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Anti-dumping and Countervailing Program

OTTAWA, March 7, 2007

4214-14
AD/1363

STATEMENT OF REASONS

Concerning the making of a preliminary determination of dumping of

CERTAIN ADULT INCONTINENCE BRIEFS ORIGINATING IN OR EXPORTED FROM FRANCE



DECISION

On February 20, 2007, pursuant to subsection 38(1) of the Special Import Measures Act, the President of the Canada Border Services Agency made a preliminary determination of dumping with respect to all-in-one (one piece) disposable adult incontinence briefs, which provide absorbent protection against urinary and fecal incontinence and are held in place during use by means of a fastening system, originating in or exported from France.

TABLE OF CONTENTS


SUMMARY OF EVENTS

  1. The investigation was initiated in response to a complaint filed with the Canada Border Services Agency (CBSA) by SCA North America-Canada Inc. (“SCA”) of Oakville, Ontario on October 3, 2006. The complainant provided evidence to support its claim that adult briefs from France had been dumped and that the dumping had caused injury to SCA. On October 23, 2006, the CBSA informed SCA that the complaint was properly documented and notified the Government of France that a properly documented complaint had been filed.

  2. On November 22, 2006, the President of the CBSA (President) initiated an investigation into the alleged dumping of certain adult incontinence briefs from France.

  3. Upon receiving notice of the initiation of the investigation, the Canadian International Trade Tribunal (Tribunal) started its preliminary injury inquiry. On January 22, 2007, the Tribunal made a preliminary determination that there is evidence that discloses a reasonable indication that the dumping of certain adult incontinence briefs from France has caused injury to the Canadian industry.

  4. On February 20, 2007, pursuant to subsection 38(1) of the Special Import Measures Act (SIMA),the President made a preliminary determination of dumping with respect to certain adult incontinence briefs originating in or exported from France.

PERIOD OF INVESTIGATION

  1. The investigation covers all subject goods released into Canada during the Period of Investigation (POI), that is, from October 1, 2005 to September 30, 2006.

INTERESTED PARTIES

Complainant

  1. The complainant, SCA, is the only known producer of like goods in Canada. Its Canadian headquarters are located at 1275 North Service Road West, Suite 612 in Oakville, Ontario. The manufacturing facility is located at 999 Farrell Street in Drummondville, Quebec.

Exporters

  1. At the time of the initiation of the investigation, the CBSA had identified two potential exporters of the subject goods from customs import documentation and from the complaint submitted by SCA.

  2. During the preliminary stage of the investigation, the CBSA confirmed that there was only one exporter of subject goods from France. A parent company to subsidiaries that produce subject and like goods in France, sell like goods in France and sell subject goods to Canada, designated itself as the exporter. The CBSA will be considering the vendor of the subject goods as the exporter.

Importers

  1. The CBSA had identified two potential importers of the subject goods from customs import documentation and from the complaint submitted by SCA at the time of initiation. During the preliminary stage of the investigation, the CBSA confirmed that the subject goods were sold to only one importer in Canada.

PRODUCT INFORMATION

Definition

  1. For the purpose of this investigation, the subject goods are defined as:

    “All-in-one (one piece) disposable adult incontinence briefs, which provide absorbent protection against urinary and fecal incontinence and are held in place during use by means of a fastening system, originating in or exported from France.”

Additional Product Information

  1. The adult briefs covered by this investigation are disposable, i.e. are normally thrown away after use, as opposed to cloth diapers that are normally re-used after cleaning and washing. The imported adult briefs are directly substitutable for domestically produced like goods. They come in a range of different absorbency levels and sizes to fit a range of different body shapes from Small (waist size of 22”-36”) to Extra Large (waist size of 60”-64”). They incorporate a fastening system such as a glue type tape that connects the front portion of the brief to the back and helps to keep the brief in place. Although the glue type tape is a common form of fastening systems, other forms are also used including the hook and loop type of fastening system (such as “Velcro”).

  2. The product definition excludes incontinence products described as “step-in” underwear or protective underwear, a product into which a person must step-in and pull up to the waist. It also excludes goods described commonly as “Belted Briefs”, a two-piece system that consists of a belt that is fastened around the waist of an individual and used with a diaper folded through the crotch. Incontinence products commonly described in the industry as “pads” or any other self standing absorbent core product that must be worn with a separate garment such as a mesh or cotton undergarment are not covered under this product definition.

  3. The individual adult briefs are packed in inner packs of varying quantity, usually 10 to 12 per pack and 6 to 8 packs per outer case. Sales are made either on a case quantity or pallet quantity basis.

Production Process

  1. All producers generally manufacture adult briefs in the same manner. Raw material cellulose pulp sheet is fiberised, and then combined with super-absorbent powder to produce a mix of fibres and powder that is formed into a shaped (typically hourglass or similar) absorbent core. This process is conducted on a pocket-forming drum. The core is then combined with an impervious backsheet made of a plastic polyethylene sheet (which helps prevent leakage) in combination with a nonwoven and a liquid pervious top sheet. The liquid pervious top sheet, which allows for the absorption of fluids, is a nonwoven material produced from polypropylene fibres. The absorbent core is glued in place onto the impervious backsheet and then the pervious topsheet is glued in place over both the core and backsheet to form a continuous web that has the individual absorbent cores separated by the top sheet and backsheet layers. Before the core is applied to the backsheet, the leg elastics are stretched and then glued in place on the backsheet.

  2. Other manufacturing operations follow such as the application of an adhesive tape fastening system, the shaping of the product into a body fitting form by cutting out a leg area, the folding of the outer edges of the product into a narrower shape to facilitate cutting of the product, the cutting of the product into individual units, the trifolding or bifolding of the product to facilitate packaging.

Classification of Imports

  1. The subject adult incontinence briefs are properly classified in section X of the Customs Tariff under the following ten-digit classification numbers of the Harmonized System:

    4818.40.20.00 Napkins (diapers), napkin (diaper) liners and similar sanitary articles for incontinence, designed to be worn by persons, excluding those of a kind for babies.

    (Unit of Measure: kilogram)

CANADIAN INDUSTRY

  1. SCA is the only known producer in Canada. The company is a wholly owned subsidiary of SCA Hygiene Products AB (Sweden), which in turn is wholly owned by SCA Hygiene Holding Company AB (Sweden). In 1996, it acquired some Canadian incontinence product manufacturing capabilities from Cascades PSH Inc. in Drummondville, Quebec. SCA installed two new state of the art adult brief manufacturing machines between 2000 and 2003, and a third one between 2003 and 2005.

  2. The company currently employs close to 200 employees. SCA has sales and marketing offices at its location in Drummondville, Quebec and in Oakville, Ontario.

  3. Prior to the initiation of this investigation, the CBSA was satisfied that the standing requirements of subsection 31(2) of SIMA had been met. There has been no change in the structure of the Canadian industry since then.

IMPORTS INTO CANADA

  1. During the preliminary phase of the investigation, the CBSA did not modify its estimates of the volume of imports from countries other than France. The CBSA did review information received during the investigation from the importer and the exporter.

  2. The CBSA has revised the estimated volume of subject goods imported from France. Import values and volumes were obtained from confidential information received during the investigation and may not be divulged. The following table presents the CBSA’s revised estimated percentage import share of certain adult incontinence briefs into Canada:

    Imports of Certain Adult Incontinence Briefs (October. 1, 2005 to September 30, 2006)

    Imports into Canada % of Total Imports
    France 4.6%
    Other Countries 95.4%
    Total Imports 100%

INVESTIGATION PROCESS

  1. At the time of the initiation of the investigation, a Request for Information (RFI) was sent to two parties that were identified as known and possible exporters or vendors of subject goods. All RFIs included instructions indicating that exporters who were not also manufacturers were to forward the RFIs to the manufacturers of the goods. Information concerning imports of the subject goods was also requested from two potential importers.

  2. The CBSA received three responses to the RFI for exporters, one from the manufacturer of like and subject goods (Tyco Healthcare Manufacturing France SAS), one from the seller of like goods in France (Tyco Healthcare France SAS) and one from the vendor of the subject goods to Canada (Tyco Healthcare Group AG). The three companies are associated to Tyco Group S.a.r.l., which is located in Luxembourg. While the three responses were received separately, they were submitted with the purpose of being considered as one response on behalf of Tyco Group S.a.r.l., a parent company of the three companies. Tyco Group S.a.r.l. designated itself as the exporter of subject goods to Canada.

  3. At the initiation of the investigation, the CBSA had set a deadline of January 8, 2007 for the submission of responses to the RFI for exporters. While some information was received by the CBSA on this date, the last information submitted on behalf of Tyco Group S.a.r.l. was received on January 12, 2007.

  4. The CBSA received a response to the RFI for importers from one importer in Canada, Tyco Healthcare Group Canada Inc. (Tyco Canada). This company is also associated to Tyco Group S.a.r.l. The other potential importer contacted at initiation did not provide any information to the CBSA. Tyco Canada’s submission was received in a timely manner.

DUMPING INVESTIGATION

  1. At the initiation of the investigation, the CBSA estimated that the weighted average margin of dumping of the subject goods was equal to 43.5%, when expressed as a percentage of export prices. The estimate was based on information provided by the complainant and information from the CBSA’s import data system.

  2. 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 administrative, selling and all other costs plus a reasonable amount for profits. The export price of goods sold to an importer in Canada is generally an amount equal to the lesser of the adjusted exporter’s sale price and the adjusted importer’s purchase price for the goods. These prices are adjusted where necessary by deducting the costs, charges, expenses, duties and taxes resulting from the exportation of the goods as provided for in subparagraph 24(a)(i) to 24(a)(iii) of SIMA. When the export price is less than the normal value, the difference is the margin of dumping.

  3. In conducting its investigation, the CBSA requested identified exporters and importers to provide sales and cost information necessary to determine the normal values and export prices of the subject goods. For the purpose of a preliminary determination, normal values and export prices are usually estimated, to the extent possible, based on information contained in responses to RFIs from exporters, vendors, manufacturers and importers.

  4. The three submissions received by the CBSA that were made on behalf of Tyco Group S.a.r.l., were considered to be one complete response to the RFI for exporters. While Tyco Group S.a.r.l. (Tyco) designated itself as the exporter of subject goods, the CBSA is not considering this company as the exporter for SIMA purposes since it is not located in France. For the investigation, while the CBSA views all associated Tyco entities involved in the production and selling of like goods in France and the production and selling of subject goods to Canada as one entity, it considers Tyco Healthcare Group AG (THAG) to be the exporter of subject goods to Canada for SIMA purposes. THAG conducts business activities at a location in France from which subject goods are exported to Canada.

  5. Tyco Canada’s submission was also complete and included information with respect to the purchase of subject goods from THAG as well as information on the resale of the goods to customers in Canada.

PRELIMINARY RESULTS OF THE DUMPING INVESTIGATION

  1. From the information received by the CBSA, it was confirmed that, for SIMA purposes, there was only one exporter (THAG) and one importer of subject goods (Tyco Canada) during the POI.

  2. Margins of dumping were estimated on the basis of unverified information provided by the Tyco associated companies. The CBSA did not conduct on-site verifications of the information submitted by these companies prior to the preliminary determination. The information received was considered to be an adequate basis for purposes of estimating margins of dumping for this decision. The CBSA will be conducting on-site verifications in France and also at the importer’s premises in Canada in order to assess whether information from these parties is reliable for purposes of the final decision.

  3. THAG did not have domestic market sales to purchasers in France with whom it was not associated. All adult incontinence briefs are sold in the domestic market by Tyco Healthcare France SAS (Tyco France). The transactions between THAG and Tyco France cannot be used to determine normal values due to the relationship between the two companies. Accordingly, the CBSA used the rule of subparagraph 16(1)(c)(ii) of SIMA, and deemed Tyco France to be the exporter of the goods for purposes of estimating the normal values of the goods sold to the importer in Canada. Tyco France had a sufficient number of sales of like goods in France during the POI for purposes of estimating normal values. For all sales of subject goods to Canada, the normal values were estimated on the basis of weighted average selling prices of domestic sales of like goods to unrelated customers, a methodology that is based on section 15 of SIMA. Actual net selling prices reported by Tyco France were used for estimating normal values.

  4. The export price of goods sold to an importer in Canada is generally an amount equal to the lesser of the adjusted exporter’s sale price and the adjusted importer’s purchase price for the goods. These prices are adjusted where necessary by deducting the costs, charges, expenses, duties and taxes resulting from the exportation of the goods as provided for in subparagraph 24(a)(i) to 24(a)(iii) of SIMA. When sales are made between an associated exporter and importer, such as THAG and Tyco Canada, the President must consider the reliability of the section 24 export price from the exporter to the related importer. This price is tested to determine if the importer sold the product in Canada at a price that allowed for the recovery of all costs incurred by the importer, including the cost of the goods, the costs incurred in preparing, shipping and exporting the goods to Canada, all costs incurred reselling the goods (including duties and taxes), and an amount representative of the average profit in Canada. An industry amount for profit was estimated following the method of paragraph 22 (c) of the Special Import Measure Regulations, using information from three vendors in Canada on sales of goods for a general category of goods that include adult incontinence briefs. If section 24 export prices are not reliable, export prices can be calculated in accordance with paragraph 25(1)(c) of SIMA. The CBSA analyzed the information submitted by Tyco Canada and found that section 24 export prices were not reliable. For purposes of the preliminary determination, export prices were therefore estimated following the method of paragraph 25(1)(c) of SIMA.

  5. The total estimated normal value was compared with the total estimated export price for all subject goods imported into Canada during the POI. It was found that, overall, the goods exported by THAG were dumped. When the normal value of subject goods sold to Canada exceeded the export price, the estimated margin of dumping for these transactions ranged from 0.1% to 39.9%.

  6. On the basis of the CBSA's preliminary analysis, it is estimated that all of the subject goods were dumped by an estimated weighted average margin of dumping of 16.2%, expressed as a percentage of the export price.

    Summary of Preliminary Results of Dumping Investigation

    Country Estimated Margin of Dumping as Percentage of Export Price Estimated Dumped Goods as Percentage of Country Imports Estimated Dumped Goods as Percentage of Total Imports
    France 16.2% 100% 4.6%


  7. Under subsection 35(1) of SIMA, the President is required to terminate an investigation prior to the preliminary determination if he is satisfied that the margin of dumping of the goods of a country is insignificant or that the volume of dumped goods of a country is negligible. Pursuant to subsection 2(1) of SIMA, a margin of dumping of less than 2% is defined as insignificant, whereas a volume of dumped goods from a country forming less than 3% of total imports is considered negligible.

  8. As shown in the table above, the estimated weighted average margins of dumping of subject goods is above 2% and is, therefore, not insignificant. As well, the volume of dumped goods is above 3%, and is, therefore, not negligible.

DECISION

  1. Based on the preliminary results of the investigation, the President, on February 20, 2007, made a preliminary determination of dumping respecting certain adult incontinence briefs originating in or exported from France, 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 duty is necessary to prevent any injury from dumped imports.

PROVISIONAL DUTY

  1. Pursuant to subsection 8(1) of SIMA, provisional duty will be applied to dumped 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.

  2. Provisional anti-dumping duty is based on the estimated margin of dumping, expressed as a percentage of the export price of the goods. Based on the estimated margin of dumping, the amount of provisional duty applicable on subject goods released into Canada on or after February 20, 2007 is 16.2% of the export price of the goods.

  3. Provisional duty is payable by the importer in Canada and applies until the day the Tribunal makes a finding on the question of injury or the day the investigation is terminated by the CBSA.

  4. Importers are required to pay provisional duty in cash or by certified cheque. Alternatively, they may post security equal to the amount payable. Importers should contact their regional customs office if they require further information on the payment of provisional duty or the posting of security. If the importers of such goods do not indicate the required SIMA code or do not correctly describe the goods in the customs documents, an administrative monetary penalty could be imposed. The imported goods are subject to the Customs Act. As a result, failure to pay duties within the specified time will result in the application of the provisions of the Customs Act regarding interest.

FUTURE ACTION

The Canada Border Services Agency

  1. The CBSA will continue its dumping investigation and will make a final decision by May 22, 2007.

  2. If the President is satisfied that the goods were dumped, and that the margin of dumping 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 importers.

The Canadian International Trade Tribunal

  1. 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 20, 2007.

  2. If the Tribunal finds that the dumping has not caused injury or is not threatening to cause injury, the proceedings will be terminated and all provisional duty collected, or security posted, will be returned. If the Tribunal makes an affirmative decision, anti-dumping duty will be imposed on imports of the subject goods.

  3. For purposes of the preliminary determination of dumping, the President has responsibility for determining whether the actual and potential volume of dumped goods is negligible. After a preliminary determination of dumping, 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 goods from a country is negligible.

RETROACTIVE DUTY ON MASSIVE IMPORTATIONS

  1. Under certain circumstances, anti-dumping 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 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 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 duty.

UNDERTAKINGS

  1. 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. Acceptable undertakings must account for all or substantially all of the exports to Canada of the dumped goods. In the event that an undertaking is accepted, the required payment of provisional duty on the goods would be suspended.

  2. 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. 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.

  3. 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 CBSA Website noted below for information on undertakings offered in this investigation. A notice will be posted on the CBSA Website when an undertaking proposal is received. Interested parties have nine days from the date the undertaking offer is received to make representations.

PUBLICATION

  1. A notice of this preliminary determination of dumping will be published in the Canada Gazette pursuant to paragraph 38(3)(a) of SIMA.

INFORMATION

  1. This Statement of Reasons has been provided to persons directly interested in these proceedings. It is also posted on the CBSA website at the address below. For further information, please contact Michel Leclair, Edith Trottier or Véronique Pouliot as follows:

    Mail:
    SIMA Registry
    Anti-dumping and Countervailing Program
    Trade Programs Directorate
    Canada Border Services Agency
    100 Metcalfe Street, 11th Floor
    Ottawa, Ontario K1A 0L8
    CANADA

    Telephone:
    Michel Leclair 613-954-7232
    Edith Trottier 613-954-7182
    Véronique Pouliot 613-954-1641

    Fax:
    SIMA Registry 613-948-4844

    E-mail:
    simaregistry-depotlmsi@cbsa-asfc.gc.ca

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



Darwin Satherstrom
Acting Director General
Trade Programs Directorate

Date Modified: 2007-03-07

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