Common menu bar links
Anti-dumping and Countervailing Program
Stainless Steel Wire
OTTAWA, April 16, 2004
4258-123
AD/1292
4218-14
CV/98
STATEMENT OF REASONS
Concerning the making of a preliminary determination with respect to
THE DUMPING OF CERTAIN STAINLESS STEEL WIRE ORIGINATING IN OR EXPORTED FROM THE REPUBLIC OF KOREA, SWITZERLAND AND THE UNITED STATES OF AMERICA
and the making of a preliminary determination with respect to
THE SUBSIDIZING OF CERTAIN STAINLESS STEEL WIRE ORIGINATING IN OR EXPORTED FROM INDIA
and the termination of the investigation with respect to
THE DUMPING OF CERTAIN STAINLESS STEEL WIRE ORIGINATING IN OR EXPORTED FROM CHINESE TAIPEI AND INDIA
DECISION
On April 2, 2004, pursuant to subsection 38(1) of the Special Import Measures Act, the President of the Canada Border Services Agency made a preliminary determination of dumping respecting cold drawn and annealed stainless steel round wire, up to and including 0.300 inches (7.62 mm) in maximum solid cross-sectional dimension, originating in or exported from the Republic of Korea, Switzerland and the United States of America, and made a preliminary determination of subsidizing of such product originating in or exported from India. On the same date, pursuant to paragraph 35(2)(a) of the Special Import Measures Act, the President terminated the dumping investigation of such product originating in or exported from Chinese Taipei and India.
Cet énoncé des motifs est également disponible en français.
TABLE OF CONTENTS
SUMMARY OF EVENTS
PERIOD OF INVESTIGATION
INTERESTED PARTIES
- Complainant
- Exporters
- Importers
PRODUCT DEFINITION
ADDITIONAL PRODUCTS INFORMATION
- Classification of Imports
CANADIAN INDUSTRY
IMPORTS INTO CANADA
INVESTIGATION
RESULTS OF THE DUMPING INVESTIGATION
- Chinese Taipei
- India
- Korea
- Switzerland
- United States
- Summary of Results (Dumping)
RESULTS OF THE SUBSIDY INVESTIGATION
- Summary of Results
REPRESENTATIONS CONCERNING THE INVESTIGATION
DECISION
PROVISIONAL DUTY TO BE IMPOSED
FUTURE ACTION
- The Canada Border Services Agency
- The Canadian International Trade Tribunal
RETROACTIVE DUTY ON MASSIVE IMPORTATIONS
UNDERTAKINGS
PUBLICATION
INFORMATION
APPENDIX 1
APPENDIX 2
APPENDIX 3
[1] On November 21, 2003, the Commissioner of the Canada Customs and Revenue Agency (CCRA) initiated an investigation into the alleged injurious dumping of certain stainless steel wire originating in or exported from Chinese Taipei, India, the Republic of Korea (Korea), Switzerland and the United States of America (United States), and the subsidizing of such product originating in or exported from India. The investigation was initiated in response to a complaint filed by Central Wire Industries Limited (Central Wire) on October 2, 2003.
[2] On October 22, 2003, the CCRA informed Central Wire that the complaint was properly documented, notified the governments of the named countries that a properly documented complaint had been filed and provided the High Commissioner of India with the sections of the non-confidential version of the complaint that related to subsidies and the allegations of injury. The complainant claimed that low priced imports have increased, causing prices to decline. This, in turn, has harmed Canadian production through lost sales and market share, and deterioration in financial performance.
[3] Upon receiving notice of the investigation, the Canadian International Trade Tribunal (Tribunal) started its preliminary injury inquiry. On January 20, 2004, the Tribunal made a preliminary determination that the evidence disclosed a reasonable indication that the dumping and subsidizing of stainless steel wire have caused injury.
[4] On December 12, 2003, responsibility for the customs program of the Canada Customs and Revenue Agency, including the administration of the Special Import Measures Act (SIMA), was transferred to the Canada Border Services Agency (CBSA), which was created on the same day. The President of the CBSA (President) is now responsible for dumping and subsidy investigations.
[5] On February 17, 2004, pursuant to paragraphs 39(1)(a), (b) and (c) of SIMA, the President made the decision to extend the 90-day period for making a preliminary decision in the investigation to 135 days, due to the complexity and novelty of the issues presented by the investigation, the number of persons involved in the investigation, and the difficulty of obtaining satisfactory evidence.
[6] As a result of the CBSA's preliminary investigation, on April 2, 2004, pursuant to subsection 38(1) of SIMA, the President made a preliminary determination of dumping respecting certain stainless steel wire originating in or exported from Korea, Switzerland and the United States, and made a preliminary determination of subsidizing of such product originating in or exported from India. On the same date, pursuant to paragraph 35(2)(a) of SIMA, the President terminated the dumping investigation of such product originating in or exported from Chinese Taipei and India.
[7] The dumping and subsidy investigation covered all subject goods released into Canada during the period of investigation (POI), that is, from October 1, 2002 to September 30, 2003.
[8] The complainant, Central Wire, is the sole producer of cold drawn and annealed stainless steel wire in Canada. The company produces these goods at its plants in Perth, and Erin, Ontario. The head office is located at 1 North Street, in Perth, Ontario.
[9] When the investigation was initiated, the CBSA identified 97 known or possible exporters of the subject goods. The CBSA sent a Request for Information (RFI) to all identified exporters. Complete responses to the RFIs were received from four exporters located in India and two exporters located in the United States. During the investigation, the CBSA confirmed that 10 of the possible exporters did not export subject goods during the POI.
[10] When the investigation was initiated, the CBSA identified 107 known or possible importers of the subject goods. A RFI was sent to all identified importers and the CBSA received 46 responses. Nineteen importers responded with satisfactory information demonstrating that they were not involved in any subject goods transactions, and therefore are no longer part of the investigation.
[11] For the purpose of this investigation, the subject goods were defined as:
Cold drawn and annealed stainless steel round wire, up to and including 0.300 inches (7.62mm) in maximum solid cross-sectional dimension.
Additional Products Information
Technical Information
[12] Stainless steel is defined as alloy steel containing, by weight, 1.2 per cent or less of carbon and 10.5 per cent or more of chromium, with or without other elements.
Production Process
[13] Stainless steel wire can be produced in a variety of sizes across a wide range of product grades. The production process is essentially the cold drawing of stainless steel wire rod of appropriate alloy composition through one or more dies. As the wire is drawn to smaller diameters, annealing operations are performed to process it to its finished size and specification. The wire may be treated to provide special surface conditions or appearance, including matte and diamond. In addition, coatings may be applied to serve as lubricants in subsequent processing or manufacturing operations.
[14] Stainless steel wire is packaged according to client specifications and product type. The wire can be shipped on spools, reels, coils, or in barrels. TIG wire, a welding wire, is cut to length and shipped in tubes or in bulk (boxes).
[15] Subject stainless steel wire is commonly produced in sizes of .003 inches (0.08 mm) to .300 inches (7.62 mm). Grades are defined by their chemistries, and generally all grades of stainless steel wire are, or can be, produced in Canada. The predominant grades of stainless steel wire sold in Canada are AISI1 304, 304L, 314, 316, 316L, 330, 308, 308L, 308LSi, 309LSi, 316LSi, 302, 302HQ and 430.
Product Application
[16] Much of the stainless steel wire consumed in Canada is sold for further manufacture and is used in a number of applications. Some common uses are in the fastener and battery industries for the manufacture of cold-headed pins, nails, rivets and battery anodes. Stainless steel wire is also used for the production of racks, grills, hooks, rings and similar formed parts, and continuous wire conveyor belts.
[17] However, stainless steel wire can also be sold in the form of finished products such as welding wire and lashing wire. Welding wire is used to bond parts used in manufacturing equipment and products made from stainless steel plates or tubes. Lashing wire, due to its strength and corrosion resistance, is used throughout the telephone and cable industries to support signal-carrying cables.
[18] The subject stainless steel wire are generally classified under the following Harmonized System classification numbers:
7223.00.11.00
7223.00.19.00
7223.00.20.00
[19] There has been no change in the structure of the Canadian industry since the initiation of the investigation. Central Wire is the sole producer of the like goods.
[20] For purposes of the preliminary determination, the CBSA further refined its estimates of the volume of imports from all sources. For this purpose, the CBSA utilized its internal information system, reviewed customs accounting documents and examined information received during the investigation from importers and exporters. It was discovered that some imports had been misclassified, which the CBSA corrected in order to obtain an accurate estimate of import volumes.
[21] CBSA officers requested information from known or possible exporters and importers, and also requested the Government of India to provide information on alleged subsidies granted by the national government and by the Indian State of Maharashtra, where the Indian exporters are located. The period of investigation (POI) extended from October 1, 2002 to September 30, 2003.
[22] Four exporters located in India and two exporters in the United States submitted complete responses to our Requests for Information. As well, several other exporters in the United States and one exporter in Switzerland provided incomplete responses which were inadequate for making determinations on dumping. No exporters in Chinese Taipei or Korea co-operated or supplied any information. Thus, only six exporters, who account for approximately 24 per cent of subject imports, supplied complete submissions.
[23] In addition, the four exporters in India, as well as the government of India and the State of Maharashtra, supplied sufficient information regarding subsidy programs.
[24] CBSA officers carried out on-site verifications of the information provided by the six co-operating exporters in the latter part of February and early March. Meetings were also held with government officials in India.
Results of the Dumping Investigation
[25] In conducting its investigation, the CBSA requested identified exporters and importers to provide sales and cost information necessary to determine the normal values and export prices of the subject goods.
[26] Normal values are generally based on the domestic selling prices of the goods in the country of export or on the total cost of the goods (cost of production, administrative, selling and all other costs) plus an amount for profit.
[27] The export price of goods shipped to Canada is generally the lesser of the exporter's ex-factory selling price or the importer's purchase price. When the export price is less than the normal value, the difference is the margin of dumping.
[28] Where information submitted to the CBSA by exporters was verified and found to be reliable, such information was used in calculating the margins of dumping. Margins of dumping were calculated for each separate product shipped to Canada by each exporter by subtracting the total export price from the total normal value of all of the sales made to Canada. As such, any sales made at undumped prices reduced the overall margin of dumping found for that particular product.
[29] In respect of each exporter, the overall margin of dumping of all of the products was calculated by weighting the margins found for each product according to the volume exported to Canada. In making this calculation, the margin of dumping for any product that was not dumped (that had an overall negative margin of dumping) was set to zero.
[30] In calculating the weighted average margin of dumping of a country, the overall margins of dumping found in respect of each exporter were weighted according to the volume of subject goods exported to Canada during the POI.
[31] For exporters that did not provide a complete response to the request for information, or did not permit verification of the information in a timely manner, the normal value of the goods has been estimated based on the export price of the goods plus an advance of 108 per cent, representing the highest estimated margin of dumping (excluding anomalies) found for a cooperative exporter during the investigation, expressed as a percentage of the export price.
[32] Further details regarding the normal values, export prices and margins of dumping are discussed below.
[33] No submissions were received from exporters of subject goods located in Chinese Taipei. As such, all of the goods exported from Chinese Taipei and imported into Canada during the POI were estimated to have been dumped by 108 per cent when expressed as a percentage of export price.
[34] The four exporters in India submitted complete responses to the RFI: they are, by order of descending volume of subject goods imported during the POI, Venus Wire Industries Limited (Venus), VSL Wires Limited (VSL), Macro Bars and Wires (India) Pvt. Limited (Macro) and Nevatia Steel & Alloys Pvt. Limited (Nevatia).
Venus
[35] Normal Value - Venus produces stainless steel wire mainly for export, but has a base of domestic market sales as well. It buys its raw materials from independent suppliers located in India and in foreign countries. Venus supplied information on its sales and costs of production for like goods sold in the domestic market and for goods exported to Canada. The information was found satisfactory for the purpose of making the preliminary determination. As a result, it was determined that, for a number of products, Venus had a sufficient number of profitable sales of like goods to non-associated customers in India. The normal values for these products were estimated based on the weighted average domestic market selling prices, using the method in section 15 of SIMA.
[36] For those products where there were not a sufficient number of acceptable sales of like goods in the domestic market, the normal values were estimated as per the method in paragraph 19(b) of SIMA, using the cost of production of the goods, selling, administrative and all other costs, and an amount for profit. The amount for profit was based on the weighted average profit on domestic market sales by Venus of goods of the same general category as the goods sold to Canada.
[37] The normal values were adjusted to account for differences in the terms and conditions of sale.
[38] Export Price - As the goods were sold to unrelated importers in Canada, export prices were estimated in accordance with the method in section 24 of SIMA, on the basis of the lesser of the exporter's selling price and the importer's purchase price.
[39] Margin of Dumping - The normal values were compared with the export prices for all subject goods imported into Canada during the POI. It was found that none of the importations were dumped.
VSL
[40] Normal Value - VSL, also referred to as "Viraj", produces mostly for the export market but also sells like goods to customers in India and purchases its raw materials from an affiliated company located in India. VSL supplied information and data pertaining to the sales and costs of like goods sold in the domestic market as well as to the costs of goods exported to Canada. The information was found satisfactory for the purpose of making a preliminary determination. As a result, where there existed a sufficient number of profitable domestic market sales made to non-associated customers in India, the normal values were estimated on the basis of the weighted average prices for these sales, using the method in section 15 of SIMA. The normal values were further adjusted to account for differences in quality.
[41] For those products where there were not a sufficient number of acceptable sales of like goods in the domestic market, the normal values were estimated as per the method in paragraph 19(b) of SIMA, using the cost of production of the goods, selling, administrative and all other costs, and an amount for profit. The amount for profit was based on VSL's weighted average profit on domestic market sales of goods of the same general category as the goods sold to Canada.
[42] Export Price - As the goods were sold to unrelated importers in Canada, export prices were estimated in accordance with the method in section 24 of SIMA, on the basis of the lesser of the exporter's selling price and the importer's purchase price.
[43] Margin of Dumping - The normal values were compared with the export prices for all subject goods imported into Canada during the POI. It was found that 98.9 per cent of the goods exported by VSL were dumped by an estimated weighted average margin of dumping of 0.6 per cent, expressed as a percentage of export price. The margins of dumping for the dumped goods range from 0.2 per cent to 9.7 per cent.
Macro
[44] Normal Value - Macro produces and sells mostly in the export market with limited sales of like goods to customers in India. Purchases of raw materials are made from unrelated suppliers within the domestic market. Macro supplied information pertaining to the sales and costs of like goods sold in the domestic market as well as the goods exported to Canada. The information was found satisfactory for the purpose of making a preliminary determination.
[45] Due to a lack of acceptable sales of like goods in the domestic market, the normal values were estimated as per the method in paragraph 19(b) of SIMA, using the cost of production of the goods, selling, administrative and all other costs, and an amount for profit. The amount for profit was based on the weighted average profit on domestic market sales of goods of the same general category by other producers in India.
[46] The normal values were adjusted to account for differences in the terms and conditions of sale.
[47] Export Price - As the goods were sold to unrelated importers in Canada, export prices were estimated in accordance with the method in section 24 of SIMA, on the basis of the lesser of the exporter's selling price and the importer's purchase price.
[48] Margin of Dumping - The normal values were compared with the export prices for all subject goods imported into Canada during the POI. It was found that none of the importations were dumped.
Nevatia
[49] Normal Value - Nevatia produces stainless steel wire primarily for export while maintaining a base of domestic market sales, and sources its raw materials from independent suppliers in India. Nevatia supplied information on its sales and costs of production for like goods sold in the domestic market and for goods exported to Canada. The information was found satisfactory for the purpose of making the preliminary determination.
[50] Due to a lack of acceptable sales of like goods in the domestic market, the normal values were estimated as per the method in paragraph 19(b) of SIMA, using the cost of production of the goods, selling, administrative and all other costs, and an amount for profit. The amount for profit was based on Nevatia's weighted average profit on domestic market sales of goods of the same general category as the goods sold to Canada.
[51] Export Price - As the goods were sold to unrelated importers in Canada, export prices were estimated in accordance with the method in section 24 in SIMA, on the basis of the lesser of the exporter's selling price and the importer's purchase price.
[52] Margin of Dumping - The normal values were compared with the export prices for all subject goods imported into Canada during the POI. It was found that 100 per cent of the goods exported by Nevatia were dumped by an estimated weighted average margin of dumping of 5.9 per cent, expressed as percentage of export price. The margins of dumping for the dumped goods range from 2.4 per cent to 8 per cent.
[53] No submissions were received from exporters located in Korea. As such, all of the goods exported from Korea and imported into Canada during the POI were estimated to have been dumped by 108 per cent when expressed as a percentage of export price.
[54] A complete submission was not received from the identified exporter in Switzerland. As such, all of the goods exported from Switzerland and imported into Canada during the POI were estimated to have been dumped by 108 per cent when expressed as a percentage of export price.
[55] Two exporters located in the United States provided responses to the RFI. They are: Sandvik Materials Technology (Sandvik) and Sumiden Wire Products Corporation (Sumiden).
Sandvik
[56] Normal Value - Sandvik sells to various customers in its domestic market at the national distributor level, and to a single related importer, Sandvik Canada. Purchases of raw materials are made from related and unrelated, domestic and international suppliers. Prices from related suppliers were tested and found to be comparable to those of unrelated suppliers. Sandvik will provide updated costing and sales data based on discussions held during the verification meetings at Sandvik's premises. For purposes of the preliminary determination, the sales and cost information submitted by Sandvik is sufficient for use in estimating normal values and export prices for the goods.
[57] Normal values were estimated based on the weighted average domestic market selling prices, using the method in section 15 of SIMA. Where there were not a sufficient number of acceptable sales of like goods in the domestic market, normal values were estimated as per the method in paragraph 19(b) of SIMA, using the cost of production of the goods, selling, administrative and all other costs, and an amount for profit. The amount for profit was based on Sandvik's weighted average profit on domestic market sales of goods of the same general category as the goods sold to Canada.
[58] Export Price - For the preliminary determination, export prices were estimated in accordance with the method in section 24 of SIMA, on the basis of the lesser of the exporter's selling price and the importer's purchase price. However, since the majority of the goods were sold to a related importer in Canada, further information has been requested to determine whether the export prices should be established pursuant to section 25 of SIMA. The additional information will be taken into consideration for purposes of the final decision.
[59] Margin of Dumping - The normal values were compared with the export prices for all subject goods imported into Canada during the POI. It was found that 99.1 per cent of Sandvik's exports to Canada were dumped by an estimated weighted average margin of dumping of 54 per cent, expressed as a percentage of export price. The margins of dumping for the dumped goods range from 0.7 per cent to 149 per cent.
Sumiden
[60] Normal Value - Sumiden produces stainless steel wire mainly for the domestic market and purchases its raw materials from independent suppliers. Sumiden supplied information on its sales and costs of production for like goods sold in the domestic market and for goods exported to Canada. The information was found satisfactory for the purpose of making the preliminary determination. For a number of products, Sumiden had a sufficient number of acceptable sales of like goods to non-associated customers in the United States. The estimated normal values for these products were based on the weighted average domestic market selling prices, using the method in section 15 of SIMA.
[61] For those products where there were not a sufficient number of acceptable sales of like goods in the domestic market, the normal values were estimated as per the method in paragraph 19(b) of SIMA, using the cost of production of the goods, selling, administrative and all other costs, and an amount for profit. The amount for profit was based on Sumiden's weighted average profit on domestic market sales of goods of the same general category as the goods sold to Canada.
[62] The normal values were further adjusted to account for differences in the terms and conditions of sale.
[63] Export Price - As the goods were sold to unrelated importers in Canada, export prices were estimated in accordance with the method in section 24 of SIMA, on the basis of the lesser of the exporter's selling price and the importer's purchase price.
[64] Margin of Dumping - The normal values were compared with the export prices for all subject goods imported into Canada during the POI. It was found that 86.8 per cent of the goods were dumped by an estimated weighted average margin of dumping of 10.2 per cent, expressed as a percentage of export price. The margins of dumping for the dumped goods range from 0.1 per cent to 30.4 per cent.
Other Exporters in the United States
[65] Six exporters from the United States supplied incomplete information which could not be used for the preliminary determination. It is expected that several of these exporters will provide additional information prior to the final decision. A further 51 exporters did not co-operate in the investigation and provided no information whatsoever. For all these exporters, normal values were estimated on the basis of an advance of 108 per cent over export price, representing the highest estimated margin of dumping (excluding anomalies) found for a cooperative exporter during the investigation. Export prices were estimated pursuant to section 24 of SIMA on the basis of the lesser of the exporter's selling price and the importer's purchase price.
Country |
Estimated Dumped Goods as Percentage of Country Imports |
Estimated Weighted Average Margin of Dumping * |
Country Imports as a Percentage of Total Imports |
Estimated Dumped Goods as a Percentage of Total Imports |
Chinese Taipei |
100% |
108 % |
2.3% |
2.3% |
India |
21.3% |
0.2% |
16.2% |
3.4% |
Korea |
100% |
108% |
5.0% |
5.0% |
Switzerland |
100% |
108% |
4.1% |
4.1% |
United States |
99.4% |
100% |
64.5% |
64.2% |
* as a percentage of export price
[66] During the investigation, the CBSA conducted a comprehensive review of customs documentation and other available information, which lead to the conclusion that a significant volume of the subject importations from Chinese Taipei had been incorrectly classified. In particular, the largest Chinese Taipei exporter of goods classified as "stainless steel wire" provided information that confirmed that sales to Canada were exclusively of galvanized carbon steel wire. Therefore, the volume of subject goods imported from Chinese Taipei was reduced considerably.
[67] Under Subsection 35(1) of SIMA, the President is required to terminate an investigation prior to the preliminary determination if he is satisfied that the volume of dumped goods of a country is negligible or the margin of dumping of the goods of a country is insignificant. Pursuant to subsection 2(1) of SIMA, a margin of dumping of less than two per cent is defined as insignificant, whereas a volume of dumped goods from a country forming less than three per cent of total imports is considered negligible.
[68] As shown in the table above, the volume of dumped goods from Chinese Taipei is 2.3 per cent, and is therefore negligible. As well, the estimated weighted average margin of dumping of subject goods from India is 0.2 per cent and is therefore insignificant. As a result, the dumping investigation was terminated respecting imports from Chinese Taipei and India.
Results of the Subsidy Investigation
[69] In determining whether a program has resulted in a subsidy under SIMA, the CBSA considers whether:
- there has been a financial contribution by a government of a country other than Canada; and
- there was a benefit conferred to persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of goods.
[70] Pursuant to subsection 2(1.6) of SIMA, there exists a financial contribution by a government of a country other than Canada in cases 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
d) the government permits or directs a non-governmental body to do anything referred to in any of paragraphs (a) to (c) 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.
[71] If a subsidy is found to exist, it may be subject to countervailing duties if it is specific. A subsidy is considered specific when it is limited to a particular enterprise, or is an export subsidy, which is contingent on export performance.
[72] On the basis of information provided in the complaint and information available through public documents and/or received during previous subsidy investigations involving India, the CBSA forwarded Requests for Information on the subsidy programs to the four identified Indian exporters, as well as to the Government of India and the Government of the State of Maharashtra, where all the exporters are located. The information was requested in order to establish whether there had been financial contributions made by any level of government and, if so, to establish if a benefit had been
conferred on persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of the subject goods respecting the following programs:
Government of India (GOI) Programs
- Duty Entitlement Pass Book Scheme (DEPB)
- Advance Licences
- Export Oriented Units
- Special Economic Zones
- Export Promotion Capital Goods Scheme
- Pre-shipment and Post-shipment Export Financial Assistance
- Loan Guarantees from the Government of India
- Income Tax Exemption on Export Profits
Government of the State of Maharashtra (GSM) Programs
- Waiver of Stamp Duty and Registration Fees
- Octroi (Municipal Tariff) Refund
- Incentives to Small-scale Industries
- Exemption from Electricity Duty
- Financing of Capital Incentives and Refunds
- Sales Tax Incentives
[73] Complete responses to the Requests for Information were received from all concerned parties and full verification of the data was conducted at the exporters' premises in India. CBSA officials also met with representatives of the GOI in Delhi to further discuss India's benefit programs for stainless steel wire exporters.
[74] The investigation revealed that benefits accorded to exporters by the GOI have been decreasing over the past several years, and that the State of Maharashtra has not conferred benefits on producers of subject stainless steel wire. Notwithstanding, the CBSA has established that there has been a financial contribution by the GOI that has conferred a benefit to the exporters with respect to the following programs:
- Duty Entitlement Pass Book Scheme
- Income Tax Exemption on Export Profits
- Export Promotion Capital Goods Scheme
- Pre-shipment and Post-shipment Export Financial Assistance
[75] The above subsidy programs are considered specific since they are contingent upon export performance. As a result, the CBSA has preliminarily determined that the above programs constitute subsidies that are subject to countervailing duty, as per Appendix 1.
[76] The programs utilized and amounts of subsidy preliminarily determined for each exporter are indicated in Appendix 2.
Country |
Subsidized Goods as a Percentage of Total Subject Goods Imported |
Estimated Percentage of Subsidy on Subject Goods |
Subsidized Goods as a Percentage of Total Imports from all Countries |
India |
100% |
6.2% |
16.2% |
[77] Under subsection 35(1) of SIMA, the President is required to terminate an investigation prior to the preliminary determination if the amount of subsidy on the goods of a country is insignificant or if the volume of subsidized goods of a country is negligible. Further, section 41.2 of SIMA requires the President to take into account the provisions of Article 27 of the World Trade Organization Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) when conducting subsidy investigations. These provisions stipulate that any investigation involving a developing country must be terminated as soon as the President determines that the total amount of subsidy for a developing country does not exceed two per cent of the value of the goods, or that the volume of the subsidized imports represents less than four per cent of the total imports of subject goods.
[78] The CBSA normally makes reference to Part I of the "DAC" 2List of Aid Recipients, maintained by the Organization for Economic Co-operation and Development, to determine eligibility for the differential amounts for developing countries in subsidy investigations. As India is a developing country according to this list, the highest threshold for negligibility and insignificance would apply. Nevertheless, the table above illustrates that the estimated amount of subsidy is not insignificant, while the volume of subsidized goods is not negligible.
Representations Concerning the Investigation
[79] On November 21, 2003, the CBSA received written representations from the GOI wherein it was argued that the subsidy investigation should not be initiated. The GOI stated that the complainant had not provided sufficient evidence of a causal link between the allegedly subsidized imports and injury to the Canadian industry. As well, the GOI stated that the issue of like goods had not been sufficiently examined, and further argued that the subsidy programs named in the complaint are not export subsidies as defined by the Subsidies Agreement. Given that the representations were not received until the date of initiation, the CBSA was unable to take the views of the GOI into consideration until the primary phase of the investigation.
[80] CBSA officers addressed the representations when they met with the GOI in Delhi on March 5, 2004. Canadian officials confirmed that before initiating the investigation, the CBSA had established that evidence in the complaint disclosed a reasonable indication that the allegedly subsidized stainless steel wire from India had caused injury to the Canadian industry producing these goods. The CBSA representatives further explained that questions regarding causal link and like goods would be probed in further detail as part of the Tribunal enquiry. As well, officers expressed the position of the CBSA respecting the various subsidy programs named in the investigation, as described in Appendix 1.
[81] On April 2, 2004, pursuant to subsection 38(1) of SIMA, the President of the Canada Border Services Agency made a preliminary determination of dumping respecting cold drawn and annealed stainless steel round wire, up to and including 0.300 inches (7.62 mm) in maximum solid cross-sectional dimension, originating in or exported from the Korea, Switzerland and the United States, and made a preliminary determination of subsidizing of such product originating in or exported from India.
[82] On the same date, pursuant to paragraph 35(2)(a) of SIMA, the President terminated the dumping investigation of such product originating in or exported from Chinese Taipei and India.
Provisional Duty to be Imposed
[83] In light of the preliminary determination of injury made by the Tribunal and to prevent further injury from dumped and subsidized imports, provisional duties will be imposed on all subject goods imported into Canada from India, Korea, Switzerland and the United States, on and after April 2, 2004, pursuant to subsection 8(1) of SIMA.
[84] The provisional anti-dumping duty is based on the estimated margins of dumping, expressed as a percentage of the export price of the goods. Provisional countervailing duty is expressed on a rupee per metric tonne basis. For any new exporters in India that may sell to Canada in the future, provisional countervailing duty will be based on the total of the highest estimated amount of subsidy found respecting each subsidy program, which equals 13, 857 rupees per metric tonne. Appendices 2 and 3 show the estimated amounts of subsidy and rates of provisional duty, payable on subject goods released from Customs on and after April 2, 2004.
[85] Provisional duty is payable by the importer and applies until the day the Tribunal makes its finding on injury. However, if the investigation is terminated by the CBSA or there is an undertaking arrangement, provisional duty will cease.
[86] Importers are required to pay provisional duty in cash or by certified cheque. Alternatively, they may post security equal to the amount payable. Importers should contact their regional customs office if they require further information on the payment of provisional duty or the posting of security. If the importers of such goods do not indicate the required SIMA code or do not correctly describe the goods in the customs documents, an administrative monetary penalty could be imposed. The imported goods are subject to the Customs Act. As a result, failure to pay duties within the specified time will result in the application of the provisions of the Act regarding interest.
The Canada Border Services Agency
[87] The CBSA will continue its investigation of the dumping and subsidizing and will make a final decision by June 30, 2004.
The Canadian International Trade Tribunal
[88] The Tribunal has begun its full inquiry into the question of injury to the Canadian industry. The Tribunal is expected to issue its final decision by July 30, 2004.
[89] If the Tribunal finds that the dumping or subsidizing has not caused injury or is not threatening to cause injury, the proceedings will be terminated and all provisional duty collected will be refunded. If the Tribunal makes a decision of injury, anti-dumping and/or countervailing duty will be imposed on imports of subject goods.
Retroactive Duty on Massive Importations
[90] Under certain circumstances, anti-dumping and countervailing duty can be imposed retroactively on subject goods imported into Canada. When the Tribunal conducts its inquiry on material injury to the Canadian industry, it may consider if dumped and/or subsidized goods that were imported close to or after the initiation of the investigation constitute massive importations over a relatively short period of time and have caused injury to the Canadian industry. Should the Tribunal issue a finding that there were recent massive importations of dumped and/or subsidized goods that caused injury, imports of subject goods released by the CBSA in the 90 days preceding the day of the preliminary determination could be subject to anti-dumping and/or countervailing duty.
[91] After a preliminary determination of dumping, exporters may give a written undertaking to revise selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated. Similarly, after a preliminary determination of subsidizing, the government of a country may give a written undertaking to eliminate the subsidy on the goods or to eliminate the injurious effect of the subsidy by limiting the amount of the subsidy or the quantity of goods exported to Canada. Exporters, with the consent of their government, may also undertake to revise their selling prices so that the injurious effect of the subsidy is eliminated.
[92] Acceptable undertakings must account for all or substantially all of the exports to Canada of the dumped and subsidized goods. In the event that an undertaking is accepted, the required payment of provisional duty on the goods would be suspended.
[93] In view of the time needed for consideration of undertakings, written undertaking proposals should be made as early as possible, and no later than 60 days after the preliminary determination of dumping and subsidizing.
[94] The legislation allows all interested parties to make representations concerning any undertaking proposals. The CBSA will maintain a list of interested parties and will notify them should an undertaking proposal be received. Persons wishing to be notified must provide their name, address, telephone, fax, or e mail address, to one of the officers listed below. Interested parties may also consult the Internet website noted below for information on undertakings offered in this investigation. A notice will be posted on the website when an undertaking proposal is received. Interested parties have nine days from the date the undertaking offer is received to make representations.
[95] A notice of this preliminary determination of dumping and subsidizing, and partial termination of dumping will be published in the Canada Gazette pursuant to paragraph 38(3)(a) and subparagraph 35(2)(b)(ii) of SIMA.
[96] This Statement of Reasons has been provided to persons directly interested in these proceedings. It is also posted on the Directorate's Web site at the address below. For further information, please contact Vera Hutzuliak, Edith Trottier-Lawson, Libby Campbell or Beth MacDonald as follows:
Canada Border Services Agency
Anti-Dumping and Countervailing Directorate
191 Laurier Avenue West, 10th Floor
Ottawa, Ontario K1A 0L5
Canada
Telephone
Vera Hutzuliak (613) 954-0689
Edith Trottier-Lawson (613) 954-7182
Libby Campbell (613) 954-7380
Beth MacDonald (613) 948-7809
Fax
(613) 948-4844
E mail
Vera.Hutzuliak@ccra-adrc.gc.ca
Edith.Trottier-Lawson@ccra-adrc.gc.ca
ElizabethB.Campbell@ccra-adrc.gc.ca
Beth.MacDonald@ccra-adrc.gc.ca
Web Site
http://www.cbsa-asfc.gc.ca/sima
Suzanne Parent
Director General
Anti-dumping and Countervailing Directorate
SUBSIDY PROGRAMS IN INDIA THAT WERE FOUND TO HAVE CONFERRED A BENEFIT ON EXPORTERS OF STAINLESS STEEL WIRE
Duty Entitlement Pass Book Scheme
The Government of India's Duty Entitlement Pass Book (DEPB) scheme operates essentially as a type of duty drawback program. According to the GOI, the objective of the DEPB scheme is to neutralize the incidence of duty on the import content of an exported product by granting a certain rate of import duty or DEPB credit when a product is exported. The DEPB duty credit is calculated as a proportion of the value of the exported product and is based on the GOI's "Standard Input-Output Norms", which also list for any given exported product, the type and quantity of goods that may be imported duty-free for use in the production of this finished exported end-product. Any DEPB credits not used by the exporter to import inputs duty-free may be sold in the open market.
It is the position of the GOI that the DEPB program is a permissible drawback program under the WTO Agreement on Subsidies and Countervailing Measures. The GOI further asserts that the sale of the credits does not alter the nature of the DEPB as a valid substitution drawback program; rather it contends that the sale of the credits is simply another method of indirectly exempting duties on inputs.
A review of the material supplied by the exporters of stainless steel wire in their submissions and during the verification meetings revealed that in certain cases the companies received excessive duty exemption under the DEPB scheme, as evidenced by their ability to import ineligible goods on a duty-free basis and/or to sell their DEPB credit licences.
The CBSA notes that section 2 of SIMA includes, in its definition of subsidy, duty exemption on imports of any goods other than energy, fuel, oil or catalysts consumed in the production of exports, or duty exemption on goods other than those incorporated into the finished exported product. The GOI's financial contribution when allowing duty exemption for imports of ineligible goods under the DEPB scheme is established under paragraph 2(1.6)(b) of SIMA as the amount of duties not collected.
The CBSA also maintains that DEPB credits, which are sold, are not used in duty exemption programs allowable under SIMA and that revenue from the sale of unused DEPB credits therefore constitutes a subsidy. The GOI's financial contribution in respect of the sale of DEPB credits is established under paragraph 2(1.6)(c) of SIMA, as the provision of goods or services other than general governmental infrastructure.
The unallowable duty exemptions granted under the DEPB scheme and proceeds from the sale of DEPB licences constitute specific subsidies since they are contingent upon export performance.
Under subsection 27.1(2) of the Special Import Measures Regulations (SIMR), the amount of subsidy received, in respect of any amount of duty owed and due to the government that was deducted, was treated as a grant under section 27 of the SIMR. Similarly, under subsection 27.1(1) of the SIMR, the amount of subsidy in respect of the sales of DEPB credits was calculated by treating the revenues from these sales as grants. The amounts were then allocated over the total quantity of subsidized goods to which the grants were applicable.
Income Tax Exemption on Export Profits
Under section 80 HHC of the Indian Income Tax Act, exporters may deduct a portion of their export profit when determining taxable income. During the period investigated, exporters were able to deduct 50 per cent of their export profit when calculating income tax payable.
The CBSA considers the GOI's income tax deduction to be a subsidy under paragraph 2(1.6)(b) of SIMA, because exempted amounts would otherwise be owing and due to the government. This tax deduction constitutes a specific subsidy since it is contingent upon export performance.
The CBSA calculated the amount of subsidy conferred on each exporter in accordance with section 32 of the SIMR, by multiplying the export profit deduction by the relevant tax rate and allocating this figure over the total quantity of subsidized goods to which the deduction was applicable.
Export Promotion Capital Goods Scheme
The GOI's Export Promotion Capital Goods (EPCG) scheme allows exporters to import capital equipment and components at reduced or nil import duties. It was found during this investigation that only one exporter of stainless steel wire had imported capital equipment under this scheme.
The GOI's financial contribution under the EPCG scheme is established under paragraph 2(1.6)(b) of SIMA as the amount of duties not collected. The benefit to exporters is the amount of duty savings received under this program.
Only exporters are eligible for EPCG licences. Therefore, the EPCG scheme provides a specific subsidy for the reason that it is contingent on export performance.
Under section 27.1(2) of the SIMR, the amount of subsidy received, in respect of any amount owing and due to government that is deducted, is to be treated as a grant. Accordingly, the amount of subsidy was calculated as the difference between the duties applicable at time of importation and those actually paid. The resultant duty savings were then amortized over the estimated useful life of the imported capital equipment, as determined by the depreciation rates used in the exporters' financial statements and allocated over the total quantity of subsidized goods to which the grants were applicable.
Pre- and Post-Shipment Export Financial Assistance (EFA)
Also known as the Export Packing Credit, Pre-shipment Export Financial Assistance is offered to exporters under a program administered by the Reserve Bank of India (RBI), the GOI's Central Bank. Under this program, banks extend pre-shipment working capital loans at ceiling rates set by the RBI, for such purposes as purchasing raw materials, as well as processing, warehousing, packing, transporting and shipping goods for export.
Similarly, the RBI administers a Post-shipment Export Financial Assistance program, under which banks extend loans to exporters at ceiling rates set by the RBI, for the period from the shipment of the exported goods until the date of realization of export proceeds.
During the current investigation, it was found that interest rates applicable to short term loans taken in respect of export sales were now essentially identical to those taken in respect of domestic sales. Consequently, the EFA programs did not result in benefits for the majority of the stainless steel wire exporters in this investigation.
The CBSA found that there was a small discernible difference between the interest rates applicable to domestic and export sales for only one exporter. The GOI's financial contribution in this instance was established under paragraph 2(1.6)(d) of SIMA, where the Government permits or directs a non-governmental body to carry out anything referred to in paragraph 2(1.6)(a). This latter paragraph cites practices of the Government involving the direct transfer of funds.
The interest rate reduction emanating from EFA programs constitutes a specific subsidy because it is contingent on export performance.
The benefit to the exporters was calculated in accordance with section 28 of the SIMR, as the amount by which the interest paid on the EFA loans was lower than the interest that would have been payable for comparable commercial loans. To calculate an amount for subsidy, this benefit was distributed over the quantity of subject goods for which the exporter had availed himself of EFA loans.
CERTAIN STAINLESS STEEL WIRE
ESTIMATED AMOUNTS OF SUBSIDY BY EXPORTER
India |
Export Subsidy Programs Utilized |
Percentage of Subsidized Goods as Percentage of Total Goods |
Amount of Subsidy* and Provisional Duty Payable (per Metric Tonne) |
Venus Wire Industries Limited |
Duty Entitlement Pass Book Scheme Income Tax Exemption on Export Profits Export Promotion Capital Goods Scheme |
100% |
5,654 rupees |
VSL Wires Limited |
Duty Entitlement Pass Book Scheme Income Tax Exemption on Export Profits |
100% |
667 rupees |
Macro Bars and Wires (India) Pvt. Limited |
Duty Entitlement Pass Book Scheme Income Tax Exemption on Export Profits |
100% |
12, 256 rupees |
Nevatia Steel & Alloys Pvt. Limited |
Duty Entitlement Pass Book Scheme Income Tax Exemption on Export Profits Pre and Post-shipment Export Financial Assistance |
100% |
12,326 rupees |
New Exporters ** |
13, 857 rupees |
* The benefits received from these programs, in aggregate, represent on average 6.2% of the value of the goods and exceed the 2 per cent threshold stipulated in Article 27.10 of the Subsidies Agreement concerning developing countries.
**For any new exporters in India that may sell to Canada in the future, provisional countervailing duties will be based on the total of the highest estimated amount of subsidy found respecting each Indian benefit program, which equals 13,857 rupees per metric tonne.
CERTAIN STAINLESS STEEL WIRE
ESTIMATED MARGINS OF DUMPING BY EXPORTER/COUNTRY
Percentage of Goods Dumped |
Range of Margins of Dumping for Dumped Imports * |
Weighted Average Estimated Margin of Dumping * |
Provisional Duty Payable* | |
All Exporters (1) |
100% |
- |
108% |
108% |
100% |
108% |
|||
All Exporters (1) |
100% |
- |
108% |
108% |
100% |
108% |
|||
Sumiden Wire Products Corporation |
86.8% |
0.1% - 30.4% |
10.2% |
10.2% |
Sandvik Materials Technology |
99.1% |
0.7% - 149% |
54% |
54% |
All other exporters (1) |
100% |
- |
108% |
108% |
99.4% |
100% |
* as a percentage of export price
(1) Margin of dumping based on highest margin of dumping (excluding anomalies) estimated for the Preliminary Determination.
