CC 2021 IN: Container chassis
Statement of Reasons—Initiation of investigations

Concerning the initiation of investigation into the dumping and subsidizing of container chassis originating in or exported from China.

Decision

Ottawa,

Pursuant to subsection 31(1) of the Special Import Measures Act, the Canada Border Services Agency initiated investigations on June 10, 2021, respecting the alleged injurious dumping and subsidizing of certain container chassis originating in or exported from China.

On this page

Summary

[1] On April 20, 2021, the Canada Border Services Agency (CBSA) received a written complaint from Max‑Atlas Equipment International Inc. (Max Atlas) (hereinafter, the complainant), alleging that imports of certain container chassis (container chassis) from the People’s Republic of China (China) are being dumped and subsidized. The complainant alleged that the dumping and subsidizing have caused injury and are threatening to cause injury to the Canadian industry producing like goods.

[2] On May 11, 2021, pursuant to paragraph 32(1)(a) of the Special Import Measures Act (SIMA), the CBSA informed the complainant that the complaint was properly documented. The CBSA also notified the Government of China (GOC) that a properly documented complaint had been received. The GOC was also provided with the non‑confidential version of the subsidy complaint and was invited for consultations prior to the initiation of the subsidy investigation, pursuant to Article 13.1 of the Agreement on Subsidies and Countervailing Measures. A request for consultations was not received by the CBSA.

[3] The complainant provided evidence to support the allegations that container chassis from China have been dumped and subsidized. The evidence also discloses a reasonable indication that the dumping and subsidizing have caused injury and/or are threatening to cause injury to the Canadian industry producing like goods.

[4] On June 10, 2021, pursuant to subsection 31(1) of SIMA, the CBSA initiated investigations respecting the dumping and subsidizing of container chassis from China.

Interested parties

Complainant

[5] The contact information for the complainant is as follows:

Max‑Atlas Equipment International Inc.
371 ch. du Grand Bernier N
Saint‑Jean‑sur‑Richelieu, QC  J3B 4S2

[6] Max‑Atlas is a manufacturer of container chassis and subassemblies used in a wide variety of industries including, but not limited to, the transportation, waste management and mobile energy (generators) industries, as well as the oil and gas industry for the transportation of frac sand in fracking operations. Max‑Atlas also manufactures and sells parts and custom designed chassis.Footnote 1

[7] The other known manufacturers of like goods in Canada are:

Raja Trailer
9108 River Road
Delta, BC  V4G 1B5

Innovative Trailer Design
161 The West Mall
Toronto, ON  M9C 4V8

Di‑Mond
195 Constellation Drive
Stoney Creek, ON  L8E 0J5

[8] Di‑MondFootnote 2 and Innovative Trailer DesignFootnote 3 both support the complaint. Raja Trailer expressed a neutral opinion of the complaint.Footnote 4

Trade unions

[9] The complainant identified the Fédération démocratique de la métallurgie, des mines et des produits chimiques (FEDEM), as the union of which Max‑Atlas’ employees are members. The complainant did not identify any additional trade unions.Footnote 5

Exporters

[10] The CBSA identified 22 potential exporters of the subject goods from CBSA import documentation and from information submitted in the complaint. All of the potential exporters were asked to respond to the CBSA’s Dumping Request for Information (RFI), Subsidy RFI and Section 20 RFI.

Importers

[11] The CBSA identified 86 potential importers of the subject goods from CBSA import documentation and from information submitted in the complaint. All of the potential importers were asked to respond to the CBSA’s Importer RFI.

Government

[12] Upon initiation of the investigations, the GOC was sent the CBSA’s Section 20 RFI and the CBSA’s Government Subsidy RFI.

[13] For the purposes of these investigations, the GOC refers to all levels of government, i.e., federal, central, provincial/state, regional, municipal, city, township, village, local, legislative, administrative or judicial, singular, collective, elected or appointed. It also includes any person, agency, enterprise, or institution acting for, on behalf of, or under the authority of any law passed by, the government of that country or that provincial, state or municipal or other local or regional government.

Product information

Definition

[14] For the purpose of these investigations, subject goods are defined as:

Container chassis and container chassis frames, whether finished or unfinished, assembled or unassembled, regardless of the number of axles, for the carriage of containers, or other payloads (including self‑supporting payloads) for road, marine roll‑on/roll‑off and/or rail transport, and certain subassemblies of container chassis originating in or exported from the People’s Republic of China.

The subject goods include the following complete or substantially completeFootnote 6 major subassemblies,Footnote 7 when imported, purchased or supplied with, or for assembly with, subject container chassis frames:

  1. running gear assemblies for connection to the container chassis frame, whether fixed in nature or capable of sliding fore and aft or lifting up and lowering down, which may include suspension(s), wheel end components, slack adjusters, axles, brake chambers, locking pins, tires and wheels
  2. landing gear assemblies, for connection to the container chassis frame, capable of supporting the container chassis when it is not engaged to a tractor and
  3. connection assemblies that connect to the container chassis frame or a section of the container chassis frame, such as B‑trains and A‑trains, capable of connecting a container chassis to a converter dolly or another container chassis

Additional product informationFootnote 8

[15] Chassis are typically, but are not limited to, rectangular framed trailers with a suspension and axle system, wheels and tires, brakes, a lighting and electrical system, a coupling for towing behind a truck tractor, and a locking system or systems to secure the shipping container or containers to the chassis using twistlocks, slide pins or similar attachment devices to engage the corner fittings on the container or other payload.

[16] These chassis are typically used in the transportation of intermodalFootnote 9 cargo containers and are skeletal rectangular framed trailers. The rectangular frame comprises steel with a suspension and axle system, wheels and tires, brakes, a lighting and electrical system, a coupling for towing behind a truck tractor, and a locking system or systems to secure the shipping container or containers attached to the chassis. Chassis are designed to carry containers of various sizes, usually ranging from 20’ to 60’ in Canada, including the typical container lengths of 20’, 40’, 45’, 53’ and 60’. Containers carried on chassis include marine containers which are sometimes referred to as “ISO containers”, as they are manufactured to specifications set out by the International Organization for Standardization (ISO). Other containers carried by the Subject Goods include, but are not limited to, domestic containers designed to be carried exclusively over land and not via ocean transport, tank containers for the carriage of liquids or sand, flat racks which are containers without sides, generators for emergency systems and temporary power delivery and waste containers.

[17] Some chassis are built to a single container size and for holding a single container. Others are designed to be extendable chassis, meaning their sliding or adjustable suspension can be extended to allow for longer containers to be carried. Some longer chassis are designed to allow the operator to carry multiple smaller containers, allowing the operator the flexibility of carrying loads for multiple clients simultaneously.

[18] Chassis may be imported into Canada in a fully assembled form, or imported as an unassembled chassis, such as a chassis frame accompanied by the relevant subassemblies, with most or all of the integral items required to assemble a chassis into a finished form. For an unfinished or unassembled chassis to be subject to the scope, the parts for a single chassis do not have to be imported at the same time.

[19] The subject container chassis frames are steel skeletal frames forming the main frame of the trailer and typically include: coupler plate assemblies, bolsters consisting of transverse beams with locking or support mechanisms, gooseneck assemblies, drop assemblies, extension frame assemblies with locking mechanisms and/or rear impact guards. These container chassis frames are only used to manufacture a finished container chassis.

[20] For greater certainty, the subject goods include unfinished or unassembled container chassis or container chassis frames, for painting, coating or further assembly with components such as, but not limited to hub and drum assemblies, brake assemblies (either drum or disc), axles, brake chambers, suspensions and suspension components, wheel end components, landing gear legs, spoke or disc wheels, tires, brake control systems, electrical harnesses and lighting systems.

[21] The subject goods do not include the individual components of the container chassis or subassemblies when imported as individual components, meaning not as part of an unassembled or unfinished container chassis or as part of a substantially complete subassembly. Such non‑subject individual components may include hub and drum assemblies, brake assemblies (either drum or disc), axles, brake chambers, suspensions and suspension components, wheel end components, landing gear legs, spoke or disc wheels, tires, brake control systems, electrical harnesses and lighting systems. Some of these components may also be used in the production of non‑subject trailers such as flatbeds, tankers, dumpers, grain hoppers and others.

[22] The processing of the subject goods, such as trimming, cutting, grinding, notching, punching, drilling, painting, coating, staining, finishing, assembly, bolting, welding or any other processing in China or another country does not remove the product from the definition of subject goods. In addition, if unfinished chassis manufactured in China are merely assembled into a completed chassis in a third country, such as the United States or Mexico, the chassis remains subject to the scope of these investigations. The inclusion of additional components not identified as comprising the finished or unfinished container chassis does not remove the chassis from the definition of subject goods.

[23] The subject goods do not include:

  1. dry van trailers, meaning trailers with a wholly enclosed cargo space comprised of fixed sides, nose, floor and roof, with articulated panels (doors) across the rear and occasionally at selected places on the sides, with the cargo space being permanently incorporated in the trailer itself
  2. refrigerated van trailers, meaning trailers with a wholly enclosed cargo space comprised of fixed sides, nose, floor and roof, with articulated panels (doors) across the rear and occasionally at selected places on the sides, with the cargo space being permanently incorporated in the trailer and being insulated, possessing specific thermal properties intended for use with self‐contained refrigeration systems and
  3. flatbed or platform trailers, meaning trailers that consist of load‐carrying main frames and a solid, flat or stepped loading deck or floor permanently incorporated with and supported by frame rails and cross members

Production processFootnote 10

[24] The standard production process for chassis primarily involves the fabrication and assembly of welded steel parts.

[25] The chassis frame consists of welded steel parts in three basic subassemblies – the front, or forward beam and front cross‑member, assembly, the middle assembly and the rear, or rear cross‑member including the rear impact guard, assembly. The chassis frame subassemblies are composed of steel I‑beams, fabricated beams from plates and flat bars, box beams, channels and angles that are cut and welded into the shape of the frame.

[26] The completed chassis also includes the running gear assembly, air brake system, and lighting and electrical systems.

[27] The running gear assembly comprises the tires, hub and drum assemblies, axles and suspensions, brake chambers and other components.

[28] Chassis producers use metal inert gas (MIG) welders to weld the various steel components together. The middle, or drop frame assembly, consists of the main longitudinal beams (cross‑members) and may include diagonal bracing. Once the steel parts are assembled and coated, the air brake system and electrical components are added to the assembly. The final assembly of the product prior to delivery can be described as follows:

  1. The front/gooseneck assembly, in an orientation with the king pin facing upward, provides for access to attach the landing gear and cross‑brace
  2. The mainframe with the operational top surface being inverted for access to the lower portion of the structure provides access to install the axle/wheel/tire portion of the suspension. In the case of a slider‑type suspension, this can be done in the upright orientation. Additional wheel/tire combinations are also added to the axles at this stage, although typically a single wheel/tire is installed to each axle spindle with the pairing shipped free
  3. The front section and mainframes are then oriented upright and the connection just behind the landing gear is completed. This requires a support at the king pin area of the front section and a support near the forward location of the mainframe, in order to align for fastener placement
  4. The rear section, which can be comprised of the rear bolster and the rear impact guard, is secured to the rear portion of the main beam, behind the suspension
  5. The axle alignment procedure is then performed
  6. Air and electrical system connections are completed from section to section
  7. A final inspection, including light check, air brake timing tests and roadworthiness inspection is performed

Product useFootnote 11

[29] Container chassis are typically used in the transportation of intermodal cargo containers and are skeletal rectangular framed trailers.

Classification of imports

[30] The allegedly dumped goods are normally imported under the following tariff classification number: 8716.39.30.90.

[31] Subject goods may also be imported under the following tariff classification numbers:

  • 8716.39.30.20
  • 8716.39.90.90
  • 8716.90.30.00
  • 8716.90.99.10
  • 8716.90.99.90

[32] The listing of tariff classification numbers is for convenience of reference only. The tariff classification numbers include non‑subject goods. Also, subject goods may fall under tariff classification numbers that are not listed. Refer to the product definition for authoritative details regarding the subject goods.

Like goods and class of goods

[33] Subsection 2(1) of SIMA defines “like goods” in relation to any other goods as goods that are identical in all respects to the other goods, or in the absence of any identical goods, goods the uses and other characteristics of which closely resemble those of the other goods.

[34] In considering the issue of like goods, the CITT typically looks at a number of factors, including the physical characteristics of the goods (such as composition and appearance) their market characteristics (such as substitutability, pricing, distribution channels and end uses), and whether the domestic goods fulfill the same customer needs as the subject goods.

[35] With respect to the definition of like goods, the complainant stated that like goods are those goods described in the product definition. That is, domestically produced container chassis, which meet the product definition. Therefore, it does not include domestically produced goods which are specifically excluded from the product definition. The complainant noted CITT decisions in Hot‑Rolled Carbon Steel Plate and Seamless Carbon or Alloy Steel Oil and Gas Well Casing, to support this position.Footnote 12 The complainant also submits that subject goods and like goods form a single class of goods.

[36] The complainant recognizes that the subject goods are marketed to different industries and applications, including the moving industry, firefighting, construction and utility equipment and the oil and gas industry. The complainant states that such differences in marketing, however, are not illustrative of different classes of goods. The specific models marketed for particular uses are not necessarily the only model which can effectively be used to complete the tasks the customer requires and are interchangeable with other models of chassis. According to the complainant, the fact remains that the function and role of the chassis are identical, namely the hauling of containers and goods.

[37] With respect to physical characteristics, the complainant stated that the subject goods and the like goods are all composed of the same materials, namely primary structures composed of welded steel beams, landing gear assemblies (the legs), running gear assemblies (the wheels) and the lighting and electrical assemblies (brake lights, etc.). The subject goods are substantially similar in appearance, often being effectively longer or shorter versions of each other.Footnote 13

[38] In terms of market characteristics, the complainant stated that the subject goods and like goods are all designed for use in the carriage of containers for road transport. In addition, chassis produced to the same dimensions or specifications are generally interchangeable. All chassis are sold through the same or similar channels of distribution, namely (1) end users (trucking companies, chassis rental companies, etc.) or (2) distributor networks. All chassis covered under the scope of this complaint are manufactured in common facilities, using similar production processes and the same production employees.Footnote 14

[39] After considering questions of use, physical characteristics and all other relevant factors, the CBSA is of the opinion that domestically produced container chassis, that are of the same description as subject goods, are like goods to the subject goods. Further, the CBSA is of the opinion that the subject goods and like goods constitute only one class of goods.

The Canadian industry

[40] The complaint includes data on domestic production and on domestic sales of container chassis for domestic consumption.Footnote 15 The CBSA also contacted all known potential producers of container chassis in Canada to gather further information concerning the domestic production of container chassis for domestic consumption.Footnote 16

[41] The CBSA received letters of support from Di‑MondFootnote 17 and Innovative Trailer Design.Footnote 18 Raja Trailer expressed a neutral opinion of the complaint.Footnote 19 Of the companies contacted by the CBSA, the three identified above were the only confirmed producers of container chassis in Canada.

[42] The complainant and the supporting producers account for the vast majority of the domestic production of like goods.

Standing

[43] Subsection 31(2) of SIMA requires that the following conditions for standing be met in order to initiate an investigation:

  1. the complaint is supported by domestic producers whose production represents more than 50% of the total production of like goods by those domestic producers who express either support for or opposition to the complaint and
  2. the production of the domestic producers who support the complaint represents 25% or more of the total production of like goods by the domestic industry

[44] As the complainant and the supporting producers represent the vast majority of the total production of like goods in Canada, the CBSA is satisfied that the standing requirements pursuant to subsection 31(2) of SIMA have been met.

Canadian market

[45] The complainant, using data from IHS MarkitFootnote 20, Statistics CanadaFootnote 21, and the Coalition of American Chassis Manufacturers,Footnote 22 estimated the total volume of imports of container chassis from China, the United States, and all other countries from January 1, 2017 to December 31, 2020. The United States is not a subject country but was listed separately from other non‑subject countries for purposes of comparison given its size in the Canadian market for container chassis.

[46] The tariff classification numbers for container chassis include both subject and non‑subject goods. As such, the complainant made a number of adjustments in an effort to remove non‑subject goods.Footnote 23

[47] The CBSA conducted its own analysis of imports of container chassis based on CBSA’s import data, customs import entry documentation and commercial intelligence provided by the complainant. In the CBSA’s review of commercial entry information for container chassis entering Canada, adjustments were made to the FIRM data to correct any errors respecting the quantity and value for duty as necessary. The CBSA notes there are discrepancies in the volumes estimated by the complainant and the CBSA. The adjustments made by the CBSA were made based import data not available to the complainant such as import entry documentation.

[48] The CBSA’s estimate of the apparent Canadian market for like goods, using the CBSA’s estimates of imports and the complainant’s and supporting producers’ information concerning domestic production for domestic consumption, is as follows:Footnote 24

Table 1
CBSA’s estimate of Canadian market
(expressed as % of the volume (units))
  2017 2018 2019 2020
Sales from Canadian producers 73% 72% 57% 62%
Imports from China 18% 18% 39% 30%
Imports from United States 5% 8% 1% 1%
Imports from all other countries 5% 3% 4% 6%
Total apparent Canadian market 100% 100% 100% 100%
Totals may not equal 100% due to rounding

[49] The CBSA will continue to gather and analyze information on the volume of imports during the dumping period of investigation (POI) of May 1, 2020 to April 30, 2021, and the subsidy POI of January 1, 2020 to April 30, 2021, as part of the preliminary phase of the dumping and subsidizing investigations and will refine these estimates.

Evidence of dumping

[50] The complainant alleged that the subject goods from China have been injuriously dumped into Canada. Dumping occurs when the normal value of the goods exceeds the export price to importers in Canada.

[51] Normal values are generally based on the domestic selling price of like goods in the country of export where competitive market conditions exist or as the aggregate of the cost of production of the goods, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits.

[52] The complainant made the allegation that the semi‑trailer industry in China may not be operating under competitive market conditions and as such, the domestic market for container chassis may not be reliable for determining normal values. Accordingly, the complainant submitted that normal values should be determined under section 20 of SIMA.

[53] The export price of goods sold to importers in Canada is generally the lesser of the exporter’s selling price and the importer’s purchase price, less all costs, charges and expenses resulting from the exportation of the goods.

[54] Estimates of normal values and export prices by both the complainant and the CBSA are discussed below.

Normal values

Complainant’s estimates

Section 15

[55] The complainant stated that sufficient information was not available to estimate normal values pursuant to section 15 of SIMA. As a result, the complainant was unable to estimate normal values on the basis of section 15 of SIMA.Footnote 25

Section 19(b)

[56] Consequently, the complainant estimated normal values using a constructed cost approach based on the methodology in paragraph 19(b) of SIMA. The calculation was based on the aggregate of estimates of the cost of production of the subject goods, a reasonable amount for administrative selling and all other costs and a reasonable amount for profits.

[57] The complainant estimated normal values based on their own costs of production adjusted to reflect conditions in China as well as publicly available information on costs and profits in China.

[58] As information from Chinese producers on their costs of production of subject goods was not available to the complainant, the complainant estimated the cost of production of the subject goods from China, based on five benchmark models produced by the complainant, using:

  1. The complainant’s direct material costs for the production of container chassisFootnote 26
  2. The complainant’s direct labour costs for the production of container chassis, adjusted downward based on a ratio of comparable Canadian and Chinese wage rates in 2015, as reported in the Wall Street Journal. The complainant stated that a similar labour rate was used for the purposes of the initiation of a dumping investigation on Corrosion Resistant Steel from China and Decorative and Non‑Structural PlywoodFootnote 27
  3. The complainant’s factory overhead costs for the production of container chassis, adjusting the portion for indirect labour costs in the same manner as direct labour costsFootnote 28
  4. To estimate a reasonable amount for administrative, selling, and other costs and a reasonable amount for profits for the subject goods from China, the complainant relied on the publicly available financial results for 2019 for CIMC vehicles, a known producer of container chassis in China. Using this information, the complainant estimated an amount of 9.5%Footnote 29 of cost of goods sold as a reasonable amount for administrative selling and other costs and 7.1% of cost of goods sold as a reasonable amount for profitsFootnote 30
Section 20

[59] The complainant submitted that domestic selling prices of container chassis in China are substantially influenced by government policies and should not be used in the calculation of normal values since the prices are not reflective of competitive market conditions. As a result, the complainant also estimated normal values for exporters in China using the methodology of section 20 based on surrogate country information.

[60] The complainant submits that the United States would be an appropriate surrogate country. To support this assertion, the complainant noted that the United States and China are the largest producers of container chassis in the world and that both countries have significant domestic demand for container chassis given their large populations and extensive road networks.Footnote 31 The complainant further submits that Mexico would be the most appropriate alternative surrogate.Footnote 32

[61] The section 20 surrogate normal values estimated by the complainant for the United States are calculated in the same manner as the China section 19 normal values discussed above with adjustments to reflect labour rates in the United States. The amount for profits and the amount for selling, general and administrative expenses (SG&A) were estimated based on a the publicly available financial information of Wabash, a producer of semi‑trailers in the United States.Footnote 33

[62] The complainant’s estimated normal value based on the methodology in subparagraph 20(1)(c)(ii) of SIMA was constructed as follows:Footnote 34

  1. Material costs were estimated using the complainant’s direct material costs for the production of container chassis
  2. The complainant’s direct labour costs for the production of container chassis, adjusted downward based on a ratio of comparable Canadian and United States wage rates in 2015, as reported in the Wall Street Journal. The complainant stated that a similar labour rate was used for the purposes of the initiation of a dumping investigation on Corrosion Resistant Steel from China and Decorative and Non‑Structural PlywoodFootnote 35
  3. Factory overhead costs were estimated using the complainant’s factory overhead costs for the production of container chassis, adjusting the portion for indirect labour costs in the same manner as direct labour costs
  4. To estimate a reasonable amount for administrative, selling, and other costs and a reasonable amount for profits for the subject goods from United States, the complainant relied on the publicly available financial results for 2019 for Wabash National (Wabash), the largest known producer of semi‑trailers in the United States. Using this information, the complainant estimated an amount of 8.6%Footnote 36 of cost of goods sold as a reasonable amount for administrative selling and other costs and 14.0% of cost of goods sold as a reasonable amount for profits.Footnote 37 According to the complainant, there was no publicly available financial information for producers of container chassis in the United States

[63] The complainant submitted that Mexico would be the most appropriate alternative surrogate. The complainant submits that Mexico is the third largest exporter of subject goods to Canada behind China and the United States and has identified known producers of container chassis in Mexico. As such, the complaint also included estimated surrogate normal values for Mexico. The section 20 surrogate normal values estimated by the complainant for Mexico are calculated in the same manner as the China section 19 normal values and United States section 20 normal values discussed above, with adjustments to reflect labour rates in Mexico and SG&A and profit information from the publicly available financial statements of a container chassis producer in Mexico.

[64] As discussed above, if there is sufficient reason to believe that the conditions described in section 20 of SIMA exist in the sector under investigation, normal values will be determined pursuant to section 20 of SIMA.

CBSA's estimates

[65] In the absence of pricing information specific to container chassis in China, the CBSA was unable to estimate normal values following the methodology described in section 15 of SIMA.

[66] As detailed in the “Section 20 Allegations” section of this Statement of Reasons, the CBSA is of the opinion that there is sufficient evidence to support the initiation of a section 20 inquiry. The CBSA will endeavor to gather additional information from exporters, the GOC, and other relevant sources in order to enable the CBSA to form an opinion as to whether the conditions of section 20 exist in the domestic market for container chassis in China.

[67] While the CBSA acknowledges that there is evidence that the conditions of section 20 exist in the semi‑trailer industry in China, the CBSA finds the methodology of section 19 to be a conservative and reasonable basis for estimating normal values at this stage.

[68] Accordingly, for the purposes of the initiation of the investigation, the CBSA estimated normal values using a constructed cost approach based on the methodology in paragraph 19(b) of SIMA, calculated based on the aggregate of an estimate of the cost of production of the subject goods, a reasonable amount for administrative selling and other costs and a reasonable amount for profits

[69] The CBSA found the estimated cost of production of container chassis in China as provided by the complainant to be reasonable and representative. The CBSA acknowledges that the normal values estimated by the complaint may not match the exact models of container chassis sold to Canada from China but finds the complainant has provided sufficient information to demonstrate the comparability of the reference products and the subject container chassis exported from China. As such, the CBSA finds the reference products selected by the complainant, and the cost of production information, to be reasonable and representative.

[70] The CBSA used the same cost of production of the subject goods in China as estimated by the complainant. However, the CBSA estimated direct and indirect labour costs with more recent data available from 2019 on Chinese manufacturing labour costs. This resulted in a downward adjustment based on a ratio of comparable Chinese and Canadian labour costs.Footnote 38

[71] The CBSA estimated a reasonable amount for selling, administrative and all other costs based on the financial information provided in the complaint for CIMC Vehicles. Using this information, the CBSA estimated a reasonable amount for selling, administrative and all other costs equal to 9.5% of cost of production.

[72] The CBSA estimated a reasonable amount for profits in the same manner as detailed above for selling, administrative and all other costs, based on the profits made by CIMC Vehicles and reported in their publicly available 2019 financial statements. Using this information, the CBSA estimated a reasonable amount for profits equal to 7.1% of cost of production.

Export price

[73] The export price of goods sold to an importer in Canada is generally determined in accordance with section 24 of SIMA as being an amount equal to the lesser of the exporter’s sale price for the goods and the price at which the importer has purchased or agreed to purchase the goods adjusted by deducting all costs, charges, expenses, and duties and taxes resulting from the exportation of the goods.

[74] The complainant estimated export prices of subject container chassis based on commercial intelligence from Canadian importers, or potential importers, of subject goods.Footnote 39

[75] In order to confirm export prices and determine the volume and value of imports of subject goods into Canada from the subject countries, the CBSA relied on information available through the facility for information retrieval management (FIRM), ACROSS and imports of the goods classified under the relevant tariff classification. Specifically, the CBSA reviewed import entry documentation for every known importation of subject goods during the period of review, January 1, 2020 to December 31, 2020. The CBSA used information from commercial invoices for each individual transaction to estimate export prices.

[76] The CBSA used import entry documents to match actual export prices with the normal values, as estimated above, for the reference products. The CBSA identified actual export prices for four of the five models for which normal values were estimated. The CBSA was able to match a normal values with a corresponding export price for approximately 55% of the container chassis imported between January 1, 2020 and December 31, 2020.Footnote 40

Estimated margins of dumping

[77] The CBSA estimated the margin of dumping for China by comparing the estimated normal values with the estimated export prices. Based on this analysis, it is estimated that container chassis imported into Canada from China were dumped by 39.0%, expressed as a percentage of export price.

Section 20 allegations

[78] Section 20 is a provision of SIMA that may be applied to determine the normal value of goods in a dumping investigation where certain conditions prevail in the domestic market of the exporting country. In the case of a prescribed country under paragraph 20(1)(a) of SIMA, it is applied where, in the opinion of the CBSA, the government of that country substantially determines domestic prices and there is sufficient reason to believe that the domestic prices are not substantially the same as they would be in a competitive market.Footnote 41

[79] The provisions of section 20 are applied on a sector basis rather than on the country as a whole. The sector reviewed will normally only include the industry producing and exporting the goods under investigation.

[80] The CBSA initiates dumping investigations on the presumption that section 20 is not applicable to the sector under investigation unless there is information that suggests otherwise.

[81] A section 20 inquiry refers to the process whereby the CBSA collects information from various sources in order to form an opinion as to whether the conditions described under subsection 20(1) of SIMA exist with respect to the sector under investigation. Before initiating an inquiry under section 20, the CBSA must first analyze the information submitted in the complaint and the evidence it has gathered independently to determine if it is sufficient to warrant the initiation of an inquiry.

[82] The complainant alleged that the conditions described in section 20 prevail in the semi‑trailer industry sector in China, which includes container chassis. That is, the complainant alleged that this industry sector in China does not operate under competitive market conditions and consequently, prices of container chassis established in the Chinese domestic market are not reliable for determining normal values.Footnote 82

[83] The complainant provided a variety of evidence supporting the claim that the GOC substantially determines prices of container chassis in China. The complainant cited specific policies implemented by the GOC, such as the China’s 13th Five‑Year Plan and 13th Five‑Year Comprehensive Transportation Service Development Plan along with two initiates: the Belt and Road initiative and Made‑in‑china 2025 initiative. The complainant also provided evidence of significant state‑ownership and subsidization in the semi‑trailer sector, which includes container chassis, and in the upstream steel industry, which supplies a significant portion of materials to produce semi‑trailers. The complainant noted the GOC offers preferential tax treatment to the purchase of chassis in China.Footnote 43

[84] The CBSA reviewed the information submitted in the complaint, and conducted research regarding the GOC’s macro economic policies and measures in relation to the semi‑trailer sector. The information currently available to the CBSA indicates that the GOC has implemented a number of industrial policies, ownership measures, subsidy and tax programs which could influence the semi‑trailer industry sector and the steel industry supplying inputs to semi‑trailer enterprises. In previous section 20 inquiries, the GOC’s industrial plans have been found to strongly influence the decisions of steel enterprises in China.

[85] With respect to the semi‑trailer industry sector, which includes container chassis, the CBSA has information which demonstrates that the prices of container chassis may be significantly affected by the GOC’s policies and that prices of container chassis in China may not be substantially the same as they would be if they were determined in a competitive market.

[86] In summary, the CBSA believes that there is sufficient evidence to support an inquiry into the allegation that measures taken by the GOC substantially influence prices in the semi‑trailer industry sector in China, which includes container chassis, and that the prices are substantially different than they would be in a competitive market.

[87] Consequently, on June 10, 2021, the CBSA included in its investigation, a section 20 inquiry in order to determine whether the conditions set forth in paragraph 20(1)(a) of SIMA prevail in the semi‑trailer industry sector in China, which includes container chassis.

[88] As part of this section 20 inquiry, the CBSA sent section 20 RFIs to all potential producers and exporters of container chassis in China, as well as to the GOC, requesting detailed information related to the semi‑trailer industry sector in China, which includes container chassis.

[89] For the purposes of obtaining information necessary to calculate normal values pursuant to subparagraph 20(1)(c) of SIMA, the CBSA will request information from producers in surrogate countries. As such, the CBSA has selected the United States, Mexico and Turkey as potential surrogate countries and will send questionnaires to known producers of container chassis in these countries.

[90] The CBSA selected the United States and Mexico as surrogate countries as both countries have significant domestic production of container chassis and represent the highest volumes of container chassis exported to Canada. For the purposes of selecting a third country, the CBSA examined countries with economic or geographic characteristics comparable to China. Of these countries, the CBSA found that Turkey was the most appropriate surrogate given the reasonably comparable economic conditions and the existence of a developed container chassis industry.

[91] The CBSA also requested information from Canadian importers of container chassis regarding their Canadian sales of container chassis from other countries.

[92] In the event that the CBSA forms an opinion that domestic prices of container chassis in China are substantially determined by their government, and there is sufficient reason to believe that the domestic prices are not substantially the same as they would be if they were determined in a competitive market, the normal values of the goods under investigation will be determined, pursuant to paragraph 20(1)(c) of SIMA, where such information is available, on the basis of the domestic selling price or the aggregate of the cost of production, a reasonable amount for SG&A, and a reasonable amount for profits of the like goods sold by producers in any country designated by the CBSA and adjusted for price comparability; or, pursuant to paragraph 20(1)(d) of SIMA, where such information is available, on the basis of the selling price in Canada of like goods imported from any country designated by the CBSA and adjusted for price comparability.

Evidence of subsidizing

[93] In accordance with section 2 of SIMA, a subsidy exists where there is a financial contribution by a government of a country other than Canada that confers a benefit on persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of goods. A subsidy also exists in respect of any form of income or price support within the meaning of Article XVI of the General Agreement on Tariffs and Trade, 1994, being part of Annex 1A to the World Trade Organization (WTO) Agreement that confers a benefit.

[94] Pursuant to subsection 2(1.6) of SIMA, a financial contribution exists where:

  1. practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities
  2. 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
  3. the government provides goods or services, other than general governmental infrastructure, or purchases goods or
  4. the government permits or directs a non‑governmental body to do anything referred to in any of paragraphs (a) to (c) above 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

[95] A state‑owned enterprise (SOE) may be considered to constitute “government” for the purposes of subsection 2(1.6) of SIMA if it possesses, exercises, or is vested with, governmental authority. Without limiting the generality of the foregoing, the CBSA may consider the following factors as indicative of whether the SOE meets this standard: 1) the SOE is granted or vested with authority by statute; 2) the SOE is performing a government function; 3) the SOE is meaningfully controlled by the government; or 4) some combination thereof.

[96] If a subsidy is found to exist, it may be subject to countervailing measures if it is specific. A subsidy is considered to be specific when it is limited, in law or in fact, to a particular enterprise or is a prohibited subsidy. An “enterprise” is defined under SIMA as also including a “group of enterprises, an industry and a group of industries”. Any subsidy which is contingent, in whole or in part, on export performance or on the use of goods that are produced or that originate in the country of export is considered to be a prohibited subsidy and is, therefore, specific according to subsection 2(7.2) of SIMA for the purposes of a subsidy investigation.

[97] In accordance with subsection 2(7.3) of SIMA, notwithstanding that a subsidy is not specific in law, a subsidy may also be considered specific in fact, having regard as to whether:

[98] For purposes of a subsidy investigation, the CBSA refers to a subsidy that has been found to be specific as an “actionable subsidy”, meaning that it is countervailable.

Subsidy programs in China

[99] In alleging that actionable subsidies were applicable to the subject goods imported from China, the complainant mainly relied on previous CBSA and the US Department of Commerce’s (USDOC) subsidy investigations findings. The complainant also relied on industry reports and government documents, WTO Trade Policy Reviews, and general news articles and publications.

[100] The complaint provided evidence of 27 different programs that producers of subject goods in China may have benefited from.

[101] The complainant listed a number of subsidy programs, with references to the provisions in SIMA, under which the subsidy is alleged to constitute a financial contribution and under which it would be considered to be specific and, therefore, actionable. The complainant has also claimed that each program is either used by or is available for use by producers and exporters of chassis in China. They also assert that since steel is a significant raw material input, that many subsidies available to input suppliers benefit chassis producers in China. The documents that formed the basis for these allegations were appended to the complaint.

[102] The complainant primarily referred to the CBSA’s investigations in regards to the subsidizing of Sucker Rods, Unitized Wall Modules, Photovoltaic Modules, OCTG, Seamless Casing, Pup Joints, Carbon Steel Welded Pipe, Stainless Steel Sinks, Cold‑Rolled Steel, and Large Diameter Line Pipe. Subsidy information was also referenced from the recently concluded Chassis and SubassembliesFootnote 44 investigation by USDOC.

[103] The CBSA reviewed the relevant public reports for the subsidy programs identified in the complaint. The CBSA also reviewed the descriptions of subsidy programs provided in reports for other investigations, including other programs found by the USDOC.

[104] As a result, based on the information available, the CBSA identified 27 potentially actionable subsidy programs that may have benefited Chinese producers/exporters of container chassis. Many of these are programs that the CBSA has already countervailed in respect of previous subsidy investigations concerning goods from China. These programs have been grouped into the following five categories:

  1. Preferential loans and loan guarantees
  2. Grants and grants equivalents
  3. Preferential tax programs
  4. Relief from duties and taxes
  5. Goods/services provided by the government at less than fair market value

[105] The CBSA’s analysis revealed that the alleged subsidy programs constitute potential financial contributions by the GOC that may have conferred benefits to producers/exporters of chassis. In addition, the programs were further examined and were considered to be potentially specific either in law or in fact within the meaning of subsections 2(7.2) and 2(7.3) of SIMA.

[106] The description of the identified programs to be investigated are found in the Appendix.

[107] If more information becomes available during the investigation process that indicates that some exporters/producers of subject goods may have benefited from any other programs during the POI that are not included in the Appendix, the CBSA will request complete information from the GOC and exporters/producers of subject goods to pursue the investigation of these programs.

CBSA's conclusion

[108] Sufficient evidence is available to support the allegations that container chassis originating in or exported from China have been subsidized. In investigating these programs, the CBSA has requested information from the GOC, exporters and producers to determine whether exporters/producers of subject goods received benefits under these programs and whether these programs, or any other programs, are actionable subsidies and, therefore, countervailable under SIMA.

Estimated amount of subsidy

[109] The complainant was unable to estimate the amounts of subsidy on a program basis for the subject goods imported from China. Instead, the complainant estimated the amount of subsidy as being equal to the difference between its estimated total cost of production and the export price for Chinese container chassis from January 1, 2020 to December 31, 2020.Footnote 45

[110] The CBSA estimated the amount of subsidy conferred to exporters of the subject goods from China by comparing the estimated full costs of the subject goods with their total estimated export prices, using the costing and export price methodologies explained in the evidence of dumping section.

[111] It is the CBSA’s understanding that subsidies have the effect of lowering the cost of production of goods which allows exporters to pass‑through the subsidy benefits in reducing the selling price of those goods to Canada. Therefore, the CBSA is satisfied that the exporter’s ability to sell subject goods to Canada at prices substantially below their estimated costs supports the complainant’s allegations that the imported goods are subsidized.

[112] The CBSA’s analysis of the information indicates that subject goods imported into Canada during the period of January 1, 2020 to December 31, 2020 were subsidized and that the estimated amount of subsidy is 33% of the export price.

Evidence of injury

[113] The complainant alleges that the subject goods have been dumped and subsidized and that such dumping and subsidizing have caused and are threatening to cause injury to the domestic industry producing like goods in Canada.

[114] SIMA refers to material injury caused to the domestic producers of like goods in Canada. The CBSA has concluded that container chassis produced by the domestic industry are like goods to the subject goods from China.

[115] In support of their injury allegations, the complainant provided evidence of: an increase in the volume of dumped and subsidized imports, lost market share, lost sales, price undercutting, price suppression, and reduced profitability and employment.

Increase of subject imports and loss of market share

[116] The complainant states that the volume of subject goods from China has increased significantly since 2017. The complainant provided a table detailing the volume of the container chassis market in Canada. Based on the provided data, the complainant notes that imports from China increased from 2017 to 2019. In 2020, the Canadian market for container chassis decreased sharply due to the impact of the COVID‑19 pandemic.Footnote 46

[117] The complainant alleges the subject imports’ market share grew from 2017 to 2019 and remained at an increased level in 2020, despite the contraction of the Canadian market. At the same time, the domestic market share shrunk each period from 2017 to 2019, and remained reduced in 2020.Footnote 47

[118] The CBSA’s analysis of import data supports the allegation of an increase in the import volume of the allegedly dumped goods. Based on the CBSA’s estimate of imports, from 2017 to 2019, there was a surge in the volume of imported goods from China. At the same time, imports from other countries dropped significantly. The CBSA notes that the volume of imports of subject goods decreased in 2020 but that this was consistent with an overall contraction in the Canadian market for container chassis associated with the COVID‑19 pandemic.

[119] The CBSA’s analysis of market share also found that during the period of 2017‑2019 imports of subject goods from China gained significant market share. At the same time, the market share of domestic production decreased. Imports from China maintained an increased market share in 2020 as the market for container chassis in Canada shrunk dramatically. Based on this information, the CBSA finds that the complainant’s allegation of lost market share is reasonable and well supported.

Lost salesFootnote 48

[120] The complainant provided evidence of lost sales on an offer specific basis. Specifically, the complaint includes examples of numerous sales that were lost either entirely or in part by the complainant to exporters of the allegedly dumped goods. The evidence includes detailed commercial intelligence along with supporting documentation.

[121] Based on the CBSA’s analysis of information detailing individual lost sales contained in the complaint as well as the CBSA’s estimate of imports and market share, the CBSA finds the complainant’s claim of lost sales to be reasonable and well supported. As such, the CBSA is of the opinion that this injury factor is sufficiently supported and linked to the allegedly dumped and subsidized goods.

Price suppression and price undercuttingFootnote 49

[122] The complainant argues that the allegedly dumped and subsidized goods have captured market share by undercutting the prices of the Canadian producers. Based on the import data estimates provided by the complainant, it is evident that the prices for container chassis from China have been priced significantly lower than imports from other countries.

[123] In addition, the complainant provided specific examples of sales offers which showed that subject good prices for these offers were significantly lower than the complainant’s prices.

[124] As a result of these significant price discrepancies, the complainant states that it has been forced to reduce its pricing or lose sales. In support of this, the complainant provided evidence of several instances where they were forced to discount pricing in order to compete with imports of allegedly dumped and subsidized goods.

[125] The CBSA conducted its own analysis into the unit price disparity using import data. The average prices calculated by the CBSA reveal a trend similar to that described by the complainant. Specifically, from 2017 until 2019, the average price of subject goods has been significantly less than the complainant’s average unit selling price.

[126] The CBSA also examined the complainant’s sales and costing data for the period of 2017 to 2020. The CBSA notes that between 2017 and 2020 the complainant was not able to increase average unit selling prices at a rate sufficient to keep up with rising costs of production.

[127] Based on the above and the CBSA’s analysis of the information contained in the complaint, the CBSA finds the claim of price suppression and price undercutting to be supported and sufficiently linked to the allegedly dumped and subsidized goods.

Reduced profitabilityFootnote 50

[128] The complainant alleges that the injurious impact of the dumped and subsidized goods is demonstrated by reduced profits. To support this allegation, the complainant has provided financial performance information concerning its sales of container chassis for the period of 2017 to 2020.

[129] Detailed information regarding the revenue and profitability cannot be divulged for confidentiality reasons. However, the CBSA has reviewed the information provided in the complaint and found that there is a clear indication of an impact on financial performance from 2017 to 2020 which supports the link between the allegedly dumped and subsidized goods and financial injury.

Reduced employmentFootnote 51

[130] The complainant submits that they have been forced to layoff employees as a result of the reduced production volumes caused by the presence of the unfairly dumped and subsidized goods.

[131] In support of this allegation, the complainant provided information concerning employment levels and layoffs. Prior to the major market and production impacts of the COVID‑19 pandemic, the complainant asserts that they had steadily reduced employment from May 2018 to October 2019. This number dropped further following the beginning of the COVID‑19 pandemic.

[132] Based on the CBSA’s analysis of the information contained in the complaint the CBSA finds that the complainant did layoff employees and reduce employment during the period of 2017 to 2020. The CBSA also finds that the complainant has sufficiently linked this reduction in employment to the allegedly dumped and subsidized goods.

CBSA's conclusion—injury

[133] Overall, based on the evidence provided in the complaint, and supplementary data available to the CBSA through its own research and customs documentation, the CBSA finds that the evidence discloses a reasonable indication that the dumping and subsidizing of the subject goods from China have caused injury to the container chassis industry in Canada in the form of an increase in the volume of dumped and subsidized imports, lost market share, lost sales, price undercutting, price suppression, and reduced profitability and reduced employment.

Threat of injury

[134] The complainant states that the import of the allegedly dumped and subsidized goods threaten to cause further material injury to the Canadian domestic industry.

[135] The complainant provided the following information to support the allegation that imports of subject goods threaten to cause further injury to the Canadian industry.

Increase in the volume of imports of subject goodsFootnote 52

[136] As described in the Injury section, the complainant has noted an increase in the volume of allegedly dumped and subsidized container chassis imported into Canada from China. The complaint also provided projected import volumes of subject goods for 2021, 2022 and 2023. These projections were based on a linear forecast using 2017 to 2019 trend data, which demonstrate a continued increase in the volume of imports of subject goods. The complainant alleges that this indicates a likelihood of substantially increased imports into Canada, if a finding is not put in place.

[137] The CBSA’s analysis of import data supports the allegation of an increased volume of imports of subject goods. The CBSA further finds that it is reasonably likely that the volume of subject goods from China will continue to increase, and is likely to further reduce the market share of domestic producers in Canada.

Production capacity of Chinese producersFootnote 53

[138] The complaint includes information concerning the potential production capacity of CIMC, the largest known Chinese producer of container chassis. The complainant acknowledges that there is limited detailed public information available concerning CIMC’s specific container chassis production capacity but argues that the information that is available suggests that CIMC could easily supply the entire Canadian market many times over. The complainant also submits that container chassis are primarily steel products and that the steel industry in China has massive excess capacity.

[139] While there is limited publicly available information concerning the production capacity of container chassis in China, the CBSA does find that the information that is available suggests there is significant container chassis production capacity in China.

Diversion of subject goods to CanadaFootnote 54

[140] The complainant submitted that the United States first imposed a 10% tariff on Chinese container chassis imports on September 24, 2018 as part of the Section 301 Measure. These tariffs were then raised to 25% on May 10, 2019. Further, the complainant noted that the largest component of the subject goods is the steel frame, which may be subject to duties under the Section 232 Measure implemented on June 1, 2018.

[141] On May 17, 2021, the International Trade Administration of the USDOC published its determination that certain chassis and subassemblies from China had been dumped and subsidized. The complainant submits that this additional trade remedy will increase the risk of diversion of subject goods to Canada.Footnote 55

[142] The CBSA agrees that the recent imposition of US section 232 & 301 tariffs on container chassis from China may have contributed to subject goods being diverted from the US into Canada. Further, the CBSA finds that the newly imposed trade remedies could lead to increased volumes of Chinese exports of subject goods into Canada in the future and thereby threaten to cause further injury to the Canadian industry.

Impact on current/proposed investmentsFootnote 56

[143] The complainant has provided evidence that the continued presence of allegedly dumped and subsidized goods have impacted, and will continue to impact, their current and proposed investments.

[144] Detailed information regarding current and proposed investments cannot be divulged for confidentiality reasons. However, the CBSA has reviewed the information provided by the complainant and finds that there is a reasonable link between the presence of the allegedly dumped and subsidized goods and the complainant’s investments.

CBSA's conclusion—threat of injury

[145] The complaint contains evidence that discloses a reasonable indication that there is a threat of injury to the container chassis industry in Canada. The information provided by the complainant indicates that the rate of increase in the volume imports of subject goods, the production capacity of Chinese producers, the potential for diversion, and the impact on current and proposed investments are collectively posing a threat to the Canadian industry.

Causal link—dumping/subsidizing and injury/threat of injury

[146] The CBSA finds that the complainant has sufficiently linked the injury they suffered in terms of lost market share, lost sales, price undercutting, price suppression, and reduced profitability and employment to the alleged dumping and subsidizing of the subject goods imported into Canada and the price advantage this provides.

[147] Evidence has been provided to establish this link via import data, specific examples of lost sales and financial information, as provided in the complaint and respective attachments, as well as in the injury allegations submitted.

[148] The complainant submitted that the continued dumping and subsidizing of goods from China will cause further injury to the Canadian domestic industry in the future. As discussed above, the CBSA is of the opinion that this allegation of threat of injury is reasonably supported.

[149] In summary, the CBSA is of the opinion that the information provided in the complaint has disclosed a reasonable indication that the alleged dumping and subsidizing have caused injury and are threatening to cause injury to the Canadian domestic industry.

Conclusion

[150] Based on information provided in the complaint, other available information, and the CBSA’s import documentation, the CBSA is of the opinion that there is evidence that container chassis originating in or exported from China have been dumped and subsidized. Further, there is evidence that discloses a reasonable indication that such dumping and subsidizing have caused and are threatening to cause injury to the Canadian industry. As a result, pursuant to subsection 31(1) of SIMA, dumping and subsidy investigations were initiated on June 10, 2021.

Scope of the investigations

[151] The CBSA is conducting investigations to determine whether the subject goods have been dumped and/or subsidized.

[152] The CBSA has requested information from all potential exporters and importers to determine whether or not subject goods imported into Canada during the POI of May 1, 2020 to April 30, 2021, were dumped. The information requested will be used to determine the normal values, export prices and margins of dumping, if any. The CBSA also requested information from the GOC with respect to the possibility that the conditions of section 20 of SIMA exist in the semi‑trailer industry in China.

[153] The CBSA has also requested information from the GOC and all potential producers/exporters to determine whether or not subject goods imported into Canada during the POI of January 1, 2020 to April 30, 2021, were subsidized. The information requested will be used to determine the amounts of subsidy, if any.

[154] All parties have been clearly advised of the CBSA’s information requirements and the time frames for providing their responses.

Future action

[155] The CITT will conduct a preliminary inquiry to determine whether the evidence discloses a reasonable indication that the alleged dumping and subsidizing of the goods has caused or is threatening to cause injury to the Canadian industry. The CITT must make its decision on or before the 60th day after the date of the initiation of the investigations. If the CITT concludes that the evidence does not disclose a reasonable indication of injury to the Canadian industry, the investigations will be terminated.

[156] If the CITT finds that the evidence discloses a reasonable indication of injury to the Canadian industry and the CBSA’s preliminary investigations reveal that the goods have been dumped and/or subsidized, the CBSA will make preliminary determinations of dumping and/or subsidizing within 90 days after the date of the initiation of the investigations, by September 8, 2021. Where circumstances warrant, this period may be extended to 135 days from the date of the initiation of the investigations.

[157] Under section 35 of SIMA, if, at any time before making a preliminary determination, the CBSA is satisfied that the volume of goods of a country is negligible, the investigation will be terminated with respect to goods of that country.

[158] Imports of subject goods released by the CBSA on and after the date of preliminary determinations of dumping and/or subsidizing, other than goods of the same description as goods in respect of which a determination was made that the margin of dumping of the goods is insignificant, may be subject to provisional duty in an amount not greater than the estimated margin of dumping and the estimated amount of subsidy on the imported goods.

[159] Should the CBSA make preliminary determinations of dumping and/or subsidizing, the investigations will be continued for the purpose of making final decisions within 90 days after the date of the preliminary determinations.

[160] After the preliminary determinations, if, in respect of goods of a particular exporter, the CBSA’s investigations reveal that imports of the subject goods from that exporter have not been dumped or subsidized, or that the margin of dumping or amount of subsidy is insignificant, the investigation(s) will be terminated in respect of those goods.

[161] If final determinations of dumping and/or subsidizing are made, the CITT will continue its inquiry and hold public hearings into the question of material injury to the Canadian industry. The CITT is required to make a finding with respect to the goods to which the final determinations of dumping and/or subsidizing applies, not later than 120 days after the CBSA’s preliminary determinations.

[162] In the event of an injury finding by the CITT, imports of subject goods released by the CBSA after that date will be subject to anti‑dumping duty equal to the applicable margin of dumping on the imported goods and countervailing duty equal to the amount of subsidy on the imported goods. Should both anti‑dumping and countervailing duties be applicable to subject goods, the amount of any anti‑dumping duty may be reduced by the amount that is attributable to an export subsidy.

Retroactive duty on massive importations

[163] When the CITT conducts an inquiry concerning injury to the Canadian industry, it may consider if dumped and/or subsidized goods that were imported close to or after the initiation of an investigation constitute massive importations over a relatively short period of time and have caused injury to the Canadian industry.

[164] Should the CITT issue such a finding, anti‑dumping and countervailing duties may be imposed retroactively on subject goods imported into Canada and released by the CBSA during the period of 90 days preceding the day of the CBSA making preliminary determinations of dumping and/or subsidizing.

[165] In respect of importations of subsidized goods that have caused injury, however, this provision is only applicable where the CBSA has determined that the whole or any part of the subsidy on the goods is a prohibited subsidy, as explained in the previous “Evidence of Subsidizing” section. In such a case, the amount of countervailing duty applied on a retroactive basis will be equal to the amount of subsidy on the goods that is a prohibited subsidy.

Undertakings

[166] After a preliminary determination of dumping by the CBSA, other than a preliminary determination in which a determination was made that the margin of dumping of the goods is insignificant, an exporter may submit a written undertaking to revise selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated.

[167] Similarly, after the CBSA has rendered a preliminary determination of subsidizing, a foreign government may submit a written undertaking to eliminate the subsidy on the goods exported or to eliminate the injurious effect of the subsidy, by limiting the amount of the subsidy or the quantity of goods exported to Canada. Alternatively, exporters with the written consent of their government may undertake to revise their selling prices so that the amount of the subsidy or the injurious effect of the subsidy is eliminated.

[168] An acceptable undertaking must account for all or substantially all of the exports to Canada of the dumped goods. Interested parties may provide comments regarding the acceptability of undertakings within nine days of the receipt of an undertaking by the CBSA. The CBSA will maintain a list of parties who wish to be notified should an undertaking proposal be received. Those who are interested in being notified should provide their name, telephone and fax numbers, mailing address and e‑mail address to one of the officers identified in the “Information” section of this document.

[169] If undertakings were to be accepted, the investigation and the collection of provisional duties would be suspended. Notwithstanding the acceptance of an undertaking, an exporter may request that the CBSA’s investigation be completed and that the CITT complete its injury inquiry.

Publication

[170] Notice of the initiation of these investigations are being published in the Canada Gazette pursuant to subparagraph 34(1)(a)(ii) of SIMA.

Information

[171] Interested parties are invited to file written submissions presenting facts, arguments, and evidence that they feel are relevant to the alleged dumping and subsidizing. Written submissions should be forwarded to the attention of the SIMA Registry and Disclosure Unit.

[172] To be given consideration in the investigations, all information should be received by the CBSA by October 15, 2021.

[173] Any information submitted to the CBSA by interested parties concerning these investigations is considered to be public information unless clearly marked “confidential”. Where the submission by an interested party is confidential, a non‑confidential version of the submission must be provided at the same time. This non‑confidential version will be made available to other interested parties upon request.

[174] Confidential information submitted to the CBSA will be disclosed on written request to independent counsel for parties to these proceedings, subject to conditions to protect the confidentiality of the information. Confidential information may also be released to the CITT, any court in Canada, or a WTO or Canada‑United States‑Mexico Agreement (CUSMA) dispute settlement panel. Additional information respecting the CBSA’s policy on the disclosure of information under SIMA may be obtained by contacting one of the officers identified below or by visiting the CBSA’s website.

[175] The schedule of the investigations and a complete listing of all exhibits and information are available. The exhibit listing will be updated as new exhibits and information are made available.

[176] This Statement of Reasons is available through the CBSA’s website at the address below. For further information, please contact the officers identified as follows:

SIMA Registry and Disclosure Unit
Trade and Anti-dumping Programs Directorate
Canada Border Services Agency
11-100 Metcalfe St
Ottawa ON  K1A 0L8

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

Doug Band
Director General
Trade and Anti‑dumping Programs Directorate

Appendix—description of identified programs

Category 1: Preferential Loans and Loan Guarantees

Program 1: Loans from State‑Owned Banks at Preferential Rates

This program relates to government loans at a preferential rate of interest. The benefit provided in this case is a lower rate of interest than would otherwise be available if the enterprises had to obtain a non‑guaranteed commercial loan (i.e. the benchmark non‑guaranteed commercial loan). Financial institutions may be considered to constitute “government” if they possess, exercise or are vested with government authority, which may be indicated by the following factors:

The 2019 annual report for Chinese chassis producer CIMC, explicitly states that “for the policy‑based preferential interest rate loans received by the Group, the entry value of the borrowings shall be the borrowing amount actually received, and the relevant borrowing costs shall be calculated based on the principal of the borrowings and the policy preferential interest rate. The financial interest subsidy directly received by the Group reduces the relevant borrowing costs.”

The CBSA has previously countervailed this program in Fabricated Industrial Steel Components (FISC), Carbon and Alloy Steel Line Pipe (Line Pipe), Pup Joints, Oil Country Tubular Goods (OCTG), and Seamless Casing.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 2: Loan Guarantee through the Government of China/SOE Banks/Public Bodies

Assurance provided by the GOC, a SOE bank or public body (the guarantor) to assume the debt obligation of a borrower if that borrower defaults. A guarantee can be limited or unlimited, making the guarantor liable for only a portion or all of the debt.

The CBSA has previously countervailed this program in Large Diameter Carbon and Alloy Steel Line Pipe (Large Diameter Line Pipe), FISC, and Line Pipe.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 3: Debt and Interest Forgiveness on Loans from State‑Owned Banks

To stimulate the economy and support the development of key industries, the state‑owned banks write off bad debts or interest owed by SOEs.

The CBSA has previously countervailed this program in Seamless Casing. In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as “Interest Payment Subsidies”.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 4: Preferential Export Financing and Export Credit Guarantee/Insurance

The China Export & Credit Insurance Corporation (Sinosure) is a state‑funded policy‑oriented insurance company that was established to promote China’s foreign trade and economic cooperation. The China Exim Bank and Sinosure each provide export credit guarantees which, according to information from the Bank, have “played a key role in supporting Chinese companies to go global” and promoted “the export of new and high‑tech products”.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as “Policy Loans to the Chassis Industry”.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e., amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not collected. The above confers a benefit to the exporter by way of reducing its financial costs upon obtaining loans from a financial institution, and the benefit is equal to the amount of the exemption/deduction. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 2: Grants and Grant Equivalents

Program 5: Insurance Grants

Local and Provincial Government Reimbursement Grants on Credit Insurance Fees.

The CBSA has previously countervailed this program in Galvanized Steel Wire, Certain Seamless Casing, OCTG, Pup Joints, Stainless Steel Sinks, Line Pipe, and Large Diameter Line Pipe.

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 6: Design, Research and Development Grants

A grant that provides financial aid for enterprises determined to have undertaken expenses in design or research and development.

The CBSA has previously countervailed this program in Sucker Rods, Copper Tube, Photovoltaic Modules and Laminates, OCTG, Unitized Wall Modules, Seamless Casing, Pup Joints, and Decorative and Other Non‑Structural Plywood (Plywood).

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 7: Export Development Performance Grants

Companies in China receive such grants provided by the GOC to assist in the development of export markets or to recognize export performance.

The CBSA has previously countervailed this program in Sucker Rods, OCTG, Unitized Wall Modules, Galvanized Steel Wire, Aluminum Extrusions, Carbon Steel Welded Pipe, Steel Grating and Plywood.

As per the SOR issued at the OCTG final determination, the program was established in the Circular of the Trial Measures of the Administration of International Market Development Funds for Small and Medium‑Sized Enterprises Cai Qi No. 467, 2000, which came into force on October 24, 2000. The program was established to support the development of small and medium‑sized enterprises, to encourage SMEs to join in the competition of international markets, to reduce the business risks of the enterprises, and to promote the development of the national economy. The granting authority is the Foreign Trade and Economic Department and the program is administered at the local levels.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they may have countervailed this program as “Export Seller’s Credit” and “Export Buyer’s Credit”.

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 8: Performance Award Grants

A grant that provides financial aid for enterprises with excellent performance.

The CBSA has previously countervailed this program in Seamless Casing, Aluminum Extrusions, OCTG, Pup Joints, Copper Tube, and Line Pipe.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 9: Reductions in Land Use and/or Rental Fees

This program provides for the reduction in land use fees and rental rates for a certain number of years. Examples of this program in action include: a document titled '[2003] No. 8 Preferential Supply of Land', in order to offset costs for industrial companies in the Ninghai Economic Development Zone; or similar initiatives in the Tianjin Binhai New Area and the Tianjin Economic and Technological Development Area.

The CBSA has previously countervailed this program in Stainless Steel Sinks, Unitized Wall Modules, Photovoltaic Modules and Laminates, Seamless Casing, OCTG, Pup Joints, Line Pipe, and Plywood.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as “Provision of Land Use Rights to SOEs for LTAR”.

The financial contribution by the government consists of government revenue that is otherwise due but is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 10: Grants for the Retirement of Capacity

The GOC’s 12th Five‑Year Plan for Energy Conservation and Emission Reduction calls for accelerating and eliminating “backward production capacity” in certain industrial sectors, including the elimination of 48 million metric tonnes of steel production. In 2013, the State Council issued the “Guiding Opinion on Resolving the Problem of Severe Excess Capacity,” which called for establishing special funds to accelerate the elimination of backwards capacity and to also support industries with excess production capacity.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 11: Grants for Relocating Production Facilities

As part of the GOC’s 12th Five‑Year Steel Development Plan, the GOC has been locating urban based steel producers to locations outside of their current city. The GOC’s 12th Five‑Year Plan for Energy Conservation and Emission Reduction calls for the relocation for “heavy polluting enterprises” and for measures to optimize the “regional spatial layout” of “key industries,” including the steel industry.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they may have countervailed this program as “Other Payments from the State Capital Operating Budget”.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 12: Grant ‑ Patent Assistance/Award

Based on the information available to the CBSA, this program was provided in several provinces, such as Guangdong, Shanghai and Jiangsu.

For example, the GOC document associated with this program for Guangdong province may include: “Administrative Measures of Patent Award of Guangdong Province”. In Guangdong province, this program was administered by the Intellectual Property Office of Guangdong, the Bureau of Personnel of Guangdong Province and municipal level authorities. The program was established to support improvement in technology innovation and to promote intellectual property.

In addition, the GOC document associated with this program for Shanghai may include: “The administrative measures regarding the financial support/subsidy for Patents by Shanghai”. In Jiangsu province, this program was administrated by Jiangsu Intellectual Property Office.

The CBSA has previously countervailed this program in Plywood.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 13. Environment Protection Grant

These are grants provided by the GOC for the purposes of improving environmental performance, for example, monitoring and cleaning pollutants, improving energy efficiency, upgrading facilities to be more environmentally efficient, and waste water treatment.

The CBSA has previously countervailed this program in Copper Tube.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 14. Subsidies Related to Employment, Training and Recruitment

Available information indicates that the GOC has introduced several grants and incentives designed to support job stabilization by assisting companies with unemployment insurance payments as well as supporting the recruitment, training and subsequent job security of their staff.

The CBSA has previously countervailed this program in Plywood. The program has also been found to be benefitting exporters during the preliminary phase of the currently ongoing Upholstered Domestic Seating investigation.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 15: Subsidies Related to Pandemic Support

Available information indicates that the GOC has introduced several grants and incentives designed to support job stabilization and weather economic hardships experienced by exporters during the COVID‑19 pandemic.

The program has been found to be benefitting exporters during the preliminary phase of the currently ongoing Upholstered Domestic Seating investigation.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 3: Preferential Tax Programs

Program 16. Corporate Income Tax Exemption and/or Reduction in Special Economic Zones (SEZs) and Other Designated Areas

This program was established under the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, which came into effect on July 1, 1991. The program was allegedly established to absorb investment in special economic zones (SEZs) and designated areas to take the lead in their economic development. The granting authority responsible for this program is allegedly the State Administration of Taxation and the program is administered by local tax authorities.

Under this program, it is alleged that an eligible enterprises may receive a reduced corporate income tax rate of 15%.

Under Article 57 of the Enterprise Income Tax Law in China and the “notification of the State Council on Providing Transitional Preferential Tax Treatments to High‑Tech Enterprises Newly Set Up in Special Economic Zones and in the Pudong New District of Shanghai,” the GOC exempts HNTEs from income taxes for the first two years after earning a profit from production, and pay only half of the standard tax rate for the next three years if located in a special economic zone (i.e., the Hainan, Shantou, Shenzhen, Xiamen, Zhuhai) or the Pudong New District of Shanghai. Certain container chassis producers are located in some of these special economic zones and, thus, are eligible for this subsidy.

The CBSA has previously countervailed this program in Aluminum Extrusions, Carbon Steel Welded Pipe, OCTG, Seamless Casing, and Line Pipe.

The financial contribution by the government consists of government revenue that is otherwise due but is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to either enterprises in certain geographic areas.

Program 17. Corporate Income Tax Reduction for New High Tech Enterprises

Under Article 28.2 of the Enterprise Income Tax Law in China, companies designated as high‑ or new‑technology enterprises are entitled to a reduced income tax rate of 10 percent instead of the normal national corporate tax rate of 25 percent. The granting authority responsible for this program is alleged to be the State Administration of Taxation and the program is administered by local tax authorities. In its notification of subsidy programs to the WTO, the GOC listed this program.

Available financial information for Chinese chassis producers shows that they have benefitted from this tax program. Specifically, CIMC Vehicles 2019 Annual Report reveals that it has received a “reduced preferential corporate income tax rate of 15%” for certain subsidiaries in China that are approved as “high and new technology enterprises”.

The CBSA has previously countervailed this program in FISC, Line Pipe, Seamless Casing, OCTG, Pup Joints, and Plywood.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as “Income Tax Deduction for High‑and New‑Technology Enterprises”.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to enterprises in certain industries.

Program 18. Municipal/Local Income or Property Tax Reductions

The CBSA has previously countervailed this program in Stainless Steel Sinks, Unitized Wall Modules, Photovoltaic Modules and Laminates, and Line Pipe under the title “Reduction, Exemption or Refund of Land Use Fees, Land Rental Rates, and Land Purchase/Transfer Prices.”

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 19. Preferential Tax Policies for Foreign‑Invested Enterprises (FIEs)

Despite the implementation of the new Enterprise Income Tax Law (EITL) in 2008, which officially superseded the old FIE Tax Law, FIEs have likely continued to benefit from various incentives that were provided under the older Foreign‑Invested Enterprise Tax Law (FIE Tax Law). Specifically, Article 9 of the FIE Tax Law delegates to China’s provincial and local governments the authority to provide exemptions and reductions of local income taxes for “productive” FIEs. Eligibility criteria vary by province and the relevant governmental authorities administer the application process.

The CBSA has previously countervailed this program in Pup Joints and Seamless Casing. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 20. Preferential Tax Policies Related to Research and Investment

Under this program based on the 2008 corporate tax law, high‑ or new‑technology enterprises may deduct 50 percent of their total R&D expenses from their taxable income. Eligible expenses include design costs, expenses for materials and fuel consumed through R&D activities, wages, salaries, and benefits for personnel engaged in R&D activities, depreciation expenses on instruments and equipment, and many other expenses.

The CBSA has previously countervailed this program in Photovoltaic Modules and Laminates, Seamless Casing, OCTG, Pup Joints, and Plywood. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as “Tax Offsets for Research and Development under the Enterprise Income Tax Law of the People’s Republic of China (EIT)”.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 21. Tax Incentives to Develop the Qianhai Cooperation Zone

It is alleged that Chinese chassis producers have benefitted extensively from this tax program. In 2012, Shenzhen launched a plan to create “one of the world’s largest logistics centres” and aimed to lure companies with “tax incentives, bank loans and other preferential policies.” Shenzhen has tax incentives in place to develop the Qianhai Cooperation Zone to include a “modern logistics” zone as it considers the logistics industry to be a pillar industry.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they may have countervailed this program as “Other Payments from the State Capital Operating Budget”.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 4: Relief from Duties and Taxes

Program 22. Offsets to Taxable Income Related to Purchases of Domestic Machinery

Under this program, a tax credit up to 40% of the purchase price of domestic equipment may apply to the incremental increase in tax liability from the previous year. The legal bases of this program are the provisional measures on enterprise income tax credit for investment in domestically produced equipment for technology renovation projects of July 1, 1999 and the Notice of the State Administration of Taxation on Stopping the Implementation of the Enterprise Income Tax Deduction and Exemption Policy of the Investments of an Enterprise in Purchasing Home‑made Equipment, No. 52 [2008] of the State Administration of Taxation, effective January 1, 2008.

The CBSA has previously countervailed this program in Aluminum Extrusions, Photovoltaic Modules and Laminates, Seamless Casing, OCTG, and Pup Joints.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 23. Exemption or Refund of Tariff and Import Value‑Added Tax (VAT) for Imported Technologies and Equipment

The program was established to absorb investment in SEZs and encourage districts to take the lead in development. The granting authority responsible for this program is the General Administration of Customs and this program is administered by local customs authorities. Under this program, machinery and equipment, spare parts, raw and semi‑processed materials, means of transportation and other capital goods necessary for production that are imported by enterprises in SEZs shall be exempted from import duties.

The CBSA has previously countervailed this program in Photovoltaic Modules and Laminates, Unitized Wall Modules, Seamless Casing, Pup Joints, and Line Pipe.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 24. Relief from Duties and Taxes on Imported Material and Other Manufacturing Inputs

Under a duty drawback program, a subsidy may exist where the amount of duties and taxes relieved or refunded on inputs incorporated into exported goods is found to be in excess of the actual liability that existed on those imports.

The CBSA has previously countervailed this program in Photovoltaic Modules and Laminates, Seamless Casing, OCTG and Pup Joints.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 25. Deed Tax Exemption for SOEs Undergoing Mergers or Restructuring

The GOC imposes a deed tax on transfers of land and real estate. In the context of an ownership transfer by means of an asset sale, as opposed to a stock sale, a deed tax of three to five percent is levied on the amount of the purchase price, and the purchaser is responsible for paying the tax. The GOC’s “Notice of the Ministry of Finance and the State Administration of Taxation on Several Deed Tax Policies Concerning Enterprise Reorganization and Restructuring,” exempts this deed tax where the transfer of ownership occurs as part of the restructuring or merger of an SOE.

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as “Government‑Directed Debt Restructuring”.

This financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 5: Good / Services Provided by the Government at Less Than Fair Market Value

Program 26. Acquisition of Government Inputs/Utilities for Less than Adequate Remuneration

The complainant alleges that exporters purchase input materials or utilities from SOEs at prices which are below fair market value. They have identified the following inputs as just some that are provided to chassis manufacturers at less than fair market value:

In a recent investigation by the USDOC into Chassis and Subassemblies from China, it appears that they countervailed this program as follows:

The CBSA has previously countervailed this program in Seamless Casing, OCTG, Stainless Steel Sinks, Steel Piling Pipe, Large Diameter Line Pipe, and Pup Joints.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA as they involve the provision of goods or services, other than general governmental infrastructure. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 27. Provision of Land for Less than Adequate Remuneration by Government

All land in China belongs to the government (i.e., either national or local governments, or through a “collective” at the township or village level), and government land agencies across China control the allocation of land through the granting of land‑use rights.

The CBSA has previously countervailed this program in Line Pipe and Large Diameter Line Pipe.

This financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

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