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OTTAWA, June 26, 2002

4366-9
AD/1139

Concerning a determination under subsection 76.03(7) of the Special Import Measures Act regarding

CERTAIN HOT-ROLLED CARBON STEEL PLATE AND HIGH STRENGTH LOW ALLOY PLATE ORIGINATING IN OR EXPORTED FROM MEXICO, OR ORIGINATING IN OR EXPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA, THE REPUBLIC OF SOUTH AFRICA, AND THE RUSSIAN FEDERATION

DECISION

On June 11, 2002, pursuant to subsection 76.03(7) of the Special Import Measures Act, the Commissioner of Customs and Revenue determined that the expiry of the injury findings of the Canadian International Trade Tribunal made on October 27,1997, in Inquiry No. NQ-97-001, concerning certain hot-rolled carbon steel plate and high strength low alloy plate originating in or exported from Mexico, or originating in or exported from the People's Republic of China, the Republic of South Africa and the Russian Federation, is likely to result in the continuation or resumption of dumping of the goods.

  • This statement of reasons is also available in French. Please refer to the "Information" section.
  • Cet énoncé des motifs est également disponible en français. Veuillez consulter la section Renseignements .

TABLE OF CONTENTS

SUMMARY

BACKGROUND

PRODUCT INFORMATION
DEFINITION
PRODUCT DESCRIPTION
CLASSIFICATION OF IMPORTS
INJURY FINDINGS AGAINST SIMILAR GOODS

PARTICIPANTS

CONSIDERATION AND ANALYSIS
INCIDENCE OF DUMPING WHILE THE INJURY FINDINGS WERE IN PLACE
CURRENT NORMAL VALUES AND CANADIAN MARKET PRICE
TRADING PRACTICE OF IMPORTERS
WORLDWIDE OVERCAPACITY
DEMAND AND CAPACITY UTILIZATION
ABILITY TO PRODUCE PLATE IN FACILITIES USED FOR OTHER GOODS
ANTI-DUMPING MEASURES BY OTHER COUNTRIES
OTHER TRADE MEASURES TAKEN BY OTHER COUNTRIES
OTHER ANTI-DUMPING ACTIONS BY CANADA
SAFEGUARD INVESTIGATION BY CANADA

CONCLUSION

PROCEDURAL ISSUE

FUTURE ACTION

INFORMATION

SUMMARY

On February 11, 2002, the Canadian International Trade Tribunal (Tribunal), pursuant to subsection 76.03(3) of the Special Import Measures Act (SIMA), initiated an expiry review of its injury findings made on October 27,1997, in Inquiry No. NQ-97-001, concerning certain hot-rolled carbon steel plate and high strength low alloy plate (carbon steel plate) originating in or exported from Mexico, or originating in or exported from the People's Republic of China (China), the Republic of South Africa (South Africa) and the Russian Federation (Russia). The purpose of the expiry review is to determine whether the Tribunal injury findings are to be continued or rescinded.

The Commissioner of Customs and Revenue (Commissioner) has 120 days after the initiation of an expiry review by the Tribunal to determine whether there is a likelihood of continued or resumed dumping if the injury findings expire. Consequently, the Commissioner commenced an investigation on February 12, 2002, to determine whether the expiry of the aforementioned injury findings is likely to result in the continuation or resumption of dumping of the goods. On the basis of the information available, the Commissioner determined on June 11, 2002, that the expiry of the injury findings is likely to result in the continuation or resumption of dumping of the goods.

The Tribunal will now conduct an inquiry to determine whether the expiry of the injury findings is likely to result in injury or retardation to the domestic industry. On May 2, 2002, the Tribunal announced the postponement of its inquiry due to the fact that the Canadian industry, importers, exporters and the Tribunal itself are involved in a safeguard investigation of a broad range of steel products. Consequently, the Tribunal will commence its inquiry on August 30, 2002, following this affirmative determination by the Commissioner.

If the Tribunal determines that the expiry of the injury findings is likely to result in injury or retardation, the injury findings will be continued, with or without amendment. If the Tribunal determines that the expiry of the injury findings is unlikely to result in injury or retardation, the injury findings will be rescinded.

BACKGROUND

The anti-dumping investigation of carbon steel plate originating in or exported from China, Mexico, the Republic of Poland, Russia and South Africa was initiated on February 13, 1997, as a result of a complaint filed by Stelco Inc., with the support of the other Canadian producers. The investigation resulted in the termination of the investigation with respect to the Republic of Poland, and preliminary and final determinations of dumping with respect to China, Mexico, Russia and South Africa.

The Tribunal issued a finding of injury on October 27, 1997. On June 21, 1999, the Tribunal issued a corrigendum to the injury finding, in order to issue a separate injury finding for Mexico, pursuant to section 77.016 of SIMA.

Injury findings expire five years from the date of the injury finding unless an expiry review has been initiated. On December 21, 2001, the Tribunal issued a notice of expiry of injury findings indicating that the above-mentioned findings were scheduled to expire. The notice of expiry of the injury findings invited opinions from interested persons or governments requesting or opposing the initiation of an expiry review. On February 11, 2002, the Tribunal initiated a review of the above-mentioned injury findings as it was of the opinion that such a review was warranted and provided notice to the Commissioner.

On February 12, 2002, the Commissioner initiated an investigation to determine whether the expiry of the injury findings is likely to result in the continuation or resumption of dumping of the goods. A questionnaire was sent to interested parties, including the Canadian producers, importers, exporters, foreign governments, and other interested parties, requesting information necessary for the Commissioner to evaluate the factors relevant to this expiry review. In addition, the public was invited to provide information it considered relevant to the decision.

The expiry review investigation covered all subject goods released into Canada during the Period of Review (POR) of January 1, 1999 to December 31, 2001.

PRODUCT INFORMATION

DEFINITION

The goods subject to this expiry review are defined as:

Hot-rolled carbon steel plate and high strength low alloy plate not further manufactured than hot-rolled, heat-treated or not, in cut lengths, in widths from 24 inches (+/- 610 mm) to 152 inches (+/- 3,860 mm) inclusive, and thicknesses from 0.187 inches (+/-4.75 mm) to 4 inches (+/- 101.6 mm) inclusive, originating in or exported from Mexico, or originating in or exported from China, Russia and South Africa, but excluding plate for use in the manufacture of pipe and tube (also known as skelp); plate in coil form; plate having a rolled, raised figure at regular intervals on the surface (also known as floor plate); and plate produced to ASTM specifications A515 and A516M/A516, grade 70, in thicknesses greater than 3.125 inches (+/- 79.3 mm).

PRODUCT DESCRIPTION

The types of carbon steel plate typically made in Canada include plate meeting CSA specification G40.21 or equivalent specifications in various grades, as well as plate made to ASTM specifications A283M/A283, A36M/A36, A572M/A572, A588M/A588, A242M/A242, A515M/A515, and A516M/A516 or equivalent specifications in various grades.

Subject carbon steel plate made to the above specifications can be used in a number of applications, the most common being in the production of rail cars, oil and gas storage tanks, heavy construction machinery, agricultural equipment, bridges, industrial buildings, high rise office towers, automobiles and truck parts, shipbuilding, ship repairs, and pressure vessels.

Steel plates are made by hot-rolling from either semi-finished slabs or directly from ingots into rectangular shapes or coils. While details may vary from mill to mill, the process by which carbon steel plate is produced is essentially the same for all producers and entails the following processes: heating the slabs/ingots, descaling, rolling, levelling, cutting to size, inspecting and testing. Subsequently, the plate may be heat-treated which may include annealing, normalizing, stress relieving, quenching, tempering or combinations of these treatments.

CLASSIFICATION OF IMPORTS

The Harmonized System (H.S.) provides fourteen specific classification numbers under which subject carbon steel plate may be classified:

  • 7208.51.10 00
  • 7208.51.99 10
  • 7208.51.99 91
  • 7208.51.99 92
  • 7208.51.99 93
  • 7208.51.99 94
  • 7208.51.99 95
  • 7208.52.19 00
  • 7208.52.90 10
  • 7208.52.90 91
  • 7208.52.90 92
  • 7208.52.90 93
  • 7208.52.90 94
  • 7208.52.90 95

INJURY FINDINGS AGAINST SIMILAR GOODS

Currently, there are two other Tribunal injury findings in place concerning similar carbon steel plate. These are referred to as Plate II and Plate IV. A third injury finding previously in place, Plate I, was rescinded.

"Plate I" - carbon steel plate from Belgium, Brazil, the Czech Republic, Denmark, Germany, Romania, United Kingdom and the former Yugoslav Republic of Macedonia was subject to a Tribunal injury finding, rescinded in 1998.

"Plate II" - Tribunal injury finding of May 1994, continued in May 1999, involving carbon steel plate from Italy, the Republic of Korea, Spain and Ukraine.

"Plate IV" - Tribunal injury finding of June 2000, involving carbon steel plate from Brazil, Finland, India, Indonesia, Thailand and Ukraine.

PARTICIPANTS

Canadian producers, exporters, traders and importers (106 in all) were provided with the Tribunal's Notice of Expiry Review and a questionnaire requesting information necessary for the Commissioner to evaluate the factors relevant to this expiry review. They were also invited to submit case briefs arguing that the dumping is likely or unlikely to continue or resume in the event the injury findings are allowed to expire. As well, they could submit replies providing their comments in respect of the case briefs submitted by other parties.

The three producers of carbon steel plate in Canada: Algoma Steel Inc., Sault Ste. Marie, Ontario; IPSCO Inc., Regina, Saskatchewan; and Stelco Inc., Hamilton, Ontario participated in this expiry review. They responded to the Commissioner's questionnaire and submitted case briefs arguing that dumping is likely to continue or resume should the injury findings be allowed to expire.

Only one of the 47 exporters that were sent expiry review questionnaires participated in the expiry review. Highveld Steel and Vanadium Corp. Ltd. (Highveld) in South Africa, responded to the Commissioner's questionnaire, submitted a case brief arguing that dumping of subject goods from South Africa is not likely to continue or resume if the injury findings are allowed to expire, and responded to the case arguments presented by the Canadian producers.

In terms of importers' participation, a response to the Commissioner's questionnaire was received from an importer of the subject goods, Wirth Limited of Montreal, Quebec. The importer did not submit case arguments. Responses were also received from four Canadian importers indicating they had not imported subject goods during the period of review, January 1, 1999 to December 31, 2001.

The three Canadian producers, Algoma Steel Inc., IPSCO Inc. and Stelco Inc.; the South African exporter, Highveld; and the Canadian importer, Wirth Limited, are regarded as parties to the proceedings as defined in the Guidelines on the Conduct of Expiry Review Investigations under the Special Import Measures Act.

Other interested persons, who are not parties to the proceedings, were invited to provide information they considered relevant to the decision. No information or responses were received from any other interested parties.

The CCRA also gathered information from a variety of public sources, including expert analysts reports, trade journals, foreign government orders and injury findings, reports from international organizations and Canadian government publications.

CONSIDERATION AND ANALYSIS

In making a determination of whether the expiry of an injury finding is likely to result in the continuation or resumption of dumping, the Commissioner may consider any factor specifically identified in paragraphs (a) to (i) of subsection 37.2(1) of the Special Import Measures Regulations, as well as any other factors that are relevant in the circumstances. The following factors were of particular relevance to this review:

  • incidence of dumping while the injury findings were in place;
  • current normal values and Canadian market price;
  • trading practices of importers;
  • worldwide overcapacity;
  • demand and capacity utilization;
  • ability to produce plate in facilities used for other goods;
  • anti-dumping measures by other countries;
  • other trade measures taken by other countries;
  • other anti-dumping actions by Canada; and
  • safeguard investigation by Canada.

An analysis of each factor follows. The analysis was based on the information that was before the Commissioner on the date the record closed.

INCIDENCE OF DUMPING WHILE THE INJURY FINDINGS WERE IN PLACE

The statistics for total imports of carbon steel plate from the named countries during the POR are summarized as follows:

Imports and Enforcement Data
China, Mexico, Russia and South Africa *
Year Value for Duty (C$) Quantity Imported (MT) Quantity Dumped (MT) SIMA Duty Paid
(C$)
% of Goods Dumped
1999 $22,966 34.5 29 $213 84%
2000 $3,967,520 8,174 2.4 $2,074 0.03%
2001 $12,028,428 28,326 218 $79,269 0.8%

* Based on Statistics Canada data and CCRA enforcement system information. Information on the individual countries cannot be shown, as it would disclose confidential information.

The overall import volumes of subject goods from Mexico, China and Russia and the amount of anti-dumping duty paid on these goods have not been substantial. The Canadian industry contends that the imports from China, Mexico and Russia ceased because the exporters could not sell to Canada without dumping. The industry also pointed out that the Commissioner has concluded in past expiry review determinations (e.g., carbon steel welded pipe, March 23, 2001) that an exporter's inability to sell goods to Canada, because its current normal values are higher than prevailing Canadian market prices, is a strong indicator that dumping will continue or resume if the injury findings are allowed to expire.

The South African exporter, Highveld, noted that its shipments to Canada during the period of review, January 1, 1999 to December 31, 2001, were not dumped and contended that it is not likely to sell carbon steel plate to Canada at dumped prices if the injury findings are allowed to expire.

In the case of South Africa, the import volumes had all but ceased after the 1997 Tribunal injury finding. Imports began increasing in the last half of 2000 and had become significant by 2001. It should be noted that the normal values in place at the time of the Tribunal findings were issued in South African rand. While these values afforded protection to the Canadian industry for some time, the rapid devaluation of the rand in 2001 allowed South African producers to resume selling to Canada at non-dumped prices. A reinvestigation of normal values, initiated on August 3, 2001 and completed on January 15, 2002, resulted in the determination of significantly higher normal values. If these normal values had been in place in 2001, the South African exporters could not have remained competitive in the Canadian marketplace without dumping.

CCRA's Position

The producers in China, Mexico, and Russia did not export subject goods to Canada in significant volumes. This absence of exports indicates that the exporters either could not participate in the Canadian market at non-dumped prices or chose not to participate because of other reasons, for example, freer access to other markets. While an exporter's inability to make sales to Canada is not proof positive of the likelihood of continued or resumed dumping, it is nonetheless a strong indicator that dumping may continue or resume if the injury findings are allowed to expire.

With respect to South Africa, exports occurred principally when normal values were at artificially low levels, caused by the rapid devaluation of the rand. As a result of the revised normal values, Highveld of South Africa may not be able to participate in the Canadian market to the extent it did in 2001.

CURRENT NORMAL VALUES AND CANADIAN MARKET PRICE

As noted, new normal values were issued on January 15, 2002, as a result of a reinvestigation. Specific normal values were determined for one exporter from Russia, one exporter from South Africa and all exporters from China. Due to lack of cooperation by other exporters in the reinvestigation, specific normal values were not determined for the remaining exporters in Russia and South Africa and all of the exporters in Mexico.

The Tribunal has found in its past reviews of steel products that import prices will converge at the lowest possible price point necessary to make a sale in the Canadian market. This reflects the price-sensitivity of plate as a commodity product. To compete with the Canadian producers and other importers in the Canadian market, importers of plate from the named countries will need to match or better their price offerings.

The Canadian industry predicts that selling prices in Canada in 2002 will remain at the same level as they were in 2001. Publications by financial and market analysts support this prediction.

CCRA's Position

In order to obtain a sale to Canada, foreign producers will have to price their goods at levels that are competitive with the prevailing prices in the Canadian market place, that is at prices which are lower than the current normal values determined for those goods.

TRADING PRACTICE OF IMPORTERS

When purchasing steel, most importers will consider three basic factors: price, product quality and the customers' needs. Price is essentially the only factor at play in this review, given that the goods are produced to international standards.

Importers buy steel at low prices from a mill to sell it to a customer at a higher price. These importers usually operate at low profit margins, often less than 5%. These thin profit margins limit an importer's ability to independently offer large price cuts to customers. Thus, to offer plate at prices low enough to undercut the Canadian producers' prices, and to maximize their profit margins, importers must seek out foreign producers who will sell products at the lowest prices possible. Importers are also free to buy steel from any producer in any country and can change suppliers with relative ease and speed. Source switching is part of the operations of importers.

There has been a pattern of continuing involvement in importing dumped plate by the same core group of importers over the years. These importers have a long history of importing goods at dumped prices and have been involved in several Canadian anti-dumping investigations resulting in Tribunal injury findings, involving plate from a total of 21 countries. In its past plate injury findings, the Tribunal commented that the importers have demonstrated a "cat-and-mouse" pattern, where they seek new sources to replace those where imports are subjected to anti-dumping duties.

As the Canadian industry also pointed out, the importers involved in sourcing subject plate were also identified as being amongst the most active importers of hot-rolled, cold-rolled and galvanized sheet, other flat steel products that have recently been investigated by the CCRA.

CCRA's Position

There is ample evidence, both on the record and in previous injury findings of the Tribunal, that the importers of the subject goods willingly source plate from producers at the lowest prices possible. As anti-dumping findings are put in place against named countries, the importers will switch sources to producers in countries, which are not named in an injury finding. Should the findings be allowed to expire, there is a strong likelihood that the importers will again seek out low-priced dumped carbon steel plate from China, Mexico, Russia and South Africa.

WORLDWIDE OVERCAPACITY

Information on the global steel marketplace from various sources, including trade magazines, industry publications and expert analysts' reports, indicate that the world steel industry is facing an overcapacity crisis. There is more than 300 million tons of excess steel capacity in the world, or one-third of total world steel capacity. While these comments address the steel industry as a whole rather than specific product sectors, there is no reason to believe that the overall conclusions are not applicable to the carbon steel plate sector.

As a result of the worldwide situation in the steel market, there are a significant number of producers in several countries, including the named countries, looking to sell steel products at any price. As a result, most of the open steel markets in the world are threatened with a surge of low priced, disruptive imports.

It is important to remember that carbon steel plate is a commodity product. It is not an overly difficult product to make to recognized specifications, is easy to trade and easy to ship to foreign markets. As one of the most basic of steel products, it is highly price sensitive and is highly influenced by the effects of supply and demand.

CCRA's Position

The current overcapacity of steel production, and potential oversupply, will increase pressure on international prices as exporters seek out new sales orders to maximize production levels and minimize idle, unused capacity. Their desire to keep production facilities operating at optimal levels in conjunction with the importers' desire to source the goods as cheaply as possible will increase the likelihood that dumping will continue or resume if the injury findings expire.

DEMAND AND CAPACITY UTILIZATION

In its injury finding of October 1997, the Tribunal confirmed that the named countries, as a group, have vast export potential. The capacity utilization rate of the largest mills in each of the named countries is estimated by the Canadian industry to be 70%. This utilization rate combined with the plate production data from these mills as obtained from a recent edition of the Iron and Steel Works of the World, has allowed the industry to estimate that the unused capacity of these mills for hot-rolled steel products, including the subject plate, is more than 6.5 times the size of the 2001 Canadian market.

The Canadian industry submits that the likely future performance of the exporters and foreign producers will be impacted by the current, uncertain state of the global market for steel. The economic downturn has had a negative impact on domestic demand in the exporting countries, for steel in general and for the subject plate in particular. In some cases, developments within the named countries have also contributed to a decrease in domestic demand. Consequently, the large steel mills in China, Mexico, Russia and South Africa are underutilized and exports from these mills could increase dramatically.

Steel producers, when faced with declining demand, have little choice but to maximize production (and sales) if they are to make a profit, even if it means selling at lower prices. Steel mills are capital intensive with high fixed costs. In order to recover fixed costs, steel mills must run at high levels of production. When market demand drops, producers will search out new markets to maintain capacity utilization levels that ensure these fixed costs are recovered.

The changes in the demand and capacity utilization in each of the named countries are described below. It should be noted that due to an extremely poor response rate, there was little information provided by the exporters, Highveld being the exception. Consequently, the CCRA relied, to a great extent, on information obtained from public sources, including expert analysts reports, trade journals and publications of the Canadian government, foreign governments and international organizations.

China

Information obtained from public sources indicates that China has over 1,000 steel producers, most of which are considered to be underutilized. Nonetheless, steel analysts predict that the Chinese steel industry will become one of the world's dominant steel making groups by 2010. Chinese producers have good access to capital and a government that is committed to making steel a strategic industry. In 1999, China began a series of initiatives emphasizing equipment optimization, greater varieties of steel products and quality improvement; all aimed at improving efficiency and the variety of high-quality products its mills can produce. While these initiatives are expected to reduce the number of steel producers, the surviving producers will have enormous capacities and will play an expanding role in international competition.

However, just as Chinese steel production and exports are poised to multiply, external markets (United States and European Communities) are being closed off, through various trade measures, to Chinese steel products and the overall global demand is deteriorating. As a result, steel facilities in China are likely to remain underutilized into the foreseeable future.

Mexico

When the global economy headed into recession, Mexico, being an export dependent economy, followed suit with a sharp downturn of activity and zero growth in 2001. This downturn has been accompanied by a decrease in Mexico's traditional domestic markets for steel products, making the export markets more crucial.

With an increased dependency on exports, Mexico will need to continue to seek out new markets for its steel products, including the subject carbon steel plate, to keep its capacity utilization rates at profitable levels.

Russia

Russia has a large steel making capacity and is one of the largest exporters of steel products. Russia's production capacity is presently estimated to be twice its domestic consumption needs.

Increasingly, countries such as the United States and the European Communities are employing various trade measures to limit the access of Russian steel producers to their markets. As the Russian producers have become so dependent on these markets, the Russian producers will need to look for alternative markets to unload their excess steel products. It has been suggested that in doing so, world prices for steel products, including the subject plate, are likely to drop.

South Africa

The global economic downturn has impacted South Africa and analysts predict that the pace of growth will be retarded in 2002. Reports from expert analysts indicate that weak export growth, low commodity prices, high inflation and slowing domestic consumer demand will all restrict economic growth. They also conclude that the depreciating value of the South African rand will increase the international competitiveness of South African products and some producers are likely to switch more products to the export market.

Highveld, on the other hand, submitted that demand in its domestic market is healthy and in fact may increase slightly in 2002. It believes domestic demand will increase due to the devaluation of the South African rand and the likelihood that its domestic consumers will seek to buy lower-priced South African plate, compared to higher-priced, US currency driven plate from international sources.

Other information on the record indicated that South African prices may rise as a result of inflation, which generally moves hand-in-hand with devaluation.

As worldwide demand for steel products further declines in the face of increasing trade restrictions in many of the importing countries, access to foreign steel markets by the South African producers will be constrained.

CCRA's Position

It is clear that there is a significant unused plate capacity in the mills in the named countries. The need for exporters to keep the plants operating at optimum levels is critical to their viability and overall existence. As demand for steel products in their domestic markets level or drop off, producers will be forced to increase sales in foreign markets. Driven by the need to seek out new sales in order to maximize production capacity, exporters will target any country with an open market, including Canada. As price is the key factor for this commodity product, the success of the exporters will be dependent on their ability to compete with, or more precisely, undercut the producers currently supplying these other markets.

ABILITY TO PRODUCE PLATE IN FACILITIES USED FOR OTHER GOODS

The ability to easily switch production between hot-rolled steel sheet and the subject carbon steel plate is common to most steel producers. The Canadian industry and Highveld have confirmed that the nature of their production processes allows them to manufacture plate using much of the same equipment that is used to produce other hot-rolled steel products. Industry reports also confirm that producers in China and Russia can produce both hot-rolled sheet and carbon steel plate using the same manufacturing equipment.

It is common that when trade remedies are put in place producers in the named countries switch production from hot-rolled sheet to carbon steel plate, and vice-versa. For example, as the Canadian industry pointed out, following the 1997 plate injury finding, Highveld significantly reduced its plate exports to Canada and subsequently increased its exports to Canada of hot-rolled sheet. Consequently, hot-rolled sheet imports from South Africa were part of the 2000 anti-dumping complaint that resulted in the Tribunal's injury finding in July 18, 2001.

CCRA's Position

All of the exporters in China, Mexico, Russia and South Africa have the ability to easily switch from producing hot-rolled steel sheet products to producing the subject plate, if the Canadian plate market becomes more accessible. The probability that they will switch to producing carbon steel plate becomes even greater if the findings of injury are removed. This is particularly the case for producers in China, Russia and South Africa, as the hot-rolled sheet from these countries are subject to a Tribunal finding of injury.

ANTI-DUMPING MEASURES BY OTHER COUNTRIES

There are 10 anti-dumping measures currently in effect by authorities other than Canada in respect of goods of the same description from the named countries. As well, there have been 51 anti-dumping measures by 11 other investigating authorities regarding other common steel products, including hot-rolled steel sheet, oil country tubular goods, seamless and welded pipe, steel beams, steel strip and reinforcing bars, from the named countries. In general, the producers involved in these measures are the major producing mills in the named countries.

Counsel for Highveld has submitted that one of the USA anti-dumping cases involving South Africa was suspended, and in that case, South African goods were not dumped as the Canadian producers pointed out. However, the investigation was only suspended after the South African exporters agreed to restrict imports, thereby removing or limiting the effects of injury to the United States producers.

CCRA's Position

The available information indicates that exporters in the named countries have a history of dumping their product (either carbon steel plate or other steel products). When considered in conjunction with global overcapacity, decreasing demand and the ability of producers to make various products on existing lines, the likelihood of resumed or continued dumping of the goods in the event of the expiry of the injury findings is even greater.

OTHER TRADE MEASURES TAKEN BY OTHER COUNTRIES

On March 5, 2002, a section 201 safeguard measure was passed in the United States as a direct response to the current crisis in the North American and global steel industry, including the carbon steel plate sector. The safeguard measure resulted in increased tariff rates on imports of a number of steel products for three years. Mexico and Canada were excluded from this action, as North American Free Trade Agreement (NAFTA) partners. Mexico remains subject to both United States anti-dumping and countervailing findings in respect of carbon steel plate. South Africa and a number of other developing countries were excluded from the section 201 action. However, these countries will only remain exempt if they limit their sales of steel products to the United States to less than 3% of total imports from all countries in "a recent representative period".

In response to the United States section 201 safeguard measure, the European Communities have adopted a provisional safeguard, which will impose additional tariffs on carbon steel plate and other steel products. Although the provisional safeguard measures do not apply to products from Russia, imports of Russian plate are already subject to European Communities import quotas. Mexico also imposed increased tariff rates on steel products as a result of the United States' action.

The Canadian industry submits that these safeguard actions will make diversion of carbon steel plate, otherwise intended for the United States, European Communities and Mexico markets, inevitable, if the current injury findings are permitted to expire.

While Highveld has said that its exports to the United States will remain at current levels and that it will not divert any sales to Canada, the Canadian industry maintains that the diversion of carbon steel plate to Canada due to the safeguard measures remains a threat.

CCRA's Position

In view of the recent trade actions taken by the United States, European Communities and Mexico, exporters in the named countries may very well face a decreasing (or non-existent) sales level in these markets. When one considers the size of the markets that have been effectively closed, or had their access limited, by these safeguard measures, this factor, by itself, would indicate a possibility of diversion of dumped goods to Canada should the injury findings be allowed to expire. However, the possibility of diversion becomes more significant and probable when considered in the context of the other factors which have been considered, specifically worldwide overcapacity, demand and capacity utilization and the ability of exporters to produce carbon steel plate in facilities used for other goods.

OTHER ANTI-DUMPING ACTIONS BY CANADA

Since 1999, exporters from the named countries, except Mexico, were found to have dumped carbon and alloy steel flat products similar to the subject goods into Canada. The findings are listed in the following table:

Exporters Found to be Dumping Similar Goods into Canada
Country Product Exporter and Margin of Dumping (%) CCRA Final Determination Date
China Hot-Rolled Steel Sheet and Strip Angang: 10.4%
An Shan: 10.4%
07/18/01
  Cold-Rolled Steel Sheet Products Shanghai Boasteel Group: 2.4% 09/10/01
Russia Hot-Rolled Steel Products JSC Severstal: 30% 06/01/99
  Cold-Rolled Steel Sheet JSC Severstal: 29% 07/28/99
  Certain Corrosion-Resistant Steel Sheet JSC Severstal: 15.9% 06/04/01
South Africa Hot-Rolled Steel Sheet and Strip Highveld: 19.5%
Iscor: 36.9%
07/18/01
  Cold-Rolled Steel Sheet Products Iscor: 33.97% 09/10/01
  Certain Corrosion-Resistant Steel Sheet Iscor: 22.4% 06/04/01
Mexico No cases n/a n/a

In addition, two other findings of injury are being enforced against imports of the same goods from other countries. These cases are referred to as Plate II, which involves goods from Italy, the Republic of Korea, Spain and Ukraine, and Plate IV, which involves goods from Brazil, Finland, India, Indonesia, Thailand and Ukraine.

In both its original finding of injury for Plate II (May 1994) and its subsequent review of the finding (May 1999), the Tribunal noted the rapidity with which imports entered and exited the Canadian market, coinciding with the initiation of each new plate case. As one injury finding was put in place, importers quickly switched to importing from other non-named countries, which in turn precipitated a new investigation.

CCRA's Position

This factor clearly demonstrates that the exporters of the subject goods from the named countries, with the exception of Mexico, have a history of dumping flat steel products into Canada. When this factor is considered in relation with the exporters' capability of producing various flat steel products, including the subject plate on the same equipment, it becomes apparent that the expiry of the injury findings is likely to result in the continuation or resumption of dumping.

Furthermore, in view of the current Tribunal injury findings concerning Plate II and IV, if the Plate III injury findings are allowed to expire, it is likely that the importers will revert to importing carbon steel plate from China, Mexico, Russia and South Africa.

SAFEGUARD INVESTIGATION BY CANADA

The Canadian industry has submitted that selling prices for many steel products in Canada, including carbon steel plate, have been at record low levels as a result of import pressures. Canadian producers have asked that the government enact restrictions to stop the potential flood of imports that could be diverted to Canada as a result of the similar safeguard measures in the United States, European Communities and Mexico. In response, the Canadian government instructed the Tribunal to conduct a safeguard investigation, initiated on March 25, 2002, which specifically includes carbon steel plate.

The Tribunal has been directed to assess both increased imports into Canada and the global steel situation, including production overcapacity and the risk of trade diversion. The Tribunal is to give notice of any determination respecting injury no later than July 4, 2002. It must issue its report on the reasons for its injury finding and on any recommendations no later than August 19, 2002.

While the safeguard investigation is a separate proceeding from this review, the Canadian industry submits that the decision to initiate this action underscores the serious impact that imports have had and will have on Canadian steel production.

CCRA's Position

At this time, the CCRA cannot comment on what safeguard action will be taken, if any, or on what effect the Tribunal's decision might have on the imports of carbon steel plate into Canada from the named countries. This matter is still before the Tribunal.

CONCLUSION

Due to lack of participation by exporters and importers, the CCRA, in many cases, relied on other public sources of information; this information being the best information available. In addition to the information available from Canadian producers, there was a considerable amount of relevant information gathered from expert analysts reports, trade journals, etc. Information was also obtained from foreign government orders and injury findings, reports from international organizations and Canadian government publications.

To summarize, the following points were particularly relevant in the determination:

  • The volume of dumped goods during the POR was not substantial.
  • There were few shipments from China, Mexico and Russia, suggesting that exporters could not compete in the Canadian marketplace without selling below normal values.
  • Due to the devaluation of the South African rand, one exporter in South Africa was able to ship goods to Canada at non-dumped prices. Higher normal values were issued in January 2002.
  • A comparison of the current normal values and the Canadian market prices for carbon steel plate indicates that exporters in the named countries will be forced to dump in order to obtain sales to Canada.
  • Importers have a history of switching sources of supply to obtain the lowest price.
  • There is a current international steel crisis resulting from the excess global supply and overcapacity of steel production.
  • There has been a decrease in demand due to the global economic downturn as well as specific situations existing in the steel producing nations. Mills, facing increasing levels of unused capacity, must increase their production, even if it means selling at low prices.
  • Exporters can use the same production facilities to produce a variety of hot-rolled products including carbon steel plate.
  • Mills are becoming increasingly dependent on export sales. However, access to international markets is significantly constrained by a panoply of trade measures including anti-dumping actions, voluntary restraint agreements and safeguard measures, causing an increase in the already fierce competition among steel producers.
  • The exporters from the named countries have a history of dumping their product, be it the subject carbon steel plate or related hot-rolled products into foreign markets, in Canada and other countries.
  • Carbon steel plate from Italy, Korea, Spain, Ukraine, Brazil, Finland, India, Indonesia and Thailand is subject to other injury findings. If the Plate III injury findings were allowed to expire, importers would likely switch their source of supply to the named countries.

In conclusion, the analysis of the individual factors demonstrates, overwhelmingly, that the circumstances facing the Canadian market and the global steel markets in general, make it likely that exporters from China, Mexico, Russia and South Africa will continue or resume their past practices of dumping carbon steel plate and high strength low alloy steel plate into Canada if the findings of injury on these goods is allowed to expire.

PROCEDURAL ISSUE

The Expiry Review Guidelines describe what information constitutes the "record" of information that the Commissioner can take into consideration when making his determination. Certain information, referenced by counsel for Highveld in its rebuttal to the case arguments submitted by the Canadian industry, related to information that was not on the record. As the information was not on the record, and no exceptional circumstances existed that would allow the Commissioner to add the information to the record, the rebuttal arguments relating to information in question could not be taken into consideration. Counsels for all parties were given an opportunity to comment on this matter prior to the decision being made.

FUTURE ACTION

The Tribunal will conduct its inquiry to determine whether there is a likelihood of injury. On May 2, 2002, the Tribunal announced the postponement of its expiry review inquiry due to the fact that the industry, importers, exporters and the Tribunal itself are involved in a major investigation of safeguard measures for a range of steel products. Consequently, the Tribunal will commence its inquiry on August 30, 2002.

If the Tribunal determines that the expiry of the injury findings is likely to result in injury or retardation, the injury findings will be continued, with or without amendment. If this is the case, the CCRA will continue to levy anti-dumping duties on importations of the subject goods that are imported into Canada at dumped prices.

If the Tribunal determines that the expiry of the injury findings is unlikely to result in injury or retardation, the injury findings will be rescinded. Anti-dumping duties would no longer be levied on importations of the goods in question from the date the injury findings are rescinded.

INFORMATION

For further information, please contact one of the officers identified as follows:

Mail

Canada Customs and Revenue Agency
Anti-dumping and Countervailing Directorate
100 Metcalfe Street, 11th Floor
Ottawa, Ontario
Canada
K1A 0L8

Telephone
Ken McPhail (613) 954-9530
Hélène Bernier (613) 954-7259

Telefax
(613) 941-2612

Website

www.cbsa-asfc.gc.ca/sima-lmsi/

Denis Lefebvre
Assistant Commissioner
Customs Branch

Ottawa, June 26, 2002