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Anti-dumping and Countervailing Program
OTTAWA, March 3, 2005
4214-4
AD 1332
4218-19
CVD 104
STATEMENT OF REASONS
Concerning the making of a preliminary determination with respect to the dumping of
CERTAIN LAMINATE FLOORING ORIGINATING IN OR EXPORTED FROM AUSTRIA, BELGIUM, THE PEOPLE'S REPUBLIC OF CHINA, FRANCE, THE FEDERAL REPUBLIC OF GERMANY AND THE REPUBLIC OF POLAND
and the making of a preliminary determination with respect to the subsidizing of
CERTAIN LAMINATE FLOORING ORIGINATING IN OR EXPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA
and the termination of the investigation with respect to the dumping of
CERTAIN LAMINATE FLOORING ORIGINATING IN OR EXPORTED FROM LUXEMBOURG
DECISION
On February 16, 2005, in accordance with subsection 38(1) of the Special Import Measures Act, the President of the Canada Border Services Agency made a preliminary determination of dumping respecting laminate flooring in thickness ranging from 5.5mm to 13mm (other than laminate hardwood flooring where the hardwood component exceeds 2mm in thickness) originating in or exported from Austria, Belgium, the People's Republic of China, France, the Federal Republic of Germany, and the Republic of Poland, and made a preliminary determination of subsidizing of such product originating in or exported from the People's Republic of China. On the same date, pursuant to paragraph 35(2)(a) of the Special Import Measures Act, the President terminated the dumping investigation of such product originating in or exported from Luxembourg.
Cet énoncé des motifs est également disponible en français.
This Statement of Reasons is also available in French.
Table of Contents
- Summary of Events
- Period of Investigation (POI)
- Interested Parties
- Product Information
- Canadian Industry
- The Canadian Market
- Investigation Process
- Dumping Investigation
- Information Received - Preliminary Investigation
- Kaindl Flooring Gmbh (Kaindl), Austria
- Unilin NV (Unilin), Belgium
- Vohringer Wood Products (Shanghai) Co. Ltd. (Vohringer), China
- EPI Laminate Flooring (EPI), France
- Kronoflooring Gmbh (Kronoflooring), Germany
- Kronotex Fussboden Gmbh and Co. (Kronotex), Germany
- Akzenta Paneele + Profile Gmbh (Akzenta), Germany
- Kronopol Sp. (Kronopol), Poland
- Subsidy Investigation
- Representations Concerning the Investigation
- Decision
- Provisional Duty to be Imposed
- Future Action
- Retroactive Duty on Massive Importations
- Undertakings
- Publication
- Information
- Appendix 1 - Exporters and/or Manufacturers that Provided a Voluntary Dumping Response
- Appendix 2 - Estimated Margins of Dumping/Subsidy and Provisional Duty Payable
- Appendix 3 - Chinese Exporters and/or Manufacturers that Provided a Subsidy Response
- Appendix 4 - Summary of Preliminary Findings for Identified Programs
[1] On August 13, 2004, the Canada Border Services Agency (CBSA) received a written complaint from Uniboard Surfaces Inc. (Uniboard) concerning the alleged injurious dumping of certain laminate flooring originating in or exported from Austria, Belgium, the People's Republic of China (China), France, the Federal Republic of Germany (Germany), Luxembourg, the Republic of Poland (Poland) and Spain, and the alleged injurious subsidizing of certain laminate flooring from China. The CBSA informed Uniboard on September 3, 2004, that the complaint was properly documented. The CBSA also notified the governments of the exporting countries and provided the Government of the People's Republic of China (GRPC) with a non-confidential version of the subsidy portion of the complaint.
[2] On October 4, 2004, the President of the CBSA (President):
- initiated a dumping investigation pursuant to subsection 31(1) of the Special Import Measures Act (SIMA) 1, with respect to these products from Austria, Belgium, China, France, Germany, Luxembourg and Poland;
- initiated a subsidy investigation pursuant to subsection 31(1) of SIMA, with respect to these products from China; and
- did not initiate a dumping investigation with respect to these products from Spain as the volume of dumped goods from Spain were considered negligible.
[3] Upon receiving notice of the investigation, the Canadian International Trade Tribunal (Tribunal) started its preliminary injury inquiry. On December 3, 2004, the Tribunal determined that there is evidence that discloses a reasonable indication that the dumping and subsidizing of the subject goods have caused injury to the domestic industry.
[4] On December 17, 2004, pursuant to paragraphs 39(1)(a) and (b) of SIMA, the President made a 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.
[5] On January 6, 2005, consultations were held between Canadian government officials and representatives of the GRPC, in accordance with Article 13.2 of the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (Subsidies Agreement).
[6] On February 16, 2005, at the conclusion of the CBSA's preliminary investigation, the President made a preliminary determination of dumping, pursuant to subsection 38(1) of SIMA, respecting certain laminate flooring originating in or exported from Austria, Belgium, China, France, Germany and Poland, and a preliminary determination of subsidizing, pursuant to subsection 38(1) of SIMA, respecting certain laminate flooring originating in or exported from China.
[7] On the same date, pursuant to paragraph 35(2)(a) of SIMA, the President terminated the dumping investigation of such product originating in or exported from Luxembourg as the volume of dumped imports from that country was considered negligible.
[8] As China is listed under Part I of the DAC List of Aid Recipients2 maintained by the Organization for Economic Co-operation and Development, the CBSA has extended, and will continue to extend, developing-country status to China for the purpose of this investigation. Therefore, China is eligible for the higher insignificance (amount of subsidy) and negligibility (volume of subsidized goods) thresholds for the termination of a subsidy investigation involving a developing country.
[9] The investigation covers all subject goods released into Canada during the period July 1, 2003 to June 30, 2004.
Complainant
[10] The complainant, Uniboard, is the only known Canadian manufacturer of laminate flooring. The complainant's address is:
Uniboard Surfaces Inc.
5555 Ernest Cormier Street
Laval, Quebec
H7C 2S9
[11] When the investigation was initiated, the CBSA identified 91 potential exporters of the subject goods. A majority of the exporters shipped small quantities.
[12] 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.
[13] Ten exporters from the named countries accounted for over 70% of the value of all laminate flooring imports into Canada in this period. These exporters also accounted for over 60% of the total exports of subject goods from their own individual country.
[14] In view of the large number of exporters, the CBSA used the above sampling criteria and sent an exporter/manufacturer dumping Request for Information at the initiation of the investigation to those 10 exporters. These potential exporters (hereinafter referred to as sampled exporters) were given instructions that, if the recipient was not the manufacturer of the subject goods, the Request for Information should be forwarded to the manufacturer.
[15] As well, all other exporters of subject goods were advised that they could ask for a Request for Information from the CBSA and participate in the dumping investigation. However, these other exporters were also advised that due to the number of sampled exporters and the time constraints, the CBSA could not guarantee that a voluntary response to the Request for Information would be taken into consideration for the preliminary phase of the investigation.
[16] Information received in the preliminary phase of the investigation has allowed the CBSA to refine the list of potential exporters of subject goods. Of the 91 exporters identified at the initiation of the investigation, 6 have indicated that they do not ship subject goods. In addition, 15 new potential exporters have been identified since initiation. Consequently, there are currently 100 potential exporters of the subject goods.
[17] When the investigation was initiated, the CBSA identified and forwarded Requests for Information to 133 potential importers of the subject goods. Subsequently, 16 of these parties have indicated that they did not import subject goods during the POI. In addition, 3 new potential importers have been identified since initiation. Consequently, there are currently 120 potential importers of subject goods.
[18] For the purpose of this investigation, the subject goods are defined as:
- Laminate flooring in thickness ranging from 5.5mm to 13mm (other than laminate hardwood flooring where the hardwood component exceeds 2mm in thickness) originating in or exported from Austria, Belgium, the People's Republic of China, France, the Federal Republic of Germany, Luxembourg and the Republic of Poland.
Additional Product Information
[19] Laminate flooring may be defined as a rigid floor covering with a surface layer consisting of one or more thin sheets of a fibrous material printed with the motif and colour that will show on the flooring, generally a wood grain or ceramic tile pattern (usually paper but can be printed on the raw board) and impregnated with aminoplastic resins (usually melamine). These sheets are either pressed as High Pressure Laminate and Compact Laminate or bonded on a substrate, which usually consists of High Density Fibreboard (HDF), or in the case of Direct Pressure Laminate directly pressed on a substrate, usually HDF. The product is normally finished with a backing, primarily used as a balancing material.
[20] In the market, laminate flooring may be described as "laminated wood flooring" or "floating flooring".
Exclusion:
[21] Excluded from the foregoing definition is:
- Laminate hardwood flooring where the hardwood component exceeds 2mm in thickness.
[22] Details of the production process of laminate flooring were provided in the Statement of Reasons issued for the initiation of this investigation. This document is available through the CBSA Web site at the following address:
URL: http://www.cbsa-asfc.gc.ca/sima-lmsi/i-e/menu-eng.html
[23] Laminate flooring is properly classified in Section IX of the Customs Tariff3 under the Harmonized System (HS) Heading 44.11, under the following classification number:
4411.19.90.90
[24] Uniboard is the sole Canadian manufacturer of laminate flooring, producing for both the domestic and export markets. Founded in 1995 in Ville St. Laurent, Uniboard opened its manufacturing facility in Laval, Quebec, in 2001.
[25] Data for the volume of laminate flooring imports, from all of the various sources, was found to be unreliable in this investigation. The unit of measure required for the classification number is kilograms and the data shows other units of measure being used in many instances, such as square and cubic metres. Therefore, values are deemed to be more reliable and have been used in doing the required analysis of imports, domestic shipments and for estimating the apparent Canadian market.
[26] During the preliminary phase of the investigation, the CBSA has further refined its estimates of the value of imports of subject goods into Canada, based on information received from importers and exporters.
[27] The CBSA acknowledges that the tariff number under which laminate flooring is imported includes products that are not subject to the investigation. In addition, information received from exporters indicates that some subject goods have been classified under incorrect tariff numbers.
[28] It is not possible to provide figures for the value or volume of imports by country in this public document without divulging confidential information, as some of the sampled exporters are the sole exporters from their respective countries.
[29] Furthermore, as Uniboard is the sole manufacturer in Canada, it is not possible to provide figures for total Canadian shipments in this public document without divulging confidential information. Consequently, a total Canadian market table cannot be provided.
[30] The Canadian International Trade Tribunal (Tribunal), in their Preliminary Injury Determination, requested that the CBSA collect separate information on the dumping and subsidizing of two classes of goods - one with a surface layer of fibrous material (usually paper) and one with a hardwood surface layer not exceeding 2mm in thickness. The Tribunal requested aggregated information for these two classes of goods by both value and volume. The CBSA will provide this data based on the information made available through the investigation.
[31] At the time of the initiation of the investigation, Request for Information respecting dumping were sent to the ten sampled exporters from the seven subject countries. Requests for Information respecting subsidy were sent to the GRPC via their local embassy, as well as all identified exporters in China. Information concerning imports of the subject goods was also requested from importers.
[32] Responses to the dumping Request for Information were received from the ten sampled exporters. One of the Chinese sampled exporters indicated that they did not export subject goods to Canada, which was confirmed during the investigation.
[33] Voluntary dumping submissions were received from six Chinese exporters and one exporter located in the United States of America.
[34] Subsidy submissions were received from the GRPC and 14 Chinese exporters.
[35] Importer submissions were received from 32 importers.
[36] Information received from the seven voluntary response exporters was not utilized for purposes of the preliminary determination due to the large volume of data received from the sampled exporters. It is expected that the CBSA will review all cooperative exporters' submissions prior to the final decision and determine company-specific margins of dumping for all cooperative exporters.
[37] For purposes of the preliminary determination, the seven voluntary exporters, along with all other non-sampled exporters, were given the weighted average margin of dumping found for the co-operative sampled exporters located in their country.
[38] CBSA officers carried out on-site verifications of the information provided by some of the sampled European exporters prior to the preliminary determination. On-site verifications of the other sampled European exporters are scheduled to be conducted following the preliminary determination. As well, on-site verification of the two largest Chinese exporters and meetings with the GRPC are scheduled following the preliminary determination.
[39] At the initiation of the investigation, the CBSA estimated that the weighted average margin of dumping of the subject goods reviewed was equal to 47.5%, when expressed as a percentage of export price. This estimate was based on information provided by the complainant.
[40] Normal values are generally based on the domestic selling price of the goods in the country of export, or on the full cost of the goods including general, selling and administrative expenses, plus a reasonable amount for profits. The export price of imported goods is generally determined 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.
[41] For the purpose of the preliminary determination, normal values and export prices were estimated, to the extent possible, based on information contained in exporters' and importers' submissions.
[42] The estimated margin of dumping for an exporter was calculated by subtracting the total export price from the total normal value of all of the goods shipped to Canada during the POI, including any individual sales that were made at undumped prices. As such, any individual sales made at undumped prices reduced the overall margin of dumping found for that particular exporter.
[43] In determining the margin of dumping at the exporter level, the CBSA has recently discontinued the practice of determining a margin of dumping in respect of models or types of the product under investigation and the setting of any negative margins of dumping found in respect of a model or type equal to zero (commonly referred to as "zeroing").
[44] In respect of an exporter, where the total normal value is greater than the total export price, the difference is the margin of dumping, which is then expressed as a percentage of the total export price. Where the overall difference is negative, the margin of dumping is set equal to zero in accordance with subsection 30.2(1) of SIMA.
[45] In accordance with section 30.1 of SIMA, the margin of dumping in respect of each country was then estimated by determining the weighted average of the margins of dumping found in respect of each exporter.
[46] In calculating the weighted average estimated margin of dumping of a country, the estimated margins of dumping found in respect of each exporter, including those exporters with a zero margin of dumping, were weighted according to the volume of subject goods exported to Canada during the POI.
Information Received - Preliminary Investigation
[47] The CBSA has received complete responses to its Requests for Information from the following sampled exporters of subject goods:
Company Name |
Designation |
Location |
Kaindl Flooring Gmbh |
Producer |
Austria |
EPI Laminate Flooring |
Producer |
France |
Krono Flooring Gmbh |
Producer |
Germany |
Kronotex Fussboden Gmbh & Co. |
Producer |
Germany |
Akzenta Paneele + Profile Gmbh |
Producer |
Germany |
Kronopol Sp. |
Producer |
Poland |
Unilin NV |
Producer |
Belgium |
Kronospan Luxembourg SA |
Producer |
Luxembourg |
Vöhringer Wood Products Co. Ltd. |
Producer |
China |
[48] Subject goods from these exporters are estimated to account for 78% of the total volume of subject goods imported into Canada during the POI.
[49] The information received from the sampled exporters was, for the most part, found to be satisfactory for the purpose of making the preliminary determination.
[50] The CBSA conducted on-site verification of the information provided by some of the sampled exporters just prior to the preliminary determination. However, the CBSA did not use this information for purposes of making the preliminary determination, given the proximity to the date of the preliminary determination. The information gathered during the verification visits will be used for the purpose of making the final decision. The one exception is the information obtained during the verification visit of the Polish exporter, Kronopol Sp. Kronopol Sp.was the first exporter verified and the CBSA was able to take the results of the verification into consideration for purposes of the preliminary determination. Kronopol Sp.'s results are discussed on page 12 of this document.
[51] A description of the normal values, export prices, and margins of dumping determined for the sampled exporters is provided below. A description will not be provided for Kronospan Luxembourg SA as the investigation with respect to Luxembourg was terminated due to the volume of dumped imports from that country were considered negligible.
[52] The list of exporters and/or manufacturers that provided voluntary responses is contained in Appendix 1.
Kaindl Flooring Gmbh (Kaindl), Austria
[53] Kaindl produces laminate flooring for both the export and domestic market, and has sales of like goods to customers in Austria. Kaindl 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.
[54] Normal Value - For those models exported to Canada where there were a sufficient number of profitable domestic market sales made to non-associated customers in Austria, the normal values were estimated on the basis of the weighted average net selling prices, using the method in section 15 of SIMA. For those models exported to Canada where there were no domestic sales of like goods, 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 profit was based on the profit earned by Kaindl on sales of similar models sold in the domestic market. A downward trade level adjustment was granted to Kaindl for purposes of the preliminary determination.
[55] 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 exporter's selling price less all costs, charges and expenses arising from the exportation of the goods.
[56] Margin of Dumping - The total normal value was compared with the total export price for all subject goods imported into Canada during the POI. It was found that all of the goods exported by Kaindl were dumped by an estimated weighted average margin of dumping of 4.7%, expressed as a percentage of export price.
[57] Unilin produces laminate flooring for both the export and domestic market, and has sales of like goods to customers in Belgium. Unilin 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.
[58] Normal Value - For all models exported to Canada, there were a sufficient number of profitable domestic market sales made to non-associated customers in Belgium. Consequently, normal values were estimated on the basis of the weighted average net selling prices, using the method in section 15 of SIMA.
[59] 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 exporter's selling price less all costs, charges and expenses arising from the exportation of the goods.
[60] Margin of Dumping - The total normal value was compared with the total export price for all subject goods imported into Canada during the POI. It was found that all of the goods exported by Unilin were dumped by an estimated weighted average margin of dumping of 6.6%, expressed as a percentage of export price.
Vohringer Wood Products (Shanghai) Co. Ltd. (Vohringer), China
[61] Vohringer produces laminate flooring for both the export and domestic market, and has sales of like goods to customers in China. Vohringer 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.
[62] Normal Value - For all models exported to Canada, there were a sufficient number of profitable domestic market sales made to non-associated customers in China. Consequently, normal values were estimated on the basis of the weighted average net selling prices, using the method in section 15 of SIMA.
[63] Export Price - As the goods were sold to unrelated importers in Canada, export prices were estimated in accordance with the method in section 24 of SIMA, on the basis of the exporter's selling price less all costs, charges and expenses arising from the exportation of the goods.
[64] Margin of Dumping - The total normal value was compared with the total export price for all subject goods imported into Canada during the POI. It was found that all of the goods exported by Vohringer were dumped by an estimated weighted average margin of dumping of 26.6%, expressed as a percentage of export price.
EPI Laminate Flooring (EPI), France
[65] EPI produces laminate flooring for both the export and domestic market, and has sales of like goods to customers in France. EPI 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.
[66] Normal Value - For those models exported to Canada where there were a sufficient number of profitable domestic market sales made to non-associated customers in France, the normal values were estimated on the basis of the weighted average net selling prices for these sales, using the method in section 15 of SIMA. For those models exported to Canada where there were domestic sales of like goods to only one customer, 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 profit was based on the profit earned by EPI on sales of similar models sold in the domestic market.
[67] 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 exporter's selling price less all costs, charges and expenses arising from the exportation of the goods.
[68] Margin of Dumping - The total normal value was compared with the total export price for all subject goods imported into Canada during the POI. It was found that all of the goods exported by EPI were dumped by an estimated weighted average margin of dumping of 7.5%, expressed as a percentage of export price.
Kronoflooring Gmbh (Kronoflooring), Germany
[69] Kronoflooring produces laminate flooring for both the export and domestic market, and has sales of like goods to customers in Germany. Kronoflooring 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.
[70] Normal Value - For those models exported to Canada where there were a sufficient number of profitable domestic market sales made to non-associated customers in Germany, the normal values were estimated on the basis of the weighted average prices for these sales, using the method in section 15 of SIMA. For those models exported to Canada where there were no domestic sales of like goods, 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 profit was based on the profit earned by Kronoflooring on sales of similar models sold in the domestic market.
[71] 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 exporter's selling price less all costs, charges and expenses arising from the exportation of the goods.
[72] Margin of Dumping - The total normal value was compared with the total export price for all subject goods imported into Canada during the POI. It was found that the goods exported by Kronoflooring were not dumped.
Kronotex Fussboden Gmbh and Co. (Kronotex), Germany
[73] Kronotex produces laminate flooring for both the export and domestic market, and has sales of like goods to customers in Germany. Kronotex 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.
[74] Normal Value - For all models exported to Canada, there were a sufficient number of profitable domestic market sales made to non-associated customers in Germany. Consequently, normal values were estimated on the basis of the weighted average net selling prices, using the method in section 15 of SIMA.
[75] 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 exporter's selling price less all costs, charges and expenses arising from the exportation of the goods.
[76] Margin of Dumping - The total normal value was compared with the total export price for all subject goods imported into Canada during the POI. It was found that the goods exported by Kronotex were not dumped.
Akzenta Paneele + Profile Gmbh (Akzenta), Germany
[77] Akzenta produces laminate flooring for both the export and domestic market, and has sales of like goods to customers in Germany. Akzenta 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.
[78] Normal Value - For those models exported to Canada where there were a sufficient number of profitable domestic market sales made to non-associated customers in Germany, the normal values were estimated on the basis of the weighted average prices for these sales, using the method in section 15 of SIMA. For those models exported to Canada where there were no domestic sales of like goods, 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 profit was based on the profit earned by Akzenta on sales of similar models sold in the domestic market.
[79] 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 exporter's selling price less all costs, charges and expenses arising from the exportation of the goods.
[80] Margin of Dumping - The total normal value was compared with the total export price for all subject goods imported into Canada during the POI. It was found that all of the goods exported by Akzenta were dumped by an estimated weighted average margin of dumping of 8.7%, expressed as a percentage of export price.
Kronopol Sp. (Kronopol), Poland
[81] Kronopol produces laminate flooring for both the export and domestic market, and has sales of like goods to customers in Poland. Kronopol supplied information and data pertaining to the sales and costs of like goods sold in the domestic market and subject goods exported to Canada. However, during the verification visit, the CBSA discovered some anomalies in Kronopol's domestic sales database and costing information, which need to be further analyzed. As a consequence, the information supplied by Kronopol in their initial response to the CBSA's Request for Information was not used for purposes of making a preliminary determination.
[82] Margin of Dumping - For purposes of the preliminary determination, Kronopol received the weighted average margin of dumping of the other sampled European exporters. The estimated weighted average margin of dumping is 4.0%, expressed as a percentage of export price.
Country |
Estimated Dumped Goods as Percentage of Country Imports |
Estimated Weighted Average Margin of Dumping * |
Austria |
100% |
4.7% |
Belgium |
100% |
6.6% |
China |
100% |
26.6% |
France |
100% |
7.5% |
Germany |
25% |
2.2% |
Poland |
100% |
4.0% |
*- as a percentage of export price
[83] Under subsection 35(1) of SIMA, the President is required to terminate an investigation prior to the preliminary determination if he is satisfied that the volume of dumped goods of a country is negligible or the margin of dumping of the goods of a country is insignificant. Pursuant to subsection 2(1) of SIMA, a margin of dumping of less than 2% is defined as insignificant, whereas a volume of dumped goods from a country forming less than 3% of total imports is considered negligible.
[84] As can be seen from the previous table, all countries have margins of dumping above the 2% threshold and are, therefore, considered significant.
[85] During the investigation, the CBSA conducted a comprehensive review of the submissions received from exporters and importers, customs documentation and other available information, which led to the conclusion that a significant volume of the subject importations had been incorrectly classified. In particular, exports from Luxembourg were overstated and exports from other countries were understated. The analysis revealed that, for all countries except Luxembourg, the value of dumped goods as a percentage of total value of imports was above the 3% threshold.
[86] The volume of dumped goods from Luxembourg was determined to be 2.8%, and is, therefore, negligible. The volume for Luxembourg was based on information provided in response to the CBSA's Request for Information by all exporters located in Luxembourg, including Kronospan Luxembourg SA, as well as importers who purchased subject goods from that country during the POI. As a result, the dumping investigation was terminated respecting imports from Luxembourg.
[87] The summary of the estimated margins of dumping and provisional duty payable is found in Appendix 2.
[88] 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 Subsidies Agreement, that confers a benefit.
[89] Pursuant to subsection 2(1.6) of SIMA, a financial contribution exists where:
a) practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities;
b) amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not collected;
c) the government provides goods or services, other than general governmental infrastructure, or purchases goods; or
d) the government permits or directs a non-governmental body to do anything referred to in any of paragraphs (a) to (c) where the right or obligation to do the thing is normally vested in the government and the manner in which the non-governmental body does the thing does not differ in a meaningful way from the manner in which the government would do it.
[90] 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.
[91] Notwithstanding that a subsidy is not specific in law, a subsidy may also be considered specific having regard as to whether:
a) there is exclusive use of the subsidy by a limited number of enterprises;
b) there is predominant use of the subsidy by a particular enterprise;
c) disproportionately large amounts of the subsidy are granted to a limited number of enterprises; and
d) the manner in which discretion is exercised by the granting authority indicates that the subsidy is not generally available.
[92] 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.
[93] 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.
[94] In support of its allegations, the complainant provided a number of documents detailing support offered by the GRPC, primarily to exporting enterprises, enterprises operating in special economic zones and wood processing enterprises. Reference was also made to the fact that there is a lack of information available with regard to potential subsidies granted by the GRPC.
[95] At the time of initiation, the CBSA took the position that the estimated margin of dumping was partially attributable to certain subsidies. The CBSA estimated a weighted average amount of subsidy to be equal to 31% of the export price of the subject goods.
[96] 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 laminate flooring in China:
- 1. Special Economic Zone (SEZ) Incentives;
- 2. Grants Provided for Export Performance;
- 3. Preferential Loans;
- 4. Loan Guarantees by the Government of China;
- 5. Income Tax Credits, Refunds and Exemptions:
- (a) Reduced Corporate Tax Rate for Export-Oriented Enterprises,
- (b) Exemption/Reduction of Corporate Income Tax during Designated Start-up Period;
- 6. Relief from Duties and Taxes on Inputs;
- 7. Reductions in Land Use Fees; and
- 8. Provision of Goods and Services by State-owned Enterprises.
[97] Details regarding the general subsidy programs were provided in the Statement of Reasons issued for the initiation of this investigation. This document is available through the CBSA Web site at the following address:
URL: http://www.cbsa-asfc.gc.ca/sima-lmsi/i-e/menu-eng.html
[98] The CBSA forwarded Requests for Information relating to the named programs to the producers and exporters of subject goods in China, as well as to the GRPC. Information was requested in order to establish whether there had been financial contributions made by any level of government and, if so, to establish if a benefit has been conferred on persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of the subject goods; and whether any resulting subsidy was specific in nature.
Results of the Subsidy Investigation
[99] Responses to the CBSA's subsidy Requests for Information were received from
14 companies located in China, as well as from the GRPC. A number of the exporter responses were submitted by affiliated and/or intermediary companies involved in the sale of subject goods to Canada.
[100] The list of Chinese exporters that provided a response to the subsidy Request for Information is contained in Appendix 3.
[101] For purposes of this investigation, the "Government of the People's Republic of China" refers to all levels of government, including federal, central, provincial/state, regional municipal, city, township, village, local, legislative, administrative or judicial levels. For this reason, the CBSA instructed the GRPC to forward the relevant sections of its Requests for Information to the appropriate subordinate levels of government. Benefits provided by
state-owned enterprises operating under the direct or indirect control or influence of the GRPC may also be considered to be provided by the GRPC for purposes of this investigation.
[102] The GRPC provided a response to the subsidy Request for Information that was issued by the CBSA at the initiation of the investigation. Four separate supplemental Requests for Information were also sent to the GRPC after receiving this initial response. These supplemental Requests for Information were sent to obtain further information other than that which was provided in the GRPC's initial response, as well as clarifications relating to the information received. In all instances, the GRPC has answered all of the questions posed and has provided the CBSA with all information and documents requested and has done so in a timely manner. For these reasons, the information submitted by the GRPC in response to the original and supplemental Requests for Information has been deemed to be complete and was considered for purposes of making a preliminary determination.
[103] As a result of the high level of cooperation received for the subsidy portion of the investigation both from the GRPC and a number of Chinese exporters, a sizeable volume of information has been received by the CBSA from the cooperating parties. The analysis of this information is on-going. None of the information that has been received by the CBSA has been verified, as verification visits in China are scheduled to take place following the preliminary determination. Consequently, the CBSA is presently unable to calculate specific subsidy amounts for each exporter on a per program basis. For more details regarding the specific programs available in China that have been identified at this time, please refer to Appendix 4.
[104] Based on the CBSA's preliminary analysis of the exporter's responses, it would appear that a number of programs identified are actionable. Based on the information available regarding these programs, they would confer a benefit of just below 2%, expressed as a percentage of export price, to the largest Chinese exporter, which accounts for a large proportion of all Chinese exports to Canada. An amount of subsidy at or below 2%, when expressed as a percentage of export price, is considered insignificant.
[105] Based on the information submitted, the number of programs identified, and the preliminary analysis discussed in the above paragraph, the President is not satisfied that the amount of subsidy on the subject goods from China is insignificant and has, therefore, chosen not to terminate the subsidy investigation. The CBSA will now complete its verification and conclude its analysis on all of the programs available.
[106] As such, the CBSA has decided, based on the high level of cooperation and the information available, to apply a total rate of 2.01% for all of the eight general types of programs. Using this approach, the CBSA has estimated the amount of subsidy available to exporters in China to be 2.01% of the export price. This rate is applicable to all Chinese producers and exporters of the subject goods.
[107] Pursuant to subsection 35(1) of SIMA, the President is required to terminate an investigation prior to the preliminary determination if the President is satisfied that the amount of subsidy on the goods of a country is insignificant or that the volume of subsidized goods of a country is negligible.
[108] Further, section 41.2 of SIMA 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 the President determines that the total amount of subsidy 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 the subject goods.
[109] As indicated above, the amount of subsidy has been estimated at 2.01%, which exceeds the 2% threshold. The investigation also revealed that the value of dumped goods from China, as a percentage of total value of imports, was above the 4% threshold.
[110] Based on the thresholds outlined above, the estimated amount of subsidy is not insignificant, and the volume of subsidized goods is not negligible.
[111] The summary of the estimated amount of subsidy and provisional duty payable is found in Appendix 2.
Representations Concerning the Investigation
[112] On November 24, 2004, the CBSA received written representations from counsel on behalf of the GRPC regarding the various subsidy programs being investigated by the CBSA. In its representations, counsel for the GRPC argued that the programs being investigated are non-actionable because they are not specific and, therefore, the subsidy portion of the investigation should be terminated.
[113] The CBSA is currently evaluating the original and supplemental subsidy responses received from the GRPC and the Chinese exporters. On-site verification of the two largest Chinese exporters and meetings with the GRPC are scheduled for after the preliminary determination. As a consequence, the CBSA will take the arguments raised by counsel into consideration for the purpose of making a final decision.
[114] On December 1, 2004, the CBSA received written representations from counsel for Beijing Kronosenhua Flooring Co. Ltd. (Beijing Kronosenhua). In its representations, counsel argued that even though his client was not a mandatory respondent, the CBSA should still consider Beijing Kronosenhua's response for purposes of the preliminary determination.
[115] In addition, counsel stated that Beijing Kronosenhua is ranked number two in terms of volume of exports to Canada of laminate flooring and that their volumes are commercially significant. Counsel further stated that consideration of Beijing Kronosenhua's submission should not place an undue burden on the CBSA, especially if the President extends the preliminary determination to 135 days. Finally, counsel argues that the imposition of provisional duties based on an export price advance will place Beijing Kronosenhua at a competitive disadvantage with mandatory respondents that receive specific normal values. Counsel argues that mandatory respondents will be able to price up to eliminate dumping duty liability.
[116] At the initiation of the investigation, the CBSA stated that non-mandatory exporters could provide a response to the CBSA dumping request for information but due to the complexity of the investigation and the expected response rate, it would be unlikely that the CBSA would be able to consider any non-mandatory response for purposes of the preliminary determination. As well, the CBSA informed all non-mandatory respondents that they would receive the weighted average margin of dumping of the mandatory respondent for purposes of the preliminary determination.
[117] For the preliminary determination, Beijing Kronosenhua, along with all other Chinese exporters received the same estimated weighted average margin of dumping as Vohringer, the mandatory respondent. All Chinese exporters will pay anti-dumping duties equal to 26.6% of the export price. No sampled exporter of laminate flooring received specific normal values at the preliminary determination. It is expected that the CBSA will review
Beijing Kronosenshua's submissions prior to the final decision and determine
company-specific margins of dumping.
[118] On January 14, 2005, the CBSA received representations from counsel for Uniboard, the Canadian complainant in this investigation. Counsel provided the CBSA with an assessment of Kronotex's initial and supplementary responses to the CBSA Requests for Information. Counsel for Uniboard provided comments on Kronotex's corporate structuring, sales to Canada, domestic sales and cost of production data.
[119] On January 26, 2005, the CBSA received representations from counsel for
Kronospan Luxembourg SA, Kaindl and Quickstyle Industries Inc. Counsel's representations concerned the CBSA's use of zeroing and the use of best information available for the preliminary determination.
[120] For purposes of the preliminary determination, the CBSA relied on information contained in Kaindl's submission to estimate margins of dumping for Kaindl. With respect to zeroing, paragraph 124 deals with the CBSA approach to zeroing for this investigation.
[121] The CBSA will consider counsel's representations for purposes of the CBSA's verification visit and the final decision.
[122] On February 1, 2005, the CBSA received written representations from counsel representing the complainant concerning the CBSA's policy on the application of section 20 of SIMA. It was submitted that sections 15 to 19 of SIMA cannot be used to determine the normal value of the goods from China due to the lack of prevailing market economy conditions in the industry producing laminate flooring. It was argued that the normal value for the Chinese goods should be determined in accordance with section 20 of SIMA.
Section 20 would have allowed the CBSA to determine normal values by using information from vendors of like goods in a third country.
[123] In order to hold a sector in China as operating under "non-market" conditions, there must be evidence that the GRPC substantially determines domestic prices and that these prices are not substantially the same as they would be if they were determined in a competitive market. At the initiation of the laminate floor investigation, no evidence was provided to the CBSA that would suggest that the GRPC was in effect controlling domestic prices of like goods. If, during the course of the investigation, which would include verification visits at the premises of the two largest exporters, the CBSA discovers information that reasonably suggests that this criterion has been met, then the CBSA will pursue the matter further to substantiate the information and decide whether or not normal values should be determined under section 20 of SIMA. To date, the CBSA has found no evidence to support the complainant's allegation that the Chinese government substantially determines domestic prices in the laminate flooring industry.
[124] The CBSA received three separate representations from counsel for various exporters regarding the CBSA's use of zeroing in determining margins of dumping. All three counsel expressed their opposition to the use of "zeroing" (see paragraph 43 for a description of "zeroing").
[125] The CBSA has recently discontinued the practice of zeroing. Zeroing was not done in this investigation for purposes of determining margins of dumping for the preliminary determination.
[126] Interested parties wishing to comment on the CBSA's policy of non-zeroing must do so by March 18, 2005, which is the close of record for this investigation.
[127] Based on the preliminary results of the investigation, the President made a preliminary determination of dumping and subsidizing on February 16, 2005, pursuant to subsection 38(1) of SIMA. In light of the preliminary determination of injury made by the Tribunal, the President also considered that the imposition of provisional duties is necessary to prevent any injury from dumped imports.
[128] On the same date, pursuant to paragraph 35(2)(a) of SIMA, the President terminated the dumping investigation of such product originating in or exported from Luxembourg.
Provisional Duty to be Imposed
[129] Pursuant to subsection 8(1) of SIMA, provisional duty will be applied to dumped and subsidized subject goods that are released during the provisional period commencing on the day the preliminary determination is made, and ending on the earlier of the day on which the President causes the investigation to be terminated pursuant to subsection 41(1) or the day on which the Tribunal makes an order or finding.
[130] 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 export price. Appendix 2 shows the estimated margins of dumping and amounts of provisional duty payable on subject goods released from Customs on or after February 16, 2005.
[131] 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 customs documents, an administrative monetary penalty could be imposed. The provisions of the Customs Act apply with respect to the payment, collection or refund of any duty collected under SIMA. As a result, failure to pay duties within the prescribed time will result in the application of interest.
The Canada Border Services Agency
[132] The CBSA will continue its investigation of the dumping and subsidizing, and will make a final decision by May 17, 2005. During the second phase of the investigation, the CBSA will review any additional information received to finalize the calculations of normal value, export price, and amount of subsidy.
[133] If the President is satisfied that the goods were dumped or subsidized, and that the margin of dumping or amount of subsidy is not insignificant, a final determination will be made. Otherwise, the President will terminate the investigation and any provisional duty paid, or security posted, will be returned to the importers.
[134] The following table outlines the schedule of future events in the CBSA's investigation:
Date |
Event |
March 18, 2005 |
Closing of the Record Date |
March 25, 2005 |
Case Arguments Due from All Parties |
April 1, 2005 |
Reply Submissions Due from All Parties |
May 17, 2005 |
Final Determination / Termination of Dumping and/or Subsidy Investigation |
June 1, 2005 |
Statement of Reasons (Final Determination / Termination of Investigation) Issued |
The Canadian International Trade Tribunal
[135] 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 June 16, 2005.
[136] 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 duties collected, or security posted, will be refunded. If the Tribunal makes an affirmative decision, anti-dumping duty and/or countervailing duty will be imposed on imports of the subject goods.
[137] For purposes of the preliminary determination of dumping or subsidizing, the President has responsibility for determining whether the actual and potential volume of dumped or subsidized goods is negligible. After a preliminary determination of dumping or subsidizing, the Tribunal assumes this responsibility. In accordance with subsection 42(4.1) of SIMA, the Tribunal is required to terminate its inquiry in respect of any goods if the Tribunal determines that the volume of dumped or subsidized goods from a country is negligible.
Retroactive Duty on Massive Importations
[138] 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.
[139] 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.
[140] After a preliminary determination of dumping, exporters may submit a written undertaking to revise selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated. 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.
[141] 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.
[142] 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. Further details regarding undertakings can be found in the CBSA's Memorandum D14-1-9, available online at:
http://www.cbsa-asfc.gc.ca/publications/dm-md/d14/d14-1-9-eng.html.
[143] The legislation allows 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 website noted below for information on undertakings offered in this investigation. A notice will be posted on the Web site when an undertaking proposal is received. Interested parties have nine days from the date the undertaking offer is received to make representations.
[144] A notice of this preliminary determination of dumping and subsidizing is being published in the Canada Gazette pursuant to paragraph 38(3)(a) of SIMA.
[145] 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 one of the officers noted below.
Mail:
Canada Border Services Agency
Anti-Dumping and Countervailing Directorate
100 Metcalfe Street, 11th Floor
Ottawa, Ontario K1A 0L8
Canada
Telephone:
Brian Hodgson (613) 954-7237
Blair Hynes (613) 954-1641
Richard Killeen (613) 954-7236
Fax: (613) 948-4844
Email:
Brian.Hodgson@cbsa-asfc.gc.ca
Blair.Hynes@cbsa-asfc.gc.ca
Richard.Killeen@cbsa-asfc.gc.ca
Web site: www.cbsa-asfc.gc.ca/sima
Suzanne Parent
Director General
Anti-Dumping and Countervailing Directorate
List of Exporters and/or Manufacturers that Provided a Voluntary Dumping Response
Asia Dekor Industries (Shenzhen) Co. Ltd., China
Beijing Kronosenhua Flooring Co. Ltd., China
Chuzhou Chuzhou Wood Industry Co. Ltd., China
Danyang City Yate Flooring Co. Ltd., China
Jilin Forestry Industry Co. Ltd., China
Yekalon Industry Inc. China
Mohawk Industries, Inc., United States of America
Summary of Estimated Margins of Dumping/Subsidy and Provisional Duty Payable
Exporter |
Country |
Weighted Average Estimated Margin of Dumping (% of Export Price) |
Provisional Duty Payable (% of Export Price) |
Kaindl Flooring Gmbh |
Austria |
4.7% |
4.7% |
Other exporters |
Austria |
4.7% |
4.7% |
Unilin NV |
Belgium |
6.6% |
6.6% |
Other exporters |
Belgium |
6.6% |
6.6% |
Vöhringer Wood Products (Shanghai) Co. Ltd. |
China |
26.6% |
26.6% |
Other exporters |
China |
26.6% |
26.6% |
Akzenta Paneele + Profile Gmbh |
Germany |
8.7% |
8.7% |
Kronotex Fussboden Gmbh & Co. |
Germany |
0.0% |
0.0% |
KronoFlooring Gmbh |
Germany |
0.0% |
0.0% |
Other exporters |
Germany |
2.2% |
2.2% |
EPI Laminate Flooring |
France |
7.5% |
7.5% |
Other exporters |
France |
7.5% |
7.5% |
Kronopol Sp. |
Poland |
4.0% |
4.0% |
Other exporters |
Poland |
4.0% |
4.0% |
|
Exporter |
Country |
Weighted Average Estimated Margin of Subsidy (% of Export Price) |
Provisional Duty Payable (% of Export Price) |
|
All exporters |
China |
2.01% |
2.01% |
List of Chinese exporters and/or manufacturers that provided a subsidy response
Asia Dekor Industries (Shenzhen) Co. Ltd.
Beijing Kronosenhua Flooring Co. Ltd.
Chang Zhou Ouqiang Flooring Factory
Chuzhou Chuzhou Wood Industry Co. Ltd.
Danyang City Yate Flooring Co. Ltd.
FuJian Yong An Forestry (Group) Joint Stock Co. Ltd.
Jilin Forestry Industry Co. Ltd.
New Global Trdaing Co.
Shangdong Chenming Panels Co. Ltd.
China World Best/Shanghai Allsun Wood Industry Co. Ltd.
Shanghai Everglory Import & Export Co. Ltd.
Shanghai Oceanic Furniture & Decoration Co. Ltd.
Sichuan Shengda Wooden Products Co. Ltd.
Vöhringer Wood Products (Shanghai) Co. Ltd.
Yekalon Industry Inc.
People's Republic of China (China)
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 the analysis of exporter and government responses to the original and supplemental Requests for Information is ongoing and has not been concluded. 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. Any additional program identified as a result of the verification and continuing analysis will be addressed in the Statement of Reasons following the final determination.
Preferential Income Tax Policies For Foreign Invested Enterprises (FIEs)
For FIEs ineligible for preferential tax treatment, the applicable tax rate on worldwide income is 33%, consisting of 30% national income tax and 3% local income tax.1
An FIE can be formed in one of three ways2:
1. Chinese - foreign equity joint venture:
Joint venture between a Chinese company, enterprise, or other business organization and a foreign company, enterprise, business organization or individual set up in the form of a Chinese limited liability company.
The characteristics of a Chinese - foreign equity joint venture are joint investment, joint operation, and the participants share profits, risks and losses in proportion to their respective contributions to the registered capital of the joint venture.
The proportion of the investment by the foreign party is no less than 25% in the registered capital of equity joint venture.
2. Chinese - foreign contractual joint venture:
- Established by foreign enterprises and other economic organizations or individuals and Chinese enterprises or other economic organizations within the territory of the People's Republic of China. The rights and obligations of each part are determined in accordance with the agreement specified in the contractual joint venture contract. The investment or conditions for cooperation contributed by the Chinese and foreign parties may be provided in cash or in kind, or may include the right to the use of land, industrial property rights, non-patent technology or other property rights.
3. Wholly foreign owned enterprises:
- A wholly foreign owned enterprise is established by foreign enterprises and other economic organizations or individuals pursuant to the Chinese laws within the territory of China and all its capital is invested by foreign investors. It is also referred to as a Foreign Enterprise (FE).
1) Productive FIEs Scheduled to Operate for a period not less than 10 Years
General Information:
This program is established in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on April 9, 1991, and came into effect on July 1, 1991. This program was established in order to encourage foreign investment in or establishment of productive enterprises in China. The authority responsible for administering this program is the State Administration of Taxation of the People's Republic of China. In addition to the headquarters, there are nine additional municipal and provincial offices and over
1,000 local tax offices, each of which is responsible for administrating taxation in China. These local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential tax treatment.
Under this program, from the year an FIE begins to make a profit, they may apply for and receive an exemption from income tax in the first and second years and a 50% reduction in the third, fourth, and fifth years of profitable operation.
However, FIEs engaged in the exploitation of resources such as petroleum, natural gas, rare metals, and precious metals, will be regulated separately by the State Council in relation to this program. Further, should an FIE cease operation following a period of less than 10 years, that enterprise will be responsible for repaying the amount of tax that has been reduced or exempted under this program.
If the FIEs business license prescribes a scope that encompasses both business of a productive nature and of a non-productive nature, the FIE may only apply for and receive benefits under this program in years where the income from productive business exceeds 50% of its total income . Should the scope of the FIE not include business of a productive nature in the scope prescribed by its business license, it may not receive benefits under this program under any circumstance, regardless if it has productive business income that exceeds 50% of total income.3
The program was in operation during the POI and continues to be in operation to date.
Legal Basis:
The income tax reduction and exemption for FIEs under this program is provided for in Article 8 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises. The program is administered in accordance with the Notice of the State Administration of Taxation on the Implementation of Income Tax for the Enterprises with Foreign Investment and Foreign Enterprise.
The GPRC acknowledges that two of the companies identified by the CBSA has applied for or has received relevant tax treatment under this program during the POI. The CBSA will continue to assess whether any other companies have received preferential treatment under this program.
Eligibility Criteria:
As noted above, FIEs of a productive nature are eligible for this program as long as they are scheduled to operate for a period not less than ten years. FIEs of a productive nature are defined in Article 72 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises as FIEs engaged in the following industries:
(a) Machine manufacturing and electronics industries;
(b) Energy resource industries (not including exploitation of oil and natural gas);
(c) Metallurgical, chemical and building material industries;
(d) Light industries, and textiles and packaging industries;
(e) Medical equipment and pharmaceutical industries;
(f) Agriculture, forestry, animal husbandry, fisheries and water conservation;
(g) Construction industries;
(h) Communications and transportation industries (not including passenger transport);
(i) Development of science and technology, geological survey and industrial information consultancy directly for services in respect of production and services in respect of repair and maintenance of production equipment and precision instruments;
(j) Other industries as specified by the tax authorities under the State Council.
For further clarification regarding the definition of enterprises with a productive nature, the GPRC provided the following supplemental definition:
"Enterprise(s) with foreign investment which specialize in the sales business by purchasing commodities to carry out simple assembly, separate loading, packaging, cleaning, selecting and arranging and which do not change the forms, properties and components of the original commodities all belong to engaging in the commodity sales business and should not be designated as productive enterprise with foreign investment, for example, enterprises which engage in purchasing or importing complete sets of electrical appliances or equipment pieces and selling these products after simple assembly; enterprises which engage in purchasing various types of drinks and foodstuffs and sales business after loading, separate loading, and packaging of these products, including trades which specially provide loading, separate loading and packaging services".4
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/or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.
Determination of Specificity:
Preferential tax rates provided to FIEs were found to be limited, in law, to a particular enterprise5 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 Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises. In addition, the CBSA believes that the subsidy is further limited to a group of enterprises, which is comprised of FIEs that meet the above-mentioned eligibility criteria.
It should also be noted that the GPRC has identified this preferential tax policy for FIEs as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.6
2) Advanced Technology FIEs Scheduled to Operate for a period not less than
10 Years
General Information:
This program is established in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on April 9, 1991, and came into effect on July 1, 1991. This program was established in order to encourage foreign investment in advanced technology enterprises in China. The authority responsible for administering this program is the State Administration of Taxation of People's Republic of China. The local tax offices are implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential tax treatment.
Under this program, advanced technology FIEs who are still regarded as advanced and who have already taken advantage of the program referred to above (Program #1 under Preferential Tax Policies for FIEs) are eligible upon expiration of the program above to continue to receive a 50% reduction in Income Tax for an additional three years.
The program was in operation during the POI and continues to be in operation to date.
Legal Basis:
The income tax reduction and exemption for FIEs under this program is administered in accordance with Article 75 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.
The GPRC claims that none of the companies identified by the CBSA or by the GPRC have applied for or have received relevant tax treatment under this program during the POI. The CBSA will continue to assess whether any companies have received preferential treatment under this program.
Eligibility Criteria:
In addition to meeting the eligibility requirements established under the program #1, the FIE must be still be considered an advanced technology FIE upon expiration of the above mentioned program in order to receive benefits under this program. The GPRC did not provide the eligibility criteria used to determine whether an FIE is considered advanced as they cite that they have not identified any companies subject to this investigation as having received benefits 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)(b) of SIMA, i.e. amounts that would otherwise be owing and due to the government are reduced and/or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.
Determination of Specificity:
Preferential tax rates provided to advanced technology FIEs were found to be limited, in law, to a particular enterprise, 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 Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises. In addition, the CBSA believes that the subsidy is further limited to a group of enterprises, which is comprised of FIEs that meet the above-mentioned eligibility criteria.
It should also be noted that the GPRC has identified this preferential tax policy for FIEs as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.7
3) FIEs in Industries and Sectors Where Foreign Investment is Encouraged by the State
General Information:
This program is established in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on April 9, 1991, and came into effect on July 1, 1991. This program was established in order to encourage foreign investment in China and accelerate development of the local economies. The authority responsible for administering this program is the State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential tax treatment.
Under this program, FIEs that operate in an industry or undertake a project encouraged by the State may apply for and receive a reduction or exemption from local income tax subject to the approval of the province, autonomous region, or municipality.
The program was in operation during the POI and continues to be in operation to date.
Legal Basis:
The local income tax reduction and exemption for FIEs under this program is provided for in Article 9 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.
The GPRC acknowledges that one of the companies identified by the CBSA has applied for or has received relevant tax treatment under this program during the POI. The CBSA will continue to assess whether any other companies have received preferential treatment under this program.
Eligibility Criteria:
As noted above, FIEs that operate in an industry or undertake a project encouraged by the State may apply for and receive a reduction or exemption from local income tax subject to the approval of the province, autonomous region, or municipality. Industries and projects encouraged by the State are listed in the Guideline Catalogue for Foreign Investment Industries, which was issued by the State Planning Commission, the State Economic and Trade Commission, and the Foreign Economic and Trade Ministry on March 11, 2002, and was in effect during the POI. Further information obtained by the CBSA suggests that the State Development and Reform Commission and the Ministry of Commerce jointly promulgated an amended Industrial Catalogue for Foreign Investment on November 30, 2004, which will take effect on January 1, 2005, and supersede the one issued on March 11, 2002.
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/or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.
Determination of Specificity:
Preferential tax rates provided to FIEs were found to be limited, in law, to a particular enterprise, 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 Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises. In addition, the CBSA believes that the subsidy is further limited to a group of enterprises, which is comprised of FIEs that meet the above-mentioned eligibility criteria.
It should also be noted that the GPRC has identified this preferential tax policy for FIEs as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.8
4) FIEs Generating Income From Transferring Technologies
General Information:
This program is established in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on April 9, 1991, and came into effect on July 1, 1991. This program was established in order to encourage foreign investment and technological development in China. The authority responsible for administering this program is the State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential tax treatment.
Under this program, FIEs that generate income from transferring technologies may be eligible for preferential tax treatment such as income tax reduction or exemption. The GPRC did not refer to the specific articles in the laws provided regarding this program, including eligibility criteria or the definition of "transferring technology", as they claim that none of the companies received preferential treatment under this program. Based on other information available, income generated from transferring technology and other related services including, but not limited to, technology consultancy and training are exempted from income tax up to a maximum threshold of RMB 300,000. Income generated from these activities in excess of RMB 300,000 are subject to normal income tax rules and regulations.9
The program was in operation during the POI and continues to be in operation to date.
Legal Basis:
The articles within the law and regulations, which prescribe the use and eligibility of this program, have not been specifically identified by the GPRC as they only cite the
Foreign Enterprises Income Tax Law and Rules in whole.
The GPRC claims that none of the companies identified by the CBSA or by the GPRC have applied for or have received relevant tax treatment under this program during the POI. The CBSA will continue to assess whether any companies have received preferential treatment under this program.
Eligibility Criteria:
As noted above, FIEs that generate income from transferring technologies may be eligible for preferential tax treatment such as income tax reduction or exemption. The GPRC did not provide the specific eligibility criteria used to determine what types of income are considered to be generated from transferring technologies as they cite that they have not identified any companies subject to this investigation as having received benefits under this program. As noted above, they simply refer to the Tax Law and Regulations as a whole.
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/or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.
Determination of Specificity:
Preferential tax rates provided to FIEs were found to be limited, in law, to a particular enterprise, 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 Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises. In addition, the CBSA believes that the subsidy is further limited to a group of enterprises, which is comprised of FIEs that meet the above-mentioned eligibility criteria.
It should also be noted that the GPRC has identified this preferential tax policy for FIEs as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.10
5) FIEs Exporting Greater than 70% of Production
General Information:
It is presumed that this program was established in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on April 9, 1991, and came into effect on July 1, 1991, as all other tax programs listed in this report. It appears that this program was established in order to encourage FIEs to increase or sustain a high level of exports. The authority responsible for administering this program appears to be the State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential tax treatment.
Under this program, it appears that FIEs exporting 70% or more of the total output value of all their products are eligible to receive a 50% reduction to their income tax rate following the period of income tax exemptions referred to above under program #1
(i.e. following the two-year exemption and three-year 50% rate reduction for FIEs scheduled to operate for a period not less than 10 years). As a result, in years following the initial five years of profitability, an FIE may apply for preferential treatment under this program in any and every year which the value of its exports are greater than 70% of total sales output as described above.
As also mentioned below under program #6, should the FIEs be eligible for the reduced income tax rate of 15% due to the fact that they are located in a special economic zone, economic and technological development zone, or are any other such type of enterprise eligible for the income tax rate of 15%, they may only obtain a reduced income tax rate of 10% under this program and not a full 50% reduction to the 15% income tax rate.
The program was in operation during the POI and continues to be in operation to date.
Legal Basis:
The income tax reduction for FIEs under this program is provided for in Article 8 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises and is administered in accordance with Article 75 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.
The GPRC did not identify this program in their response to the CBSA's Request for Information and, therefore, did not comment on whether any of the companies identified for this investigation in fact received or applied for benefits under this program. The CBSA will continue to assess whether any companies have received preferential treatment under this program.
Eligibility Criteria:
The eligibility criteria for this program can be found in Article 75 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.
As noted above, following the period of initial preferential tax treatment obtained in the first year of profitable operation and the subsequent four-year period, as referred to above, an FIE may apply for and be eligible for preferential tax treatment under this program in any and every year following the five-year period in which their value of exports represents 70% or more of total output value of all products.
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/or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.
Determination of Specificity:
Preferential tax rates provided to FIEs were found to be limited, in law, to a particular enterprise, 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 Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises. In addition, the CBSA believes that the subsidy is further limited to a group of enterprises, which is comprised of FIEs that meet the above-mentioned eligibility criteria.
6) FIEs Located in Special Economic Zones, Technical Development Zones, Coastal Economic Open Zones or in the Old Urban Districts of Cities where the Zones Located, or Any Other Regions Defined by the State Council
General Information:
This program is established in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on April 9, 1991, and came into effect on July 1, 1991. This program was established in order to encourage foreign investment in Special Economic Zones (SEZs) or the Economic and Technical Development Zones (ETDZs) in open coastal cities and encourage some districts to take the lead in development. The authority responsible for administering this program is the State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential tax treatment.
Under this program, non-wholly foreign owned FIEs established in SEZs, FEs (wholly foreign owned FIEs) established in SEZs engaging in production or business operations, and FIEs of a productive nature established in ETDZs shall pay income tax at a reduced rate of 15%.
FIEs of a productive nature established in coastal economic open zones or in the old urban districts of cities where the SEZs or the ETDZs are located shall pay income tax at a reduced rate of 24%. However, if the FIEs established in coastal economic open zones or in the old urban districts of cities where the SEZs or the ETDZs are located or in any other regions defined by the State Council, who are engaged in activities relating to energy, communications, harbour, wharf or other projects encouraged by the State, may be levied at the reduced rate of 15%. Further, should the FIEs be eligible for the reduced rate of 15% under this program but also be eligible for program #5 noted above, that FIE shall pay income tax at a reduced rate of 10%.
The program was in operation during the POI and continues to be in operation to date.
Legal Basis:
The income tax reduction for FIEs under this program is provided for in Article 7 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.
The GPRC acknowledges that one of the companies identified by the CBSA has applied for or has received relevant tax treatment under this program during the POI. The CBSA will continue to assess whether any other companies have received preferential treatment under this program.
Eligibility Criteria:
The eligibility criteria for this program can be found in the following articles of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.
Article 69 defines SEZs as the special economic zones of Shenzhen, Zhuhai, Shantou and Xiamen and the Hainan Special Economic Zone established by law or established upon approval of the State Council and EDTZs as the economic and technological development zones in the coastal port cities established upon approval of the State Council.
FIEs established in ETDZs that are eligible for preferential tax treatment under this program are located in the following ETDZ areas: Dalian, Qinhuangdao, Tianjin, Yantai, Qingdao, Lianyungang, Nantong, Ningbo, Fuzhou, Guangzhou, Zhanjiang, Shanghai (Minhang, Hongqiao, Caohejing), Beihai, Shenyang, Wenzhou, Harbin, Changchun, Hangzhou, Wuhan, Chongqing, Wuhu, Xiaoshan, Huizhou, Nansha, Kunshan, Rongqiao, Weihai, Yingkou, Dongshan.11
Article 70 defines coastal economic open zones as "those cities, counties and districts established as coastal economic open zones upon approval of the State Council".
In regards to the definition of FIEs of a productive nature, as set out in Article 72, this has been addressed specifically under program #1 identified above.
Article 73 specifically identifies productive-oriented FIEs established in the Pudong New Area of Shanghai as being eligible for the reduced income tax rate of 15%.
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/or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.
Determination of Specificity:
Preferential tax rates provided to FIEs were found to be limited, in law, to a particular enterprise, 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 Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises. In addition, the CBSA believes that the subsidy is further limited to a group of enterprises, which is comprised of FIEs that meet the above-mentioned eligibility criteria.
It should also be noted that the GPRC has identified this preferential tax policy for FIEs as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.12
7) Re-investment of Profits by Foreign Investor
General Information:
This program was established in the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprise, which was promulgated on April 9, 1991, and came into effect on July 1, 1991, as all other tax programs listed in this report. This program was established in order to encourage foreign investors to
re-invest profits into businesses in China. The authority responsible for administering this program is the State Administration of Taxation of People's Republic of China. The local tax offices are responsible for implementing State policy and all relevant matters related to income tax assessment and collection, including examination and approval of applications relating to preferential tax treatment.
Under this program, foreign investors who re-invest their profits received from an FIE back into that FIE by increasing its registered capital, or use their FIE derived profit to establish another FIE which is planned to operate for a period not less than five years, are eligible to receive a refund of the income tax already paid on the profit that was re-invested.
Article 10 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises clearly identifies that any foreign investors who directly re-invest their after-tax profit into the organization from which they received the profit from, or use the profits to establish a new foreign enterprise, will be refunded 40% of the tax paid on the profit amount directly re-invested. Further, if the direct
re-investment is in a new foreign enterprise and the investor withdraws the investment before five years have passed, the tax refunded must be repaid. It also states that should State Council pass regulations relating to the provision of this preferential treatment, the provisions of those regulations will be applied.
Article 80 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises refers to "direct re-investment" as using the profits referred to above, prior to their receipt, to increase registered capital in the FIE who provided the profits, or, following receipt of those profits, establishing another FIE.
Article 81 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises addresses the preferential provisions passed by State Council, as referred to above. It states that where a foreign investor directly re-invests profits in the following ways, 100% of the income tax paid on the re-invested profit will be refunded:
- in order to establish or expand export-oriented enterprises or advanced technology enterprises;
- profits from enterprises in the Hainan Special Economic Zone are re-invested in infrastructure projects and agriculture development enterprises within this zone.
Article 82 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises provides the formula used to calculate the refund. Further, the Notice of the State Tax Administration on Problems Concerning Return of Corporate Income Tax to Foreign Investors Making Reinvestment provides rules for refund treatment in situations involving investments in foreign currency as well as providing a re-investment limit calculation which sets the maximum amount of tax that can be refunded in that year.
The program was in operation during the POI and continues to be in operation to date.
Legal Basis:
The income tax reduction for FIEs under this program is provided for in Article 10 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises and is administered in accordance with Articles 80, 81 and 82 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.
The GPRC acknowledges that one of the companies identified by the CBSA has applied for or has received relevant tax treatment under this program during the POI. The CBSA will continue to assess whether any other companies have received preferential treatment under this program.
Eligibility Criteria:
In order for a foreign investor to obtain this preferential tax treatment, 100% of the shares of the foreign investor enterprise must be foreign owned and located outside China. Therefore, foreign-funded enterprises inside China that act as investors in other enterprises will not be considered foreign investors for the purposes of preferential treatment under this program.13
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/or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.
Determination of Specificity:
Preferential tax rates provided to FIEs were found to be limited, in law, to a particular enterprise, 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 Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises and the Official Reply to Problems Concerning Re-investment Drawback of Foreign-Funded Enterprises (Guoshuihanfa [1995] No. 154). In addition, the CBSA believes that the subsidy is further limited to a group of enterprises, which is comprised of FIEs that meet the above-mentioned eligibility criteria.
It should also be noted that the GPRC has identified this preferential tax policy for FIEs as a specific subsidy in the subsidy notification that they made for purposes of their accession to the WTO.14
Relief from Duties and Taxes on Materials and Equipment
8) Exemption from Value-Added Tax (VAT) for Production of Goods Using Fuel Wood and Other Low-Valued Wood
General Information:
This program is established and administered in accordance with the Circular of Ministry of Finance and State Administration of Taxation Regarding the VAT Favorable Policy of the Comprehensively Used Product Produced and Processed with the Three Residues and Small Firewood Materials as Raw Materials, which was issued on April 29, 2001, and came into effect as of January 1, 2001. The circular also indicates that this program will expire on December 31, 2005. This program was established in order to protect China's forestry resources, which are insufficient in terms of both quality and quantity and also promote the use of this type of timber. The authorities responsible for jointly administering this program are the Ministry of Finance and the State Administration of Taxation of People's Republic of China whose local tax offices are responsible for implementing this policy within their respective areas.
Under this program, all eligible wood products purchased domestically for the production and processing of the specific types of goods outlined in the circular, referred to as comprehensively used products, are eligible for the VAT immediate refund after levy policy, which results in a full refund of 13% VAT levied against the wood inputs. In order to receive the exemption from VAT, enterprises, both domestic and foreign invested, are required to separately calculate the sales volume of the comprehensively used products and the output tax amount and input tax amount of the VAT. Failure to calculate these amounts separately or accurately will result in the inability to receive the exemption provided for under this program.
While both domestic and foreign invested enterprises are eligible for this program, this immediate VAT refund program is not available to those enterprises that export the comprehensive used products.
The program was in operation during the POI and continues to be in operation to date. As noted above, this program is scheduled to expire on December 31, 2005.
Legal Basis:
The immediate VAT refund provided under this program is provided for and administered in accordance with Circular of Ministry of Finance and State Administration of Taxation Regarding the VAT Favorable Policy of the Comprehensively Used Product Produced and Processed with the Three Residues and Small Firewood Materials as Raw Materials.
The GPRC claims that none of the companies identified by the CBSA have applied for, accrued, or received relevant VAT treatment under this program during the POI.
Eligibility Criteria:
The eligibility criteria for this program can be found in the Circular of Ministry of Finance and State Administration of Taxation Regarding the VAT Favorable Policy of the Comprehensively Used Product Produced and Processed with the Three Residues and Small Firewood Materials as Raw Materials and the attached Catalogue of Comprehensively Used Products.
Article 2 of the circular contains the definitions of the three residues and small firewood materials. The residues refer to the leftover material that results from tree cutting, log making, and processing including, for example, the branches, treetops, roots, bark, sawdust, chip veneer, blocks of wood and leftover bits and pieces, etc. Small firewood materials refers to, as an example, firewood, small lowest quality logs, strips of logs, etc.
As noted above, Article 3 of the circular specifies that this immediate VAT refund program is not available to those enterprises that export the comprehensive used products.
The Catalogue of Comprehensively Used Products is below:
Serial No. |
Name of product |
Serial No. |
Name of product |
1 |
Wood and bamboo fiberboard |
12 |
Active carbon |
2 |
Wood and bamboo flakeboard |
13 |
Tannin extract |
3 |
Wood and bamboo |
14 |
The plate material with length less than 2 m (excluding 2 m) (only refers to the plate material processed from material forming truncation and the slab) |
4 |
Wood and bamboo chip | ||
5 |
Floor block | ||
6 |
Wood turned product |
15 |
Wood, bamboo beads, wood, bamboo toothpick, little veneer, grey strip, wood pieces, wood bamboo strip, wood and bamboo cuti, leaves, root, sawdust and its comprehensive used product, oxalic acid, sawdust, carbon pencil, etc., stick of frozen sucker and popsicle, spoon of Popsicle, bamboo chip board, strike-off board |
7 |
Hydrolyzed alcohol | ||
8 |
Furfural | ||
9 |
Feedstuff yeast | ||
10 |
Conifer feedstuff | ||
11 |
Charcoal |
Determination of Subsidy:
On the basis of available information, this program does not appear to constitute a financial contribution by the government pursuant to subsection 2(1.6) of SIMA and, therefore, appears not to be a subsidy.
9) Tariff Reductions on Wood Fibre Imports
General Information:
As a result of China's WTO obligations to improve accessibility to the domestic market, the Tariff Commission of the State Council amended the Customs Import and Export Tariff of the People's Republic of China in 2004. Annex 8 of the WTO Accession of the People's Republic of China provides a schedule of items by tariff number and states that the tariffs related to those items be reduced on January 1st of each year to the amount specified in the schedule.
The tariff reduction measure is general in nature and does not require applications for receipt of the rate reduction as standard Customs entry procedures apply. The tariff reductions for wood fibre imports began in January 2002, and continued throughout the POI in 2003 and 2004. The schedule provided in Annex 8, as noted above, shows that the final scheduled tariff reduction for these goods is January 1, 2005.
Legal Basis:
The tariff reductions are provided for in accordance to the Customs Import and Export Tariff of the People's Republic of China and relate to China's obligations upon accession to the WTO. The specific tariff numbers and reductions rates are contained in the
Annex 8 of the WTO Accession of the People's Republic of China.
The GPRC claims that none of the companies identified by the CBSA have applied for, accrued, or received benefits under this program during the POI and indicated that wood fibre imports are predominantly associated with the paper industry.
Eligibility Criteria:
The eligibility criteria for this program are general in nature in that the tariff reductions relate to normal Customs entry procedures and are provided in the same manner for all wood fibre imports. No special applications are required and all imports of these materials are subject to the same tariff rate.
Determination of Subsidy:
As the setting of a tariff rate does not constitute foregone revenue, the CBSA does not consider this reduction to constitute a financial contribution by the government pursuant to subsection 2(1.6) of SIMA and is, therefore, not a subsidy.
10) Exemption on Tariffs and VAT on Imported Equipment
General Information:
The exemptions of tariffs and import-linked VAT is provided for and administered in accordance with the Circular of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment, which was established on December 29, 1997, and came into effect on January 1, 1998. This program was established in order to attract foreign advanced technology and equipment and encourage structural improvement and technological advancement in industry.
The authorities responsible for administering this program are the Ministry of Finance and the Customs General Administration People's Republic of China in cooperation with local provincial and municipal customs branches.
Under this program, enterprises meeting the eligibility criteria set forth below may apply for exemption from tariffs and VAT on imported equipment and its related technologies, components, and parts. The enterprise must receive approval of its application from the appropriate authority, and subsequently that approval documentation is submitted to the local customs officials who verify that the documents presented are adequate and that the imported items are not listed in the catalogues of commodities that are not eligible for tax exemptions.
The program was in operation during the POI and continues to be in operation to date.
Legal Basis:
The immediate VAT exemption provided under this program is administered in accordance with the Circular of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment. Article 12 of the Measures of the People's Republic of China on Control Over and Taxation for Import and Export Goods of Enterprises with Foreign Investment provides for preferential reductions and exemptions of tariffs and taxes on imported equipment as provided for in the circular noted above. The eligibility criteria related to this program also takes into consideration the following documents:
- The Current Catalogue of Key Industries, Products and Technologies The Development of Which is Encouraged by the State (Provisional);
- Guideline Catalogue for Foreign Investment Industries;
- The Directory of Imported Commodities of Non-Tax Exemption to be Used in Domestic Invested Projects;
- The Directory of Imported Commodities of Non-Tax Exemption to be Used in Foreign Invested Projects.
The GPRC acknowledges that three of the companies identified by the CBSA has applied for or has received relevant tax treatment under this program during the POI. The CBSA will continue to assess whether any other companies have received preferential treatment under this program.
Eligibility Criteria:
In accordance with the circular noted above, in order for a domestic invested enterprise (DIE) to be eligible for tariff and VAT exemptions on imported equipment, the domestic investment project the equipment relates to must be listed in The Current Catalogue of Key Industries, Products and Technologies The Development of Which is Encouraged by the State (Provisional). In addition, the equipment must be for the applicant's own use and the value of the equipment must be within the total amount of investment in the domestic project. Finally, any type of equipment that is imported and listed in The Directory of Imported Commodities of Non-Tax Exemption to be Used in Domestic Invested Projects is not eligible for the exemptions under this program.
In order for an FIE to be eligible for tariff and VAT exemptions on imported equipment, the foreign investment project the equipment relates to must relate to the projects listed in the Guideline Catalogue for Foreign Investment Industries under the encouragement category or the restricted B category. In addition, the equipment must be for the applicant's own use and the value of the equipment must be within the total amount of investment in the foreign project. Finally, any type of equipment that is imported and listed in The Directory of Imported Commodities of Non-Tax Exemption to be Used in Foreign Invested Projects is not eligible for the exemptions 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)(b) of SIMA, i.e. amounts that would otherwise be owing and due to the government are reduced and/or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption.
Determination of Specificity:
Based on the directories for commodities of non-tax exemption that were provided for both domestic and foreign invested projects, it appears that there is an inconsistency between the number and type of items listed in the directory for domestic projects in comparison to the directory for foreign project.
On the basis of available information, this program could give rise to a subsidy by means of providing reductions or exemptions of tariffs and VAT for equipment purchased by FIEs, and such reductions and exemptions would not be provided to DIEs purchasing the same equipment. Conversely, a subsidy could also arise if DIEs received reductions or exemptions of tariffs and VAT for equipment purchased and such reductions and exemptions would not be provided to FIEs purchasing the same equipment. Should a subsidy arise in either circumstance due to the inconsistency between the directories, it would likely constitute a specific subsidy 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 Circular of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment. In addition, the CBSA believes that should this program give rise to a subsidy, it would be further limited to a group of enterprises, which would be comprised of solely FIEs or DIEs that meet the above-mentioned eligibility criteria, particularly in relation to the commodity directories for non-tax exempt items.
Preferential Loans
11) Low Interest Loans to Wood Processing Projects
General Information:
The current practices regarding the range of interest rates to be used by financial institutions are addressed in the Circular of the People's Bank of China Regarding the Relevant Issues of Expanding and Floating Range of Loan Interest Rate of the Financial Institute, which was issued on December 10, 2003, and came into effect on
January 1, 2004. The purpose of this circular was to amend the method used by financial institutions to establish loan rates prior to 2004. The circular was issued in order to address a number of objectives including: to help create a more competitive market environment; better address the needs of small and medium enterprises (SMEs); and to accelerate financial institution reform.
The authority responsible for issuing the above loan interest policy is the People's Bank of China, subject to the approval of State Council.
In the complaint, it was alleged that the State Council and the Ministry of Finance authorize banks to provide loans for wood processing projects at a rate that is equal to 90% of the standard interest rate set by the central bank. In response to this allegation, the GPRC has indicated that financial institutions determine the rate of interest to charge on a loan based on the given circumstances surrounding the loan and the applicant. The financial institutions may set any loan interest rate within an upper and lower limit as prescribed in the circular noted above and in reference to the benchmark rate set by the People's Bank of China. It should be noted that these guidelines are applicable for all loans and not just loans relating to wood processing projects.
Following the issuance of the circular referred to above, loans issued after
January 1, 2004, are subject to the following policy in establishing interest rates:
- Commercial banks and Urban Credit Unions may establish any loan interest rate up to a maximum of 170% of the benchmark rate or to a minimum of 90% of the benchmark rate;
- Rural Credit Unions may establish any loan interest rate up to a maximum of 200% of the benchmark rate or to a minimum of 90% of the benchmark rate;
- Policy banks, such as the Agricultural Development Bank, the China Development Bank, and the Import-Export Bank of China, and other banks stipulated by the State Council do not increase their interest rates beyond the benchmark rate.
Prior to 2004, the maximum interest rates that could be charged on loans by the banks were based on not only the type of bank as above, but also the size of the loan recipient's enterprise. Commercial banks and Urban Credit Unions were able to establish any loan interest rate up to a maximum of 110% of the benchmark rate for large enterprises and 130% of the benchmark rate for SMEs. Rural Credit Unions were able to establish any loan interest rate up to a maximum of 150% of the benchmark rate. The minimum interest rate that could be established for all loans was 90% of the benchmark rate, and, as above, policy banks and other banks stipulated by State Council were not permitted to establish interest rates greater than the benchmark rate.
This policy was in effect during the POI and continues to be in effect to date.
Legal Basis:
The policy for establishing interest rates for loans is provided for in the Circular of the People's Bank of China Regarding the Relevant Issues of Expanding and Floating Range of Loan Interest Rate of the Financial Institute.
The GPRC claims that none of the companies identified by the CBSA have applied for, accrued, or received benefits under this alleged program.
Eligibility Criteria:
As had been noted above, the GPRC maintains that each commercial bank may determine the interest to charge on a loan at its own discretion as long as it adheres to the limits established in the circular noted above. The GPRC also states that the procedure that the banks use to determine interest rates is confidential and does not involve the government.
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 payable on the loan under this program and the interest that would be payable on a market rate commercial loan to the enterprise.
For the purposes of determining whether a subsidy exists, the CBSA considered all banks subject to the above-noted policy as falling under the definition of "government" under SIMA. With regards to the measurement of benefits accruing under this program, the CBSA would avail itself of Article 15(b) of the WTO Accession of the People's Republic of China (November 2001), which permits the use of methodologies that take into account the possibility that prevailing terms and conditions in China may not always be available as appropriate benchmarks.
Determination of Specificity:
On the basis of available of information, this program appears to be non-specific in law. However, the CBSA will continue to examine whether this program would constitute a specific subsidy, in fact, in accordance with subsection 2(7.3) of SIMA.
12) Extended Loan Payback Periods Which Include Non-Interest Bearing Grace Periods on Investments in Fast-Growth-High-Yield Plantations
General Information:
The guiding principles regarding loan agreements, established in accordance with the Law of the People's Republic of China on the People's Bank of China and the Commercial Banking Law of the People's Republic of China, are addressed in the General Principles of Loan, issued by the People's Bank of China on June 1, 1996, and implemented on August 1, 1996. The purpose of these general principles is to standardize and improve the efficiency of loan activities while protecting the interests of the parties involved and promoting sustainable development of the economy.
Under this program, companies investing in fast-growth-high-yield plantations of trees may apply for a loan with an extended loan payback period of 10-20 years, of which a grace period of 5-10 years may be granted. The reason for the loan's long-term length is due to the fact that it takes 10-20 years before the borrower is able to harvest the trees, which were planted as a result of the plantation investment. The grace period appears to be a period where the investing company is not required to make payments. The specific loan payback period and terms are determined on a company-specific basis by the lending bank as a result of negotiations between the borrower and lender in accordance with the principles referred to above.
This program was in effect during the POI and continues to be in effect to date.
Legal Basis:
The guiding principles regarding loan agreements are provided for in the General Principles of Loan. An excerpt from the Planning for the Construction of Fast-growth-high-yield Plantation Base was also submitted regarding this type of plantation investment and shows the planned preferential terms relating to loans of this nature.
The GPRC acknowledges that one of the companies identified by the CBSA has received a loan for a fast-growth-high-yield plantation project. Based on the information they submitted, it appears that the loan this company received included a grace period. Further information regarding this loan has been requested from the GPRC. The CBSA will continue to assess whether any other companies have received preferential treatment under this program.
Eligibility Criteria:
As noted above, the loan terms are dependant upon the lending bank and the borrower. The eligibility criteria for obtaining the loan with an extended payback period differ between commercial banks and are dependant on the current circumstances surrounding the loan application. However, it should be noted that Article 16 of the General Principles of Loan requires a lender, i.e. the commercial bank, to suspend, deduct, defer or exempt loan interest on loans it controls should such a decision be made by the
State Council. Unless the State Council has made such a decision, individual lenders do not have a right to suspend, deduct, defer or exempt loan interest.
The GPRC has submitted that there are no official documents in place that regulate payback periods. As noted above, further information regarding the specific loan identified by the GPRC as well as an explanation of the loan terms including the grace period have been requested.
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 interest not paid during the grace period that should have been payable.
Determination of Specificity:
On the basis of available information, should this program give rise to a subsidy by means of suspending, deducting, deferring or exempting loan interest on loans, it would likely constitute a specific subsidy 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 Planning for the Construction of Fast-growth-high-yield Plantation Base.
13) Loan Interest Assistance Provided on Loans Relating to Investments in Fast-Growth-High-Yield Plantations
General Information:
The guiding principles regarding loan agreements, as noted above, are addressed in the General Principles of Loan. The interest loan subsidies for this program are administered in accordance with the Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction which was issued and implemented on September 24, 2003. The purpose of this program is to encourage the development of particular capital construction projects, including the development of fast-growth-high-yield plantations. As discussed earlier, China has a shortage of forestry resources and, therefore, has identified the need to accelerate the development of the domestic wood industry in order to meet future requirements for timber and to also better conserve its forests. The authority responsible for administering this program is the Ministry of Finance. The fund for this program is provided for in the central financial budget.
Under this program, companies investing in fast-growth-high-yield plantations of trees, which have not received other types of interest assistance from the Ministry of Finance15, may apply for loan interest assistance over a period of 5-10 years16. This program also provided preferential loan interest terms, which have been discussed above in
program #12. The maximum amount of loan interest assistance to be provided annually is 3% of the principal. It appears that upon receipt of the annual interest assistance, the enterprise investing in the project should use the funds to offset the costs of construction if the project is in the construction phase or, in the case where the construction phase is complete, use the funds to offset the related project expenses.
This program was in effect during the POI and continues to be in effect to date.
Legal Basis:
The guiding principles regarding loan agreements are provided for in the General Principles of Loan. An excerpt from the Planning for the Construction of
Fast-growth-high-yield Plantation Base was also submitted regarding this type of plantation investment and shows the planned preferential terms relating to loans of this nature. As noted above, the program is administered in accordance with the Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction.
The GPRC acknowledges that one of the companies identified by the CBSA has received a loan for a fast-growth-high-yield plantation project but that no companies have yet received loan interest assistance relating to this program as the program is currently in the application stage. They claim that no companies have received treatment under this program but have not indicated whether any companies have applied for the program. It should be noted that on a preliminary review of the exporter responses received, it appears that one of the companies has received loan interest assistance but it is not yet known whether that assistance is directly related to this program or another type of interest assistance program that may exist. The CBSA will continue its analysis of this program and will continue to assess whether any companies have received preferential treatment under this program.
Eligibility Criteria:
According to Article 15 of General Principles of Loan, relevant government departments may subsidize loans for the purpose of encouraging particular industries and local economies according to state policies.
Article 5 of the Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction stipulates that only medium and large scale projects are eligible for the loan interest assistance. The project scales have been established in accordance to the investment amounts determined by the State Planning Committee, in particular, operation projects with a total investment amount equal to or greater than 50 million Yuan and
non-operational projects with a total investment amount equal to or greater than
50 million Yuan.
The circular also identifies the specific industries and projects targeted to receive the loan interest assistance in ranking order of preference. The targeted industries are as follows17:
(I) Agriculture:
1. Construction project of the state commodity grain base;
2. Construction project of caoutchouc (rubber) base;
3. Purchase and construction project of marine professional fisher.
(II) Forestry:
1. Construction project of the base of high yield fast-growing forest;
2. Construction project of the production change of natural forest protection project.
(III) Irrigation works: the trans-region and trans-drainage basin water conservancy pivotal project (excluding the power plant part) excluding:
1. Hydraulic hinge project directly under the Ministry of Water Resource;
2. Hydraulic hinge project of South-to-North water diversion;
3. Major hydraulic hinge projects in the western area except the above 1 and 2;
4. Prison and labor education and rehabilitation project belonging to the Ministry of
Justice and Xinjiang Construction Corps;
5. High-new technical industry development zone at state level approved by the Ministry of Science and Technology, Suzhou Industrial Park Area, Infrastructure Project of Mianyang Sci-tech City. Mainly include the infrastructure projects such as roads, bridge, tunnel, sewage, life rubbish treatment facilities, power supply, heat supply, gas supply, water supply and communication network, etc.;
6. "Three wires" rebuilding project of the war industry corps;
7. Nuclear power project (take priority consideration of the pile form designed and
manufactured domestically);
8. Project of western railway;
9. Projects determined by the State Council to reduce the interest and other projects
confirmed by the Ministry of Finance.
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 loan interest assistance provided.
Determination of Specificity:
On the basis of available information, should this program give rise to a subsidy by means of suspending, deducting, deferring or exempting loan interest on loans, it would likely constitute a specific subsidy 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 Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction and the Planning for the Construction of Fast-growth-high-yield Plantation Base.
1 Article 5 of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.
2 Statement of Reasons - Termination of Investigation - Outdoor barbeques originating in or exported from the People's Republic of China, December 3, 2004.
3 Circular of the State Administration of Taxation on the Question Concerning How Enterprises with Foreign Investment Which Concurrently Engage in Productive and Non-Productive Enjoy Preferential Tax Treatment.
4 Ministry of Finance and the State Administration of Taxation on Circular on
Interpretation of Related Projects as Set in Article 72 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises.
5 The term "enterprise" includes a group of enterprises, an industry and a group of industries.
6 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section VIII - Item 7(1).
7 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section VIII - Item 7(3).
8 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section VIII - Item 7(5).
9 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section XX.
10 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section XX.
11 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section VI.
12 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Sections V, VI, and VII.
13 Official Reply to Problems Concerning Re-investment Drawback of Foreign-Funded Enterprises (Guoshuihanfa [1995] No. 154)
14 WTO, Accession of the People's Republic of China - Doc. WT/L/432 (10 November 2001) - Annex 5A - Notification Pursuant to Article XXV of the Agreement on Subsidies and Countervailing Measures - Section VIII - Item 7(6).
15 Article 5 - Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction.
16 Planning for the Construction of Fast-growth-high-yield.
17 Article 5 of the Circular of Ministry of Finance Regarding the Issuance of Fund Management Method of Financial Interest Subsidy of Central Government of the Loan of Capital Construction.
2 OECD, DAC List of Aid Recipients - As at 1 January 2003, online: http://www.oecd.org/dataoecd/35/9/2488552.pdf
3 S.C. 1997, c. 36, as amended by 1998, c. 19; 1999, c. 17; 2001, c. 16; 2001, c. 25; 2001, c. 28; 2002, c. 19; 2002, c. 22.
