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OTTAWA, July 15, 2004
4258-123
AD/1292
4218-14
CV/98
STATEMENT OF REASONS
Concerning the making of a final determination with respect to
THE DUMPING OF CERTAIN STAINLESS STEEL WIRE
ORIGINATING IN OR EXPORTED FROM
THE REPUBLIC OF KOREA, SWITZERLAND AND
THE UNITED STATES OF AMERICA
and the making of a final determination with respect to
THE SUBSIDIZING OF CERTAIN STAINLESS STEEL WIRE
ORIGINATING IN OR EXPORTED FROM INDIA
DECISION
On June 30, 2004, pursuant to paragraph 41(1)(a) of the Special Import Measures Act, the President of the Canada Border Services Agency made a final determination of dumping respecting cold drawn and annealed stainless steel round wire, up to and including
0.300 inches (7.62 mm) in maximum solid cross-sectional dimension, originating in or exported from the Republic of Korea, Switzerland and the United States of America, and made a final determination of subsidizing of such product originating in or exported from India.
Cet énoncé des motifs est également disponible en français. Veuillez vous reporter à la section "Renseignements".
This Statement of Reasons is also available in French. Please refer to the "Information" section.
TABLE OF CONTENTS
ADDITIONAL PRODUCT INFORMATION
RESULTS OF THE DUMPING INVESTIGATION
RESULTS OF THE SUBSIDY INVESTIGATION
REPRESENTATIONS AND OTHER ISSUES
[1] On November 21, 2003, the Commissioner of the Canada Customs and Revenue Agency (CCRA) initiated an investigation into the alleged injurious dumping of certain stainless steel wire originating in or exported from Chinese Taipei, India, the Republic of Korea (Korea), Switzerland and the United States of America (United States), and the subsidizing of such product originating in or exported from India. The investigation was initiated in response to a complaint filed by Central Wire Industries Limited (Central Wire) on October 2, 2003.
[2] On December 12, 2003, responsibility for the customs program of the CCRA, including the administration of the Special Import Measures Act (SIMA), was transferred to the Canada Border Services Agency (CBSA), which was created on the same day. The President of the CBSA (President) is now responsible for dumping and subsidy investigations.
[3] Upon receiving notice of the initiation of the investigation, the Canadian International Trade Tribunal (Tribunal) started its preliminary injury inquiry. On January 20, 2004, the Tribunal made a preliminary determination that the evidence disclosed a reasonable indication that the dumping and subsidizing of stainless steel wire had caused injury to the Canadian industry.
[4] On April 2, 2004, the President made a preliminary determination of dumping respecting certain stainless steel wire originating in or exported from Korea, Switzerland and the United States, and made a preliminary determination of subsidizing of such product originating in or exported from India. On the same date, the President terminated the dumping investigation of such product originating in or exported from Chinese Taipei and India.
[5] The CBSA continued its investigation and, on the basis of the results, the President is satisfied that certain stainless steel wire originating in or exported from Korea, Switzerland and the
United States has been dumped and that the margins of dumping are not insignificant. Consequently, on June 30, 2004, the President made a final determination of dumping pursuant to paragraph 41(1)(a) of SIMA.
[6] Similarly, the President is satisfied that certain stainless steel wire originating in or exported from India has been subsidized and that the amounts of subsidy are not insignificant. As a result, on June 30, 2004, the President also made a final determination of subsidizing pursuant to paragraph 41(1)(a) of SIMA.
[7] The Tribunal's inquiry into the question of injury to the Canadian industry is continuing. Provisional duty will continue to be levied on importations of the subject goods from the named countries until the Tribunal renders its decision. The Tribunal will issue its finding by July 30, 2004.
Period of Investigation
[8] The investigation covered all subject goods released into Canada during the period of investigation (POI), that is, from October 1, 2002 to September 30, 2003.
[9] The complainant, Central Wire, is the sole producer of cold drawn and annealed stainless steel wire in Canada. The company produces these goods at its plants in Perth, and Erin, Ontario. The head office is located at 1 North Street, in Perth, Ontario.
[10] When the investigation was initiated, the CBSA identified 97 known or possible exporters of the subject goods. The CBSA sent a Request for Information (RFI) to all identified exporters. During the investigation, complete responses to the RFIs were received from exporters located in India and the United States. As a result of information submitted during the investigation and the termination of the investigation with respect to dumping from Chinese Taipei, the final number of identified exporters is 78.
[11] When the investigation was initiated, the CBSA identified 107 known or possible importers of the subject goods. An RFI was sent to all identified importers and the CBSA received 46 responses. Importers who were able to demonstrate they were not importing subject goods and/or importing directly from Chinese Taipei were removed from the list, as a result the final number of identified importers is 70.
[12] For the purpose of this investigation, the subject goods were defined as:
Cold drawn and annealed stainless steel round wire, up to and including 0.300 inches (7.62mm) in maximum solid cross-sectional dimension.
Additional Product Information
Technical Information
[13] Stainless steel is defined as alloy steel containing, by weight, 1.2% or less of carbon and 10.5% or more of chromium, with or without other elements.
Production Process
[14] Stainless steel wire can be produced in a variety of sizes across a wide range of product grades. The production process is essentially the cold drawing of stainless steel wire rod of appropriate alloy composition through one or more dies. As the wire is drawn to smaller diameters, annealing operations are performed to process it to its finished size and specification. All wire that has undergone an annealing operation at any time is included in the product definition.
[15] The wire may be treated to provide special surface conditions or appearance, including matte and diamond. In addition, coatings may be applied to serve as lubricants in subsequent processing or manufacturing operations.
[16] Stainless steel wire is packaged according to client specifications and product type. The wire can be shipped on spools, reels, coils, or in barrels. Wire that is cut-to length, such as TIG wire, is shipped in tubes or in bulk (boxes).
[17] Subject stainless steel wire is commonly produced in sizes of .003 inches (0.08 mm) to .300 inches (7.62 mm). Grades are defined by their chemistries, and generally all grades of stainless steel wire are, or can be, produced in Canada. The predominant grades of stainless steel wire sold in Canada are AISI1 304, 304L, 314, 316, 316L, 330, 308, 308L, 308LSi, 309LSi, 316LSi, 302, 302HQ and 430.
Product Application
[18] Much of the stainless steel wire consumed in Canada is sold for further manufacture and is used in a number of applications. Some common uses are in the fastener and battery industries for the manufacture of cold-headed pins, nails, rivets and battery anodes. Stainless steel wire is also used for the production of springs, racks, grills, hooks, rings and similar formed parts, and continuous wire conveyor belts.
[19] However, stainless steel wire can also be sold in the form of finished products such as welding wire and lashing wire. Welding wire is used to bond parts used in manufacturing equipment and products made from stainless steel plates or tubes. Lashing wire, due to its strength and corrosion resistance, is used throughout the telephone and cable industries to support signal-carrying cables.
[20] The subject stainless steel wire are generally classified under the following Harmonized System classification numbers:
- 7223.00.11.00 7223.00.19.00 7223.00.20.00
[21] There has been no change in the structure of the Canadian industry since the initiation of the investigation. Central Wire is the sole producer of the like goods.
[22] For purposes of the preliminary determination, the CBSA established the volume of imports from all countries using customs accounting documents, the CBSA internal information system, and submissions received from importers and exporters. During the final phase of the investigation, no further change was made to the data, other than a minor adjustment in the volume of importations from the United States that reflected additional information received from an exporter.
[23] At the time of the initiation of the investigation, CBSA officers requested information from all known or possible exporters and importers of subject goods. The Government of India was also requested to provide information on alleged subsidies granted by the national government and by the Indian State of Maharashtra, where the Indian exporters are located.
[24] During the preliminary phase of the investigation, all four exporters in India and two exporters in the United States submitted complete responses to the dumping Requests for Information. In addition, the four Indian exporters, together with the Government of India and the Government of the State of Maharashtra, supplied sufficient information regarding subsidy programs. CBSA officers carried out on-site verification of the information provided by the six co-operating exporters in the latter part of February and early March. Meetings were also held with government officials in India.
[25] Several other exporters in the United States and Switzerland provided incomplete responses, which were inadequate for making the preliminary determinations on dumping. No exporters in Chinese Taipei or Korea co-operated or supplied any information.
[26] On April 2, 2004, following an analysis of information obtained and verified prior to that date, the President made a preliminary determination of dumping respecting certain stainless steel wire from Korea, Switzerland and the United States, as well as a preliminary determination of subsidizing of such product from India. On that date, the President also terminated the dumping investigation of stainless steel wire from Chinese Taipei and India.
[27] During the final phase of the investigation, a third exporter in the United States provided a complete response to the RFI. CBSA officers conducted on-site verification of the submitted information in May 2004.
Results of the Dumping Investigation
[28] In conducting its investigation, the CBSA requested that exporters and importers provide sales and cost information necessary to determine the normal values and export prices of the subject goods. Normal values are generally based on the domestic selling prices of the goods in the country of export or on the total cost of the goods (cost of production, administrative, selling and all other costs) plus an amount for profits. The export price of goods shipped to Canada is generally the lesser of the exporter's ex-factory selling price or the importer's purchase price. When the export price is less than the normal value, the difference is the margin of dumping.
[29] Where information submitted to the CBSA by exporters was verified and found to be reliable, such information was used in calculating the margins of dumping. Margins of dumping were calculated for each separate product shipped to Canada by each exporter by subtracting the total export price from the total normal value of all of the sales made to Canada. As such, any sales made at undumped prices reduced the overall margin of dumping found for that particular product. In respect of each exporter, the overall margin of dumping of all of the products was determined by weighting the margins found for each product according to the volume exported to Canada. In making this calculation, the margin of dumping for any product that was not dumped (that had an overall negative margin of dumping) was set to zero.
[30] For exporters who did not provide a complete response to the request for information, or did not submit a response that permitted verification of the information in a timely manner, the normal values and export prices of the goods were determined pursuant to a ministerial specification under section 29 of SIMA. According to the ministerial specification, normal values were based on the export price of the goods plus an advance of 181%, representing the highest margin of dumping (excluding anomalies) found for a co-operative exporter during the investigation.
[31] In calculating the weighted average margin of dumping of a country, the overall margins of dumping found in respect of each exporter were weighted according to the volume of subject goods exported to Canada during the POI.
[32] Further information regarding the calculation of normal values, export prices and margins of dumping for the final determination is provided below.
[33] No submissions were received from exporters located in Korea. Accordingly, all of the subject goods exported from Korea and imported into Canada during the POI were determined to have been dumped by 181% when expressed as a percentage of export price.
[34] Complete submissions were not received from the identified exporters in Switzerland. As a result, all of the goods exported from Switzerland and imported into Canada during the POI were determined to have been dumped by 181% when expressed as a percentage of export price.
[35] Three exporters located in the United States provided complete responses to the CBSA's RFI during either the preliminary or final phase of the investigation. They are: Gibbs Wire and Steel Company, Inc.; Sandvik Materials Technology; and Sumiden Wire Products Corporation.
Gibbs Wire and Steel Company, Inc.
[36] Gibbs Wire and Steel Company, Inc. (Gibbs U.S.) is a distributor of stainless steel wire with five service centres located throughout the United States. Gibbs U.S. sells to a single related importer in Canada, named Gibbs Wire and Steel Company of Canada, Ltd. (Gibbs Canada), a wholly owned subsidiary of Gibbs U.S.
[37] During the final phase of the investigation, Gibbs U.S. supplied sales and cost information respecting like goods sold in its domestic market, as well as cost information for the goods exported to Canada. Gibbs Canada supplied data on its costs and resale prices in Canada. The information from both companies was validated through on-site verification and used for the purposes of determining normal values and export prices.
[38] Normal Value - For the majority of products, the normal values were determined in accordance with section 15 of SIMA, based on the weighted average domestic selling prices to unrelated customers. Sales made to customers who purchased volumes most comparable to the importer's volume were selected for this analysis. Adjustments to the domestic selling prices were made pursuant to paragraph 5(d) of the Special Import Measures Regulations (Regulations), where necessary, to account for differences in payment terms between the domestic customers and Gibbs Canada. The domestic sales used as the basis for determining normal values were sales made to customers at a level of trade that is subsequent to the national distributor trade level of the importer in Canada. Therefore, an adjustment was made to the domestic selling prices, pursuant to paragraph 9(a) of the Regulations, to reflect the difference in trade levels.
[39] For those products where there was not a sufficient number of acceptable sales of like goods in the domestic market to determine normal values under section 15 of SIMA, the normal values were determined in accordance with paragraph 19(b) of SIMA using the cost of production of the goods, selling, administrative and all other costs, and an amount for profits. The amount for profits was based on the weighted average profit made on domestic sales by Gibbs U.S. of goods of the same general category as the goods sold to Canada pursuant to subparagraph 11(b)(ii) of the Regulations.
[40] Export Price - As Gibbs Canada is a wholly owned subsidiary of Gibbs U.S., the CBSA tested the reliability of the declared selling prices by determining export prices under both section 24 and paragraph 25(1)(c) of SIMA and comparing the results.
[41] Export prices under section 24 were determined on the basis of the exporter's declared selling price less export charges. Export prices under paragraph 25(1)(c) were determined on the basis of the importer's selling price of the goods in Canada, less all costs incurred in importing and selling the goods, plus an amount for profit. The amount for profits was determined pursuant to
paragraph 22 (a) of the Regulations, based on the average profit realized by vendors of like goods in Canada.
[42] A comparison of the export prices calculated using the two methodologies revealed that the declared selling prices were acceptable for purposes of determining the export prices. Consequently, export prices were determined under section 24 of SIMA.
[43] Margin of Dumping - The normal values were compared with the export prices for all subject goods imported into Canada during the POI. It was found that 99.7% of the goods were dumped by a weighted average margin of dumping of 24.6%, expressed as a percentage of export price. The margins of dumping for the dumped goods range from 2.9% to 99.1%.
Sandvik Materials Technology
[44] Sandvik Materials Technology (Sandvik) is a United States subsidiary of Sandvik AB of Sweden. The exporter sells to various customers in the United States domestic market at the national distributor level, and to a single related importer in Canada, Sandvik Canada. Sandvik manufactures subject goods using raw material purchased from both related and unrelated domestic and international suppliers.
[45] Based on discussions held during the verification meetings at Sandvik's premises, the company provided the CBSA with updated costing and sales data, which was used to calculate the normal values and export prices of the goods for purposes of the final determination.
[46] Normal Value - In cases where there was an acceptable number of domestic sales to unrelated customers, normal values were determined in accordance with section 15 of SIMA based on the weighted average domestic market selling prices.
[47] Where applicable, the normal values determined under section 15 of SIMA were adjusted as follows pursuant to paragraph 5(a) of the Regulations. An adjustment was allowed where the goods sold to the importer in Canada and the goods sold domestically differed in their quality, structure, design or material. An adjustment was also made pursuant to section 6 of the Regulations, where rebates were generally granted in the domestic market and the importer would have qualified if the sale had occurred in the United States. The final adjustment was made pursuant to section 7 of the Regulations, where an adjustment was allowed for domestic sales where delivery charges were included in the selling price.
[48] For products where this was not the case, normal values were determined in accordance with paragraph 19(b) of SIMA, using the cost of production of the goods, selling, administrative and all other costs, and an amount for profits. The amount for profits was based on Sandvik's weighted average profit on domestic market sales of goods of the same general category as those sold to Canada pursuant to subparagraph 11(b)(ii) of the Regulations.
[49] Export Price - In view of the fact that Sandvik exported subject goods to Sandvik Canada, a related company, the CBSA tested the reliability of the declared selling prices by determining export prices under both section 24 and paragraph 25(1)(c) of SIMA and comparing the results.
[50] Export prices under section 24 were determined on the basis of the exporter's declared selling price less export charges. Export prices under paragraph 25(1)(c) were calculated on the basis of the importer's resale prices in Canada less all costs incurred in importing and selling the goods, plus an amount for profits. The amount for profits was determined pursuant to paragraph 22 (a) of the Regulations, based on the average profit realized by vendors of like goods in Canada.
[51] A comparison of the export prices, calculated using the two methodologies revealed that the declared selling prices were not acceptable. Therefore, export prices were determined under paragraph 25(1)(c) of SIMA.
[52] Margin of Dumping - The normal values were compared with the export prices for all subject goods imported into Canada during the POI. It was found that 99.8% of Sandvik's exports to Canada were dumped by a weighted average margin of dumping of 110%, expressed as a percentage of export price. The margins of dumping for the dumped goods range from 0.5% to 308%.
Sumiden Wire Products Corporation
[53] Sumiden Wire Products Corporation (Sumiden) is a manufacturer of stainless steel wire in the United States, producing subject goods mainly for the domestic market. The company purchases its raw materials from independent suppliers.
[54] Sumiden provided no additional sales or cost information during the final phase of the investigation. As a result, the analysis performed with respect to information obtained and verified prior to the preliminary determination remains unchanged for the final determination of dumping.
[55] Normal Value - For products where Sumiden had a sufficient number of acceptable domestic sales of like goods to unrelated customers, normal values were determined pursuant to section 15 of SIMA, based on the weighted average domestic market selling prices. The normal values determined under section 15 were adjusted to account for differences in the terms and conditions of sale, pursuant to paragraph 5(d) of the Regulations.
[56] For those products where there was not a sufficient number of acceptable sales of like goods in the domestic market, the normal values were determined in accordance with paragraph 19(b) of SIMA, using the cost of production of the goods, selling, administrative and all other costs, and an amount for profits. The amount for profits was based on Sumiden's weighted average profit on domestic market sales of goods of the same general category as the goods sold to Canada pursuant to subparagraph 11(b)(ii) of the Regulations.
[57] Export Price - As the goods were sold to unrelated importers in Canada, export prices were determined in accordance with section 24 of SIMA, on the basis of the lesser of the exporter's selling price and the importer's purchase price.
[58] Margin of Dumping - The normal values were compared with the export prices for all subject goods imported into Canada during the POI. It was found that 86.8% of the goods were dumped by a weighted average margin of dumping of 10.2%, expressed as a percentage of export price. The margins of dumping for the dumped goods range from 0.1% to 30.4%.
Other Exporters in the United States
[59] Six exporters from the United States supplied information which was either incomplete or was not provided in time to allow analysis and verification before the final determination. A further 51 exporters did not co-operate in the investigation and provided no information whatsoever. Margins of dumping for all these exporters were established using normal values determined under section 29 of SIMA, on the basis of an advance of 181% over the export price of the subject goods.
Country |
Volume of Importations (Kilograms) |
Dumped Goods as Percentage of Total Subject Goods Imported |
Weighted Average |
Korea |
163,893 |
100% |
181% |
Switzerland |
133,400 |
100% |
181% |
United States |
2,079,893 |
99.5% |
165% |
*determined as a percentage of export price
[60] During the POI, 99.6% of subject goods imported from named countries into Canada were determined to have been dumped. The weighted average margin of dumping for all subject goods is 167% when expressed as a percentage of export price. The volume of dumped goods per country can be seen in Appendix 1.
[61] For purposes of the preliminary determination of dumping, the President has responsibility for determining whether the actual or 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.
[62] In making a final determination of dumping in relation to goods imported from a country in the investigation, the President must be satisfied that the subject goods have been dumped and that the margin of dumping is not insignificant. Subsection 2(1) of SIMA defines insignificant as being less than 2% of the export price of the goods. The table above indicates that the margin of dumping is not insignificant.
[63] Details regarding the margins of dumping determined by exporter and country are provided in Appendix 1.
Results of the Subsidy Investigation
[64] In determining whether a program has resulted in a subsidy under SIMA, the CBSA considers whether:
-there has been a financial contribution by a government of a country other than Canada; and
-there was a benefit conferred to persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of goods.
[65] Pursuant to subsection 2(1.6) of SIMA, there exists a financial contribution by a government of a country other than Canada in cases where:
- a) practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities;
- b) amounts that would otherwise be owing and due to the government are exempted or deducted; or amounts that are owing and due to the government are forgiven or not collected;
- c) the government provides goods or services, other than general governmental infrastructure, or purchases goods; or
- d) the government permits or directs a non-governmental body to do anything referred to in any of paragraphs (a) to (c) where the right or obligation to do the thing is normally vested in the government and the manner in which the non-governmental body does the thing, does not differ in a meaningful way from the manner in which the government would do it.
[66] If a subsidy is found to exist, it may be subject to countervailing duties if it is specific. A subsidy is considered specific when it is limited to a group of enterprises, an industry or a group of industries or its granting is contingent on export performance.
[67] On the basis of information provided in the complaint and information available through public documents and/or received during previous subsidy investigations involving India, the CBSA forwarded Requests for Information on the subsidy programs to the four identified Indian exporters, as well as to the Government of India (GOI) and the Government of the State of Maharashtra, where all the exporters are located. The information was requested in order to establish whether there had been financial contributions made by any level of government and, if so, to establish if a benefit had been conferred on persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of the subject goods respecting the following programs:
B7 Duty Entitlement Pass Book Scheme
B7 Advance Licences
B7 Export Oriented Units
B7 Special Economic Zones
B7 Export Promotion Capital Goods Scheme
B7 Pre-shipment and Post-shipment Export Financial Assistance
B7 Loan Guarantees from the Government of India
B7 Income Tax Exemption on Export Profits
Government of the State of Maharashtra Programs
B7 Waiver of Stamp Duty and Registration Fees
B7 Octroi (Municipal Tariff) Refund
B7 Incentives to Small-scale Industries
B7 Exemption from Electricity Duty
B7 Financing of Capital Incentives and Refunds
B7 Sales Tax Incentives
[68] Complete responses to the Requests for Information were received from all concerned parties and full verification of the data was conducted at the exporters' premises in India prior to the preliminary determination. At that time, CBSA officials also met with representatives of the GOI in Delhi to further discuss India's benefit programs for stainless steel wire exporters. No additional information pertaining to subsidy programs in India was received during the final phase of the investigation.
[69] The investigation revealed that benefits accorded to exporters by the GOI have been decreasing over the past several years, and that the State of Maharashtra has not conferred benefits to producers of subject stainless steel wire. Notwithstanding, the CBSA has established that there has been a financial contribution by the GOI that has conferred a benefit to the exporters with respect to the following programs:
B7 Duty Entitlement Pass Book Scheme
B7 Income Tax Exemption on Export Profits
B7 Export Promotion Capital Goods Scheme
B7 Pre-shipment and Post-shipment Export Financial Assistance
[70] The above subsidy programs are considered specific since they are contingent upon export performance, and therefore constitute subsidies that are subject to countervailing duty, as per Appendix 2. The programs utilized and amounts of subsidy determined for each exporter, which are identical to those estimated at the preliminary determination, are indicated in Appendix 3.
Country |
Volume of Importations (Kilograms) |
Subsidized Goods as a Percentage of Total Subject Goods Imported |
Percentage of Subsidy on Subject Goods |
India |
526,182 |
100% |
6.2% |
[71] For purposes of the preliminary determination of dumping, the President has responsibility for determining whether the actual or 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.
[72] In making a final determination of subsidy under subsection 41(1) of SIMA, the President must be satisfied that the subject goods have been subsidized and that the amount of subsidy on the goods of a country is not insignificant. According to section 2 of SIMA, an amount of subsidy that is less than 1% of the export price of the goods is considered insignificant.
[73] However, section 41.2 of SIMA directs the President to take into account the provisions of paragraphs 10 and 11 of Article 27 of the World Trade Organization Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) when conducting subsidy investigations. These provisions stipulate, in part, that any investigation involving a developing country must be terminated as soon as the President determines that the total amount of subsidy for a developing country does not exceed 2% of the value of the goods.
[74] The CBSA normally makes reference to Part I of the "DAC" 2List of Aid Recipients, maintained by the Organization for Economic Co-operation and Development, to determine eligibility for the differential amounts for developing countries in subsidy investigations. As India is a developing country according to this list, the 2% threshold for insignificance would apply. Nevertheless, the table above illustrates that the amount of subsidy is not insignificant.
Representations and Other Issues
[75] On the date of the start of the investigation, the GOI forwarded to the CBSA written representations arguing that the subsidy investigation should not be initiated. Canadian officials addressed these representations when they met with the GOI on March 5, 2004, and confirmed that evidence in the complaint had disclosed a reasonable indication that the allegedly subsidized goods had caused injury to the Canadian industry. At that time, CBSA representatives also explained that questions regarding causal link and like goods would be probed in detail as part of the Tribunal inquiry, and described the position of the CBSA respecting the various subsidy programs named in the investigation.
[76] After the imposition of provisional duty following the preliminary determination of dumping and subsidizing, the CBSA received written and oral representations from the Spring Manufacturers Association of Canada (SMA), as well as from several individual spring producers. These representations expressed concerns about the ability of the Canadian stainless steel wire industry to supply the requirements of the spring manufacturers and noted that the duties were adversely affecting the spring production industry in Canada. The CBSA noted that importers had the option of posting security rather than paying provisional duties prior to the Tribunal's decision on injury. The SMA also conveyed its opinion that spring wire should not be regarded as subject goods. The CBSA responded that spring wire did fall within the definition of subject goods and, as such, provisional duties did apply. The CBSA advised the spring manufacturers to explore possible remedies available to them through the Tribunal process.
[77] After a preliminary determination of dumping, exporters may give a written undertaking to revise selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated. Similarly, after a preliminary determination of subsidizing, the government of a country may give a written undertaking to eliminate the subsidy on the goods or to eliminate the injurious effect of the subsidy by limiting the amount of the subsidy or the quantity of goods exported to Canada. Exporters, with the consent of their government, may also undertake to revise their selling prices so that the injurious effect of the subsidy is eliminated. The CBSA did not receive any proposals for undertakings from any of the identified exporters or from the GOI prior to the final determination.
[78] On the basis of the results of the investigation, the President is satisfied that certain stainless steel wire originating in or exported from Korea, Switzerland and the United States has been dumped and that the margins of dumping are not insignificant. Consequently, on June 30, 2004, the President made a final determination of dumping pursuant to paragraph 41(1)(a) of SIMA.
[79] Similarly, the President is satisfied that certain stainless steel wire originating in or exported from India has been subsidized and that the amounts of subsidy are not insignificant. As a result, on June 30, 2004, the President also made a final determination of subsidizing pursuant to paragraph 41(1)(a) of SIMA.
[80] The provisional period began on April 2, 2004, and will end on or before July 30, 2004, the date the Tribunal issues its finding. Subject goods imported during the provisional period will continue to be assessed provisional duty as determined at the time of the preliminary determination of dumping. For further details on the application of provisional duty, refer to the Statement of Reasons issued for the preliminary determination of dumping, which is available on the CBSA Web site at www.cbsa-asfc.gc.ca/sima-lmsi/menu-eng.html.
[81] If the Tribunal finds that the dumped and/or subsidized goods have not caused injury and do not threaten to cause injury, all proceedings relating to this investigation will be terminated. In this situation, all provisional duty paid or security posted by importers will be returned.
[82] If the Tribunal finds that the dumped and/or subsidized goods have caused injury, the anti-dumping and/or countervailing duty payable on subject goods released from customs during the provisional period will be finalized, pursuant to section 55 of SIMA. Imports released from customs after the date of the Tribunal's finding will be subject to anti-dumping duty equal to the margin of dumping and/or countervailing duty equal to the amount of subsidy. In that event, the importer in Canada shall pay all such duty. 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 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.
[83] Specific normal values and amounts of subsidy for the subject goods have been provided to the co-operating exporters for the final determination. Should the Tribunal make an injury finding, these normal values and amounts of subsidy will come into effect the day after the date of the injury finding. Where specific normal values have not been issued, anti-dumping duty at a rate of 181% of the export price will be payable on imports of the subject goods. Where specific amounts of subsidy have not been issued, a countervailing duty amount of 13,857 rupees per metric tonne will be payable on imports of the subject goods from India.
[84] In the event that subject goods originating in India are exported from Korea, Switzerland or the United States, both anti-dumping duty and countervailing duty may apply to the same goods. Under section 10 of SIMA, only the amount by which the margin of dumping exceeds the countervailing duty attributable to export subsidies will be levied as anti-dumping duty.
[85] A notice of this final determination of dumping and subsidizing is being published in the Canada Gazette pursuant to paragraph 41(3)(a) of SIMA.
[86] 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 Edith Trottier-Lawson or Libby Campbell as follows:
Canada Border Services Agency | |
Telephone |
Edith Trottier-Lawson (613) 954-7182 |
Fax |
(613) 948-4844 |
Edith.Trottier-Lawson@ccra-adrc.gc.ca | |
| Web Site | http://www.cbsa-asfc.gc.ca/sima-lmsi/ |
Suzanne Parent
Director General
Anti-Dumping and Countervailing Directorate
MARGINS OF DUMPING
|
Country |
Percentage of Goods Dumped |
Range of Margins of Dumping * |
Weighted Average Margin of Dumping * |
Republic of Korea |
|||
All Exporters |
100% |
- |
181% |
Switzerland |
|||
All Exporters |
100% |
- |
181% |
United States of America |
|||
Gibbs Wire & Steel Co. |
99.7% |
2.9% - 99.1% |
24.6 % |
Sandvik Materials Technology |
99.8% |
0.5% - 308% |
110% |
Sumiden Wire Products Corporation |
86.8% |
0.1% - 30.4% |
10.2% |
All other exporters |
100% |
- |
181% |
Total United States of America |
99.5% |
0.1% - 308% |
165% |
Total All Subject Countries |
99.6% |
0.1% - 308% |
167% |
* Determined as a percentage of Export Price
SUBSIDY PROGRAMS IN INDIA THAT WERE FOUND TO HAVE CONFERRED A BENEFIT TO EXPORTERS OF STAINLESS STEEL WIRE
Duty Entitlement Pass Book Scheme
The Government of India's Duty Entitlement Pass Book (DEPB) scheme operates essentially as a type of duty drawback program. According to the GOI, the objective of the DEPB scheme is to neutralize the incidence of duty on the import content of an exported product by granting a certain rate of import duty or DEPB credit when a product is exported. The DEPB duty credit is calculated as a proportion of the value of the exported product and is based on the GOI's "Standard Input-Output Norms", which also list for any given exported product, the type and quantity of goods that may be imported duty-free for use in the production of this finished exported end-product. Any DEPB credits not used by the exporter to import inputs duty-free may be sold in the open market.
It is the position of the GOI that the DEPB program is a permissible drawback program under the WTO Agreement on Subsidies and Countervailing Measures. The GOI further asserts that the sale of the credits does not alter the nature of the DEPB as a valid substitution drawback program; rather it contends that the sale of the credits is simply another method of indirectly exempting duties on inputs.
A review of the material supplied by the exporters of stainless steel wire in their submissions and during the verification meetings revealed that in certain cases the companies received excessive duty exemption under the DEPB scheme, as evidenced by their ability to import ineligible goods on a duty-free basis and/or to sell their DEPB credit licences.
The CBSA notes that section 2 of SIMA includes, in its definition of subsidy, duty exemption on imports of any goods other than energy, fuel, oil or catalysts consumed in the production of exports, or duty exemption on goods other than those incorporated into the finished exported product. The GOI's financial contribution when allowing duty exemption for imports of ineligible goods under the DEPB scheme is established under paragraph 2(1.6)(b) of SIMA as the amount of duties not collected.
The CBSA also maintains that DEPB credits, which are sold, are not used in duty exemption programs allowable under SIMA and that revenue from the sale of unused DEPB credits therefore constitutes a subsidy. The GOI's financial contribution in respect of the sale of DEPB credits is established under paragraph 2(1.6)(c) of SIMA, as the provision of goods or services other than general governmental infrastructure.
The unallowable duty exemptions granted under the DEPB scheme and proceeds from the sale of DEPB licences constitute specific subsidies since they are contingent upon export performance.
Under subsection 27.1(2) of the Special Import Measures Regulations (Regulations), the amount of subsidy received, in respect of any amount of duty owed and due to the government that was deducted, was treated as a grant under section 27 of the Regulations. Similarly, under subsection 27.1(1) of the Regulations, the amount of subsidy in respect of the sales of DEPB credits was calculated by treating the revenues from these sales as grants. The amounts were then allocated over the total quantity of subsidized goods to which the grants were applicable.
Income Tax Exemption on Export Profits
Under section 80 HHC of the Indian Income Tax Act, exporters may deduct a portion of their export profit when determining taxable income. During the period investigated, exporters were able to deduct 50 per cent of their export profit when calculating income tax payable.
The CBSA considers the GOI's income tax deduction to be a subsidy under paragraph 2(1.6)(b) of SIMA, because exempted amounts would otherwise be owing and due to the government. This tax deduction constitutes a specific subsidy since it is contingent upon export performance.
The CBSA calculated the amount of subsidy conferred on each exporter in accordance with section 32 of the Regulations, by multiplying the export profit deduction by the relevant tax rate and allocating this figure over the total quantity of subsidized goods to which the deduction was applicable.
Export Promotion Capital Goods Scheme
The GOI's Export Promotion Capital Goods (EPCG) scheme allows exporters to import capital equipment and components at reduced or nil import duties. It was found during this investigation that only one exporter of stainless steel wire had imported capital equipment under this scheme.
The GOI's financial contribution under the EPCG scheme is established under paragraph 2(1.6)(b) of SIMA as the amount of duties not collected. The benefit to exporters is the amount of duty savings received under this program.
Only exporters are eligible for EPCG licences. Therefore, the EPCG scheme provides a specific subsidy for the reason that it is contingent on export performance.
Under subsection 27.1(2) of the Regulations, the amount of subsidy received, in respect of any amount owing and due to government that is deducted, is to be treated as a grant. Accordingly, the amount of subsidy was calculated as the difference between the duties applicable at the time of importation and those actually paid. The resultant duty savings were then amortized over the estimated useful life of the imported capital equipment, as determined by the depreciation rates used in the exporters' financial statements and allocated over the total quantity of subsidized goods to which the grants were applicable.
Pre- and Post-Shipment Export Financial Assistance (EFA)
Also known as the Export Packing Credit, Pre-shipment Export Financial Assistance is offered to exporters under a program administered by the Reserve Bank of India (RBI), the GOI's Central Bank. Under this program, banks extend pre-shipment working capital loans at ceiling rates set by the RBI, for such purposes as purchasing raw materials, as well as processing, warehousing, packing, transporting and shipping goods for export.
Similarly, the RBI administers a Post-shipment Export Financial Assistance program, under which banks extend loans to exporters at ceiling rates set by the RBI, for the period from the shipment of the exported goods until the date of realization of export proceeds.
During the current investigation, it was found that interest rates applicable to short term loans taken in respect of export sales were now essentially identical to those taken in respect of domestic sales. Consequently, the EFA programs did not result in benefits for the majority of the stainless steel wire exporters in this investigation.
The CBSA found that there was a small discernible difference between the interest rates applicable to domestic and export sales for only one exporter. The GOI's financial contribution in this instance was established under paragraph 2(1.6)(d) of SIMA, where the Government permits or directs a non-governmental body to carry out anything referred to in paragraph 2(1.6)(a). This latter paragraph cites practices of the Government involving the direct transfer of funds.
The interest rate reduction emanating from EFA programs constitutes a specific subsidy because it is contingent on export performance.
The benefit to the exporters was calculated in accordance with section 28 of the Regulations, as the amount by which the interest paid on the EFA loans was lower than the interest that would have been payable for comparable commercial loans. To calculate an amount for subsidy, this benefit was distributed over the quantity of subject goods for which the exporter had availed himself of EFA loans.
AMOUNTS OF SUBSIDY
|
India |
Export Subsidy Programs Utilized |
Subsidized Goods as Percentage of Total Goods Exported |
Amount of Subsidy* and Countervailing Duty Payable (per Metric Tonne) |
Venus Wire Industries Limited |
Duty Entitlement Pass Book Scheme |
100% |
5,654 rupees |
VSL Wires Limited |
Duty Entitlement Pass Book Scheme |
100% |
667 rupees |
Macro Bars and Wires (India) Pvt. Limited |
Duty Entitlement Pass Book Scheme |
100% |
12, 256 rupees |
Nevatia Steel & Alloys Pvt. Limited |
Duty Entitlement Pass Book Scheme |
100% |
12,326 rupees |
New Exporters ** |
13, 857 rupees |
* The benefits received from these programs, in aggregate, represent on average 6.2% of the value of the goods and exceed the 2% threshold stipulated in Article 27.10 of the Subsidies Agreement concerning developing countries.
**For any new exporters in India that may sell to Canada in the future, countervailing duties will be based on the total of the highest amount of subsidy found respecting each benefit program in India, which equals 13,857 rupees per metric tonne.
