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Anti-dumping and Countervailing Program
Outdoor Barbeques
OTTAWA, April 28, 2004
4235-264
AD 1318
4218-16
CVD 102
STATEMENT OF REASONS
concerning the initiation of an investigation into the dumping and subsidization of
OUTDOOR BARBEQUES ORIGINATING IN OR EXPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA
DECISION
Pursuant to subsection 31(1) of the Special Import Measures Act, the President of the Canada Border Services Agency initiated an investigation on April 13, 2004, respecting the alleged injurious dumping and subsidization of self-standing barbeques for outdoor use, consisting of metal lid, base and frame, fuelled by either propane or natural gas, with primary cooking space between 200 and 550 square inches (500 and 1375 square centimeters), in assembled or knocked-down condition, originating in or exported from the People's Republic of China.
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TABLE OF CONTENTS
- Complainant
- Exporters
PRODUCT INFORMATION
- Definition
- Additional Product Information
- Production Process
- Classification of Imports
- Like Goods
CANADIAN INDUSTRY
STANDING
THE CANADIAN MARKET
EVIDENCE OF DUMPING
- Normal Values
- Costing Exercise
- Export Price
- Estimated Margins of Dumping
MARGIN OF DUMPING AND VOLUME OF DUMPED GOODS
EVIDENCE OF SUBSIDIZATION
- Potential Subsidy Programs in the People's Republic of China
ESTIMATED AMOUNT OF SUBSIDIES
AMOUNT OF SUBSIDY AND VOLUME OF SUBSIDIZED GOODS
EVIDENCE OF INJURY
CONSULTATIONS
CONCLUSION
SCOPE OF THE INVESTIGATION
FUTURE ACTION
RETROACTIVE DUTY ON MASSIVE IMPORTATIONS
UNDERTAKINGS
PUBLICATION
INFORMATION
[1] On February 19, 2004, the Canada Border Services Agency (CBSA) received a written complaint from Fiesta Barbeques Limited (Fiesta) concerning the alleged injurious dumping and subsidization of outdoor barbeques originating in or exported from the People's Republic of China (China). On March 11, 2004, pursuant to subsection 32(1) of the Special Import Measures Act (SIMA), the CBSA informed the complainant that the complaint was properly documented. The CBSA also notified the government of China, and provided a copy of the non-confidential version of the subsidy portion of the complaint.
[2] The complainant provided evidence that these products have been dumped and subsidized. The evidence provided also discloses a reasonable indication that the dumping and subsidization have caused injury or are threatening to cause injury to the Canadian industry producing these goods.
[3] On April 13, 2004, the President of the CBSA (President) initiated an investigation respecting the dumping and subsidization of the goods pursuant to subsection 31(1) of SIMA.
[4] 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 will extend developing country status to China for purposes of this investigation.
[5] The complainant, Fiesta Barbeques Limited, is the largest Canadian manufacturer of outdoor barbeques. The complainant's address is:
Fiesta Barbeques Limited
2 Walker DriveBrampton, ON
L6T 5E1
[6] The CBSA has identified 25 potential exporters of the subject goods from customs import documentation and the complaint submitted by Fiesta.
Importers
[7] The CBSA has identified 99 potential importers of the subject goods from customs import documentation and the complaint submitted by Fiesta.
[8] For the purpose of this investigation, the subject goods are defined as:
Self-standing barbeques for outdoor use, consisting of metal lid, base and frame, fuelled by either propane or natural gas, with primary cooking space between 200 and 550 square inches (500 and 1375 square centimeters), in assembled or knocked-down condition, originating in or exported from the People's Republic of China.
Additional Product Information
[9] For the purpose of the above definition, the term "primary cooking space" means the area of the main cooking space of the base of the barbeque unit, measured at the upper inside periphery of the base. The term "primary cooking space" does not include peripheral cooking surfaces such as warming racks and/or side burners.
Exclusions:
[10] Excluded from the foregoing definition are:
- barbeques and grills designed to be installed in a fixed or permanent location;
- barbeques and grills, such as camping stoves, designed primarily for portable or table-top use;
- deck-top fireplaces with grilling grates;
- smokers with grilling grates;
- outdoor cookers designed primarily to heat or boil liquids.
[11] The exclusion referred to in item (1) above does not include subject goods that have been altered by affixing brackets or other attaching or installation devices. This exclusion does not include subject goods on which frames have been altered or adjusted or subject goods on which wheels, casters or rolling devices have been removed to facilitate permanent installation.
[12] The subject goods are made from a combination of materials, including aluminium, cold-rolled steel, stainless steel, mild steel tubing, brass, steel wire, wood and plastic and/or resin. Production of the barbeques in question consists of the following main operations:
Metal Stamping:
[13] Cold-rolled steel coils are purchased by manufacturers in various widths and thicknesses, depending on the part that needs to be produced. From the coils, parts for the barbeques are manufactured on stamping presses using multi-station progressive dies. This process includes uncoiling the steel, straightening, punching, piercing, forming, and cutting to the individual part shape required for the barbeque.
[14] The stamped and formed steel parts are washed and pre-treated to increase rust-prevention qualities. The parts are then dried and painted with polyester paint.
Aluminum Die Casting:
[15] Whether produced directly or purchased from outside sources, die-casting involves the melting of aluminum ingots at high temperatures. The molten aluminum is then distributed to die casting machines through the use of a "launder" system.
[16] Molten aluminum is fed into the mold under high pressure and held there until it solidifies to form the desired part. The formed part is automatically removed by a robot, dunked into a quench tank and loaded into the trim-die to remove excess material. The part is then inspected, de-burred, palletized and put into storage.
Tube Bending and Piercing:
[17] Steel tubing is used to produce the legs of the barbeque unit. The tubing is generally received in bundles cut to the appropriate length. The tubing is then loaded into a magazine feed, which initiates the automatic bending and piercing operation to form the legs.
Welding:
[18] The barbeque legs, bases and brackets are welded to form the frame to which the base casting and all the other major components are mounted or assembled.
Powder Painting:
[19] After a five-stage pre-painting treatment process, low temperature polyester paint is applied to the steel components while high temperature textured paint is applied to the castings. Both castings and steel components are painted in a variety of colours as per customer demands.
Burner Crimping:
[20] The crimping operation is used in the production of gas burners. Stainless steel blanks manufactured on stamping presses are loaded into an assembly fixture. Crimping entails squeezing the two halves together to form the final burner complete with mounting feet. This operation produces a burner with an airtight seal around the perimeter of the burner, which prevents gas or propane from leaking while in operation.
Light Assembly Operations:
[21] These operations utilize custom-designed jigs, fixtures and equipment to allow for efficient manufacture of sub-assemblies such as the resin ladder assembly (frame of the barbeque), console assembly, side burner, side shelf and rotisserie assemblies. These are completed in-house to allow for easy assembly by the consumer.
Packaging:
[22] The various parts, components, and sub-assemblies required to assemble a complete barbeque are packaged into individual boxes with hardware components and instructions for assembly by the consumer. The boxed unit includes the metal stamped parts, pre-fabricated steel frame, front console assembly complete with hose and/or valves, and/or regulators and knobs, burner system, aluminum lid and base, wire or cast iron cooking grills, resin and/or steel or stainless steel front panels and side shelves.
[23] The finished goods are sold to retailers in packaged or boxed format. The boxed units are palletized, stretch wrapped and sent to the warehouse for storage and shipping.
[24] Outdoor gas barbeques are properly classified under the following Harmonized System classification number:
7321.11.90.30
[25] Like goods, in relation to any other goods, are goods that are identical in all respects or, in the absence of identical goods, are goods of which the uses and other characteristics closely resemble those of the other goods. Barbeques produced by the domestic industry compete directly with and have the same end use as the subject goods imported from China. The goods produced in Canada and China are completely substitutable. Therefore, the CBSA has concluded that barbeques produced by the Canadian industry constitute like goods to the subject goods.
[26] While the subject goods definition comprises a range of models within the spectrum of the primary cooking space parameters, all models are used for outdoor cooking and share the same basic properties in terms of design, composition, and function. The CBSA is of the opinion that there are no separate classes of goods based on use, characteristics, or other factors.
[27] Fiesta is a Canadian manufacturer of outdoor barbeques, producing for both the domestic and export markets. Founded in 1986, Fiesta is the largest producer of like goods in Canada. It is the only gas barbeque company in the world that manufactures all of its own castings, burners and propane cylinders.2 The latter-mentioned products are produced by Fiesta's sister company, Wolfedale Engineering Limited. Fiesta produces gas barbeques at its manufacturing facility in Mississauga, Ontario.
[28] Other Canadian manufacturers of outdoor gas barbeques include Onward Manufacturing, Wolf Steel Limited (Napoleon), and CFM Vermont Castings Majestic Inc.
[29] SIMA requires that the following conditions be met in order to initiate an investigation:
- the complaint is supported by domestic producers whose production represents more than 50% of the total production of like goods by those domestic producers who express either support for or opposition to the complaint; and
- the production of the domestic producers who support the complaint represents 25% or more of the total production of like goods by the domestic industry.
[30] For the consideration of standing under SIMA, domestic industry means the domestic producers as a whole of the like goods except that, if a domestic producer is related to an exporter or importer of allegedly dumped or subsidized goods, or is an importer of such goods, "domestic industry" may be interpreted as meaning the rest of those domestic producers.
[31] Based on an analysis of information provided in the complaint, as well as a survey of other Canadian producers, the CBSA has estimated that the complainant represents more than 50% of Canadian production of the like goods. The CBSA is satisfied that the standing requirements of SIMA have been met.
[32] The size of the market for outdoor barbeques in Canada has been relatively stable over the past four years. However, the distribution of domestic and import sales has changed significantly since 2000. Fiesta contends that the market share of domestic producers has decreased by more than 14% between 2001 and 2003, while imports from China have increased from 2% to 21% of the market during the same period.
[33] Import documentation available to the CBSA indicates that imports of subject goods from China have increased from 4,000 units in 2000 to more than 200,000 units in 2003. The CBSA acknowledges that the tariff number under which outdoor barbeques are imported is quite broad, and may include products that would not be subject to the investigation. However, this data does support the complainant's allegation of a trend of increasing volumes of subject goods being imported from China.
[34] Based on the above, the CBSA finds Fiesta's estimates of import volumes from China to be conservative and reasonable. Customs data confirms Fiesta's contention that imports from China have shown a significant increase in the past four year period. Fiesta has also noted that imports from the United States have decreased over the past four years, indicating that imports of subject goods may be displacing market share held by outdoor barbeques from other import sources.
[35] The following table presents Fiesta's estimates of the apparent Canadian market for outdoor gas barbeques over the past four years, on a volume basis:
Apparent Canadian Market 2000-2003
(units)
|
Sales in Canada |
2000 |
2001 |
2002 |
2003 |
|
Domestic Shipments |
468,397 |
491,068 |
438,173 |
396,714 |
|
Imports: |
||||
|
China |
5,850 |
12,060 |
60,811 |
120,930 |
|
United States |
120,510 |
89,847 |
60,359 |
64,350 |
|
Total Imports |
126,360 |
101,907 |
121,170 |
185,280 |
|
Total Market |
594,757 |
592,975 |
559,343 |
581,994 |
|
Market Share (%) |
||||
|
Domestic |
78.8 |
82.8 |
78.3 |
68.2 |
|
Sales of all Imports |
21.2 |
17.2 |
21.7 |
31.8 |
|
Sales - Subject Country Imports |
1.0 |
2.0 |
10.8 |
20.8 |
[36] The following graph summarizes the data presented above:
[37] The complainant alleges that outdoor gas barbeques from China are being injuriously dumped into Canada. Dumping occurs when the normal value of the goods exceeds the export price of the goods sold to importers in Canada. Normal values are generally based on the domestic selling price of the goods in the country of export, or on the full cost of production of the goods, including general, selling and administrative expenses, plus a reasonable amount for profits. In this case, the complainant's allegations of dumping are based on a comparison of estimated normal values of the subject goods and the estimated export prices to Canada.
[38] The complainant has estimated normal values for five models of subject goods (see selection criteria below) sold at various price points by Canadian retailers.
Government Control of Prices (Section 20 Method)
[39] The complainant has not provided evidence, and the CBSA has no information at this time to suggest that domestic prices of like goods are substantially determined by the government of China, and that they are not substantially the same as they would be if they were determined in a competitive market. Section 20 of SIMA has, therefore, not been used in the complainant's estimation of normal values.
Domestic Sales in China (Section 15 Method)
[40] The complainant believes that there is no domestic market for outdoor barbeques in China and that barbeques are produced in China almost exclusively for export markets. Therefore, in the absence of information related to domestic selling prices of subject goods in China, normal values have not been estimated in accordance with section 15 of SIMA based on domestic sales.
Costs of Production (Paragraph 19(b) Method)
[41] The complainant has estimated normal values using paragraph 19(b) of SIMA, based on the complainant's cost of production of like goods, plus general, selling and administrative expenses, and an amount for profits. The complainant made adjustments to these values to reflect differences in material costs and production processes for subject goods produced in China.
Calculation Methodology
A. Model Selection
[42] The complainant asserts that the subject goods can be classified into five model categories, based on retail price points. These price points range from lower-priced, small-primary-cooking-space models to higher-priced, larger models. The CBSA has reviewed retail catalogue information provided in the complaint, and finds this assertion to be valid.
[43] For purposes of normal value and export price estimates, the complainant has selected five particular import models that it believes are representative of the price points at which the subject goods are sold. Given that the industry competes strongly on price point, it is reasonable to conclude that the selected models are representative of models sold at similar price points by other retailers. The CBSA, therefore, accepts that the models chosen by Fiesta for completing margin of dumping estimates are representative of the range of subject goods covered by the product definition.
[44] In developing a cost model for the subject goods, the complainant obtained samples of the selected barbeques from China and reverse-engineered the units into their component parts. The disassembled components were then analysed, weighed and measured to establish a basis of comparison to the Canadian like goods. Differences in manufacturing techniques between the Chinese plants and their own Canadian manufacturing facilities were noted based on direct observation.
[45] Normal values for the five selected models were established based on the cost of production of like goods in Canada, plus amounts for general, selling and administrative expenses, and profit. Adjustments were made to the cost of production to reflect price differentials between the Chinese and North American steel markets during 2003. A number of steel industry publications were provided in the complaint to indicate that the cost of cold-rolled steel in China was higher in the first two quarters of 2003 than it was in the North American market.3
[46] The complainant has estimated labour costs for the subject goods based on its own costs, adjusted to reflect differences in wage rates in China. This adjustment reflects wage rate comparisons for manufacturing industries in China and Canada, as compiled by the International Labour Organization.4
[47] Overhead and general, selling and administrative expenses for the selected models have been estimated using public information available from the U.S. Department of Commerce Index of Factor Values for China.5 Fiesta has also estimated an amount for profit at 5% of the total cost of production of the subject goods. This amount is lower than the profit amount of 8% for manufacturing industries in China listed in the Department of Commerce index.
[48] The CBSA considers the normal values estimated by the complainant, using the methodology above, to be reasonable and acceptable.
[49] The export price of imported goods is generally determined in accordance with section 24 of SIMA as being the lesser of the importer's purchase price or the exporter's selling price to Canada less all charges and expenses resulting from the exportation of the goods.
[50] However, the complainant did not have sufficient information to estimate export prices based on the selling price from the exporter to the importer in Canada. Export prices were therefore estimated based on retail selling prices for the selected models of subject goods sold by a major retailer in Canada.
[51] To estimate the export price, the complainant reduced the retail price in Canada by an amount to represent the retailer's gross profit margin, as well as estimated shipping, handling, ocean freight and other off-loading charges.
[52] The CBSA reviewed the complainant's calculation and compared the complainant's estimates of the export prices with its own internal import data. Based on this comparison, the CBSA considers Fiesta's estimates of export prices to be representative of the exporter's selling prices.
[53] The complainant has estimated margins of dumping for the five selected models of subject goods. The estimated margins range from 26.7% to 47%, when expressed as a percentage of export price.
[54] The CBSA has estimated margins of dumping by comparing the complainant's estimated normal values with the CBSA's estimated export prices, which are based on actual Customs import data. The exchange rates used were those in effect at the time of importation. The estimated margins of dumping range from 0.07% to 116.5% when expressed as a percentage of export price. The overall weighted average margin of dumping estimated by the CBSA is 45.2%, when expressed as a percentage of export price.
[55] Based on the complainant's information and the CBSA's analysis of import data, there is reasonable evidence that the imported goods have been dumped.
Margin of Dumping and Volume of Dumped Goods
[56] Under section 35 of SIMA, if, at any time before the President makes a preliminary determination, the President is satisfied that the margin of dumping of the goods of a country is insignificant or the actual and potential volume of dumped goods of a country is negligible, the President must terminate the investigation with respect to that country. Pursuant to subsection 2(1) of SIMA, a margin of dumping of less than 2% of the export price is defined as insignificant and a volume of dumped goods of less than 3% of total imports is considered negligible.
[57] The CBSA estimates that 98% of the subject goods have been dumped. As well, imports of subject goods from China account for greater than 77% of the volume of outdoor barbeques imported from all countries during 2003.
[58] On the basis of the estimated margins of dumping and the actual import data for all countries for the 12-month period of January 1, 2003 to December 31, 2003, the margin of dumping and volume of dumped goods are estimated to be well above the thresholds outlined above.
[59] In assessing whether a program qualifies as a subsidy under SIMA, the CBSA considers whether:
- there exists a financial contribution by a government of a country other than Canada; and
- there is a benefit conferred on persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of goods.
[60] If a subsidy is found to exist, it may be subject to countervailing duties if it is specific. A subsidy is considered specific when it is limited to a particular enterprise, when it is an export subsidy, which is contingent on export performance, or when it is an import substitution subsidy, which is contingent on the use of domestic over imported goods.
[61] For purposes of this analysis, a program that constitutes a specific subsidy that is potentially subject to countervailing measures is referred to as an "actionable subsidy".
[62] The complainant has alleged that the subject goods from China are eligible for government programs that may constitute actionable subsidies.
[63] In support of its allegations, the complainant has provided a number of documents detailing support offered by the government of China (GOC), primarily to exporting enterprises and those operating in special economic areas. Reference was also made to the fact that there is a lack of information available with regard to potential subsidies granted by the GOC.
[64] This lack of information is largely due to the fact that China has not provided a full notification to the World Trade Organization (WTO) Committee on Subsidies and Countervailing Measures, as required under Article 25 of the WTO Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) and under Article XVI of the General Agreement on Tariffs and Trade 1994. The Chair's Report to Council for Trade in Goods in the Transitional Review of China6, November 2003, notes that updated versions of this information have not been provided. Similarly, public reports from both the U.S. Trade Representative (USTR) and the U.S. Department of Commerce indicate that information regarding potential subsidies in China has not been provided and is difficult to obtain7.
Potential Subsidy Programs in China
[65] In reviewing the information found in the reports and articles that were provided by the complainant, the CBSA has developed the following list of programs and incentives that may be provided to manufacturers of outdoor barbeques in China:
- Special Economic Zone 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
[66] Appendix I provides further description of the programs listed above.
[67] There is sufficient reason to believe that the programs and incentives listed above may constitute actionable subsidies provided by the GOC.
[68] Based on the information available to the CBSA regarding the programs named above, it is reasonable to conclude that the named subsidy programs are available to the exporters of barbeques in China. In examining these programs, the CBSA will request information from the government of China and from exporters of the subject goods to determine whether these programs confer countervailable benefits on the subject goods.
[69] In the absence of available information, the complainant has not been able to determine the value of the alleged subsidies on a per-unit basis, although these programs are believed to significantly lower the cost of production and the selling prices of the subject goods exported to Canada.
[70] The CBSA has estimated the amount of subsidies provided to barbeque manufacturers in China as follows:
Export-Contingent Subsidies
[71] Section 10 of SIMA provides that, in the case of export contingent subsidies, where all or a portion of the margin of dumping is attributable to the export subsidy, the amount of anti-dumping duty is equal to the portion of the margin of dumping that is not attributable to the export subsidy. In such instances, the amount of subsidy and the margin of dumping off-set one another, thus avoiding double-counting.
[72] The CBSA believes that the weighted average margin of dumping found for the subject goods may be at least partially attributable to certain export-contingent subsidies as described above. Therefore, the estimated weighted average margin of dumping of 45.2% of the export price includes a component that reflects the estimated benefit attributable to the various subsidy programs. The proportions of estimated margin that are attributable to dumping and subsidization cannot be determined at this time, given the lack of available information.
Domestic Subsidies
[73] The CBSA has estimated an amount of subsidy attributable to non-export-oriented domestic programs and incentives. This amount was estimated by comparing the material cost estimated by Fiesta for the five selected models of subject goods to the export prices determined by the CBSA. In cases where goods were imported into Canada at prices lower than the estimated material cost of the goods, the difference is assumed to be attributable to domestic subsidy programs. The CBSA estimates that the weighted average amount of domestic subsidy to be equal to 9.7% of the export price of the subject goods.
Amount of Subsidy and Volume of Subsidized Goods
[74] Under section 35 of SIMA, if, at any time before the President makes a preliminary determination, the President is satisfied that the amount of subsidy on the goods of a country is insignificant or the actual and potential volume of subsidized goods of a country is negligible, the President must terminate the investigation with respect to that country.
[75] Further, according to section 41.2 of SIMA, the President is required to take into account paragraph 10 of Article 27 of the WTO Subsidies Agreement when conducting subsidy investigations. This provision stipulates that in an investigation involving a developing country, an amount of subsidy of less than 2% of the value of the goods will be considered insignificant and a volume of subsidized goods of less than 4% of total imports will be considered negligible. As China is being considered as a developing country for purposes of this investigation, these differential amounts will apply.
[76] The overall weighted average margin of dumping and amount of export-contingent subsidy is estimated to be equal to 45.2%, when expressed as a percentage of export price. An additional amount for domestic subsidies is estimated to be equal to 9.7%, expressed as a percentage of export price. The CBSA estimates that 98% of the subject goods have been dumped and/or have benefited from export-contingent subsidies, and that 38.7% of the subject goods have benefited from domestic subsidies. The CBSA is, therefore, satisfied that the estimated amount of subsidy and volume of subsidized goods are well above the thresholds outlined above.
[77] The complainant has alleged that the subject goods from China have been dumped into Canada, and that the goods have been subsidized. The complainant also alleges that the dumping and subsidization have caused, or are threatening to cause, material injury to the Canadian industry. In support of its allegations, the complainant has provided evidence of suppressed and eroded prices, declines in net revenues, reduced gross margins and net income, loss of market share, lost sales, lower production volume and capacity utilization, and reduced levels of employment.
[78] In the following analysis of injury, the CBSA cannot release specific quantitative data, as it relates to only one Canadian company and would result in the disclosure of confidential information. The information is, therefore, presented without reference to specific numbers.
Price Suppression and Erosion of Gross Margins
[79] Fiesta alleges that sales of low-priced imports to Canadian retailers have undercut their own prices of like goods offered to the same vendors. The relatively stable price points at which barbeques are offered to consumers in the retail market mean that manufacturers compete by adding features to the models offered at particular price points. The higher costs associated with this practice have led Fiesta to realize reduced gross margins in 2002 and 2003.
Loss of Market Share and Declining Sales
[80] The complainant alleges that imports of outdoor barbeques from China have increased from negligible amounts in 2000 to more than 20% of the total Canadian barbeque market in 2003. The CBSA's review of import documentation supports this conclusion, as imports of subject goods from China have increased from 4,000 units in 2000 to more than 200,000 units in 2003.
[81] Fiesta contends that the increase in import penetration in the Canadian barbeque market has resulted in lost business at major retail accounts in 2002 and 2003. Information has been provided in the complaint to illustrate the decline in sales volume seen by Fiesta during this period, on a per-customer basis. The CBSA accepts that there is sufficient reason to believe that there is a correlation between Fiesta's decreased market share and the increased volume of imported barbeques from China.
Reduced Income, Margins and Net Profits
[82] The income statements provided by Fiesta illustrate that the company's domestic sales volume decreased significantly between 2001 and 2003. Fiesta claims that this decline in sales volume, which can be attributed to the increased market share of imports from China, has resulted in reduced gross margins and operating income.
Declines in Capacity Utilization
[83] Fiesta has provided information to illustrate declines in capacity utilization as a result of increased market penetration by imports of subject goods. The CBSA believes that the decline presented by Fiesta may be overstated, given that the production base used may include capacity dedicated to export production. The CBSA, therefore, adjusted the production base to account solely for domestic production capacity.
[84] The CBSA's estimates indicate a substantial decline in capacity utilization for goods produced for the domestic market. It is reasonable to conclude that this decline in capacity utilization is the result of lost sales due to the dumping and subsidization of barbeques from China.
Reduced Employment
[85] Fiesta states that direct and indirect employment related to the production of like goods in Canada has decreased from 2002 to 2003, with a further reduction expected in 2004. The complainant attributes reduced employment to the decline in production and sales due to increased import penetration by the subject goods. Fiesta also claims that this will impact employment figures for its Canadian suppliers of input goods and services.
Future Lost Profits
[86] A detailed summary of lost business to major retail customers in 2003 has been provided, through which Fiesta has concluded that total lost business for 2003 is significant. Fiesta predicts that, if the current trends continue, operating profits for 2004 will decline further.
[87] On April 8, 2004 consultations were conducted between Canadian government officials and representatives of the government of China, in accordance with Article 13.1 of the WTO Subsidies Agreement.
[88] Based on the complainant's information, other available information and the CBSA's data on imports, there is evidence that self-standing barbeques for outdoor use, consisting of metal lid, base and frame, fuelled by either propane or natural gas, with primary cooking space between 200 and 550 square inches (500 and 1375 square centimeters), in assembled or knocked-down condition, originating in or exported from the People's Republic of China, have been dumped and/or subsidized, and there is a reasonable indication that such dumping and/or subsidization has caused or is threatening to cause injury to the Canadian industry. As such, an investigation was initiated on April 13, 2004.
[89] The CBSA will conduct an investigation to determine whether the subject goods have been dumped and/or subsidized.
[90] The period of investigation is the time frame during which imports into Canada from China will be reviewed to determine whether the subject goods have been dumped and/or subsidized. The period of investigation is January 1, 2003, to March 31, 2004, and includes all subject goods shipped to Canada during this period. Information, including sales and cost data, will be requested from exporters and importers to estimate the applicable margins of dumping. Additional information will be sought from the government of China and exporters in order to estimate an amount of subsidy, if applicable.
[91] The Canadian International Trade Tribunal (Tribunal) will conduct a preliminary inquiry to determine whether the evidence discloses a reasonable indication that the dumping and subsidization of the goods has caused or is threatening to cause injury to the Canadian industry. The Tribunal must make its decision within 60 days after the date of initiation of the investigation. If the Tribunal concludes that the evidence does not disclose a reasonable indication of injury to the Canadian industry, the investigation will be terminated.
[92] If the CBSA's investigation reveals that imports of the subject goods have not been dumped or subsidized, that the amount of dumping or subsidizing is insignificant, or that the actual or potential volume of dumped or subsidized goods is negligible, the investigation will be terminated.
[93] If the evidence reveals that the goods have been dumped and/or subsidized and the Tribunal finds that there is a reasonable indication that the dumping and/or subsidizing has caused injury or is threatening to cause injury, the President will make a preliminary determination of dumping and/or subsidizing within 90 days from the date of the initiation of the investigation, that is, by July 13, 2004. Where circumstances warrant, this period may be extended to 135 days.
[94] Imports of subject goods released from customs' possession on and after the date of a preliminary determination of dumping may be subject to provisional duty in an amount not greater than the estimated margin of dumping of, or the estimated amount of subsidy on, the imported goods.
[95] Should the CBSA make a preliminary determination of dumping and/or subsidizing, the investigation will be continued for the purpose of making a final determination within 90 days of the date of the preliminary determination. However, it should be noted that the investigation or a portion thereof, will be terminated if it is found that the goods have not been dumped or subsidized, or that the margin of dumping or the amount of subsidy for the goods is insignificant.
[96] If a final determination of dumping and/or subsidizing is made, the Tribunal will continue its inquiry and hold public hearings into the question of material injury to the Canadian industry resulting from the dumped and/or subsidized imports. The Tribunal is required to make a finding, with respect to the goods to which the final determination of dumping and/or subsidization applies, not later than 120 days after the CBSA issues notice of a preliminary determination.
[97] In the event of an injury finding by the Tribunal, imports of subject goods released from customs' possession after that date will be subject to anti-dumping duty equal to the applicable margin of dumping and a countervailing duty in an amount equal to the amount of the actionable subsidy conferred on the imported goods. Should both anti-dumping and countervailing duty be applied to subject goods, the amount of any anti-dumping duty may be reduced by the amount of the margin of dumping that is attributable to any export subsidy.
Retroactive Duty on Massive Importations
[98] Under certain circumstances, anti-dumping and countervailing duties may be imposed retroactively on subject goods imported into Canada that were released during the period of 90 days preceding the day of the preliminary determination of dumping and/or subsidizing.
[99] When the Tribunal conducts an inquiry concerning 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.
[100] Should the Tribunal issue a finding that there were recent massive importations of dumped and/or subsidized goods that caused injury, importations of subject goods released from customs during the period of 90 days preceding the day of the preliminary determination could be subject to anti-dumping and countervailing duties.
[101] After a preliminary determination of dumping, an exporter may submit a written undertaking to revise its selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated. An acceptable undertaking must account for all or substantially all of the exports to Canada of the dumped goods.
[102] Similarly, after a preliminary determination of subsidizing, foreign governments may submit written undertakings to eliminate the subsidy on the goods exported or to eliminate the injurious effect of the subsidy by limiting the amount of the subsidy or the quantity of goods exported to Canada. Alternatively, exporters with the written consent of their government, may undertake to revise their selling prices so that the amount of the subsidy or the injurious effect of the subsidy is eliminated.
[103] Interested parties may provide comments regarding the acceptability of undertakings within nine days of the receipt of an undertaking by the CBSA. The CBSA will maintain a list of parties who wish to be notified should an undertaking proposal be received. Those who are interested in being notified should provide their name, telephone and fax numbers, mailing address and email address, if available, to one of the officers identified in the "Information" section.
[104] If an undertaking were to be accepted, the investigation and the collection of provisional duties would be suspended. Notwithstanding the acceptance of an undertaking, an exporter may request that the CBSA's investigation be completed and that the Tribunal complete its injury inquiry.
[105] Notice of the initiation of this investigation is being published in the Canada Gazette pursuant to subparagraph 34(1)(a)(ii) of SIMA.
[106] Interested parties are invited to file written submissions presenting facts, arguments, and evidence that they feel are relevant to the alleged dumping and/or subsidization. Written submissions should be forwarded to the attention of one of the officers identified below.
[107] To be given consideration in this phase of the investigation, all information should be received by the CBSA by May 21, 2004.
[108] Any information submitted to the CBSA by interested parties concerning this investigation is deemed to be public information unless clearly marked "confidential." Where the submission by an interested party is confidential, a non-confidential version of the submission must be provided at the same time. This non-confidential version will be made available to other interested parties upon request.
[109] Confidential information submitted to the President will be disclosed on written request to independent counsel for parties to these proceedings, subject to conditions to protect the confidentiality of the information. Confidential information may also be released to the Tribunal, any court in Canada, or a WTO dispute settlement panel. Additional information respecting the Directorate's policy on the disclosure of information under SIMA may be obtained by contacting one of the officers identified below or by visiting the Directorate's Web site.
[110] This Statement of Reasons has been provided to persons directly interested in these proceedings. It is also posted on the Directorate's Web site at the address below. For further information, please contact Ron McTiernan, Peter Dupuis or Alison O'Leary as follows:
Mail:
Canada Border Services Agency
Anti-Dumping and Countervailing Directorate
191 Laurier Avenue West, 10th Floor
Ottawa, Ontario K1A 0L5
Canada
Telephone:
Ron McTiernan (613) 954-7271
Peter Dupuis (613) 954-7341
Alison O'Leary (613) 954-7268
Fax:
(613) 948-4844
Email:
Ronald.McTiernan@ccra-adrc.gc.ca
Peter.Dupuis@ccra-adrc.gc.ca
Alison.O'Leary@ccra-adrc.gc.ca
Web site:
http://www.cbsa-asfc.gc.ca/sima
Suzanne Parent
Director General
Anti-Dumping and Countervailing Directorate
Description of Identified Programs and Incentives
Evidence provided by the complainant suggests that the government of China may have provided support to manufacturers of subject goods in the following manner. For purposes of this investigation, "Government of China" refers to all levels of government, i.e. federal, central, provincial/state, regional municipal, city, township, village, local, legislative, administrative or judicial. Benefits provided by state-owned enterprises operating under the direct or indirect control or influence of the Government of China are also considered to be provided by the Government of China for purposes of this investigation.
1. Special Economic Zone (SEZ) Incentives - Available to manufacturers operating in specified regions such as SEZs, 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:
- Tariff exemptions on imported materials
- Rebated corporate income tax
- VAT exemptions
- Rebates on investment costs
- Special land tax and land use exemptions
- 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 SEZs - Certain qualifying companies located in SEZs eligible for rebate of corporate income tax paid when profits are re-invested within the SEZ.
(d) Exemption/Reduction in Local Income tax for SEZ Enterprises - Certain foreign invested enterprises located in SEZs granted an exemption or reduction in sub-provincial income taxes.
6. Relief from Duties and Taxes on Inputs - Certain qualifying companies located in SEZs 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 SEZs pay long-term land-use fee for land on which factories are located. Certain companies eligible for reduction in land-use fee.
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.
1 OECD, DAC List of Aid Recipients - As at 1 January 2003, online: http://www.oecd.org/dataoecd/35/9/2488552.pdf
2 Fiesta Barbeques Limited - Corporate Profile, online: http://www.fiestabbq.com/about/about.html
3 The publications provided by Fiesta provide information on steel prices in the United States. Due to the highly integrated nature of the North American steel market, the CBSA accepts that this information is representative of steel prices in Canada during that period.
4 LABORSTA, International Labour Organization, online: http://laborsta.ilo.org
5 Index of Factor Values for Use in Anti-dumping Duty Investigations Involving Products from the People's Republic of China (PRC). Import Administration, U.S. Department of Commerce. Memorandum to All Reviewers, (April 1997), online: http://ia.ita.doc.gov/factorv/prc/
6 WTO, Committee on Subsidies and Countervailing Measures, Chair's Report to Council for Trade in Goods on Transitional Review of China, Doc. G/SCM/111 (4 November 2003) at 3.
7 Subsidies Enforcement, Annual Report to the Congress. USTR and US Commerce Department Joint Report to the Congress, February 2004. 2003 Report to Congress on China's WTO Compliance, USTR, 11 December 2003.
