Anti-dumping and Countervailing Program

OTTAWA, September 24, 2004

4243-38
4218-17

AD/1308
CVD/103

STATEMENT OF REASONS

Concerning the making of a preliminary determination with respect to the dumping and subsidizing of

CERTAIN CARBON STEEL AND STAINLESS STEEL FASTENERS ORIGINATING IN OR EXPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA AND CHINESE TAIPEI

DECISION

On September 10, 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 carbon steel and stainless steel fasteners, i.e. screws, nuts and bolts of carbon steel or stainless steel that are used to mechanically join two or more elements, excluding fasteners specifically designed for application in the automotive or aerospace industry, originating in or exported from the People's Republic of China and Chinese Taipei, and made a preliminary determination of subsidizing of such product originating in or exported from the People's Republic of China and Chinese Taipei.

Cet énoncé des motifs est également disponible en français. Veuillez vous reporter à la section "Renseignements". This Statement of Reasons is also available in French. Please refer to the "Information" section.

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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
• DUMPING INVESTIGATION
  • CHINA
  • CHINESE TAIPEI
  • UNITED STATES
  • SUMMARY OF RESULTS (DUMPING)
• SUBSIDY INVESTIGATION
  • CHINA
  • CHINESE TAIPEI
  • SUMMARY OF RESULTS (SUBSIDY)
• DECISION
• PROVISIONAL DUTY TO BE IMPOSED
• FUTURE ACTION
• RETROACTIVE DUTY ON MASSIVE IMPORTATIONS
• UNDERTAKINGS
• PUBLICATION
• INFORMATION
• APPENDIX 1
• APPENDIX 2
• APPENDIX 3
• APPENDIX 4
• APPENDIX 5

Summary of Events

[1] On April 28, 2004, the President of the Canada Border Services Agency (CBSA) initiated an investigation into the alleged injurious dumping and subsidizing of certain carbon and stainless steel fasteners originating in or exported from the People's Republic of China and Chinese Taipei.

[2] The investigation was initiated in response to a complaint filed by Leland Industries Inc. (Leland) of Toronto, Ontario on March 24, 2004. On March 29, 2004, the CBSA informed Leland that the complaint was properly documented and notified the governments of the named countries that a properly documented complaint had been filed and provided them with a copy of the non-confidential copy of the subsidy portion of the complaint. The complainant provided evidence that certain carbon and stainless steel fasteners had been dumped and subsidized, and that the dumping and subsidizing had caused injury to Canadian producers of these goods.

[3] On June 23, 2004 consultations were conducted between Canadian government officials and representatives of the government of China, in accordance with Article 13.2 of the World Trade Organization Agreement on Subsidies and Countervailing Measures (Subsidies Agreement).

[4] Upon receiving notice of the initiation of the investigation, the Canadian International Trade Tribunal (Tribunal) started its preliminary injury inquiry. On June 28, 2004, the Tribunal made a preliminary determination that the evidence disclosed a reasonable indication that the dumping and subsidizing of carbon and stainless steel fasteners have caused injury to the Canadian industry.

[5] On July 9, 2004, pursuant to paragraphs 39(1)(a) and (b) of the Special Import Measures Act (SIMA), the President of the CBSA (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 and the number of persons involved in the investigation.

[6] On September 10, 2004, as a result of the CBSA's preliminary investigation and pursuant to subsection 38(1) of SIMA, the President made a preliminary determination of dumping respecting certain carbon and stainless steel fasteners originating in or exported from the People's Republic of China and Chinese Taipei, and made a preliminary determination of subsidizing of such product originating in or exported from the People's Republic of China and Chinese Taipei.

[7] As China is listed under Part I of the DAC List of Aid Recipients¹ maintained by the Organization for Economic Co-operation and Development, the CBSA has extended developing country status to the People's Republic of China (China) for purposes of this investigation.

Period of Investigation

[8] The dumping investigation covered all subject goods released into Canada during the period of investigation (POI), that is, from January 1, 2003 to December 31, 2003. The subsidy investigation encompassed the period from January 1, 2003 to March 31, 2004.

Interested Parties

Complainant

[9] The complainant, Leland, is one of the largest Canadian producers of carbon steel and stainless steel fasteners. The complainant's headquarters and factory are located at 95 Commander Boulevard in Toronto, Ontario.

Exporters

[10] At the time of the initiation of the investigation, the CBSA had identified 2,857 known or possible exporters of the subject goods. During the investigation, the CBSA has conducted further analysis of customs documentation and other available information, with the refined data indicating that there are 2,709 identified exporters or possible exporters of the subject goods.

[11] Given the unusually large number of exporters, the CBSA relied upon paragraph 30.3(1)(a) of SIMA, which provides that margins of dumping may be determined in relation to the largest percentage of goods that can reasonably be investigated if it is determined that it would be impracticable to determine a margin of dumping in relation to all goods because of the number of exporters, producers or importers.

[12] During the investigation, it was found that the majority of exporters shipped in very small quantities, making it impracticable to request and analyze information from all exporters. Therefore, further to an analysis of the importation data and consultations with the complainant, it was decided that only annual shipments valued at $100,000 or more should be regarded as commercial quantities, and that information would be requested only from exporters who shipped in such quantities. During the POI, 187 exporters were found to have shipped to Canada in commercial quantities. Shipments from these exporters accounted for over 90% of all fastener imports into Canada from China and Chinese Taipei during that period. All references to sampled exporters refer to these 187 exporters which the CBSA decided it could reasonably investigate.

[13] The CBSA sent a Dumping Request for Information (RFI) to all sampled exporters, some of whom exported subject goods of Chinese or Chinese Taipei origin through other countries such as the United States of America (U.S.A.) or Hong Kong. The CBSA also sent a Subsidy RFI to all sampled exporters located in either China or Chinese Taipei, as well as to the governments of these countries.

Importers

[14] When the investigation was initiated, the CBSA identified 2,571 known or possible importers of the subject goods, of whom 156 imported in commercial quantities as defined in the above section. Further analysis after initiation indicated that in total there were 2,520 identified importers or possible importers of the subject goods. Similarly as for the exporters, an RFI was sent to all identified commercial importers. All references to sampled importers refer to these 156 importers. Submissions were received from 37 importers, three of whom are related to U.S.A. exporters, and one that is related to an exporter in China. An additional 19 importer replies were received stating that the respondent had not imported subject goods during the period of investigation.

Product Definition

[15] For the purpose of this investigation, the subject goods are defined as:

Carbon steel and stainless steel fasteners, i.e. screws, nuts and bolts of carbon steel or stainless steel that are used to mechanically join two or more elements, excluding fasteners specifically designed for application in the automotive or aerospace industry, originating in or exported from the People's Republic of China and Chinese Taipei.

Additional Product Information

Technical Information

[16] Screws, nuts and bolts are the subject of this investigation, while fastener products other than screws, nuts and bolts are excluded from the product definition. Also excluded are all non-steel fasteners and fasteners destined for specific applications in the automotive and aerospace industries.

[17] A fastener is a mechanical device designed specifically to hold, join, couple, assemble, or maintain equilibrium of two or multiple components. The resulting assembly may function dynamically or statically as a primary or secondary component of a mechanism or structure. Based on the intended application, a fastener is produced with varying degrees of built-in precision and engineering capability, ensuring adequate, sound service under planned, pre-established environmental conditions.

[18] Screws, nuts, bolts, washers, rivets, pins, studs and custom formed parts are all items that are included in the general product family of fasteners. For the purposes of this complaint however, only the three identified fastener products - screws, nuts and bolts - are the subject products under consideration.

[19] A screw is a headed and externally threaded mechanical device possessing capabilities which permit it to be inserted into holes in assembled parts, to be mated with a pre-formed internal thread or to form its own thread, and to be tightened or released by torquing its head. Screws are fastener products with an external threading on the shank. Screws include machine screws, wood screws (including deck screws), self-drilling, self-tapping, thread forming, and sheet metal screws. For example, they can either be used without any other part and fixed into wood (wood screws) or metal sheets (self-tapping screws) or be combined with a nut and washers to form a bolt. Screws may have a variety of head shapes (round, flat, hexagonal etc.), drives (slot, socket, square, phillips, etc.), shank lengths and diameters. The shank may be totally or partially threaded.

[20] A nut is a perforated block (usually of metal) possessing an internal thread for the purpose of tightening or holding two or more bodies in definite relating positions. A nut is usually used in conjunction with a bolt or a machine screw.

[21] A bolt is a headed and externally threaded mechanical device designed for insertion through holes in assembled parts to mate with a nut and is normally intended to be tightened or released by turning that nut.

[22] There are many types of fasteners, each one being defined by its specific physical and technical characteristics, the type of material from which they are made (e.g. brass, plastic, steel etc.) and the grade of the material (e.g. carbon steel: grade 2 or grade 8 etc.). Fasteners are used in a wide range of final applications and depending on the usage, they may be un-hardened or heat-treated, either bare or plated, with or without extra corrosion protection, shipped and distributed in bulk or custom packaged and labelled.

Production Process

[23] Fasteners are produced from round wire either by cold forming or by machining operations. The cold forming process starts with round wire, which, through a series of dies and punches, is formed into the desired shape with certain characteristics. A variety of metal materials are used, with carbon steel and stainless steel being the more common material used. Cold forming is generally scrapless compared to machining. Machining produces tighter tolerances, but is significantly slower and generates scrap because it involves the removal of material. Currently, cold forming is more prevalent and machining is not commonly used.

[24] Threads are also either formed or cut. A thread rolling operation forms thread on the part by feeding the headed blank into a thread-rolling machine. Rolled threads are stronger than cut threads. Steel fasteners can be un-hardened or hardened; the latter is achieved by heat-treating the steel. Hardening can be accomplished through straight hardening, which is designed to uniformly harden the part; or case hardening where the process is used to give the surface of the part a higher hardness than its core. In both cases the hardening process affects the whole part.

[25] There are various types of finishing processes such as electroplating (most commonly with zinc, nickel or chromium), and phosphate conversion coating, with the selection of finish being influenced by factors such as a requirement for corrosion protection. Certain types of paint provide extra corrosion protection. Some fasteners are also painted (powder or wet) for cosmetic reasons.

[26] Various bodies including, among others, ANSI/ASME, SAE, IFI, DIN and ISO, have issued industry standards for fasteners.²

Product Application

[27] Fasteners are used by a variety of user industries and in a wide range of final applications. Three broad categories of user industries include general industrial, automobile related industries and the aerospace industry. General industrial fasteners, the subject of this complaint, are the most wide ranging in terms of end-use. The wide variety of fastener applications in general industry includes rural buildings, grain bins, machinery and equipment, and household furniture. Automotive and aerospace fasteners are specialized products that meet the requirements for distinct use in the respective industries.

Classification of Imports

[28] The subject fasteners are properly classified under the following Harmonized System (HS) classification numbers:

7318.11.00.00
7318.12.00.00
7318.14.00.00
7318.15.90.00
7318.16.00.00

Canadian Industry

[29] Leland is one of the major Canadian producers of like carbon steel and stainless steel fasteners. The goods are produced at its manufacturing plant in Toronto, Ontario. Leland maintains four warehouses in Canada, two warehouses in the United States and also has associated sales representatives in Canada and the United States.

[30] Prior to initiation, the CBSA confirmed that Leland met the standing requirements of subsection 31(2) of SIMA. There has been no change in the structure of the Canadian industry since the initiation of the investigation.

IMPORTS INTO CANADA

[31] During the preliminary phase of the investigation, 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. This additional analysis enabled the CBSA to improve its estimates as to the proportion of non-subject fasteners (i.e. fasteners for use in the automotive and aerospace industries) imported under the relevant HS classification numbers.

[32] The CBSA's revised estimates of importations of subject goods, based on information gathered during the preliminary phase of the investigation, are presented in the following table:

Apparent Canadian Imports (2003)

Imports into Canada	Volume (kilograms)	Market Share (%)
China	39,241,532	4.2%
Chinese Taipei	132,664,862	14.1%
All Other Countries	771,590,695	81.8%
Total Imports	943,497,089	100%

INVESTIGATION PROCESS

[33] At the time of the initiation of the investigation, Requests for Information (RFIs) respecting dumping were sent to 19 exporters in China, 88 exporters in Chinese Taipei, 67 exporters in the United States of America (U.S.A.), as well as 10 additional exporters located in other countries. All RFIs included instructions indicating that exporters who were not also manufacturers were to forward the RFIs to the manufacturers of the goods in China or Chinese Taipei.

[34] RFIs respecting subsidy were sent to19 exporters in China and 88 exporters in Chinese Taipei, as well as to the government of China via that country's local embassy, and the Government of Chinese Taipei through their representatives in Canada. Information concerning export prices and import volumes was requested from 156 importers.

[35] Responses to the RFIs on dumping were received from 5 exporters and five non-exporting producers located in China (all of whom also responded to the subsidy RFIs), 30 exporters located in Chinese Taipei (only 21 of whom responded to the subsidy RFI), and four exporters located in the United States. During the investigation, the CBSA confirmed that 11 of the possible commercial exporters did not export subject goods during the POI, and that 2 other possible commercial exporters were in fact trading companies rather than exporters for purposes of SIMA. In addition, a complete response was received from the Government of Chinese Taipei.

[36] As well, several exporters in Chinese Taipei and the United States provided incomplete responses that were inadequate for making determinations on dumping and/or on subsidizing. The Government of China also provided a response that was found to be incomplete, as described in more detail in the subsidy investigation section. Thus, only 39 exporters, who accounted for approximately 41% of the CBSA's sampled subject imports, supplied complete submissions for the dumping investigation, and only 26 exporters, who account for approximately 35% of the CBSA's sampled subject imports, supplied complete submissions for the subsidy investigation.

[37] Submissions were also received from 37 importers, three of whom are related to U.S.A. exporters who responded, and one that is related to an exporter in China. An additional 19 importer replies were received stating that the respondent had not imported subject goods during the period of investigation

[38] CBSA officers carried out on-site verifications of the information provided by one of the U.S.A exporters in mid-July. Further on-site verifications involving additional exporters are scheduled following the preliminary determination, as are meetings with government officials in Chinese Taipei.

DUMPING INVESTIGATION

[39] In conducting its investigation, the CBSA requested that exporters provide sales and cost information necessary to estimate the normal values and export prices of the subject goods.

[40] 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.

[41] The export price of goods shipped to Canada is generally the lesser of the exporter's 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.

[42] Where information submitted to the CBSA by exporters was found to be substantially complete, such information was used in calculating the estimated margins of dumping. However, due to the large number of exporters who submitted substantially complete information to the CBSA, not all exporters' submissions were utilized for purposes of the preliminary determination. The selection of submissions utilized was based on the quantities exported to Canada during the POI by the individual exporters, the breadth of the product range exported, and the promptness with which the exporter supplied any necessary supplemental information. It is expected that the CBSA will be able to review all cooperative exporters' submissions prior to the final determination and determine company-specific margins of dumping for all cooperative exporters.

[43] With respect to the exporters whose company-specific information was utilized for the preliminary determination, margins of dumping were estimated for each separate product shipped to Canada by each of the exporters analyzed 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.

[44] In respect of each exporter, the overall estimated margin of dumping of all of the products was calculated by weighting the estimated margins found for each product according to the volume exported to Canada. In making this calculation, the estimated margin of dumping for any product that was not dumped (that had an overall negative estimated margin of dumping) was set to zero.

[45] In calculating the weighted average estimated margin of dumping of a country, the overall estimated margins of dumping found in respect of each exporter were weighted according to the volume of subject goods exported to Canada during the POI.

[46] For exporters of goods originating in China who supplied a substantially complete response to the dumping RFI, but whose company-specific information was not utilized for the preliminary determination, the normal value of the goods has been estimated based on their export price plus an advance of 34%. This value represents the weighted average estimated margin of dumping (expressed as a percentage of the export price) found for subject goods from China for those cooperative exporters analyzed thus far during the investigation. This advance of 34% will also be issued to exporters of Chinese origin goods who shipped in non-commercial quantities and who were not requested to provide information to the CBSA.

[47] For exporters of goods originating in Chinese Taipei who supplied a substantially complete response to the dumping RFI, but whose company-specific information was not utilized for the preliminary determination, the normal value of the goods has been estimated based on their export price plus an advance of 35%. This value represents the weighted average estimated margin of dumping (expressed as a percentage of the export price) found for subject goods from Chinese Taipei for those cooperative exporters analyzed thus far during the investigation. This advance of 35% will also be issued to exporters of Chinese Taipei origin goods who shipped in non-commercial quantities and who were not requested to provide information to the CBSA.

[48] For exporters who shipped in commercial quantities and were forwarded an RFI, but chose not to cooperate, the normal value of the goods has been estimated based on the export price of the goods plus an advance of 126%, 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.

[49] Further details regarding the normal values, export prices and margins of dumping are discussed below.

China

[50] Four exporters in China submitted complete responses to the RFI containing information that was utilized for the preliminary determination of dumping. They are: Gem-Year Industrial Co. Ltd., Robertson Jiaxing Inc., Shanghai Ben Yuan Metal Products Co. Ltd., and Tong Ming Enterprise (Jiaxing) Co. Ltd.

Gem-Year Industrial Co. Ltd. (Gem-Year)

[51] Normal Value - Gem-Year produces fasteners for both the export and domestic market, and has sales of like goods to customers in China. Gem-Year supplied information and data pertaining to the sales and costs of like goods sold in the domestic market and subject goods exported to Canada. The information was found satisfactory for purposes of making a preliminary determination. As a result, since there existed a sufficient number of profitable domestic market sales made to non associated customers in China, the normal values were estimated on the basis of the weighted average prices for these sales, using the method in section 15 of SIMA.

[52] 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.

[53] 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 94% of the goods exported by Gem Year were dumped by an estimated weighted average margin of dumping of 20%, expressed as a percentage of export price. The margins of dumping for the goods range from 0.06% to 94%.

Robertson Jiaxing Inc. (Robertson)

[54] Normal Value - Robertson produces solely for export and consequently has no domestic sales. At this time, satisfactory information is not available to compute normal values under paragraph 16(1)(c) of SIMA, based on sales of other vendors in China. For purposes of the preliminary determination, normal values have been estimated based on paragraph 19(b) of SIMA, using the cost of production of the goods, selling, administrative and all other costs, and an amount for profits. For purposes of the preliminary determination, the amount for profits was based on the complainant's estimate, which reflected the profit of a publicly traded Chinese fastener manufacturer.

[55] Export Price - For purposes of the preliminary determination, export prices were estimated in accordance with the methodology of section 24 of SIMA, on the basis of the lesser of the exporter's selling price and the importer's purchase price. As the goods were sold to a related importer in Canada, importations will be further analyzed prior to the final determination to establish whether export prices should be determined in accordance with section 25 of SIMA, based on the importer's resale prices in Canada less all costs incurred in importing and selling the goods, plus an amount for profit.

[56] 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 72% of the goods exported by Robertson were dumped by an estimated weighted average margin of dumping of 8%, expressed as a percentage of export price. The margins of dumping for the goods range from 0.08% to 44%.

Shanghai Ben Yuan Metal Products Co. Ltd. (Shanghai Ben Yuan)

[57] Normal Value - Shanghai Ben Yuan produces solely for export and consequently has no domestic sales. At this time, satisfactory information is not available to compute normal values under paragraph 16(1)(c) of SIMA, based on sales of other vendors in China. For purposes of the preliminary determination, normal values have been estimated based on paragraph 19(b) of SIMA, using the cost of production of the goods, selling, administrative and all other costs, and an amount for profits. For purposes of the preliminary determination, the amount for profits was based on the complainant's estimate, which reflected the profit of a publicly traded Chinese fastener manufacturer.

[58] 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.

[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 83% of the goods exported by Shanghai Ben Yuan were dumped by an estimated weighted average margin of dumping of 13%, expressed as a percentage of export price. The margins of dumping for the goods range from 0.11% to 66%.

Tong Ming Enterprise (Jiaxing) Co. Ltd. (Tong Ming)

[60] Normal Value - Tong Ming produces fasteners for both the export and domestic market, and has sales of like goods to customers in China. Tong Ming supplied information and data pertaining to the sales and costs of like goods sold in the domestic market and of the goods exported to Canada. However, it was found that the domestic sales database provided contained a very limited number of sales. Accordingly, the exporter was requested to submit a revised selection of like goods and corresponding domestic sales database. The revised information will be analyzed for purposes of the final determination of dumping. For purposes of the preliminary determination, the information supplied in the original response was used. As a result, normal values were estimated on the basis of the weighted average prices of those profitable domestic sales to unrelated customers, using the method in section 15 of SIMA.

[61] 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.

[62] 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 69% of the goods exported by Gem Year were dumped by an estimated weighted average margin of dumping of 5%, expressed as a percentage of export price. The margins of dumping for the goods range from 0.68% to 24%.

Chinese Taipei

[63] Three exporters in Chinese Taipei submitted complete responses to the RFI containing information which was utilized for the preliminary determination of dumping. They are: Homn Reen Enterprise Co., Ltd., Shih Hsang Ywa Industrial Co., Ltd., and Tong Hwei Enterprise Co., Ltd.

Homn Reen Enterprise Co., Ltd. (Homn Reen)

[64] Normal Value - Homn Reen produces fasteners for both the export and domestic market, and has sales of like goods to customers in Chinese Taipei. Homn Reen supplied information and data pertaining to the sales and costs of like goods sold in the domestic market and of the goods exported to Canada. The information was found satisfactory for purposes 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 Chinese Taipei, the normal values were estimated on the basis of the weighted average prices for these sales, using the method in section 15 of SIMA.

[65] 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 based on paragraph 19(b) of SIMA, using the cost of production of the goods, selling, administrative and all other costs, and an amount for profits. For purposes of the preliminary determination, the amount for profits was based on the complainant's estimate, reflecting the average profit of fastener manufacturers in Chinese Taipei as reported by the government.

[66] 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.

[67] 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 69% of the goods exported by Homn Reen were dumped by an estimated weighted average margin of dumping of 18%, expressed as a percentage of export price. The margins of dumping for the goods range from 0.1% to 118%.

Shih Hsang Ywa Industrial Co., Ltd. (SHY)

[68] Normal Value - SHY produces fasteners for both the export and domestic market, and has sales of like goods to customers in Chinese Taipei. SHY supplied information and data pertaining to the sales and costs of like goods sold in the domestic market and of the goods exported to Canada. The information was found satisfactory for purposes 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 Chinese Taipei, the normal values were estimated on the basis of the weighted average prices for these sales, using the method in section 15 of SIMA.

[69] 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 profits. For purposes of the preliminary determination, the amount for profits was based on the overall company profit as reported in SHY's financial statements.

[70] 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.

[71] 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 38% of the goods exported by SHY were dumped by an estimated weighted average margin of dumping of 2%, expressed as a percentage of export price. The margins of dumping for the goods range from 0.01% to 7%.

Tong Hwei Enterprise Co., Ltd. (Tong Hwei)

[72] Normal Value - Tong Hwei produces fasteners for both the export and domestic market, and has sales of like goods to customers in Chinese Taipei. Tong Hwei supplied information and data pertaining to the sales and costs of like goods sold in the domestic market and of the goods exported to Canada. The information was found satisfactory for purposes 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 Chinese Taipei, the normal values were estimated on the basis of the weighted average prices for these sales, using the method in section 15 of SIMA.

[73] 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 profits. For purposes of the preliminary determination, the amount for profits was based on Tong Hwei's weighted average profit on domestic market sales of goods of the same general category as the goods sold to Canada.

[74] 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.

[75] 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 68% of the goods exported by Tong Hwei were dumped by an estimated weighted average margin of dumping of 5%, expressed as a percentage of export price. The margins of dumping for the goods range from 0.1% to 54%.

United States

[76] Three exporters from the United States supplied substantially complete information which was used for purposes of the preliminary determination. They are: Fastenal Company, Hilti Inc., and Senco Products Inc. Fastenal Company and Hilti Inc. shipped subject goods originating from both China and Chinese Taipei, while Senco Products Inc. only shipped subject goods originating from Chinese Taipei.

Fastenal Company (Fastenal)

[77] Normal Value - Fastenal imports fasteners from both China and Chinese Taipei, which are sold both domestically within the United States and exported to Canada. Fastenal supplied information and data pertaining to the sales and costs of like goods sold in its domestic market and of the goods exported to Canada. The information was found satisfactory for purposes 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 the United States, the normal values were estimated on the basis of the weighted average prices for these sales, using the method in section 15 of SIMA.

[78] 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 acquisition cost of the goods, selling, administrative and all other costs, and an amount for profits. The amount for profits was based on Fastenal's weighted average profit on domestic market sales of goods of the same general category as the goods sold to Canada.

[79] Export Price - Although the goods were sold to a related importer in Canada, for purposes of the preliminary determination, export prices were estimated in accordance with section 24 of SIMA, on the basis of the lesser of the exporter's selling price and the importer's purchase price. The related party transactions will be analyzed prior to the final determination, and export prices will, if necessary, be determined in accordance with section 25 of SIMA (i.e. the importer's selling price to a third party in Canada less all costs incurred by the importer on or after the importation of the goods, an amount for profit by the importer on the sale, and all costs incurred by the exporter arising from the shipment of the goods) for purposes of the final determination

[80] Margin of Dumping - Based on the information received prior to the preliminary determination, the CBSA was not able to accurately separate Fastenal's sales on the basis of country of origin of the goods. Therefore, for purposes of the preliminary determination, the normal values were compared with the export prices of all subject goods, regardless of origin, imported into Canada during the POI³. It was found that 90% of the goods exported by Fastenal were dumped by an estimated weighted average margin of dumping of 77%, expressed as a percentage of export price. The margins of dumping for the goods range from 0.05% to 120%.

Hilti Inc. (Hilti)

[81] Normal Value - Hilti imports fasteners from both China and Chinese Taipei, which are sold both domestically within the United States and exported to Canada. Hilti supplied information and data pertaining to the sales and costs of like goods sold in its domestic market and of the goods exported to Canada. The information was found satisfactory for purposes 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 the United States, the normal values were estimated on the basis of the weighted average prices for these sales, using the method in section 15 of SIMA.

[82] 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 acquisition cost of the goods, selling, administrative and all other costs, and an amount for profits. The amount for profits was based on Hilti's weighted average profit on domestic market sales of goods of the same general category as the goods sold to Canada.

[83] Export Price - Although the goods were sold to a related importer in Canada, for purposes of the preliminary determination, export prices were estimated in accordance with section 24 of SIMA, on the basis of the lesser of the exporter's selling price and the importer's purchase price. The related party transactions will be analyzed prior to the final determination, and export prices will, if necessary, be determined in accordance with section 25 of SIMA (i.e. the importer's selling price to a third party in Canada less all costs incurred by the importer on or after the importation of the goods, an amount for profit by the importer on the sale, and all costs incurred by the exporter arising from the shipment of the goods) for purposes of the final determination

[84] Margin of Dumping - Based on the information received prior to the preliminary determination, the CBSA was not able to accurately separate Hilti's sales on the basis of country of origin of the goods. Therefore, for purposes of the preliminary determination, the normal values were compared with the export prices for all subject goods imported into Canada during the POI⁴ . It was found that 100% of the goods exported by Hilti were dumped by an estimated weighted average margin of dumping of 86%, expressed as a percentage of export price. The margins of dumping for the dumped goods range from 6% to 126%.

Senco Products Inc. (Senco)

[85] Normal Value - Senco imports fasteners from Chinese Taipei, and sells these fasteners domestically within the United States and via exports to Canada. Senco supplied information and data pertaining to the sales and costs of like goods sold in its domestic market and of the goods exported to Canada. The information was found satisfactory for purposes 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 the United States, the normal values were estimated on the basis of the weighted average prices for these sales, using the method in section 15 of SIMA.

[86] 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 acquisition cost of the goods, selling, administrative and all other costs, and an amount for profits. The amount for profits was based on Senco's weighted average profit on domestic market sales of goods of the same general category as the goods sold to Canada.

[87] 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.

[88] 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 28% of the goods exported by Senco were dumped by an estimated weighted average margin of dumping of 3%, expressed as a percentage of export price. The margins of dumping for the dumped goods range from 6.4% to 20%.

Summary of Results (Dumping)

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
China	98%	52%	4.2%	4.1%
Chinese Taipei	99%	64%	14.1%	13.9%

[89] 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 margin of dumping of the goods of a country is insignificant or that the volume of dumped goods of a country is negligible. Pursuant to subsection 2(1) of SIMA, a margin of dumping of less than 2% is defined as insignificant, whereas a volume of dumped goods from a country forming less than 3% of total imports is considered negligible.

[90] As shown in the table above, the estimated weighted average margin of dumping of subject goods from both China and Chinese Taipei is above 2% and is therefore not insignificant. As well, the volume of dumped goods from both China and Chinese Taipei is above 3%, and is therefore not negligible.

SUBSIDY INVESTIGATION

[91] In accordance with SIMA, a subsidy exists if 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 WTO Agreement, that confers a benefit.

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

• practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities;
• amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not collected;
• the government provides goods or services, other than general governmental infrastructure, or purchases goods; or
• the government permits or directs a non-governmental body to do any thing 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.

[93] 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, 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". A prohibited subsidy includes an export subsidy which is contingent, in whole or in part, on export performance or a subsidy or portion of a subsidy that is contingent, in whole or in part, on the use of goods that are produced or that originate in the country of export.

[94] Notwithstanding that a subsidy is not specific in law, a subsidy may also be considered specific 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.

[95] For purposes of a countervailing duty investigation, the CBSA refers to a subsidy that has been found to be specific as an "actionable subsidy" meaning that it is subject to countervailing measures if the imported goods under investigation have benefited from the subsidy

[96] In conducting its investigation, the CBSA sent questionnaires to all sampled exporters located in China and Chinese Taipei (as defined previously), and to the Governments of China and Chinese Taipei. These questionnaires requested information necessary 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, processing, purchase, distribution, transportation, sale, export or import of the subject goods; and whether any resulting subsidy was specific in nature. The governments of both China and Chinese Taipei were also requested to forward the questionnaires to all subordinate levels of government within their respective countries that had jurisdiction over the sampled exporters.

China

Government of China Programs

[97] For purposes of this investigation , "Government of China" refers to all levels of government, including federal, central, provincial/state, regional, municipal, city, township, village, local, legislative, administrative or judicial levels. Benefits provided by state-owned enterprises operating under the direct or indirect control or influence of the Government of China may also be considered to be provided by the Government of China for purposes of this investigation.

[98] Prior to the initiation of the investigation, the complainant submitted allegations that the subject goods from China are eligible for government programs that may constitute actionable subsidies.

[99] In support of its allegations, the complainant provided a number of documents detailing support offered by the Government of China, primarily to exporting enterprises and to those operating in Special Economic Areas (SEAs). Reference was also made within the complaint to the fact that there is a lack of information available with regard to potential subsidies granted by the Government of China. This lack of information precluded both the complainant and the CBSA from identifying any individual subsidy programs potentially available in China prior to initiation.

[100] In reviewing the information found in the various reports and articles that were provided by the complainant, the CBSA developed the following list of general types of programs that may be provided to manufacturers of subject fasteners in China:

• Special Economic Area Incentives
• Grants Provided for Export Performance and Employing Common Workers
• Preferential Loans
• Loan Guarantees by the Government of China
• Income Tax Credits, Refunds and Exemptions:
  • Reduced Corporate Tax Rate for Export-Oriented Enterprises
  • Exemption/Reduction of Corporate Income Tax during Designated Start-up Period
  • Income Tax Refund of Amounts Further Invested in Special Economic Zones
  • Exemption/Reduction in Local Income tax for Special Economic Zone Enterprises
• Relief from Duties and Taxes on Inputs
• Reductions in Land Use Fees
• Purchase of Goods from State-owned Enterprises

[101] Appendix 2 provides further details regarding the potential subsidy programs that were identified upon initiation of the investigation.

[102] The Government of China provided a response to the subsidy questionnaire that was issued by the CBSA at the initiation of the investigation. Four separate supplemental questionnaires were sent to the Government of China after receiving this initial response. These questionnaires were sent to clarify and augment the information provided in the Government of China's initial response, as well as to resolve apparent inconsistencies.

[103] The Government of China was provided with a list of the nineteen exporters selected by the CBSA as exporters to be sampled as part of the Request for Information (RFI) sent on April 28, 2004. This list contained all of the contact information available to the CBSA at that time. The Government of China submitted in its initial response (received June 16, 2004) a list of five exporters (all previously identified by the CBSA and included in the list provided within the RFI), which the Government of China stated were all the producers of which it was aware and to which its response pertainedGovernment of China's Non-Confidential response to Original RFI, Question D.2. ⁵

[104] The CBSA received subsidy submissions from three of the companies on the Government of China's list of five companies, and from two additional exporters and five domestic producers which sold exclusively to a trading company (which was itself one of the responding exporters).

[105] The CBSA's Third Supplemental RFI reiterated its request that the Government of China identify additional fastener exporters and provide information regarding these additional companies. Counsel for the Government of China had previously been provided with contact information available to the CBSA through the individual company responses in addition to that provided at initiation (this additional information primarily consisted of telephone and telefax numbers and the names of designated company contact persons). The Government of China stated in its response that it was unable to locate additional exporters beyond the five it had already identified, and listed as a primary reason for this inability the fact that the CBSA had not provided the Chinese corporate names of any additional exporters, only the English names⁶. The Government of China maintained that any additional companies were likely either traders and/or producers not specializing in the production of subject fasteners, neither of which the Government of China had any knowledge.

[106] The CBSA has requested a revised response to all of the questions contained within the original and supplemental RFIs that would pertain to all of the exporters chosen by the CBSA to be part of its sample. To aid the Government of China in this respect, the CBSA has provided the Government of China with all the contact information for the sampled exporters available from Customs documentation and from the exporter responses.

[107] In addition, it appears that many of the Government of China's responses are the result of the Government of China directly contacting the exporters it had identified, inquiring as to whether any of the companies took advantage of a given program or policy, and then relaying the results of these enquiries to the CBSA.

[108] The Government of China has also made reference to the fact that information required to answer some of the CBSA's questions is only available at lower levels of government (lower being defined as being below the national level of government) and used this lack of availability at the national government level as reason to rely on the results of enquiries of individual exporters⁷. In the original RFI, the CBSA defined the term "Government of China" as referring to "all levels of government, i.e. federal, central, provincial/state, regional, city, municipal, township, village, local, legislative, administrative or judicial, singular, collective, elected or appointed. It also includes any person, agency, state-owned 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"⁸ . The CBSA relied on the definition of government set out in paragraph 2 (1) of SIMA in preparing this definition of the "Government of China".

[109] The Government of China's response to all questions asked within the original RFI and the various supplemental RFIs was expected to be a comprehensive response encompassing all parties covered by the above definition of "Government of China", and not to be restricted solely to the national level of government. The failure to provide this information renders incomplete any response that the Government of China has made with regards to actionable subsidies that it may or may not have made available to exporters of subject goods during the POI.

[110] The CBSA has requested that the Government of China provide a revised response to its original and supplemental RFIs reflecting information obtained through its own records rather than from enquiries of exporters, in order to corroborate exporters' submissions and to provide additional information regarding the potential subsidies available in the People's Republic of China. The CBSA also stressed the definition of the "Government of China" applicable for this investigation, and requested that responses to its questions be a comprehensive response from the entire Government of China.

[111] The information submitted by the Government of China in response to the original and supplemental questionnaires has been deemed to be incomplete and unusable for purposes of making a preliminary determination. For a more detailed analysis of the Government of China's submission with respect to general types of programs, please refer to Appendix 3.

[112] On August 30, 2004 a letter was sent to the Government of China, which included a comprehensive list of the deficiencies within the Government of China's submissions, and requesting that this information be provided as soon as possible in order for the CBSA to be able to use the information in the ongoing investigation. No response had yet been received at the time of the preliminary determination on September 10, 2004.

Estimated Amount of Subsidy

[113] In the absence of the above-noted information, the CBSA has been unable to estimate an amount of subsidy based on information provided by exporters and the Government of China. As such, the CBSA has used the best information otherwise available in estimating an amount for subsidy for purposes of the preliminary determination. The CBSA has estimated the amount of subsidy available to exporters in China to be 32% of the export price. The estimated amount was determined by comparing the average export prices of the subject goods as established by the CBSA with their respective costs of production i.e. raw material and processing cost, based on the information provided by Leland within its complaint.

Chinese Taipei

Government of Chinese Taipei Programs

[114] For purposes of this investigation, "Government of Chinese Taipei" refers to all levels of government, including federal, central, provincial/state, regional municipal, city, township, village, local, legislative, administrative or judicial levels. Benefits provided by state-owned enterprises operating under the direct or indirect control or influence of the Government of Chinese Taipei may also be considered to be provided by the Government of Chinese Taipei for purposes of this investigation.

[115] Prior to the initiation of the investigation, the complainant submitted allegations that the subject goods from Chinese Taipei are eligible for government programs that may constitute actionable subsidies.

[116] In support of its allegations, the complainant submitted documents providing details on a number of programs made available by the Government of Chinese Taipei to exporters of fasteners.

[117] In reviewing the information found in the various documents that were provided by the complainant, the CBSA developed the following list of general types of programs that may be provided to manufacturers of subject fasteners in Chinese Taipei:

• Economic Processing Zone Incentives
• Grants and Financial Assistance Provided by the Government of Chinese Taipei
• Preferential Loans
• Income Tax Credits, Refunds and Exemptions:
  • Reduced Corporate Tax Rate for Exporters
  • Exemption/Reduction/Credit/Refund of Corporate Income Tax for Designated Investments
  • Income Tax Refund/Exemption for Companies Located or Investing in Economic Processing Zones and Other Designated Zones and Areas
• 5. Exemption/Reduction in Duties and Taxes:
  • Exemption/Reduction in Duties and Taxes for Companies Located or Investing in Economic Processing Zones and Other Designated Zones and Areas
  • Exemption/Reduction in Duties and Taxes for Companies Not Located in the Designated Areas Above
• 6. Exemption/Reduction in Contract and Commercial Housing Taxes
• 7. Purchase of Goods from State-owned Enterprises

[118] Appendix 4 provides further details regarding the potential subsidy programs that were identified upon initiation of the investigation.

[119] The Government of Chinese Taipei provided a response to the subsidy questionnaire that was issued by the CBSA at the initiation of the investigation. Four separate supplemental questionnaires were also sent to the Government of Chinese Taipei after receiving this initial response. These supplemental questionnaires were sent to obtain further information than that which was provided in the Government of Chinese Taipei's initial response. In all instances, the Government of Chinese Taipei has answered all of the questions asked and has provided the CBSA with all information and documents requested. Furthermore, all information has been submitted in a timely manner. For these reasons, the information submitted by the Government of Chinese Taipei in response to the original and supplemental questionnaires has been deemed to be complete and usable for purposes of making a preliminary determination.

[120] As a result of the high level of cooperation received from the Government of Chinese Taipei and a number of exporters, a sizeable volume of information has been received by the CBSA from the cooperating parties and the analysis of this information has not been completed and is on-going. In addition, none of the information that has been received by the CBSA has been verified, as verifications are scheduled to take place following the preliminary determination. For more details regarding the specific programs available in Chinese Taipei, please refer to Appendix 5.

Estimated Amount of Subsidy

[121] Due to the fact that the analysis of all information received is continuing and that verification of the information has not yet taken place, the CBSA is presently unable to calculate specific subsidy amounts for each exporter on a per program basis. As such, the CBSA has decided, based on the high level of cooperation and the information available, to apply a nominal rate of one percent to each of the 7 general types of programs. Using this approach, the CBSA has estimated the amount of subsidy available to exporters in Chinese Taipei to be 7% of the export price.

Summary of Results (Subsidy)

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
China	100%	32%	4.2%
Chinese Taipei	100%	7%	14.1%

[122] 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. Section 41.2 of SIMA further requires the President to take into account the provisions of Article 27 of the WTO Subsidies Agreement when conducting subsidy investigations. These provisions stipulate that any investigation involving a developing country must be terminated as soon as it is determined that the total amount of subsidy for a developing country does not exceed 2% of the value of the goods, or that the volume of the subsidized imports represents less than 4% of the total imports of subject goods. For developed countries, less than 1% of the value of the goods is considered insignificant, whereas a volume of subsidized goods forming less than 3% of total imports is considered negligible.

[123] The CBSA normally makes reference to Part I of the "DAC"⁹ List 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. According to this list, China is eligible for the higher insignificance and negligibility thresholds, whereas Chinese Taipei is not. Nevertheless, the table above illustrates that the estimated amount of subsidy respecting both countries is not insignificant, nor is the volume of subsidized goods negligible.

DECISION

[124] On September 10, 2004, pursuant to subsection 38(1) of SIMA, the President of the CBSA made a preliminary determination of dumping respecting certain carbon and stainless steel fasteners originating in or exported from the People's Republic of China and Chinese Taipei, and made a preliminary determination of subsidizing of such product originating in or exported from People's Republic of China and Chinese Taipei.

PROVISIONAL DUTY TO BE IMPOSED

[125] 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 China and Chinese Taipei, on and after September 10, 2004, pursuant to subsection 8(1) of SIMA.

[126] 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 also expressed as a percentage of the export price of the goods. Appendix 1 shows the estimated margins of dumping, estimated amounts of subsidy, and the rates of provisional duty, payable on subject goods released from Customs on and after September 10, 2004.

[127] 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.

[128] 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.

FUTURE ACTION

The Canada Border Services Agency

[129] The CBSA will continue its investigation of the dumping and subsidizing and will make a final decision by December 9, 2004.

The Canadian International Trade Tribunal

[130] 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 January 7, 2005.

[131] 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

[132] 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.

[133] In respect of importations of subsidized goods that have caused injury, however, this provision is only applicable where the President has determined that the whole or any part of the subsidy on the goods is a prohibited subsidy. In such a case, the amount of countervailing duty applied on a retroactive basis will equal the amount of subsidy on the goods that is a prohibited subsidy.

UNDERTAKINGS

[134] 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.

[135] 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.

[136] 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.

[137] 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 email address, to one of the officers listed below. Interested parties may also consult the CBSA Internet website noted below for information on undertakings offered in this investigation. A notice will be posted on the CBSA website when an undertaking proposal is received. Interested parties have nine days from the date the undertaking offer is received to make representations.

PUBLICATION

[138] A notice of this preliminary determination of dumping and subsidizing will be published in the Canada Gazette pursuant to paragraph 38(3)(a).

INFORMATION

[139] This Statement of Reasons has been provided to persons directly interested in these proceedings. It is also posted on the CBSA Web site at the address below. For further information, please contact Jean-Louis Lapratte, Bob Becker, Alex Lawton, or Matthew Lerette as follows:

Mail: Canada Border Services Agency
Anti-Dumping and Countervailing Directorate
100 Metcalfe Street, 11^th Floor
Ottawa, Ontario K1A 0L8
Canada

Telephone
Jean-Louis Lapratte (613) 954-7375
Bob Becker (613) 954-7246
Alex Lawton (613) 954-7410
Matthew Lerette (613) 954-7398

Fax (613) 948-4844

Email:
Jean-Louis.Lapratte@ccra-adrc.gc.ca
Bob.Becker@ccra-adrc.gc.ca
Alexander.Lawton@ccra-adrc.gc.ca
Matthew.Lerette@ccra-adrc.gc.ca

Web site www.cbsa-asfc.gc.ca/sima

Suzanne Parent
Director General
Anti-Dumping and Countervailing Directorate

---

Appendix 1

CERTAIN CARBON STEEL AND STAINLESS STEEL FASTENERS

ESTIMATED MARGINS OF DUMPING BY EXPORTER/COUNTRY

Country of Origin	Volume of Goods Dumped (Percentage)	Range of Estimated Margins of Dumping for Dumped Imports1	Weighted Average Margin of Dumping 1	Provisional Duty Payable1
People’s Republic of China
Gem-Year Industrial Co. Ltd.	83%	0.06%-94%	20%	20%
Robertson Jiaxing Inc.	72%	0.08%-44%	8%	8%
Shanghai Ben Yuan Metal Products	83%	0.11%-66%	13%	13%
Tong Ming Enterprise Co.	69%	0.68%-24%	5%	5%
Fastenal Company (USA)	90%	0.05%-120%	77%	77%
Hilti Inc. (USA)	100%	6%-126%	86%	86%
Companies Not Sampled2	100%	-	34%	34%
Non-Cooperative Companies3	100%	-	126%	126%
China Total/Average	98%	-	52%	52%
Chinese Taipei
Homn Reen Co. Ltd.	69%	0.1%-118%	18%	18%
Shih Hsang Ywa Industrial Co.	38%	.01%-7%	2%	2%
Tong Hwei Enterprise Co.	68%	0.1%-54%	5%	5%
Fastenal Company (USA)	90%	0.05%-120%	77%	77%
Hilti Inc. (USA)	100%	6%-126%	86%	86%
Senco (USA)	28%	6.4%-20%	3%	3%
Companies Not Sampled2	100%	-	35%	35%
Non-Cooperative Companies3	100%	-	126%	126%
Chinese Taipei Total/Average	99%	-	64%	64%

¹ As a percentage of export price

² Weighted average margin calculated for co-operating exporters whose information was utilized for the preliminary determination. Margin also applied to sampled exporters who had co-operated but whose information could not be used.

³ Margin based on highest margin of dumping (excluding anomalies) estimated for the Preliminary Determination

CERTAIN CARBON AND STAINLESS STEEL FASTENERS

ESTIMATED AMOUNTS OF SUBSIDY BY EXPORTER/COUNTRY

Country of Origin	Percentage of Goods Subsidized	Estimated Amount of Subsidy as a Percentage of Export Price	Provisional Duty Payable as a Percentage of Export Price
People’s Republic of China
All Exporters	100%	32%	32%
Chinese Taipei
All Exporters	100%	7%	7%

Appendix 2

CHINA

Description of Identified Programs and Incentives at Initiation

1. Special Economic Area (SEA) Incentives – Available to manufacturers operating in specified regions such as economic and technical development zones, export processing zones, bonded zones and high technology industrial development zones. Benefits either granted outright or contingent on export performance, in the form of:

A7 Tariff exemptions on imported materials

A7 Rebated corporate income tax

A7 VAT exemptions

A7 Rebates on investment costs

A7 Special land tax and land use exemptions

A7 Preferential costs of services and infrastructure provided by government bodies or state-owned enterprises

2. Grants Provided for Export Performance and Employing Common Workers – Benefits provided by Government of China in the form of direct grants to enterprises satisfying specified export criteria, or to assist in expanding export sales.

3. Preferential Loans – Preferential interest rates and financing terms provided, either directly by the Government of China or indirectly through financial institutions, to companies satisfying specified export-contingent criteria.

4. Loan Guarantees by the Government of China – Loans provided to certain manufacturers satisfying export-contingent or other criteria guaranteed by the Government of China or by financial institutions operating under the direct or indirect control or influence of the Government of China.

5. Income Tax Credits, Refunds and Exemptions:

(a) Reduced Corporate Tax Rate for Export-Oriented Enterprises – Reduced rate of tax on corporate income for those companies that have a significant volume of export sales.

(b) Exemption/Reduction of Corporate Income Tax during Designated Start-up Periods – Exemption from and further reduction of income tax for companies operating in special economic areas during a designated start-up period (usually five years). The result is that export profits are exempt from corporate income tax.

(c) Income Tax Refund of Amounts Further Invested in SEAs – Certain qualifying companies located in SEAs eligible for rebate of corporate income tax paid when profits are re-invested within the SEA.

(d) Exemption/Reduction in Local Income Tax for SEA Enterprises – Certain foreign invested enterprises located in SEAs granted an exemption or reduction in sub-provincial income taxes.

6. Relief from Duties and Taxes on Inputs – Certain qualifying companies located in SEAs permitted to import machinery and other inputs for use in the production of subject goods exempt from applicable duties and taxes.

7. Reductions in Land Use Fees – Certain qualifying companies located in SEAs pay reduced long-term land-use fees for land on which factories are located.

8. Purchase of Goods from State-owned Enterprises – Entities operating under the direct or indirect control or influence of the Government of China provide goods, such as raw materials, chemicals, metallurgy and semi-manufactured inputs, and services, such as utilities, natural gas and hydroelectric power, to manufacturers at below-market prices.

Appendix 3

CHINA

Summary of Preliminary Findings regarding Subsidies

The complainant initially, due to the lack of publicly available information regarding potential subsidies in China, had not identified specific subsidy programs, instead identifying general types of programs where the information available supported their existence. The CBSA initiated its investigation on the basis of these general types of subsidy programs and planned to identify specific programs through the information provided by the Government of China and the exporters. With the exception of those programs identified below, the information submitted thus far has been insufficient to specifically identify the subsidy programs that are being utilized by the fastener industry. Accordingly, the following analysis is organized by types of program rather than by individual program.

1. Special Economic Area (SEA) Incentives

In the original RFI, the CBSA defined SEA as encompassing any “Economic and Technical Development Zone, Bonded Zone, Export Processing Zone, High Technology Industrial Development Zone, or any other designated area”¹⁰ . The Government of China, in its initial response, ignored this definition and used its own (apparently drawing a definition of SEA from its own Exhibit E.IG.1¹¹ ), while noting that the term “Special Economic Area” had no legal meaning within China. The Government of China’s definition of SEA was limited to the specific SEAs listed in Exhibit E.IG.1, internal page 17, rather than encompassing all SEAs in the People’s Republic of China. Although the Government of China, in its response to the Third Supplemental RFI, communicated its understanding of the term SEA after the CBSA referenced the terminology used by the World Trade Organization in the “Accession of The People’s Republic of China”¹² , many of the questions set out in the original RFI regarding the possible subsidies available to companies within these SEAs remain unanswered.

Exporters have indicated that they are located in several SEAs, including the Jiashan Economic Development Zone, the Jiaxin City Economic Development Zone, and the Jiashan County Economic Development Zone. The Government of China provided general information regarding the establishment of the SEAs in China. However, no additional information has been provided by the Government of China regarding the criteria or advantages offered to enterprises that locate in the specific SEAs where the exporters are located. Information obtained from these exporters has indicated that they may be receiving reduced rates of taxation and reduced land fees due to their location within a SEA.

The CBSA has not received sufficient information in order to make a determination as to whether the possible benefits accruing to companies located in SEAs exist and constitute actionable subsidies. Additional information, and verification of the submitted information, is required in order for the CBSA to determine whether the Government of China has conferred benefits of this nature to the producers and/or exporters of the subject goods and to determine to what extent these may constitute actionable subsidies.

2. Grants Provided for Export Performance and Employing Common Workers

The Government of China has stated that no grants have been provided to producers or exporters of the subject goods. In supplementary questioning, the CBSA requested that the Government of China provide comprehensive federal and provincial budget documents in order to determine whether grants of this nature have been detailed therein. The Government of China has not provided these documents in their entirety.

Information obtained from one exporter originally contained indications that grants linked to increases in export sales were obtained both from the national and local governments. Responses to supplemental questionnaires from both the Government of China and the exporter in question have indicated that these grants may actually have been benefits obtained under other government programs at the national and sub-provincial levels of government. The Government of China has submitted no information other than a sparse narrative explanation of one of these programs, while the exporter has submitted information relating to a county-level program that may account for some of these possible “grants”¹³ .

The CBSA was not able to corroborate the statements made by the producers and/or exporters of the subject goods and the Government of China. Additional information and verification of the submitted information, is required in order for the CBSA to determine whether the Government of China has conferred benefits of this nature on the producers and/or exporters of the subject goods and to determine to what extent these may constitute actionable subsidies.

3. Preferential Loans

The Government of China has indicated that none of the companies it recognizes as producers and/or exporters have received preferential loans from the Government of China. However, the CBSA is aware, from the submissions of producers and exporters, that loans have been made to some of these companies from financial institutions that are wholly or partially controlled by the Government of China (responses received from the producers of subject goods in China have also indicated that these loans do not contain preferential terms).

Additional information, and verification of the submitted information, is required in order for the CBSA to determine whether the Government of China has conferred benefits of this nature and to determine to what extent these may constitute actionable subsidies.

4. Loan Guarantees by the Government of China

The Government of China has provided legislative references to indicate that it is illegal, under domestic legislation, for the Government of China to act as a guarantor in commercial lending transactions. However, the CBSA has yet to receive confirmation that producers and/or exporters of subject goods have not received loan guarantees from financial institutions operating under the direct or indirect control or influence of the Government of China. Information obtained from exporters has included indications that financial institutions operating under the direct or indirect control or influence of the Government of China may have extended such guarantees during the POI.

Additional information, and verification of the submitted information, is required in order for the CBSA to determine whether the Government of China has conferred benefits of this nature and to determine to what extent these may constitute actionable subsidies.

5. Income Tax Credits, Refunds and Exemptions

The Government of China has stated that no export-contingent tax benefits have been provided to producers of subject goods in China¹⁴ . The CBSA’s analysis of the Government of China’s responses to its questionnaires indicates that there may be an export-driven component within the criteria specified for tax incentives offered to foreign-invested enterprises. Article 75(7) of the Detailed Rules for the Implementation of the Income Tax Law of the People’s Republic of China for Foreign Invested Enterprises contains a provision that provides a reduction in income tax if at least 70% of a company’s goods are exported.¹⁵ Several of the exporters have indicated that 100% of their production of subject fasteners in China is exported. As such, producers in China may be eligible for a reduced tax rate. The CBSA also requires additional information with regard to potential tax credits, refunds, and exemptions granted by provincial and sub-provincial levels of the Government of China, which exporters have indicated may be available. This additional information regarding taxes at all governmental levels has been requested from the Government of China.

Additional information, and verification of the submitted information, is required in order for the CBSA to determine whether the Government of China has conferred benefits of this nature and to determine to what extent these may constitute actionable subsidies.

6.

Relief from Duties and Taxes on Inputs

General information has been provided by the Government of China regarding the systems involved in granting relief from duties and taxes on inputs and imported machinery used in the production of subject goods. However, specific information pertaining to duty and tax relief granted to producers of subject goods has not been provided. In addition, exporters have submitted conflicting information regarding the duty and tax deferral and/or relief available to producers of subject goods, in regards to both inputs and imported machinery used in the production of subject goods.

Additional information has been requested in order to determine whether producers of subject goods have received excessive relief from duties and taxes on inputs, and/or any relief from duties and taxes on imported machinery in a manner that would constitute an actionable subsidy. Until such time as this additional information has been received and verified, the CBSA is unable to determine whether the Government of China has conferred benefits of this nature and is unable to determine to what extent these may constitute actionable subsidies.

7. Reductions in Land Use Fees

In response to the CBSA’s inquiries regarding the establishment of land use fees, the Government of China provided national legislation regarding the system by which land use fees are collected. However, no specific information was provided detailing the method by which land use fees are established in the particular municipalities/regions in which producers of subject goods are located. The Government of China indicated that information of this type is maintained at local government level and is not readily available.

Information provided by certain exporters indicates that they may have paid reduced land-use fees based on the establishment of operations within specified locations, or received dispensations from land-use fees based on continuing operations. Information provided by exporters has also indicated that the land-use fees can be subject to negotiation and dispute between the government and exporters.

It would appear that multiple levels of government are involved in the administration of the legislation involving land use fees. The CBSA requires additional information from all levels of government involved in the establishment of land use fees pertaining to the municipalities/regions in which producers of subject goods are located. Additional information has been requested from the Government of China (including provincial, municipal and regional levels) in order that a determination can be made as to whether any reductions in land use fees have been granted and to determine to what extent these may constitute actionable subsidies.

8.

Purchase of Goods from State-owned Enterprises

The Government of China has indicated that producers of subject goods do not purchase input materials from state-owned enterprises. However, the exporters’ responses to CBSA questionnaires indicate that certain producers of subject goods may purchase services such as utilities, natural gas and hydroelectric power from government-controlled bodies. The CBSA has not received sufficient information to ascertain whether the prices paid by the producers and/or exporters of the subject goods are at or below market prices. Additional information, and verification of the submitted information, is required in order for the CBSA to determine whether the Government of China has conferred benefits of this nature to the producers and/or exporters of the subject goods and to determine to what extent these may constitute actionable subsidies.

In addition, the Government of China had stated in its response it believed that the primary raw material used in the manufacture of subject goods, carbon and stainless steel wire rod, was imported into China rather than purchased from domestic steel producers and that therefore no state-owned enterprises were involved in providing raw materials to the producers of subject goods.¹⁶ However, exporters have provided contradictory evidence. Certain exporters of subject goods have claimed that they purchase steel wire rod from state-owned enterprises and have submitted invoices supporting these claims. An analysis of the limited number of invoices thus far submitted has indicated that the state-owned enterprises may have provided steel wire rod to the producers of subject goods at reduced prices.

Additional information, and verification of the submitted information, is required in order for the CBSA to determine whether the Government of China has conferred benefits of this nature and to determine to what extent these may constitute actionable subsidies.

Appendix 4

CHINESE TAIPEI

Description of Identified Programs and Incentives at Initiation

1. Economic Processing Zone (EPZ) Incentives - Available to manufacturers operating in specified regions such as EPZs, Export Processing Zone, Environment Technology Park, Science-based Industrial Park, Industrial Estate, Mixed Industrial/Commercial Zone or any other designated area. Benefits either granted outright or contingent on export performance, in the form of:

o Import duties exemptions on imported materials

o Commodity taxes and business taxes exemptions on machinery and materials

o Export taxes and contract taxes exemptions

o Five-year income tax exemptions for companies in "newly emerging and strategic industries"

o Preferential housing tax rates

2. Grants and Financial Assistance Provided by the Government of Chinese Taipei - Benefits provided by Government of Chinese Taipei in the form of direct government investment/equity participation, reimbursement of costs of anti-dumping or subsidy proceedings, financial assistance for Research and Development (R&D) under several programs.

3. Preferential Loans - Preferential interest rates and financing terms provided, either directly by the Government of Chinese Taipei or indirectly through financial institutions, to companies satisfying specified criteria under various programs involving the Development Fund of the Executive Yuan, Export/Import Bank of the Republic of China (EXIM) and the Board of Foreign Trade (BOFT).

4. Income Tax Credits, Refunds and Exemptions:

a. Reduced Corporate Tax Rate for Exporters - Reduced rate of tax on corporate income for those companies that have a significant volume of export sales.

b. Exemption/Reduction /Credit/Refund of Corporate Income Tax for Designated Investments - For companies investing in "emerging, important and strategic industries", new companies or expansions, automated equipment and technology, and outward (foreign) investments and/or technical cooperation projects.

c. Income Tax Refund/Exemption for Companies Located or Investing in EPZs and Other Designated Zones and Areas Other Designated Areas - Certain qualifying companies located and/or investing in SEZs and other designated Parks, Estates and Regions are eligible for corporate income tax exemptions and/or deductions.

5. Exemption/Reduction in Duties and Taxes

o For Companies Located or Investing in EPZs and Other Designated Zones and Areas - Certain qualifying companies are permitted to import machinery and other inputs for use in production of subject goods exempt from applicable duties and taxes.

o For Companies Not Located in Designated Areas Above - Certain qualifying companies receive a reduction in import duties with respect to inputs used in production of subject goods.

6. Exemption/Reduction in Contract and Commercial Housing Taxes - Companies located in EPZs and other Designated Zones and Areas are exempt from contract tax and are allowed reductions in commercial housing tax.

7. Purchase of Goods from State-owned Enterprises - Entities operating under the direct or indirect control or influence of the Government of Chinese Taipei may have provided raw material input (steel wire) used in the production of the subject goods, to manufacturers/exporters in Chinese Taipei at preferential prices.

Appendix 5

CHINESE TAIPEI

Summary of Preliminary Findings for Identified Programs

Calculation of the Amount of Subsidy for the Following Programs

The CBSA is unable to calculate an amount of subsidy for each program at this time as analysis of exporter and government responses to the original and supplemental requests for information (RFIs) is continuing and has not been concluded. In addition to the responses already received, further supplemental RFIs have been sent out to exporters and the government and have yet to be received and analyzed. Further, all information the CBSA has received from both the government and respondent exporters has not yet been verified, as verification has been scheduled to take place following the preliminary determination.

1) Research and Development Funding Programs

a. Industrial Technology Development Program

General Information:

This program was established in March 1997 in order to encourage enterprises to engage in the research and development of innovative technology. The financial assistance granted under this program is administered by the Department of Industrial Technology under the Ministry of Economic Affairs (MOEA) and is provided in order to cover part of the R&D costs incurred by the enterprise.

The total amount of the grant under this program cannot exceed 50% of the total R&D costs incurred. Further, the grant may only be used to cover the following expenses: personnel costs incurred for full-time and/or part-time research personnel; costs of consumable instruments and raw materials; costs for use and maintenance of R&D equipment; costs for technology transfer; and domestic and overseas travel expenses.

The program was in operation during the POI and continues in operation to date.

Legal Basis:

The Government of Chinese Taipei (GOCT) has not provided the laws, regulations or other legal instruments which provide the authority for the program. The GOCT claims that the sample companies currently being investigated have not received grants under this program.

Eligibility Criteria:

In order for companies to apply for assistance under this program, they must be incorporated under the Company Law with sound financial standing, possess a R&D department with sufficient R&D personnel in Chinese Taipei, and have the capability of implementing R&D plans. Foreign companies with proven R&D track records may also submit project application based on the requirements above. If the applicant company has committed a material breach with respect to any government science and technology project contracts within the last five years, the government is unable to grant funding under this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the amount of the grant.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

b. Pilot Research Promotion Program for R&D Alliances

General Information:

This program was established in March 2001 in order to encourage enterprises to form alliances for further R&D activities. The financial assistance granted under this program is administered by the Department of Industrial Development, MOEA, and is provided in order to cover part of the R&D costs incurred by the enterprises.

The total amount of the grant under this program cannot exceed 50% of the total R&D costs incurred. Further, the grant may only be used to cover the following expenses: personnel costs incurred for full-time and/or part-time research personnel; costs of consumable instruments and raw materials; costs for use and maintenance of R&D equipment; costs for technology transfer; and domestic and overseas travel expenses.

The program was in operation during the POI and continues in operation to date.

Legal Basis:

The GOCT has not provided the laws, regulations or other legal instruments which provide the authority for the program. While the GOCT acknowledges that four of the sample companies jointly applied for assistance under this program, the reason they give for not providing the legislation is that the application submitted by the four companies related to a project involving fasteners designed for the aerospace industry, which are not subject to this investigation.

Eligibility Criteria:

In order for companies to jointly apply for assistance under this program, they must be incorporated under the Company Law with sound financial standing, possess a R&D department with sufficient with sufficient R&D specialists in Chinese Taipei, and have the capability of implementing R&D plans. Foreign companies with proven R&D track records may also submit project application based on the requirements above. If the applicant company has committed a material breach with respect to any government science and technology project contracts with the last five years, the agency is unable to grant funding under this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the amount of the grant.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

c. Strategic Service oriented Research and Development Program

General Information:

This program was established in July 2001, in order to encourage enterprises to engage in the development of service oriented innovation. The financial assistance granted under this program is administered by the Department of Industrial Development, MOEA, and is provided in order to cover part of the R&D costs incurred by the enterprises.

The total amount of the grant under this program cannot exceed 50% of the total R&D costs incurred. Further, the grant may only be used to cover the following expenses: personnel costs incurred for full-time and/or part-time research personnel; costs of consumable instruments and raw materials; costs for use and maintenance of R&D equipment; costs for technology transfer; and domestic and overseas travel expenses.

The program was in operation during the POI and continues in operation to date.

Legal Basis:

The GOCT has not provided the laws, regulations or other legal instruments which provide the authority for the program. The GOCT claims that the sample companies currently being investigated have not received grants under this program.

Eligibility Criteria:

In order for companies to apply for assistance under this program, they must be incorporated under the Company Law with sound financial standing, possess a R&D department with sufficient R&D personnel in Chinese Taipei, and have the capability of implementing R&D plans. Foreign companies with proven R&D track records may also submit project application based on the requirements above. If the applicant company has committed a material breach with respect to any government science and technology project contracts with the last five years, the agency is unable to grant funding under this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the amount of the grant.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

d. Program for Encouragement of the Establishment of Industrial Technology Innovation Centers in Taiwan by Domestic Enterprises

General Information:

This program was established in January 2002 in order to encourage domestic enterprises to set up R&D centers in Chinese Taipei. The financial assistance granted under this program is administered by the Department of Industrial Development, MOEA, and is provided in order to cover part of the R&D costs incurred by the enterprises.

The total amount of the grant under this program cannot exceed 50% of the total R&D costs incurred. Further, the grant may only be used to cover the following expenses: personnel costs incurred for full-time and/or part-time research personnel; costs of consumable instruments and raw materials; costs for use and maintenance of R&D equipment; costs for technology transfer; and domestic and overseas travel expenses.

The program was in operation during the POI and continues in operation to date.

Legal Basis:

The GOCT has not provided the laws, regulations or other legal instruments which provide the authority for the program. The GOCT claims that the sample companies currently being investigated have not received grants under this program.

Eligibility Criteria:

In order for companies to apply for assistance under this program, they must be incorporated under the Company Law with sound financial standing, possess a R&D department with sufficient R&D personnel in Chinese Taipei, and have the capability of implementing R&D plans. Foreign companies with proven R&D track records may also submit project application based on the requirements above. If the applicant company has committed a material breach with respect to any government science and technology project contracts with the last five years, the agency is unable to grant funding under this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the amount of the grant.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

e. Small Business Innovation Research Program and the IT Applications Promotion Project Program

General Information:

These programs were established in February 1999 in order to encourage Small and Medium-sized Enterprises (SMEs) to engage in the research and development of innovative technology. The financial assistance granted under these programs is administered by the Department of Industrial Development, MOEA, and is provided in order to cover part of the R&D costs incurred by the enterprises.

The total amount of the grants under these programs cannot exceed 50% of the total R&D costs incurred. Further, the grants may only be used to cover the following expenses: personnel costs incurred for full-time and/or part-time research personnel; costs of consumable instruments and raw materials; costs for use and maintenance of R&D equipment; costs for technology transfer; and domestic and overseas travel expenses.

These programs were in operation during the POI and continue in operation to date.

Legal Basis:

These programs are provided for in accordance with MOEA Regulations on Motivating Development of Industrial Technology by Enterprises. These regulations are prescribed in accordance with the provisions set out in Article 22.1.2 of the Statute of Upgrading Industries. The GOCT acknowledges that one of the sample companies received grants under these programs.

Eligibility Criteria:

In order for companies to apply for assistance under these programs, they must be incorporated under the Company Law with sound financial standing, possess a R&D department with sufficient R&D personnel in Chinese Taipei, and have the capability of implementing R&D plans. Foreign companies with proven R&D track records may also submit project application based on the requirements above. If the applicant company has committed a material breach with respect to any government science and technology project contracts with the last five years, the agency is unable to grant funding under these programs.

Determination of Subsidy:

On the basis of available information, these programs would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the amount of the grant.

Determination of Specificity:

On the basis of available information, these programs appear to be non-specific in law. However, there is presently insufficient information in respect of these programs to determine if they would constitute a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

2) GOCT Direct Capital Investment of Up to 49% of Cost of Investments in Specific Projects in Ten Emerging Industries

General Information:

The GOCT responded that the Development Fund of the Executive Yuan has never provided equity participation (up to 49%) for any of the sample companies and provided no further information regarding this alleged program. Based on other information available to the CBSA, this program provides for the GOCT, through The Executive Yuan Development Fund, to invest up to 49% of the cost of any investment project in return for shares in the company engaging in that project. Following a specified amount of time, the shares are then sold by the GOCT back to the company.

Legal Basis:

Based on information available to the CBSA, the program appears to be provided in accordance with the provisions set out in Article 21 of the Statute of Upgrading Industries which states that the Executive Yuan shall establish a development fund for the purposes outlined in that article.

Eligibility Criteria:

The CBSA does not currently possess information regarding the specific eligibility criteria relating to this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the difference between the amount the government paid for the investment and the fair market value of the investment.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

3) Development Fund for Grants Towards Upgrading Important Enterprises or Projects

General Information:

The GOCT responded that the Development Fund of the Executive Yuan has never provided grants for any of the sample companies and provided no further information regarding this alleged program. Based on other information available to the CBSA, this program provides for the GOCT, through The Executive Yuan Development Fund, to directly provide funding to designated enterprises for designated projects involving the upgrading and improvement of their industrial structure.

Legal Basis:

Based on information available to the CBSA, the program appears to be provided in accordance with the provisions set out in Article 21 of the Statute of Upgrading Industries which states that The Executive Yuan shall establish a development fund for use of the purposes outlined in that article.

Eligibility Criteria:

The CBSA does not currently possess information regarding the specific eligibility criteria relating to this program.

Determination of Subsidy:

On the basis of available information, these programs would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the amount of the grant.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

4) Programs for Companies in Economic Processing Zones, Science Parks and Other Designated Areas

The GOCT responded that none of the sample companies being investigated are located in any of the types of zones, estates or parks identified by the CBSA or any other designated areas, but provided information on the following programs.

a. Exemption of Import Duty, Commodity Tax, and Business Tax on Inputs and Machinery

General Information:

All in-zone enterprises are entitled to the exemption of taxes and duties on imported raw and consumption materials, fuels, semi-finished products, samples, and finished products for transhipment by traders and warehousing operators. However, all machinery, equipment, and other imported goods are not entitled to duty and tax exemptions if they are shipped from the Export Processing Zones (EPZs) to leviable areas within five years after importation.

In respect to Science Parks, park enterprises and warehousing facilities are entitled to establish bonded warehouses in the parks and are therefore not subject to duties and taxes. The park enterprises are required to set up ledgers to record the quantities of the following goods that enter and leave the parks: machinery, equipment, raw materials, materials, fuels, semi-finished products, samples purchased, regardless of source (domestic or abroad); wastes, scraps, finished products, semi-finished products generated by the park enterprise; and finished goods for trading purposes.

Enterprises located in Industrial Parks are subject to the same rules applicable to enterprises not located in designated areas in relation to duty drawback. The rebates of duties and taxes for non-designated areas are explained in section 6 of this appendix below.

The authority responsible for EPZs is the Export Processing Zones Administration-MOEA, while Science Parks are under the Science Park Administration and all other special economic zones are administered by the Industrial Development Bureau – MOEA. No further information specific to Industrial Estates, Mixed Industrial/Commercial Zones, or any other designated areas was provided in relation to the above program.

Legal Basis:

The exemption of taxes and duties for enterprises located in Economic Processing Zones is provided for in Article 13 of the Statute for the Establishment and administration of Export Processing Zone.

Eligibility Criteria:

In order to be eligible for the exemptions, business entities must be located in Economic Processing Zones such as Export Processing Zones and Science Parks. However, business entities located in Industrial Parks are not eligible for the exemptions. No further information specific to Industrial Estates, Mixed Industrial/Commercial Zones, or any other designated areas was provided in relation to the above program.

Determination of Subsidy:

To the extent that this program confers excess relief of duties or taxes or provides relief on products in a manner that is not consistent with the provisions of SIMA regarding duty and tax relief for subsidy purposes, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e. amounts that would otherwise be owing and due to the government are exempted, and would confer a benefit to the recipient equal to the amount of the exemption.

Determination of Specificity:

On the basis of available information, should this program give rise to a subsidy, it would likely constitute a specific subsidy, in law, pursuant to paragraph 2(7.2)(a) of SIMA; i.e. as it is limited, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Statute for the Establishment and administration of Export Processing Zone; or, alternatively, it may constitute a specific subsidy pursuant to paragraph 2(7.2)(b) of SIMA; i.e. as it may be a prohibited subsidy in the form of an export subsidy that is contingent, in whole or part, on export performance.

b. Exemption from Deed Tax

General Information:

When transactions take place which involve the purchase, sale, acceptance of Dien¹⁷, exchange, bestowal, partition, or acquisition of ownership thereof by virtue of possession, of real estate, Deed Tax is assessed and becomes payable.

Within 30 days from the conclusion of a deed contract or the date of applying for registration in law to become the owner by virtue of possession, the taxpayer must file a Statement of Deed Tax, along with copies of the contract and related documents, to the local tax collection office. Following receipt of the documents, the tax office will, within 15 days, examine the documents, determine the amount of tax owing, and issue a tax notice to the taxpayer for payment.

Legal Basis:

The exemption of deed tax for enterprises acquiring a new standard plant building in the Export Processing Zones or acquiring a building from the Export Processing Zones Administration is provided for in the Statute of Deed Tax.

Eligibility Criteria:

Exemption of Deed Tax is limited only to enterprises acquiring a new standard plant building in the Export Processing Zones or acquiring a building from the Export Processing Zones Administration. This exemption is not available to enterprises engaging in real estate transactions in Science Parks and Industrial Parks.

Determination of Subsidy:

To the extent that this program confers excess relief of taxes in a manner that is not consistent with the provisions of SIMA regarding tax relief for subsidy purposes, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e. amounts that would otherwise be owing and due to the government are exempted, and would confer a benefit to the recipient equal to the amount of the exemption.

Determination of Specificity:

On the basis of available information, should this program give rise to a subsidy, it would likely constitute a specific subsidy pursuant to paragraph 2(7.2)(b) of SIMA; i.e. as it would be a prohibited subsidy in the form of an export subsidy that is contingent, in whole or part, on export performance.

5) Reduction of House Tax

General Information:

House Tax is levied and collected from building owners on all buildings attached to land and on construction that enhances the utility value of the buildings. Within 30 days of the completion of construction, the taxpayer must declare the current value of the building and report it to the local tax authorities. In addition to the declaration made by the taxpayer, the real estate assessment committee in each city or county would also assess the standard value of buildings located within its jurisdiction. Taking into consideration the taxpayer’s declaration and the real estate assessment committee’s assessed value, the tax authority calculates the current value of the building and issues a house tax bill accordingly on an annual basis.

Legal Basis:

The guidelines regarding the collection and reductions of House tax are provided for in the Statute of House Tax.

Eligibility Criteria:

Buildings owned by factories which are duly registered according to law and that are used directly for production are entitled to a 50% reduction of their House Tax. The reduction is available to all factories regardless of whether they are located in a designated area or not.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e. amounts that would otherwise be owing and due to the government are reduced, and would confer a benefit to the recipient equal to the amount of the reduction.

Determination of Specificity:

On the basis of available information, this program appears to be non-specific in law. However, presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

6) Possible Subsidies in respect of Duties and Taxes

For each of the following sections, the information provided is based on the information currently available to the CBSA. Information specifically relating to imported goods not directly incorporated into exported products is not currently available. Further information respecting this issue has been requested and will be received and analyzed at a later date. However, the way each of the taxes and duties function is discussed below as well as the treatment of imported goods consumed during export production.

a. Business Tax

General Information:

Business Tax in Chinese Taipei is called Value Added Tax (VAT). VAT is levied on imported goods and on the sale of goods and services within Chinese Taipei. VAT taxpayers are business entities, which supply goods or services, as well as a consignee or importer of goods. In addition, recipients of services supplied by a foreign enterprise, organization, institute, or association which do not have permanent business establishments within Chinese Taipei are also subject to VAT. VAT is not levied on export sales and there are no special or preferential tax rates or exemptions of VAT related to the acquisition of capital equipment.

A business entity’s payable or refundable tax is determined by calculating the difference between the input tax and the output tax for that tax return period. Input tax is the amount of VAT paid by the business entity on purchases of goods or services, while output tax is the amount of VAT collected on sales of goods or services by the entity.

Business entities selling goods or services are required to issue government uniform invoices to purchasers, unless the entity is special in nature or a small business entity, which may allow them to issue ordinary receipts instead. If the purchaser of goods or services is a business entity, the input tax must be stated separately on the uniform invoice. If the purchaser is not a business entity, the uniform invoice should only show one total amount which includes the sale amount and the input tax combined.

Before the 15^th day of the following month, a business entity must file a tax return with the tax office with all relevant documents concerning the amount of total sales and VAT payable/refundable for the preceding two months. If the business calculates VAT payable, the payment to the Treasury must be filed with the tax return. The tax form must always be filed, even if no sales occurred in the preceding two-month period.

Legal Basis:

The guidelines regarding the administration of VAT are provided for in the Value-Added and Non-Value-Added Business Tax Act. Articles 7 and 8 provide for items and types of entities which are exempt from VAT.

Eligibility Criteria:

All business entities are subject to VAT as noted above with exception to the entities, goods, and services listed in Articles 7 and 8 of the Value-Added and Non-Value-Added Business Tax Act which, to name only a few, include Export Processing Zones, Science Parks, charities, medical services, education, etc.

Determination of Subsidy:

To the extent that this program confers exemptions or remissions, in respect of the production and distribution of exported products, of indirect taxes in excess of those levied in respect of the production and distribution of like products when sold for domestic consumption, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e. amounts that would otherwise be owing and due to the government are exempted, and would confer a benefit to the recipient equal to the amount of the exemption.

Determination of Specificity:

On the basis of available information, should this program give rise to a subsidy, it would likely constitute a specific subsidy pursuant to paragraph 2(7.2)(b) of SIMA; i.e. as it would be a prohibited subsidy in the form of an export subsidy that is contingent, in whole or part, on export performance.

b. Commodity Tax

General Information:

Commodity Tax is levied on goods specified in the Statute of Commodity Tax at the time they are imported or shipped from the factory. The seven general categories of goods that are specified in the statute in Articles 6 through 12 are as follows: rubber tires, cement, beverages, flat-glass, oil and gas, electrical appliances, and vehicles. Each category provides for specific goods and the tax rates associated with those goods.

Tax on commodities produced domestically is collected from manufacturers while tax on imported goods is collected from the consignee or holder of the bill of lading for those imported goods. Before the 15^th of the following month, manufacturers must file a tax form, as prescribed by the Ministry of Finance (MOF), to the tax authorities along with payment of any tax on commodities released by the manufacturer. Even if there is no tax payable, the manufacturer must file a return. In relation to imported goods, the taxpayer pays the taxes at the customs office when the goods are imported and declared to be taxable commodities.

Legal Basis:

The guidelines regarding the administration of Commodity Tax are provided for in the Statute of Commodity Tax. Article 3 lists the types of commodities exempt from the tax and Article 4 allows for refunds and offsets of the tax under specified conditions. The MOF prescribes the rules governing exemptions, refunds, and offsets relating to Commodity Tax.

Eligibility Criteria:

Commodities meeting the following conditions specified in Article 3 are eligible for exemption and are as follows:

1. Raw materials used for manufacturing other taxable commodities;

2. Commodities which are exported for sale abroad;

3. Goods for exhibition but not for sale;

4. Commodities which are contributed for military entertainment purposes; and

5. Commodities which are directly supplied for military use, with the approval of the Ministry of National Defence.

Commodity Tax paid or recorded on account as paid on commodities meeting the following conditions specified in Article 4 are eligible for refund or offset and are as follows:

1. Export goods;

2. Raw materials used for manufacturing export goods;

3. Unsaleable goods returned to factory for reprocessing or for refining into similar goods which are subject to commodity tax;

4. Unsaleable goods for reason of damage; and

5. Goods physically destroyed in transit or in storage by fire or water or other calamities beyond control.

Determination of Subsidy:

To the extent that this program confers exemptions or remissions, in respect of the production and distribution of exported products, of indirect taxes in excess of those levied in respect of the production and distribution of like products when sold for domestic consumption, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e. amounts that would otherwise be owing and due to the government are exempted, and would confer a benefit to the recipient equal to the amount of the exemption.

Determination of Specificity:

On the basis of available information, should this program give rise to a subsidy, it would likely constitute a specific subsidy pursuant to paragraph 2(7.2)(b) of SIMA; i.e. as it would be a prohibited subsidy in the form of an export subsidy that is contingent, in whole or part, on export performance.

c. Import Duty

General Information:

The Department of Customs Administrations -MOF is responsible for administering the duty drawback and the Industrial Development Bureau -MOEA is responsible for the establishment of the criteria for offsetting and/or refund of customs duties paid on imported raw materials.

Firms that engage in export sales are required, when production begins, to compile a list of the quantity of raw materials used for manufacture of the finished product and submit it along with the documents relating to export sales and to raw materials consumed in the manufacture of those products to MOEA for examination and approval. During the examination, MOEA scrutinizes the quantities consumed and the reasonable percentage rate of attrition in the normal production to set up the criteria for duty drawback.

In order to obtain a refund of duty following exportation, the firms must submit a petition accompanied by the description of export product; the list of raw materials consumed; the quality, specifications, composition, quantities and weights of the raw materials incorporated into the finished products; the lists of the suppliers; and the previous import declaration of the subject materials. The amount of the drawback is subject to payment of the original import duties in advance.

Legal Basis:

The guidelines for the administration of duty drawback are prescribed by the Regulations Governing the Offsetting or Refund of Duties and Taxes on Raw Materials.

Eligibility Criteria:

In accordance with the regulations, only imported raw materials consumed in the production of goods for export are eligible for duty drawback. Imported energy, fuel, oil, and catalysts that are used or consumed in the production of goods for export are not entitled to duty drawback.

Determination of Subsidy:

To the extent that this program confers excess relief of taxes or provides relief on products in a manner that is not consistent with the provisions of SIMA regarding tax relief for subsidy purposes, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e. amounts that would otherwise be owing and due to the government are exempted, and would confer a benefit to the recipient equal to the amount of the exemption.

Determination of Specificity:

On the basis of available information, should this program give rise to a subsidy, it would likely constitute a specific subsidy pursuant to paragraph 2(7.2)(b) of SIMA; i.e. as it would be a prohibited subsidy in the form of an export subsidy that is contingent, in whole or part, on export performance.

7) Financial Assistance for International Trade Protection Measures

General Information:

The authority responsible for administering this program is the Bureau of Foreign Trade (BOFT) – MOEA.

Under this program, BOFT provides funds to cover part of the costs incurred by industries for legal and financial counselling as a result of responding to anti-dumping and countervailing investigations. The amount of funding is limited to 30% of the total costs incurred and cannot exceed NT$2 million.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The GOCT has not provided the laws, regulations or other legal instruments which provide the authority for the program The GOCT claims that the sample companies currently being investigated have not received grants under this program.

Eligibility Criteria:

The funding is only available to National industrial associations, exporters' associations, and Provincial and County import/export commercial associations. In order to apply, at least two companies must be involved in the investigation, with the exception in cases where only one company exports to the country conducting the investigation or where the investigating country only files the investigation against one domestic exporting company. In addition, the export volume of the subject goods by the domestic companies involved must represent 50% or more of all subject goods imported into the investigating country from Chinese Taipei.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the amount of the grant.

Determination of Specificity:

On the basis of available information, should this program give rise to a subsidy, it would likely constitute a specific subsidy pursuant to paragraph 2(7.2)(b) of SIMA; i.e. as it would be a prohibited subsidy in the form of an export subsidy that is contingent, in whole or part, on export performance.

8) Loan to Assist in the Upgrading of Small and Medium Enterprises

General Information:

This program was established in April 2000 to assist SMEs in their effort to improve their operations, raise their production technology and product quality, and promote industrial improvement overall. The authority responsible for this program is the Development Fund of the Executive Yuan. The Development Fund of the Executive Yuan together with certain public and private banks administers assistance under this program. The administering bank, Taiwan Business Bank, is responsible for the governance of the loan and the reimbursement of the loan made by the participating banks.

The participating banks in the program, those who lend money to the SMEs, are responsible for assuming the risk of the loan. In order to encourage banks to participate, the Development Fund lends funds to the participating banks at lower than market interest rates. The participating bank then sets the interest rate to the lender which is, according to the GOCT, not lower than market interest rates.

The use of the loan is limited to the investment plan that has been approved by the lending bank. Investment plans may only seek investment financing for the following items: procurement of imported or domestic automated machinery, land and buildings for Industrial Parks, and research and development or manufacturing of new products and new technologies. The lending contract must stipulate that the lending bank and Development Fund have the right to perform on-site examinations of accounting records and are entitled to examine how the assets purchased with the financing are being used in accordance with the investment plan.

The program was in operation during the POI and continues in operation to date.

Legal Basis:

The GOCT acknowledges that three of the sample companies received loans under this program. The program is administered in accordance with Key Points for Loan to Assist in the Upgrading of Small and Medium Enterprises.

Eligibility Criteria:

Enterprises established under Company Law and foreign enterprises legally registered in Chinese Taipei may apply for financing under this program if they meet the Criteria for Determining Small and Medium-sized Enterprises as set out by the Executive Yuan.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(d) of SIMA; i.e. a government directs a non-governmental body to transfer funds to a third party through a bank acting as an intermediary, and would confer a benefit to the recipient equal to the difference between the amount of interest charged on the loan under this program and the interest that would be charged on a market rate commercial loan to an SME.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

9) Loan for Purchases of Automated Machinery and Equipment

General Information:

This program was established in February 2002 to encourage enterprises to purchase automated machinery and equipment designed to improve production technology and product quality, and promote industrial upgrades overall. The authority responsible for this program is the Development Fund of the Executive Yuan. The Development Fund of the Executive Yuan together with certain public and private banks administers assistance under this program. The administering bank, Chiao Tung Bank, is responsible for the governance of the loan and the reimbursement of the loan made by the participating banks.

The participating banks in the program, those who lend money to the enterprises, are responsible for assuming the risk of the loan. In order to encourage banks to participate, the Development Fund lends funds to the participating banks at lower than market interest rates. The participating bank then sets the interest rate to the lender which is, according to the GOCT, not lower than market interest rates.

The use of the loan is limited to the investment plan that has been approved by the lending bank. Investment plans may only seek investment financing for the procurement of imported or domestic automated machinery and/or equipment. The lending contract must stipulate that the lending bank and Development Fund have the right to perform on-site examinations of accounting records and are entitled to examine how the assets purchased with the financing are being used in accordance with the investment plan.

The program was in operation during the POI and continues in operation to date.

Legal Basis:

The GOCT acknowledges that two of the sample companies received loans under this program. The program is administered in accordance with Key Points for Loan for Purchases of Automated Machinery and Equipment.

Eligibility Criteria:

Any public or private enterprises established under Company Law and foreign enterprises legally registered in Chinese Taipei intending to purchase automated machinery and/or equipment may apply for financing under this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(d) of SIMA; i.e. a government directs a non-governmental body to transfer funds to a third party through a bank acting as an intermediary, and would confer a benefit to the recipient equal to the difference between the amount of interest charged on the loan under this program and the interest that would be charged on a market rate commercial loan to the enterprise.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

10) Assisting SMEs Under the Medium and Long-Term Capital Loan Plan

General Information:

This program was established in July 1996 to encourage investment in and development of SMEs. The authority responsible for this program is the Small and Medium Enterprise Administration - MOEA. The program is administered by the Council for Economic Planning and Development which disburses funds from the Medium and Long-Term Capital Loan Plan.

The participating banks in the program, those who lend money to the enterprises, are responsible for assuming the risk of the loan. In order to encourage banks to participate, funds from the plan referred to above are lent to the participating banks at lower than market interest rates. The participating bank then sets the interest rate to the lender which is, according to the GOCT, not lower than market interest rates.

The use of the loan is limited to the investment plan that has been approved by the lending bank. Investment plans may only seek investment financing for the procurement of land, buildings, business premises, and machinery and equipment to be used for the purposes of expanding the business and/or improving automation and technology. The lending contract must stipulate that the lending bank, Council for Economic Planning and Development, the Small and Medium Enterprise Administration, and Small and Medium Business Credit Guarantee Fund have the right to perform on-site examinations of accounting records and are entitled to examine how the assets purchased with the financing are being used in accordance with the investment plan.

The program was in operation during the POI and continues in operation to date.

Legal Basis:

The GOCT acknowledges that one of the sample companies received loans under this program. The program is administered in accordance Criteria for Assisting SMEs under the Medium and Long-Term Capital Loan Plan.

Eligibility Criteria:

Any enterprise, with the exception of those whose stocks trade in Over-the-counter and stock exchange markets, that meet Executive Yuan’s “Standards for Identifying a Small and Medium-sized Enterprise” or SMEs entitled to be guaranteed by the Small and Medium Business Credit Guarantee Fund (SMEG) are eligible to apply.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(d) of SIMA; i.e. a government permits or directs a non-governmental body to transfer funds to a third party through a bank acting as an intermediary, and would confer a benefit to the recipient equal to the difference between the amount of interest charged on the loan under this program and the interest that would be charged on a market rate commercial loan to the enterprise.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

11) Loans for Product Marketing, Overseas Investment, and Overseas Construction Projects

General Information:

This program was established in July 1996 to encourage investment in and development of SMEs. The authority responsible for this program is the Small and Medium Enterprise Administration – MOEA, which governs the SME Development fund that provides funds for this loan program. The administering bank, Export/Import Bank of the Republic of China (EXIM Bank), is responsible for the governance of the loan made to the enterprises and is controlled by the GOCT.

The funding for these loans is supplied by the SME Development fund directly to the EXIM Bank which then lends the funds to the enterprise. The interest rates on the loans are set by the EXIM Bank according to the LIBOR PLUS or OECD’s CIRR rates. These interest rates set by EXIM Bank are, according to the GOCT, not lower than market interest rates.

The use of the loan is limited to product marketing, overseas investment, and overseas construction projects. The lending contract must stipulate that the Small and Medium Enterprise Administration, SME Development Fund Management Committee, and the lending bank have the right to perform on-site examinations of accounting records in order to monitor the implementation of the loan plan.

The program was in operation during the POI and continues in operation to date.

Legal Basis:

The GOCT has not provided the laws, regulations or other legal instruments which provide the authority for the program. The GOCT claims that the sample companies currently being investigated have not received loans under this program.

Eligibility Criteria:

Any enterprises that meet Executive Yuan’s “Standards for Identifying a Small and Medium-sized Enterprise” are eligible to apply for loans under this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the difference between the amount of interest charged on the loan under this program and the interest that would be charged on a market rate commercial loan to the enterprise.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

12) Financing from the Export/Import Bank of the Republic of China

General Information:

The GOCT responded that the EXIM Bank did not provide loans to any of the sample companies being investigated for the purpose of exporting their products to Canada. The GOCT also claims that EXIM Bank does not offer preferential interest rates. As noted previously, the EXIM loan interest rates are based on the 6-month LIBOR PLUS or OECD’s CIRR rates. Fees relating to export insurance depend on the credit risk, country risk and time period associated with the transaction. No further information regarding this alleged program was provided by the GOCT.

Based on other information available to the CBSA, EXIM Bank also offers financing to enterprises wishing to import goods from Chinese Taipei. It is a bank-to-bank arrangement through which EXIM bank extends credit lines to local and foreign financial institutions that in turn redistribute the funds to their clients for the specific use of purchasing of goods from Chinese Taipei. The financing received cannot exceed 85% of that the purchase price of the goods and the total amount of financing per transaction shall not exceed US$2,000,000. The types of products that can be financed are limited to 13 categories of goods.

Legal Basis:

The GOCT has not provided the laws, regulations or other legal instruments which provide the authority for the program. The GOCT claims that the sample companies currently being investigated have not received loans under this program.

Eligibility Criteria:

The CBSA does not currently possess information regarding the specific eligibility criteria relating to this program in relation to financing for exporters and manufacturers. In order for an importer to obtain purchase financing as discussed above, they must purchase one or more of the types of the following goods:

1. Machinery & Accessories

2. Hardware & Precision Metal Products

3. Transportation Equipment & Accessories

4. Computer Peripherals Equipment, Software, Semiconductor Industry Products & Components, Parts

5. Telecommunication Electronic Products & Accessories

6. Precision Equipment & Accessories

7. Advanced Electronic Products & Accessories

8. Office Equipment & Accessories

9. Medical Equipment & Accessories

10. Environmental Protection Equipment & Accessories

11. Electric Equipment, Electric Wire & Cable & Accessories

12. Sewing Machine, Cart, Exercise Equipment & Accessories, Etc.

13. Other Durable Goods (Subject to EXIM Bank Approval)

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the difference between the amount of interest charged on the loan under this program and the interest that would be charged on a market rate commercial loan to the enterprise.

Determination of Specificity:

On the basis of available information, should this program give rise to a subsidy, it would likely constitute a specific subsidy pursuant to paragraph 2(7.2)(b) of SIMA; i.e. as it would be a prohibited subsidy in the form of an export subsidy that is contingent, in whole or part, on export performance.

13) Bureau of Foreign Trade Loans to SME Exporters

General Information:

The GOCT responded that The Bureau of Foreign Trade (BOFT) has never implemented any SME loan program and provided no further information regarding this alleged program. Based on other information available to the CBSA, the BOFT requested that the Small and Medium Enterprise Credit Fund allocate NT$30 billion in funding for loans to SMEs to enable the enterprises to develop their export businesses. This program was identified as a key part of Chinese Taipei’s trade policies and measures that have been adopted.

Legal Basis:

The GOCT has not provided the laws, regulations or other legal instruments which provide the authority for the program. The GOCT claims that the BOFT has never implemented any SME loan program.

Eligibility Criteria:

The CBSA does not currently possess information regarding the specific eligibility criteria relating to this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the difference between the amount of interest charged on the loan under this program and the interest that would be charged on a market rate commercial loan to the enterprise.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

14) Bureau of Foreign Trade Expansion of Financing

General Information:

No information regarding BOFT loans or financing have been provided other than the information provided above in section 12 of this appendix. Based on other information available to the CBSA, the BOFT identified the expansion of export financing as a key part of Chinese Taipei’s trade policies and measures that have been adopted.

Legal Basis:

The GOCT has not provided the laws, regulations or other legal instruments which provide the authority for the program.

Eligibility Criteria:

The CBSA does not currently possess information regarding the specific eligibility criteria relating to this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA; i.e. a practice of government that involves a direct transfer of funds, and would confer a benefit to the recipient equal to the difference between the amount of interest charged on the loan under this program and the interest that would be charged on a market rate commercial loan to the enterprise.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

15) Five-year Tax Exemption for Emerging, Important and Strategic Industries

General Information:

The authority responsible for administering this program is the Industrial Development Bureau – MOEA.

An enterprise that qualifies as an emerging, important and strategic industry may, within two years from the date they receive capital contribution payments from shareholders, apply for exemption of corporate income tax on those payments as long as they have the shareholders’ approval.

Newly incorporated companies meeting the qualification are entitled to the exemption as described above for a period of five years. The five year period commences on the first day in which the company begins marketing its products or providing its services.

Expanding enterprises already in existence are only entitled to use the exemption to offset corporate income tax levied against income earned as a result of the expansion. They also are able to use the exemption over a five-year period, which commences on the first day in which the new equipment begins operation or services have been provided. Further, for the expansion to be eligible for the exemption, it must involve the creation of additional independent production or service units, or a major increase in production or service equipment.

Within two years of beginning production or providing service, enterprises eligible for the tax exemption may, at their own discretion, defer the commencement date of the five-year tax exemption period up to a maximum of four years. The newly deferred commencement date of the tax exemption period should be the beginning date of a fiscal year.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The GOCT has not provided the laws, regulations or other legal instruments which provide the authority for the program. The GOCT claims that the sample companies currently being investigated have not received tax exemptions under this program.

Eligibility Criteria:

In order to qualify as an “emerging, important and strategic industry”, the following thee criteria should be met:

1. Products to be produced under the investment plan should belong to emerging, important and strategic industries;

2. The paid-in or increased paid-in capital for the investment plan should be over NT$200 million; and

3. The amount of funds available for the purchase of brand-new machinery/equipment in the investment plan should be over NT$100 million

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e. amounts that would otherwise be owing and due to the government are exempted, and would confer a benefit to the recipient equal to the amount of the exemption.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

16) Providing a Five-Year Profit-Seeking Enterprise Income Tax Exemption Incentive to Newly Incorporated or Expanded Manufacturing Industries and Their Associated Technical Service Industries

General Information:

The authority responsible for administering this program is the Industrial Development Bureau – MOEA. The GOCT responded that none of the sample companies received this tax exemption and provided no further explanation regarding this alleged program. However, reference materials provided by the GOCT to the CBSA contained some information regarding the program.

Investments in new start-ups or in capital increases for expansion during the period of January 1, 2002 through to December 31, 2003 will be exempt from profit-seeking-enterprise income tax in accordance with the following conditions:

1. Investments in new start-ups may claim exemption from profit-seeking-enterprise income tax for five continuous years beginning on the date that the resulting products are first sold or services are first provided.

2. Enterprises investing in capital increases for expansion may claim exemption from profit-seeking-enterprise income tax for five continuous years beginning on the date which the newly added facilities start operating or provide services. This exemption is limited to the expansion of independent production or service units, and the expansion of primary production or service facilities.

Also, within two years of when the products are first sold or when services are first provided, the enterprise eligible for this tax exemption may delay the commencement date of the five-year tax exemption period up to a maximum of four years. The newly deferred commencement date of the tax exemption period should be the first day of a fiscal year.

Legal Basis:

The GOCT has not provided the laws, regulations or other legal instruments which provide the authority for the program. The GOCT claims that the sample companies currently being investigated have not received tax exemptions under this program.

Eligibility Criteria:

The CBSA does not currently possess information regarding the specific eligibility criteria relating to this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e. amounts that would otherwise be owing and due to the government are exempted, and would confer a benefit to the recipient equal to the amount of the exemption.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

17) Providing a Five-Year Profit-Seeking Enterprise Income Tax Reduction to Funds Invested in Equipment for Automation of Production or Production Technology

General Information:

The authority responsible for administering this program is the Industrial Development Bureau – MOEA. The Executive Yuan is responsible for prescribing the approving authority, the deadline for filing applications, application procedures, the enforcement period, the income tax credit rate and other relevant matters.

Under this program, enterprises may credit 5 to 25% of the cost of the investment in equipment for automation of production or production technology against the amount profit-seeking enterprise income tax payable in the current year. Should the enterprise choose not to use up the entire credit amount in the current year, it may carry forward the credit for a maximum period of five years from the then current year.

However, if the enterprise sublets, leases, re-sells, returns, or reports that the equipment or technology is unserviceable within three years, the enterprise must repay the credited income tax benefit they received to the income tax authority plus applicable interest. The only exception to this is if the equipment or technology has been reported as unserviceable as a result of an earthquake, typhoon, flood, drought, plague of insects, fire, war or any other event of force majeure.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The income tax reduction for investing in automated machinery and equipment is administered in accordance with Article 6 of the Statute for Upgrading Industries.

The GOCT was unable to indicate whether any of the sample companies have applied for or received this tax credit during the POI as enterprises were only required to submit income tax returns relating to the period around the same time the GOCT received and was in the process of responding to the CBSA’s RFI. However, following a brief scan of the exporter responses received, it appears that some of the sample companies have applied for and received tax credits under this program.

Eligibility Criteria:

A principal company duly established under Company Law may apply for assistance under this program.

The automated equipment purchased shall perform one of the following functions and be required in the course of manufacturing products or providing services:

1. Automated filling and discharging of materials;

2. Automated monitoring, detection and calibration;

3. Automated data processing and calculation; and

4. Automated assembly, processing or control of production conditions.

The following shall be considered automated technology:

1. Patents or know-how exclusively used on automated equipment; or

2. Know-how or package software required for computer-aided design, manufacturing or management.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e. amounts that would otherwise be owing and due to the government are reduced, and would confer a benefit to the recipient equal to the amount of the reduction.

Determination of Specificity:

On the basis of available information, this program appears to be non-specific in law. However, presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

18) Tax Credit to Company Investment in County or Township Areas with Scanty Natural Resources or Slow Development

General Information:

This program was established in July 1992 in order to encourage companies to invest in disadvantaged areas. The authority responsible for administering this program is the Industrial Development Bureau – MOEA.

Companies located in a disadvantaged area as specified in Article 2 of the measures noted below are eligible for a credit of up to 20% of the total cost of its investment in brand new machinery, equipment, and plant building(s), to be used for production or operation purposes. The amount of the tax credit can be applied against the amount of profit-seeking enterprise income tax payable for the year in which the investment plan is completed. If the amount of income tax payable in the year of completion is less than the amount of the tax credit earned, the remaining amount of the tax credit may be deducted over the next four years.

However, if the enterprise sublets, leases, re-sells, returns, demolishes, declares unserviceable, or transfers the machinery and equipment outside the designated area within three years of receiving the “Tax Credit Certificate”, and such actions result in the total investment amount becoming less than NT$25,000,000, the enterprise must repay the credited income tax benefit they received plus applicable interest to the income tax authority. Also, if within two years of receiving the “Tax Credit Certificate” the enterprise employs less additional people than the number of employees specified in Article 3 of the measures, the enterprise must repay the credited income tax benefit they received plus applicable interest to the income tax authority.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The income tax reduction for investing in disadvantaged areas is provided for in the Measures Governing Application of Tax Credit to Company Investment in County or Township Areas with Scanty Natural Resources or Slow Development.

The GOCT acknowledged that one of the sample companies being investigated is located in a disadvantaged area but has not applied for the tax credit available under this program. While the GOCT identifies the legislative authority for the program, a copy of the legislation noted above has not been provided since they claim none of the sample companies have received assistance under this program.

Eligibility Criteria:

In order to apply for the tax credit under this program, the enterprise must meet the following criteria:

1. To be incorporated in a county or township area with scanty natural resources or slow development, or a branch office to be established in such an area;

2. The total amount used in purchasing brand new machinery, equipment and plant building(s) under the investment project concerned amounts to Twenty Five Million New Taiwan Dollars (NT$ 25,000,000) or more;

3. The number of additionally employed employees in a full year amounts to fifty (50) persons or more; and

4. Belongs to the agricultural industry, the manufacturing industry, or the service industry.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e. amounts that would otherwise be owing and due to the government are reduced, and would confer a benefit to the recipient equal to the amount of the reduction.

Determination of Specificity:

On the basis of available information, this program would likely constitute a specific subsidy, in law, pursuant to paragraph 2(7.2)(a) of SIMA; i.e. as it is limited to particular enterprises, pursuant to a legislative, regulatory, or administrative instrument or other public document, in this case, as set forth in the Measures Governing Application of Tax Credit to Company Investment in County or Township Areas with Scanty Natural Resources or Slow Development.

19) Income Tax Reserve Against Investment Losses in Outward (Foreign) Investments and/or Technical Cooperation Projects

General Information:

This program exists in order to enhance the international competitiveness of domestic industries and avoid unbalanced development. The regulations governing the measures for providing assistance and guidance under this program, including conditions, procedures, and approval are prescribed by MOEA. The GOCT responded that none of the sample companies requested this tax deduction and provided no further explanation regarding this alleged program other than the fact that if no losses occur within five years, that the reserve must be treated as income in the fifth year.

Based on the information available, a company or national of the Republic of China (Chinese Taipei) meeting the eligibility criteria may set aside an amount of up to 20% of the total foreign investment as a reserve to cover any investment losses that occur within five years. As noted above, if no losses are incurred within the five-year period, the reserve that was set aside must be treated as income in the fifth year. Further, if the company is liquidated for its income in accordance with the Income Tax Law, upon its dissolution, deactivation, invalidation, merger, or assignment, its cumulative balance of the reserve shall be treated as income in that current year of liquidation.

The program was in operation during the POI and continues to be in operation to date.

Legal Basis:

The income tax reduction for investing in disadvantaged areas is provided for in Article 12 of the Statue for Upgrading Industries.

The GOCT acknowledged that none of the sample companies being investigated applied for the tax credit available under this program. While the program is provided for under the legislation noted above, the regulations prescribed by MOEA governing this program have not been provided.

Eligibility Criteria:

A company may set aside a reserve, as described above, under the following circumstances:

1. Where the outward investment has been approved by MOEA; or

2. Where an application for recordation of the investment has been filed with MOEA after the implementation of such investment in accordance with the regulations as prescribed by MOEA.

Eligibility for this program, in addition to the criteria above, shall be further limited to those whose total outward investments represent more that 20% of the total share equity of the relevant invested enterprise abroad.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e. amounts that would otherwise be owing and due to the government are reduced, and would confer a benefit to the recipient equal to the amount of the reduction.

Determination of Specificity:

Presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in law, in accordance with subsection 2(7.2) of SIMA or a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

20) Export Loss Reserves

General Information:

Based on information available prior to initiation, it appeared that exporters located in Chinese Taipei were able to set aside an export loss reserve of up to one percent of export sales from the previous year as was provided for in Article 31 of the Statute for Encouragement of Investment. The reserve was treated as a deduction from taxable income and was identified as a liability on company accounts. Had a company’s export loss reserve exceeded one percent during the tax year, the excess funds were to be carried forward as taxable income in the subsequent year.

However, based on information provided by the GOCT, no deductions under this program are provided to exporters as the Statute for Encouragement of Investment was repealed on January 30, 1991. As a result, the CBSA will no longer be pursuing this program in its investigation, as the program no longer exists.

21) Preferential Income Tax Ceiling

General Information:

Based on information available prior to initiation, it appeared, under this program, that productive enterprises and large trading companies located in Chinese Taipei were permitted to pay no more than 25% in corporate income taxes on income exceeding NT$500,000 as opposed to the 35% required by Chinese Taipei’s graduated corporate income tax law. This program was provided for in Article 15 of the Statute for Encouragement of Investment. Benefits under Article 15 were available to all productive enterprises, defined by the statute as stock companies engaging in manufacturing, handicrafts, mining, agriculture, forestry, fishery, animal husbandry, transportation, warehousing, public utilities, public facility construction and development, public housing construction, technical services, hotels, and heavy machinery construction.

However, based on information provided by the GOCT, no deductions under this program are provided to exporters as the Statute for Encouragement of Investment was repealed on January 30, 1991. As a result, the CBSA will no longer be pursuing this program in its investigation, as the program no longer exists.

22) Export Insurance Provided by The Bureau of Foreign Trade and EXIM Bank

General Information:

The Export-Import Bank of the Republic of China (EXIM Bank), which is wholly owned by the government, was established in 1979 to facilitate export and import trade in Chinese Taipei by offering various types of financing and services including Export Credit Insurance. In addition, the BOFT also provides reserved funds to EXIM Bank for export insurance services to exporters enhancing to safeguard them against commercial risks and political risks occurred in international trade.

The GOCT has responded that all export insurance fees charged by EXIM Bank are not preferential that the export insurance fee charged is contingent upon the credit risk, country risk and time period with which the export transaction takes place.

Legal Basis:

The GOCT has not provided the laws, regulations or other legal instruments which provide the authority for the program. The GOCT claims that EXIM Bank has not provided export insurance to any of the sample companies currently being investigated.

Eligibility Criteria:

The CBSA does not currently possess information regarding the specific eligibility criteria relating to this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA; i.e. the government is providing a service, other than governmental infrastructure, and would confer a benefit to the recipient equal to the difference in fees charged by EXIM and those that would be charged by a private insurance institution.

Determination of Specificity:

On the basis of available information, should this program give rise to a subsidy, it would likely constitute a specific subsidy pursuant to paragraph 2(7.2)(b) of SIMA; i.e. as it would be a prohibited subsidy in the form of an export subsidy that is contingent, in whole or part, on export performance.

23) Purchase of Goods from State-Owned Enterprises – China Steel Corporation (CSC)

General Information:

The GOCT has responded that they do not control the majority of CSC stock and therefore CSC is not considered a stat-owned enterprise. However, based on the information they provided, it appears that the government still possess significant influence in CSC’s business affairs as the government continues to possess a substantial share of the corporation’s stock and also nominates a number of members to CSC’s Board of Directors.

Based on information provided by the complainant, it appears that exporters in Chinese Taipei are able to purchase low-priced steel inputs from CSC and it is alleged that CSC maintains two price lists, one for those enterprises that sell domestically and one for those that export their products. Further, the Taiwan Industrial Fasteners Institute (TIFI) has claimed that carbon steel wire rod supplied by CSC was an important factor in the development of the fastener industry in Chinese Taipei and credits CSC’s cooperation with the industry for the place in which Chinese Taipei occupies in the global fastener market.

Supplemental information regarding wire pricing has been requested and has been received from some of the sample companies involved in the investigation. Following the preliminary determination, the CBSA will conduct a full analysis of CSC’s pricing to these sample companies in this investigation in comparison to market prices for steel wire of other wire producers during the same period in order to determine if CSC’s prices appear preferential. Should the prices appear preferential in nature, the CBSA will pursue the matter and request any further information required in order to make a determination.

Legal Basis:

The GOCT has provided all information requested and it does not appear at this time that there are any specific laws, regulations or other legal instruments which provide the authority for this program.

Eligibility Criteria:

The CBSA does not currently possess information regarding the specific eligibility criteria relating to this program.

Determination of Subsidy:

On the basis of available information, this program would likely constitute a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA; i.e. the government is providing goods, other than governmental infrastructure, and would confer a benefit to the recipient equal to the difference in prices charged for wire sold by CSC to exporters and the fair-market value of the wire.

Determination of Specificity:

On the basis of available information, this program appears to be non-specific in law. However, presently there is insufficient information in respect of this program to determine if the program would constitute a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.

1 OECD, DAC List of Aid Recipients – As at 1 January 2003, online: http://www.oecd.org/dataoecd/35/9/2488552.pdf

2 The American National Standards Institute/American Society of Mechanical Engineers, Society of Automotive Engineers, Industrial Fastener Institute, Deutsches Institut für Normung e.V., and International Organisation for Standardization, respectively.

3 For purposes of determining a weighted average margin of dumping for China and Chinese Taipei, the CBSA relied on existing Customs data to separate Fastenal's exports by origin

4 For purposes of determining a weighted average margin of dumping for China and Chinese Taipei, the CBSA relied on existing Customs data to separate Hilti's exports by origin.

5 Government of China's Non-Confidential response to Original RFI, Question D.2

6 Government of China's Non-Confidential response to Supplementary RFI #3, Question 4

7 Most explicitly in the Government of China's Non-Confidential Response to Supplementary RFI #3, Question 4 (b)

8 Original RFI, Part C, pp.11

9 DAC stands for Development Assistance Committee

10 Original RFI, Part E, Section C, pp.16

11 Government of China’s Non-confidential response to Original RFI, Response E.1.A1-A7

12 WTO Document WT/L/432

13 Gem-Year response to Supplementary RFI Public Exhibit SC1(a)(1) to SC1(a)(3)

14 Government of China original Non-Confidential response, E.5.5(a)A1 – E.5.5(a).C

15 Government of China original response, Public Exhibit E.1.A1-A7.2.1

16 Government of China Non-Confidential response E.8-A.1-C.8(f)

17 “The right of dien is a right to use an immovable property of another person and to collect fruits therefrom by paying a price and taking possession of the property. It differs from but does not preclude the creation of mortgage. […] The owner of the immovable property does not lose his title to the property by creating the right of dien thereon. […] While the right of dien is assignable by the dien-holder, the title to the property remains in the owner and is thus transferable to a third party so long as it does not affect the right of the dien-holder. See the Civil Code, Articles 911 through 927.” (J.Y. Interpretation No. 139, October 4, 1975, Transalated by Raymond T. Chu, http://www.judicial.gov.tw/j4e/doc/139.pdf)