the claims that the complainant’s financial performance has been adversely impacted by imports of allegedly

dumped and subsidized goods to be reasonable and sufficiently supported.

Production Capacity Underutilization37

[133] The complainant submitted that they have experienced a steady decrease in production capacity utilization rates since 2017. To support this allegation, the complainant provided

domestic industry data of production volumes for the period from 2017 to the first half of 2020.

[134] Based on the information provided by the complainant, the CBSA finds that there is a reasonable link between the presence of the allegedly dumped and subsidized goods and the

complainant’s inability to increase capacity utilization with respect to GM.

35 Exhibit 2 (NC) – Grinding Media Complaint, paras. 232-239. 36 Exhibit 2 (NC) – Grinding Media Complaint, Exhibit 78: Affidavit of Raphael Delhaye, Regional Finance

Manager. 37 Exhibit 2 (NC) – Grinding Media Complaint, paras. 240-241.


Reduction in Employment38

[135] The complainant explained that, since 2018, they have had to reduce employee working hours. In addition, year-over-year employment has also decreased as a result of decreasing sales.

The total number of employees has decreased by 10% between 2017 and Q1 2020.

[136] Based on information provided by the complainant, the CBSA finds that there is a reasonable link between the presence of the allegedly dumped and subsidized goods and the

complainant’s reduction in employment levels with respect to GM production.

CBSA’s Conclusion – Injury

[137] Overall, based on the evidence provided in the complaint, and supplementary data available to the CBSA through its own research and customs documentation, the CBSA finds

that the evidence discloses a reasonable indication that the dumping and subsidizing of the

subject goods from India have caused injury to the domestic industry in Canada. The nature of

the injury is well documented with respect to an increase in the volume of dumped and

subsidized imports, price depression and lost sales, price undercutting, lost market share,

impacted financial results, and underutilization of capacity.

THREAT OF INJURY

[138] The complainant states that the imports of the allegedly dumped and subsidized goods threaten to cause further material injury to the Canadian domestic industry.

[139] The complainant provided the following information to support the allegation that imports of subject goods threaten to cause further injury to the Canadian industry.

Threat to Continuous Investments39

[140] The complainant alleges that planned capital expenditures at the Magog Plant have been revised, and the reduced capital expenditures are at risk of being eliminated.

[141] The complainant further explained that the projected capital expenditures for 2020, spanning investments in infrastructures and machinery, legal compliance and best management

practices, major maintenance and information technology, have been revised downwards, with

no planned expenditures for 2021. The complainant stated that corporate management support

for plant investment is expected to be lost due to the continuation of low-priced imports of GM

from India.40

[142] Upon review of the information provided by the complainant, the CBSA finds that the evidence provided presents a reasonable and well supported threat of injury for investments.

38 Exhibit 2 (NC) – Grinding Media Complaint, paras. 242-250. 39 Exhibit 2 (NC) – Grinding Media Complaint, paras. 251-253. 40 Exhibit 2 (NC) – Grinding Media Complaint, Exhibit 1: Affidavit of Patrick Laplante, Plant Manager.


Nature of the Subsidy Programs and the Likely Effects on Trade41

[143] The complainant submits that a number of alleged subsidy programs made available by the GOI are export contingent and therefore prohibited. The prohibition stems from the

recognition that export subsidies “are specifically designed to distort international trade, and

therefore likely to hurt other countries’ trade.”42

[144] The complainant explained that the nature of the subsidies in question and the effects that they are likely to have on trade indicate that the alleged dumping and subsidizing of the goods, to

the extent that they have not already caused injury to the domestic industry, are threatening to

cause injury to the domestic industry.

[145] Based on the CBSA’s analysis of the alleged subsidy programs, the CBSA confirms that many of the alleged subsidy programs are export contingent. The CBSA recognizes that the

nature of the programs and their effects on trade could lead to additional exportation of injurious

GM from India to Canada.

Likely Volume of Subject Good Imports43

[146] The complainant submits that the volume of allegedly dumped and subsidized imports from India has increased significantly within the recent time-period. The increase in imports has

corresponded with low-priced import offers that have undercut the complainant’s pricing and had

a significant impact on the domestic industry.

[147] The complainant submits that it has lost customers to the subject goods and claims that it is at risk of losing an additional long-standing customer, which began testing out subject goods

in the summer of 2020.44

[148] The complainant alleges that the volume of subject good imports will likely continue to rise relatively to domestic consumption over the next 12 to 18 months unless applicable

measures are imposed.

[149] Based on the evidence submitted by the complainant and available to the CBSA, the CBSA recognizes that the volumes of subject goods will likely continue to increase.

41 Exhibit 2 (NC) – Grinding Media Complaint, paras. 260-262. 42 Exhibit 2 (NC) – Grinding Media Complaint, para. 261 43 Exhibit 2 (NC) – Grinding Media Complaint, paras. 263-267. 44 Exhibit 2 (NC) – Grinding Media Complaint, Exhibit 11: Affidavit of Stephan Marin, Regional Sales Manager.


Substantial Increase in Production Capacity and Excess Production Capacity45

[150] The complainant submits that there is clear indication that the global economy and other export markets for subject goods will shrink significantly as a result of the pandemic. Other

export markets demonstrate limited capacity to absorb current export levels of subject goods, let

alone an increase in exports amid a decrease in spending and investment that will reduce demand

for grinding media.

[151] Continued expansions to the capacity of AIAE contrasts sharply with the ability of other export markets to absorb additional exports. In August 2019, following an expansion of 50,000

MT of grinding media, AIAE had a grinding media production capacity of 340,000 MT, out of a

total production capacity of 390,000 MT for High Chrome Internal Mills (HCMI) which includes

the capacity of both grinding media and cast linings. According to AIAE, capacity for grinding

media and cast linings were set to increase by an additional 50,000 MT each, bringing total

capacity to 390,000 MT of grinding media, out of a total production capacity of 490,000 MT of

HCMI.46

[152] According to information provided in the complaint AIAE has underutilized capacity, which the complainant stated exceeds that of the entire Canadian market for grinding media.

[153] Based on the information provided in the complaint, the CBSA finds that the added production capacity of grinding media by AIAE in the past two years already exceeded the size

of the entire Canadian market, which could lead to additional exportation of injurious GM from

India to Canada.

Prices that are Likely to have a Significant Depressing or Suppressing Effect47

[154] The complainant states that allegedly dumped and subsidized goods from India have entered the domestic market at low prices, which have had price depressing effects, resulting in

lost sales.

[155] Given this persisting situation, and taking into account that price competition takes place at each sales negotiation with a major client, typically on a quarterly basis, the complainant

submits that the price spread is likely to continue, and subject goods are thus likely to have a

significant depressing and suppressing effect on the price of domestic like goods in the future.

[156] The complainant alleges that the offering of subject goods at dumped and subsidized prices is likely to increase demand for further imports of the goods. The complainant provided

account specific information indicative of the fact that the volume of imports of subject goods

are likely to further increase relative to domestic consumption unless measures are imposed.

45 Exhibit 2 (NC) – Grinding Media Complaint, paras. 268-277. 46 Exhibit 2 (NC) – Grinding Media Complaint, Exhibit 71: AIAE Annual Report 2019-2020. 47 Exhibit 2 (NC) – Grinding Media Complaint, paras. 278-284.


[157] Based on the information provided in the complaint, the CBSA recognizes that imports from India have entered Canada at increasingly low prices and caused price-depressing and

price-suppressing effects, which could lead to additional exportation of injurious GM from India

to Canada.

Diversion of Dumped and Subsidized Goods to Canada48

[158] The complainant alleges that Brazil’s recent imposition of anti-dumping and countervailing duties on grinding media from India is relevant, due to the fact that Brazil is rich

in mining resources and was previously an important market for Indian exporters.

[159] To support their claim, the complainant stated that in 2016, Indian exports of grinding media to Brazil totaled 13,732 MT. By contrast, from January to April 2020, there were no

exports of grinding media from India to Brazil. The imposition of trade remedies successfully

curtailed Indian imports into Brazil, illustrating that without resorting to dumping and/or sales of

subsidized grinding media, Indian producers could not compete in the Brazilian market.

Importantly, the lack of Indian grinding media within the Brazilian market coincides with the

increased penetration of Indian grinding media in the Canadian market.

[160] The reduction of Indian exports to Brazil reinforces the complainant’s allegation that dumped and subsidized goods from India are likely to cause injury in Canada. In addition, the

curtailing of market opportunities in Brazil necessarily leads export-oriented producers in India

to seek alternatives for their exports in other markets. This accentuates the threat of injury to the

domestic industry in Canada, as it frees more capacity in India, and leads to the likely diversion

of subject goods that previously were exported to Brazil.

[161] The CBSA finds that Indian grinding media exporters are likely to seek other export markets, including Canada, to recover some of the volumes lost in the Brazilian market.

Market Conditions in India and Resulting Impact on the Domestic Industry49

[162] The complainant states that while India’s economy grew 4.2% in 2019, growth is projected to decline to 1.9% in 2020. Both decreasing domestic growth and demand are currently

coupled with excess production capacity for grinding media. This combination lends further

support to the threat of injury resulting from subject goods being exported into Canada at

dumped and subsidized prices.

48 Exhibit 2 (NC) – Grinding Media Complaint, paras. 285-288. 49 Exhibit 2 (NC) – Grinding Media Complaint, paras. 289-299.


[163] The complainant states that the Canadian economy is forecasted to experience slowing growth, alongside weak oil prices, declining manufacturing and cooling investment in various

sectors. The complainant further states that while GDP growth for 2019 was 1.9% according to

the IMF, GDP is anticipated to retract by -6.2% in 2020.50 The complainant submits that if the

Canadian market contracts as forecasted, it will experience a decreased market share due to

rising subject good imports and a market contraction.

[164] The complainant states that as import competition from India has increased steadily from 2017 through H1 2020, the performance of the domestic industry has been adversely impacted

by allegedly dumped and subsidized imports over the same period, causing total and domestic

sales volumes to decline. Evidence indicates that these trends will continue through the end of

2020 and into 2021. India has exported large and increasing volumes of subject goods to Canada,

which threaten injury to the domestic industry by deeply undercutting Canadian grinding media

pricing.

[165] The complainant adds that evidence indicates Indian producers are export oriented and have well established channels of distribution within Canada. This evidence supports the

conclusion that India will continue to export large volumes of allegedly dumped and subsidized

subject goods, priced to undercut domestic goods, helping to secure sales in Canada at the

expense of the complainant. There is also a risk that those sales increase throughout the

remainder of the year through to 2021. This will result in further injury to the domestic industry.

[166] The CBSA’s analysis of the information contained in the complaint revealed market conditions that the CBSA recognizes may lead GM producers in India to target certain export

markets, including Canada, which may cause further injury to the Canadian industry.

CBSA’s Conclusion – Threat of Injury

[167] The complaint contains evidence that discloses a reasonable indication that there is a threat of injury to the domestic industry in Canada. The information provided by the complainant

indicates that an impact on continuous investments, the nature of the alleged subsidy programs in

India and their likely effect on trade, the likely increase of volume of subject imports, the

substantial increase in production capacity and excess capacity, the likelihood of diversion of

allegedly dumped and subsidized goods to Canada, the market conditions in India and the

resulting impact on the domestic industry collectively pose a threat of injury to the Canadian

industry.

50 Exhibit 2 (NC) – Grinding Media Complaint, Exhibit 87: IMF, World Economic Outlook The Great Lockdown

(April 2020), Growth Projections Table.


CAUSAL LINK – DUMPING/SUBSIDIZING AND INJURY/THREAT OF INJURY

[168] The CBSA finds that the complainant has sufficiently linked the injury they suffered in price depression and price suppression, lost sales, price undercutting, lost market share, impacted

financial performance, capacity underutilization and reduced employment to the alleged

dumping and subsidizing of the subject goods imported into Canada and the price advantage this

provides.

[169] Evidence has been provided to establish this link via import data, specific examples of lost sales and financial information, as provided in the complaint and respective attachments, as

well as in the injury allegations submitted.

[170] The complainant submitted that the continued dumping and subsidizing of goods from India will cause further injury to the Canadian domestic industry in the future. As discussed

above, the CBSA is of the opinion that this allegation of threat of injury is reasonably supported.

[171] In summary, the CBSA is of the opinion that the information provided in the complaint has disclosed a reasonable indication that the alleged dumping and subsidizing have caused

injury and are threatening to cause injury to the Canadian domestic industry.

CONCLUSION

[172] Based on information provided in the complaint, other available information, and the CBSA’s import documentation, the CBSA is of the opinion that there is evidence that GM

originating in or exported from India has been dumped and subsidized. Further, there is a

reasonable indication that such dumping and subsidizing have caused and are threatening to

cause injury to the Canadian industry. As a result, pursuant to subsection 31(1) of SIMA,

dumping and subsidy investigations were initiated on December 17, 2020.

SCOPE OF THE INVESTIGATIONS

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

[174] The CBSA has requested information from all potential exporters and importers to determine whether or not subject goods imported into Canada during the POI of October 1, 2019

to September 30, 2020, were dumped. The information requested will be used to determine the

normal values, export prices and margins of dumping, if any.

[175] The CBSA has also requested information from the GOI and all potential producers/exporters to determine whether or not subject goods imported into Canada during the

POI of October 1, 2019 to September 30, 2020, were subsidized. The information requested will

be used to determine the amounts of subsidy, if any.

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


FUTURE ACTION

[177] The CITT will conduct a preliminary inquiry to determine whether the evidence discloses a reasonable indication that the alleged dumping and subsidizing of the goods have caused or are

threatening to cause injury to the Canadian industry. The CITT must make its decision on or

before the 60th day after the date of the initiation of the investigations. If the CITT concludes that

the evidence does not disclose a reasonable indication of injury to the Canadian industry, the

investigations will be terminated.

[178] If the CITT finds that the evidence discloses a reasonable indication of injury to the Canadian industry and the CBSA’s preliminary investigations reveal that the goods have been

dumped and/or subsidized, the CBSA will make preliminary determinations of dumping and/or

subsidizing within 90 days after the date of the initiation of the investigations, by March 17,

2021. Where circumstances warrant, this period may be extended to 135 days from the date of

the initiation of the investigations.

[179] Under section 35 of SIMA, if, at any time before making preliminary determinations, the CBSA is satisfied that the volume of goods of a country is negligible, the investigation(s) will be

terminated with respect to goods of that country.

[180] Imports of subject goods released by the CBSA on and after the date of preliminary determinations of dumping and/or subsidizing, other than goods of the same description as goods

in respect of which a determination was made that the margin of dumping of, or the amount of

subsidy on the goods is insignificant, may be subject to provisional duty in an amount not greater

than the estimated margin of dumping or the estimated amount of subsidy on the imported goods.

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

the date of the preliminary determinations.

[182] After the preliminary determinations, if, in respect of goods of a particular exporter, the CBSA’s investigations reveal that imports of the subject goods from that exporter have not been

dumped or subsidized, or that the margin of dumping or amount of subsidy is insignificant, the

investigation(s) will be terminated in respect of those goods.

[183] If final determinations of dumping and/or subsidizing are made, the CITT will continue its inquiry and hold public hearings into the question of material injury to the Canadian industry.

The CITT is required to make a finding with respect to the goods to which the final

determinations of dumping and/or subsidizing applies, not later than 120 days after the CBSA’s

preliminary determinations.


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

dumping on the imported goods and countervailing duty equal to the amount of subsidy on the

imported goods. Should both anti-dumping and countervailing duties be applicable to subject

goods, the amount of any anti-dumping duty may be reduced by the amount that is attributable to

an export subsidy.

RETROACTIVE DUTY ON MASSIVE IMPORTATIONS

[185] When the CITT conducts an inquiry concerning injury to the Canadian industry, it may consider if dumped and/or subsidized goods that were imported close to or after the initiation of

an investigation constitute massive importations over a relatively short period of time and have

caused injury to the Canadian industry.

[186] Should the CITT issue such a finding, anti-dumping and countervailing duties may be imposed retroactively on subject goods imported into Canada and released by the CBSA during

the period of 90 days preceding the day of the CBSA making preliminary determinations of

dumping and/or subsidizing.

[187] In respect of importations of subsidized goods that have caused injury, however, this provision is only applicable where the CBSA has determined that the whole or any part of the

subsidy on the goods is a prohibited subsidy, as explained in the previous “Evidence of

Subsidizing” section. In such a case, the amount of countervailing duty applied on a retroactive

basis will be equal to the amount of subsidy on the goods that is a prohibited subsidy.

UNDERTAKINGS

[188] After a preliminary determination of dumping by the CBSA, other than a preliminary determination in which a determination was made that the margin of dumping of the goods is

insignificant, an exporter may submit a written undertaking to revise selling prices to Canada so

that the margin of dumping or the injury caused by the dumping is eliminated.

[189] Similarly, after the CBSA has rendered a preliminary determination of subsidizing, a foreign government may submit a written undertaking to eliminate the subsidy on the goods

exported or to eliminate the injurious effect of the subsidy, by limiting the amount of the subsidy

or the quantity of goods exported to Canada. Alternatively, exporters with the written consent of

their government may undertake to revise their selling prices so that the amount of the subsidy or

the injurious effect of the subsidy is eliminated.

[190] An acceptable undertaking must account for all or substantially all of the exports to Canada of the dumped goods. Interested parties may provide comments regarding the

acceptability of undertakings within nine days of the receipt of an undertaking by the CBSA. The

CBSA will maintain a list of parties who wish to be notified should an undertaking proposal be

received. Those who are interested in being notified should provide their name, telephone and

fax numbers, mailing address and e-mail address to one of the officers identified in the

“Information” section of this document.


[191] If undertakings were to be accepted, the investigations and the collection of provisional duties would be suspended. Notwithstanding the acceptance of an undertaking, an exporter may

request that the CBSA’s investigations be completed and that the CITT complete its injury

inquiry.

PUBLICATION

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

INFORMATION

[193] Interested parties are invited to file written submissions presenting facts, arguments, and evidence that they feel are relevant to the alleged dumping and subsidizing. Written submissions

should be forwarded to the attention of the SIMA Registry and Disclosure Unit.

[194] To be given consideration in this phase of the investigations, all information should be received by the CBSA by January 25, 2021.

[195] Any information submitted to the CBSA by interested parties concerning these investigations is considered to be public information unless clearly marked “confidential”.

Where the submission by an interested party is confidential, a non-confidential version of the

submission must be provided at the same time. This non-confidential version will be made

available to other interested parties upon request.

[196] Confidential information submitted to the CBSA will be disclosed on written request to independent counsel for parties to these proceedings, subject to conditions to protect the

confidentiality of the information. Confidential information may also be released to the CITT,

any court in Canada, or a WTO or Canada-United States-Mexico Agreement (CUSMA) dispute

settlement panel. Additional information respecting the CBSA’s policy on the disclosure of

information under SIMA may be obtained by contacting one of the officers identified below or

by visiting the CBSA’s website.

[197] The schedule of the investigations and a complete listing of all exhibits and information are available at: www.cbsa-asfc.gc.ca/sima-lmsi/i-e/menu-eng.html. The exhibit listing will be

updated as new exhibits and information are made available.

http://www.cbsa-asfc.gc.ca/sima-lmsi/i-e/menu-eng.html


[198] This Statement of Reasons has been provided to persons directly interested in these proceedings. It is also available through the CBSA’s website at the address below. For further

information,

statement of reasons · 2020. 12. 30. · statement of reasons concerning the initiation of...

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