Notice of conclusion of administrative review: Small and Large Power Transformers (SLPT 2024 UP1)

Period of investigation

The period of investigation (POI) and the profitability analysis period (PAP) for this review were from November 1, 2022 to October 31, 2024.

Administrative review process

At the initiation of the review, the CBSA sent a Request for Information (RFI) to all known exporters, importers, producers and trading companies to solicit information on the costs and selling prices of subject goods and like goods. The information was requested for purposes of updating the normal values and export prices for subject goods imported into Canada.

As part of the review, case briefs and reply submissions were provided by counsel representing the Canadian industry, exporter, vendor and importers. Details of the representations are provided in Appendix 1.

Details pertaining to the information submitted by the exporter, vendor and importers in response to the RFIs as well as the results of the CBSA’s review are provided below.

Normal values and export prices

Hyundai Electric is located in South Korea and is a manufacturer and exporter of various transformers and related electricity distribution equipment, including small and large power transformers. The company head office is located in Seoul, South Korea and its manufacturing facility is in Ulsan, South Korea. During the POI, Hyundai Electric produced the subject goods that it exported to Canada.

Hyundai Corporation (Hyundai Corp.), also based in Seoul, South Korea, is a trading company of large power transformers that were shipped to Canada. Hyundai Corp is considered to be related to Hyundai Electric for the purposes of the Special Import Measures Act (SIMA).

Hyundai Canada Inc. (Hyundai Canada) is an importer of large power transformers located in Vancouver, Canada. HD Hyundai Electric America Corporation (HE America) is a non-resident importer of small and large power transformers located in Atlanta, US. Both importers are considered to be related to Hyundai Electric for purposes of SIMA.

During the course of the review, Hyundai Electric provided responses to the CBSA’s dumping RFI^{Footnote 1} as well as two supplemental RFIs^{Footnote 2} (SRFI) to gather additional information and seek clarification. Likewise, Hyundai Corp. provided responses to the CBSA’s RFI^{Footnote 3} as well as one SRFI^{Footnote 4}. Hyundai Canada and HE America (hereinafter “the importers”) provided responses to the CBSA’s importer RFIs^{Footnote 5}, as well as five^{Footnote 6} and four^{Footnote 7} SRFIs, respectively.

Hyundai Electric did not have sales of like goods in its domestic market. As a result, normal values were determined in accordance with paragraph 19(b) of SIMA, based on the aggregate of cost of production, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits. As domestic sales were made on credit terms other than cash discounts, prices were also adjusted in accordance with subsection 21(2) of SIMA.

The reasonable amount for profits was determined in accordance with subparagraph 11(1)(b)(ii) of the Special Import Measures Regulations (SIMR), based on the weighted average profit made on profitable domestic sales of goods of the same general category sold during the PAP.

Based on the information provided, the CBSA was able to calculate the appropriate deductions accordingly to section 24 or section 25 of SIMA and conduct a reliability test of the export prices from Hyundai Electric to the importers. As export sales were also made on credit terms other than cash discounts, prices determined under section 24 and paragraph 25(1)(d) were also adjusted in accordance with subsection 27(2) of SIMA.

The test revealed that the export prices determined in accordance with section 24 were unreliable and, therefore, the export prices for subject goods exported to Canada by Hyundai Electric through the importers, for all future sales of subject goods, will be determined in accordance with paragraph 25(1)(d) of SIMA.

As such, the CBSA established specific deductions to determine the importers’ export prices based on their resale prices of the imported goods to unrelated purchasers in Canada, less deductions for all additional costs, charges and expenses incurred in preparing, shipping and exporting the goods to Canada, all costs, charges and expenses resulting from the imported goods, or arising from their shipment, that were incurred in reselling the goods in Canada (including general, selling, and administrative expenses, duties and taxes) or associated with the assembly and/or installation of the goods in Canada, and an amount representative of the industry profit pursuant paragraph 22(a) of SIMR. These specific export price adjustment are effective for goods released on or after July 21, 2025.

The normal values and export prices determined as a result of this review for the importers may be applied to any requests for re-determination of importations of subject goods that have not been processed prior to the conclusion of this review, regardless of the date that the requests were received. The normal values and export price parameters determined as a result of this review may be applied retroactively where conditions are met.

Exporter responsibility

All parties are cautioned that, where there are increases in domestic prices and/or costs, the export price should be increased accordingly to ensure that any sale made to Canada is not only above the normal value but at or above selling prices and full costs and profit of the goods in the exporter’s domestic market. If exporters do not adjust export prices accordingly, retroactive assessments of anti-dumping duties may be warranted. Please refer to the Memorandum D14-1-8: Administrative Review Policy – Special Import Measures Act (SIMA) for details.

Importer responsibility

Importers are reminded that it is their responsibility to calculate and declare their anti-dumping duty liability. If importers are using the services of a customs broker to clear importations, the brokerage firm should be advised that the goods are subject to SIMA measures and be provided with sufficient information necessary to clear the shipments. To determine their anti-dumping liabilities, importers should contact the exporter(s) to obtain the applicable normal values. For further information on this matter, refer to Memorandum D14-1-2: Disclosure of normal values, export prices, and amounts of subsidy established under the Special Import Measures Act.

The Customs Act (Act) applies, with any modifications that the circumstances require, with respect to the accounting and payment of anti-dumping duties. As such, failure to pay the SIMA duties within the prescribed time will result in the application of the interest provisions of the Act.

Should the importer disagree with the determination made on any importation of goods, a request for re-determination may be filed. For more information on how to file a request for re-determination, please refer to the Guide for appealing a duty assessment.

Contact us

Email: simaregistry-depotlmsi@cbsa-asfc.gc.ca

Appendix 1: Representations

Representations^{Footnote 8}, case arguments^{Footnote 9} and reply submissions^{Footnote 10} were received from counsel on behalf of Northern Transformer Corporation, PTI Transformers Inc., PTI Transformers L.P. and Transformateurs Delta Star Inc. (collectively, the “Canadian producers”). Counsel on behalf of HD Hyundai Electric (Hyundai Electric), Hyundai Corporation (Hyundai Corp.), HD Hyundai Electric America (HE America) and Hyundai Canada Inc. (Hyundai Canada) (collectively, the “respondents”), also submitted case arguments^{Footnote 11} and reply submissions.^{Footnote 12}

During the course of the administrative review (review), counsel for the Canadian producers discussed various concerns pertaining to the responses to the requests for information (RFI) and supplemental RFIs. Issues raised included: the determination of the exporter, the date of sale, revenues, credit adjustments, input purchase prices, related parties, reliability and retroactive assessment of duties.

There were a number of exporter, producer and importer specific issues that were raised. In order to respect the confidentiality designations made by interested parties, the Canada Border Services Agency (CBSA) is limited in the information that can be divulged in response to arguments made concerning certain topics.

The non-confidential material issues raised by the parties are summarized as follows and the CBSA has provided a response below.

Determination of the exporter

Case briefs

Counsel for the respondents submitted that Hyundai Electric is the exporter for this review as they have been for previous investigations. Counsel refers to a Canadian International Trade Tribunal (CITT) decision regarding EMCO Electric International v President of the Canada Border Services Agency (EMCO), and notes that the CITT’s interpretation of the term “exporter” in Special Measures Import Act (SIMA) is “the person in the foreign country who sends the goods to Canada, determined on the facts of the particular transactions at issue”. Further, counsel emphasizes that the exporter for SIMA purposes is the person or firm who is a principal in the transaction, thus concluding that Hyundai Electric is the sole exporter.^{Footnote 13}

Counsel for the Canadian producers submitted that Hyundai Corp. is located in the country of export and was involved for certain transactions of the subject goods. Counsel also refers to EMCO and interprets the decision to suggest that the relationship between the trading company and the producer should be at arm’s length. However, counsel argues that a trading company does not need to meet this criterion to be found as the exporter for SIMA purposes. Furthermore, counsel refers to three criteria for determining the exporter, which include the determination of whether or not the trading company participates as principals, provides a service to the key players in the transactions or mainly acts as vending agents for the producer. Counsel argued that based on the criteria, Hyundai Corp. is the exporter for SIMA purposes.^{Footnote 14}

Reply submissions

Counsel for the respondents argued that Hyundai Corp. acted as a passive intermediary in the export of the subject goods. Counsel indicates that the trading company does not provide any input to a customer’s transformer specifications, it is indirectly involved in the bidding process to supply customers in Canada with transformers and its functions in the transactions are limited. Counsel also states that the Canadian producers’ arguments are only based on the location of Hyundai Corp. and that the trading company’s involvement is overemphasized in the Canadian producers’ arguments.^{Footnote 15}

Counsel for the Canadian producers stated that the respondents’ arguments are based on a misapplication of certain EMCO factors and a complete avoidance of other factors. Counsel argues that the respondents unnecessarily emphasize Hyundai Electric as a producer of the subject goods to support the premise that the producer is the “principal” in the transaction. The reply submission also indicates that Hyundai Corp. playing a passive role is not determinative when the CBSA is examining the question of who the exporter is based on the EMCO factors.^{Footnote 16}

CBSA response

The CBSA took the representations into account, and examined the involvement of each separately incorporated entity to determine the identity of the exporter, including any relationships between entities.

The CBSA found producers located in the countries of export to be the exporter for SIMA purposes. As such, Hyundai Electric was located in the country of export, was a principal in the transaction, and owned the goods at some point before they were shipped directly to Canada.

Date of Sale

Representations by counsel

The respondents’ submissions indicated the date of sale as the date that a certificate of conformance is issued following a successful Factory Acceptance Test (FAT).^{Footnote 17}

Counsel for the Canadian producers indicated that there was an inconsistency with the date of sale being reported in this review compared to prior proceedings, where the date of sale was reported as the customer’s purchase order date. Counsel further argued that no justification was provided to support the change.^{Footnote 18}

Case briefs

Counsel for the respondents stated that the purchase order does not represent the date of sale, as it is a preliminary agreement that amounts to booking a production slot. Counsel further argued that the material terms of sale are not finalized after the initial purchase order date. Counsel submitted that transaction details are modified and reflected through numerous change orders issued between the purchase order date and the FAT completion date.^{Footnote 19}

Counsel for the Canadian producers argued that the FAT is a procedural step in the contract agreement and does not alter the material terms of sale, specifically, price, quantity or delivery conditions. Further, counsel stated that the customer’s acceptance of the FAT is not a material term of sale. Counsel added that there have been no changes in industry practices to justify departing from the date of sale methodology used in previous proceedings.^{Footnote 20}

Reply submissions

Counsel for the respondents reaffirmed its stance on the date of sale and argued that the Canadian producers’ arguments on the acceptance of the FAT, requirement of change in industry practices and the date of sale in previous proceedings should be dismissed.^{Footnote 21}

CBSA response

The CBSA took the representations into account, and examined the submissions to determine the date of sale in accordance with SIMA and the Special Import Measures Regulations (SIMR).

As stated in the RFIs sent to the respondents,“the CBSA considers the date of sale to be the date that the parties establish the material terms of the sale.”^{Footnote 22}

After reviewing the submissions, the CBSA found that no material terms were changed after the purchase order date for any of the transactions. As such, export prices determined under section 24 and paragraph 25(1)(d) were adjusted in accordance with subsection 27(2) of SIMA, using the purchase order date as the date of sale.

Revenues

Case briefs

Counsel for the Canadian producers submitted that, with regard to the export price determination, the CBSA should remain consistent with the CITT’s decisions in Hyundai Canada Inc v President of the Canada Border Services Agency, (EA-2019-008/010) (Hyundai Canada) and Hyundai Heavy Industries (Canada) dba Remington Sales Co v President of the Canada Border Services Agency, (EA-2019-009) (Remington Sales), and disregard revenue associated with ancillary goods and services when they exceed the costs incurred. Counsel suggested that the CBSA should apply a revenue-capping approach used by the United States Department of Commerce. Counsel explained this method as when the costs associated with separately priced non-subject goods and services exceed the revenues from such non-subject goods and services, there is a net cost associated with selling the non-subject good that is necessary to deduct from the price of the subject good, in order to obtain an ex factory price of the subject good.^{Footnote 23}

Reply submissions

Counsel for the respondents argued that the revenue-capping method and the “higher of” rule are inconsistent with SIMA and should be dismissed. Counsel stated that the CBSA must make an assessment of the starting point from the Section 25 export price calculation that eliminates (as opposed to deducts) revenues related to non-subject goods and services and ignoring the related expenses, and the excluded revenues and expenses cannot be re-introduced into the section 25 export price.^{Footnote 24}

CBSA response

The CBSA took the representations into account, and examined the revenues and expenses reported in the respondents’ submissions.

Based on the information provided, the CBSA established specific deductions to determine the export prices for Hyundai Canada and HE America, for all additional costs, charges and expenses incurred in preparing, shipping and exporting the goods to Canada, and all costs, charges and expenses resulting from the imported goods, or arising from their shipment, that were incurred in reselling the goods in Canada (including GS&A, duties and taxes) or associated with the assembly and/or installation of the goods in Canada.

Credit adjustments

Case briefs

Counsel for the Canadian producers stated that based on certain factors affecting the sale of the subject goods, the CBSA should consider the sales of transformers as credit sales pursuant to section 27(1) of SIMA and discount the export price accordingly.^{Footnote 25}

Counsel for the respondents argued that for the purpose of calculating export prices, the CBSA should not make any present value adjustments to the extended selling prices under section 27 of SIMA because the transactions at issue are not made on credit terms other than cash discounts.^{Footnote 26}

Reply submissions

Counsel for the Canadian producers stated that the respondents’ argument of avoiding section 27 adjustments is without merit and that several of the sales reported by the respondents over the Period of Investigation involve a significant lag between the date when the value of the transformer was contractually determined and the date of sale, perfectly illustrating why section 27 adjustments are necessary.^{Footnote 27}

Counsel for the respondents indicated that certain factors in the sale of long lead-time goods such as transformers are irrelevant for the purposes of section 27 of SIMA. Counsel also argued that the Canadian producers do not define the term "credit" in their submissions, do not explain what "credit" Canadian customers receive.^{Footnote 28}

CBSA response

Based on the information provided, the CBSA determined that export sales were made on credit terms other than cash discounts. As such, export prices determined under section 24 and paragraph 25(1)(d) were adjusted in accordance with subsection 27(2) of SIMA.

Input purchase prices

Case briefs

Counsel for the Canadian producers stated that Hyundai Electric’s input suppliers are “associated persons” in accordance with subsections 2(2) and 2(3). As such, counsel argued that upward input price adjustments should be made based on the difference between the prices offered by unaffiliated companies and affiliated companies, subject to paragraph 11.2(1)(c) of the SIMR.^{Footnote 29}

Reply submissions

Counsel for the respondents argued that the CBSA does not have sufficient information on the record to determine what the correct scope of inputs would be for the purpose of an adjustment under subsection 11.2(1) of the SIMR.^{Footnote 30}

CBSA response

As Hyundai Electric purchased significant factor inputs from associated suppliers, these purchases were analyzed for the purposes of paragraph 11.2(1) of SIMR. As a result, the cost of the inputs were determined in accordance with subsection 11.2(1)(a) of SIMR.

Exclusion of related parties

Case briefs

Counsel for the Canadian producers noted that Hyundai Electric’s domestic sales involved related parties, and argued that the CBSA should exclude all related parties in determining a reasonable amount for profits.^{Footnote 31}

Reply submissions

Counsel for the respondents agreed with the case brief of the Canadian producers and noted that the related parties were already excluded from Hyundai Electric’s submissions for the purpose of this analysis.^{Footnote 32}

CBSA response

After reviewing the submissions on the record, related parties were removed in determining a reasonable amount for profit.

Reliability and retroactive duties

Case briefs

Counsel for the respondents stated that the export prices should be determined under section 24 of SIMA as they are reliable based on the CBSA’s reliability test and the facts on the record relating to the export transactions at issue.^{Footnote 33}

Counsel for the Canadian producers provided reliability calculations and stated that the evidence on the record demonstrates that section 24 export prices between the respondents are not reliable. Counsel added that consequently, the CBSA should retroactively assess duties and apply the cascading effect in determining the price and duties, after having found that export prices were unreliable in previous reviews.^{Footnote 34}

Reply submissions

Counsel for the respondents argued that extensive submissions were filed and a clear methodology was provided. Counsel stated that the methodology was consistent with SIMA on removing non-subject revenues from the starting s. 25 selling price and making equivalent and consistent adjustments to the Section 24 export price. Further, counsel referred to the Canadian producers’ reliability analysis and indicated that the adjustments made in their calculations were contrary to SIMA.^{Footnote 35}

CBSA response

After reviewing the submissions, the CBSA was able to conduct the reliability test which revealed that the export prices determined in accordance with section 24 were unreliable and, therefore, the export prices for subject goods exported to Canada by Hyundai Electric through HE America and Hyundai Canada, for all future sales of subject goods, will be determined in accordance with paragraph 25(1)(d) of SIMA. The normal values and export prices determined as a result of this review may be applied retroactively where conditions are met. Please refer to the Memorandum D14-1-8: Administrative Review Policy – Special Import Measures Act (SIMA) for details.