DP 2022 IN: Drill pipe
Statement of Reasons—Initiation of investigations

Decision

Ottawa, April 8, 2022

Pursuant to subsection 31(1) of the Special Import Measures Act, the Canada Border Services Agency initiated investigations on March 25, 2022, respecting the alleged injurious dumping and subsidizing of certain drill pipe originating in or exported from China.

Summary

[1] On February 3, 2022, the Canada Border Services Agency (CBSA) received a written complaint from Command Drilling Products Ltd. (CDP) (Nisku, AB) (hereinafter, “the complainant”) alleging that imports of certain drill pipe originating in or exported from the People’s Republic of China (China) have been dumped and subsidized. The complainant alleged that the dumping and subsidizing have caused injury and are threatening to cause injury to Canadian producers of drill pipe.

[2] On February 24, 2022, pursuant to paragraph 32(1)(a) of the Special Import Measures Act (SIMA), the CBSA informed the complainant and 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 pursuant to Article 13.1 of the Agreement on Subsidies and Countervailing Measures, prior to the initiation of the subsidy investigation. The CBSA did not receive any request for consultations.

[3] The complainant provided evidence to support the allegations that certain drill pipe from China have been dumped and subsidized, as well as evidence that discloses a reasonable indication that the dumping and subsidizing have caused injury or are threatening to cause injury to the Canadian industry producing like goods.

[4] On March 25, 2022, pursuant to subsection 31(1) of SIMA, the CBSA initiated investigations respecting the dumping and subsidizing of certain drill pipe from China.

Interested parties

Complainant

[5] The name and address of the complainant is as follows:

Command Drilling Products Ltd.
406 22nd Ave
Nisku, AB  T9E 7W8

[6] CDP was incorporated in 2011 and produced its first drill pipe in 2014. Located in Nisku, Alberta, CDP sells domestically produced drill pipe directly to customers within Canada.^{Footnote 1}

Other producers

[7] The complainant stated that they are the only producer of drill pipe in Canada.^{Footnote 2}

Trade union

[8] The complainant stated that there are no known trade unions that represent persons employed in the production of drill pipe in Canada.^{Footnote 3}

Exporters

[9] The CBSA identified 64 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, Subsidy, and Section 20 Requests for Information (RFI).

Importers

[10] The CBSA identified 27 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

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

[12] 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, 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

The Canadian industry

[64] There are no other known producers of drill pipe in Canada.

Evidence of dumping

[72] 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.

[73] 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.

[74] The complainant made the allegation that the OCTG industry in China may not be operating under competitive market conditions and as such, the domestic market for drill pipe may not be reliable for determining normal values. Accordingly, the complainant submitted that normal values should be determined under section 20 of SIMA.

[75] 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.

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

Section 20 allegations

[98] 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 25}

[99] 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.

[100] 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.

[101] 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.

[102] The complainant alleged that the conditions described in section 20 prevail in the OCTG sector in China, which includes drill pipe. That is, the complainant alleged that this industry sector in China does not operate under competitive market conditions and consequently, prices of drill pipe established in the Chinese domestic market are not reliable for determining normal values.^{Footnote 26}

[103] The complaint included a variety of evidence to support the claim that the GOC substantially determines domestic prices of drill pipe in the country and that the prices are substantially different than they would be in a competitive market. Specifically, the complainant provided evidence of export controls, state-ownership in the oil and gas industry sector impacting the consumption of subject goods in China, state-ownership in the steel industry and OCTG sector, and subsidization in the steel industry and OCTG sector.

[104] The complainant also cited specific policies implemented by the GOC, such as China’s 13th Five-Year Plan on National Economic and Social Development, 14th Five-Year Plan on National Economic and Social Development, Iron and Steel Industry Adjustment and Upgrade Plan, National Steel Plan, Steel Revitalization/Rescue Plan, List of Industries, Products and Technologies Currently Encouraged by the State for Development, State Council Decision on Accelerating the Development of Strategic Emerging Industries, Implementation of Capacity Replacement Measures in the Steel Industry, and Made in China 2025 Industrial Policy.^{Footnote 27}

[105] Based on its own analysis, the CBSA believes that there is reasonable evidence to support an inquiry into the allegations that the measures taken by the GOC substantially influence prices in the OCTG sector in China, and that the prices are substantially different than they would be in a competitive market.

[106] Consequently, on March 25, 2022, 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 OCTG sector in China, which includes drill pipe.

[107] As part of this section 20 inquiry, the CBSA sent section 20 RFIs to all potential producers and exporters of drill pipe in China, as well as to the GOC, requesting detailed information related to the OCTG sector in China, which includes drill pipe.

[108] For the purposes of obtaining information necessary to calculate normal values pursuant to subparagraph 20(1)(c) of SIMA, the CBSA requested information from producers in surrogate countries. As such, the CBSA has selected the US and the UAE as potential surrogate countries and has sent questionnaires to known producers of drill pipe in these countries.

[109] The CBSA selected the US and UAE as surrogate countries as both countries have significant domestic production of drill pipe, significant oil and gas production, and are market-based economies.

[110] In the event that the CBSA forms an opinion that domestic prices of drill pipe in China are substantially determined by the 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 prices or the aggregate of the cost of production, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits of 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 produced and imported from any country designated by the CBSA and adjusted for price comparability.

Evidence of subsidizing

[111] 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.

[112] 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

[113] A stated-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.

[114] 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.

[115] 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:

• there is exclusive use of the subsidy by a limited number of enterprises
• there is predominant use of the subsidy by a particular enterprise
• disproportionately large amounts of the subsidy are granted to a limited number of enterprises and
• the manner in which discretion is exercised by the granting authority indicates that the subsidy is not generally available

[116] 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.

Evidence of injury

[131] 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 material injury to the drill pipe industry in Canada.

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

[133] In support of their allegations, the complainant provided evidence of: suppressed market share, lost sales, price undercutting, price depression, reduced profits, suppressed capacity utilization, and an inability to proceed with plans to expand production.^{Footnote 31}

Threat of injury

[147] The complainant alleges that the dumped and subsidized goods threaten to cause further material injury to the domestic producers of drill pipe. The complainant provided the following information to support the allegation that imports of subject goods threaten to cause further injury to the Canadian industry.

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

[163] The CBSA finds that the complainant has sufficiently linked the injury it has suffered to the alleged dumping and subsidizing of subject goods imported into Canada in the form of suppressed market share, lost sales, price undercutting, price depression, reduced profits, suppressed capacity utilization, and an inability to proceed with plans to expand production.

[164] 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.

[165] 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

[166] Based on information provided in the complaint, other available information, and the CBSA’s customs documentation, the CBSA is of the opinion that there is evidence that drill pipe originating in or exported from China has 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 domestic industry. As a result, pursuant to subsection 31(1) of SIMA, dumping and subsidy investigations were initiated on March 25, 2022.

Scope of the investigations

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

[168] 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 January 1, 2021 to February 28, 2022 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 OCTG industry in China.

[169] 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, 2021 to February 28, 2022 were subsidized. The information requested will be used to determine the amounts of subsidy, if any.

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

Future action

[171] 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 have caused or are 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.

[172] 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 June 23, 2022. Where circumstances warrant, this period may be extended to 135 days from the date of the initiation of the investigations.

[173] 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.

[174] 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, or the amount of subsidy on, the goods is insignificant, may be subject to provisional duty in an amount not greater than the estimated margin of dumping or the estimated amount of subsidy on the imported goods.

[175] 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.

[176] 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.

[177] 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 apply, not later than 120 days after the CBSA’s preliminary determinations.

[178] 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 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

[179] 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 the investigations constitute massive importations over a relatively short period of time and have caused injury to the Canadian industry.

[180] 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.

[181] 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

[182] 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.

[183] 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.

[184] An acceptable undertaking must account for all or substantially all of the exports to Canada of the dumped or subsidized 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 number, mailing address and email address to one of the officers identified in the “Information” section of this document.

[185] 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

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

Information

[187] 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.

[188] To be given consideration in these investigations, all information should be received by the CBSA by August 2, 2022, at noon.

[189] 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.

[190] 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.

[191] 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.

[192] 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

• Telephone:
• Ted Chester: 343-553-1888
• Alex Wu: 343-573-2930

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

Doug Band
Director General
Trade and Anti-dumping Programs Directorate

Appendix: description of identified programs

Evidence provided by the complainant and obtained by the CBSA suggests that the Government of China may have provided support to exporters/producers of subject goods in the following manner.

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:

• Where a statue or other legal instrument expressly vests government authority in the entity concerned
• Evidence that an entity is, in fact, exercising governmental functions and
• Evidence that a government exercises meaningful control over an entity

The CBSA has previously countervailed this program in Container Chassis, Upholstered Domestic Seating (UDS), Fabricated Industrial Steel Components (FISC), Carbon and Alloy Steel Line Pipe (Line Pipe I), Oil Country Tubular Goods (OCTG I), and Seamless Casing.

The United States Department of Commerce (USDOC) countervailed this program as “Central and Provincial Policy Lending to Chinese Drill Pipe Producers” in Drill Pipe from China.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA, in that practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities, that conferred a benefit to the recipient. 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 Guarantees through the Government of China/SOE Banks/Public Bodies

Assurance provided by the Government of China, 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 UDS, Large Diameter Carbon and Alloy Steel Line Pipe (Large Diameter Line Pipe), and Line Pipe I.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA, in that practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities, that conferred a benefit to the recipient. 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 state owned enterprises (SOEs).

The CBSA has previously countervailed this program in Certain Seamless Carbon or Alloy Steel Oil and Gas Well Casing (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 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”.

The CBSA has previously countervailed this program in UDS and Line Pipe I.

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 UDS, Seamless Casing, OCTG I, Stainless Steel Sinks, and Line Pipe I.

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, including related to innovation, science & technology, information technology, or quality improvement.

The CBSA has previously countervailed this program in Container Chassis, UDS, Decorative and Other Non-Structural Plywood (Plywood), Sucker Rods, Copper Tube, Line Pipe I, Rebar I, Photovoltaic Modules and Laminates, OCTG I, Unitized Wall Modules, Seamless Casing, and FISC.

The USDOC countervailed this program as “Technology to Improve Trade R&D Fund” in Drill Pipe from China.

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: 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 Container Chassis, UDS, and 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 8: Export Development and 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 Container Chassis, UDS, Plywood, Sucker Rods, OCTG I, Line Pipe I, Unitized Wall Modules, Aluminum Extrusions, Carbon Steel Welded Pipe (CSWP I), Pup Joints, FISC, Stainless Steel Sinks, and Steel Grating.

As per the SOR issued at the OCTG I 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 (SMEs), 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.

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 9: Performance Award Grants

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

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

The USDOC countervailed this program as “Outstanding Growth Private Enterprise and Small and Medium-sized Enterprises Development in Jiangyin Fund” in Drill Pipe from China.

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 10: Reductions in Land Use and/or Rental Fees

This program provides for the reduction in land use fees and rental rates for 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 UDS, Plywood, Stainless Steel Sinks, Unitized Wall Modules, Photovoltaic Modules and Laminates, Seamless Casing, OCTG I, and Line Pipe I.

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 11: 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 12: 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.

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 Container Chassis, UDS, Line Pipe I, Concrete Reinforcing Bar (Rebar I), OCTG I, FISC, and 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, Recruitment, and Social Security

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 Container Chassis, UDS, and Plywood.

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 CBSA has previously countervailed this program in Container Chassis and UDS.

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 16: Subsidies Related to Capital Expenditures

Available information indicates that the GOC has introduced several grants and incentives designed to support companies with expenditures on capital assets, including equipment procurement, property or plant developments, upgrades or renovations, and company projects deemed by the government to benefit local infrastructure.

The CBSA has previously countervailed this program in Container Chassis, Line Pipe I, and Rebar I.

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 17: 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 NHTEs 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.

The CBSA has previously countervailed this program in UDS, Aluminum Extrusions, OCTG I, Seamless Casing, and Line Pipe I.

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 18: Corporate Income Tax Reduction for New High Tech Enterprises (“NHTE”)

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.

The CBSA has previously countervailed this program in Container Chassis, UDS, Plywood, Sucker Rods, FISC, Line Pipe I, Seamless Casing, and OCTG I.

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: Corporate Income Tax Reduction for Newly Profitable Enterprises

This program was originally found pursuant to Article 57 of the Income Tax Law of the People's Republic of China for Enterprises and the Notification of the State Council on Carrying out the Transitional Preferential Policies concerning Enterprise Income Tax, Guo Fa (2007), No. 39.

The CBSA has previously countervailed this program in OCTG I.

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: Municipal/Local Income or Property Tax Reductions

This program covers reductions and exemptions in tax provided from Municipal/Local Income tax units.

The CBSA has previously countervailed this program in UDS, Sucker Rods, Unitized Wall Modules, Photovoltaic Modules and Laminates, CSWP I, and Line Pipe I.

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: 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 USDOC countervailed this program as “Two Free, Three Half Tax Exemption for FIEs” and “Exemption from City Construction Tax and Education Tax for FIEs” in Drill Pipe from China.

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 22: 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 Container Chassis, UDS, Plywood, Sucker Rods, Photovoltaic Modules and Laminates, Seamless Casing, Rebar I, and OCTG I. 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.

Category 4: Relief from Duties and Taxes in Inputs, Material and Machinery

Program 23: 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, and OCTG I.

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: Exemption or Refund of Tariff and Import Value-Added Tax (VAT) for Imported Technologies and Equipment

The program was established to absorb investment in Special Economic Zones (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 Sucker Rods, Photovoltaic Modules and Laminates, Unitized Wall Modules, Seamless Casing, and Line Pipe I.

The USDOC countervailed this program as “Import Tariff and Value-Added Tax (VAT) Exemptions for FIEs and Certain Domestic Enterprises Using Imported Equipment in Encouraged Industries” in Drill Pipe from China.

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: 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, and OCTG I.

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 26: 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.

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 27: Acquisition at Less Than Fair Market Value of Government Inputs/Utilities

Provision by the government, including by SOEs and state-controlled enterprises, of goods or services at prices lower than the fair market value of the goods or services in the territory of the government providing the subsidy.

The CBSA has previously countervailed this program in Container Chassis, UDS, FISC, Sucker Rods, CSWP I, Seamless Casing, OCTG I, and Steel Piling Pipe.

The USDOC countervailed this program as “Provision of Green Tubes for LTAR [Less Than Adequate Remuneration]” and “Provision of Electricity for LTAR” in Drill Pipe from China.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA as it 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 28: Acquisition at Less Than Fair Market Value of Government Assets

Based on information available to the CBSA, during past periods of privatization, China's state-owned oil companies shifted their focus toward core businesses and moved to divest themselves of certain peripheral operations such as production of OCTG, changing the ownership status of certain exporters from that of SOEs to either FIEs or private limited enterprises. The CBSA has determined in a past countervailing investigation that for one such exporter, the majority of previously government-owned assets had been distributed to company employees at no cost.

The CBSA has previously countervailed this program in OCTG I.

The complainant also alleges that SOEs benefit from exemptions from distributing dividends to the government as their owner even when they earn profits. This exemption may constitute an acquisition at less than fair market value of equity capital from the GOC.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA as it 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 29: 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 Seamless Casing and Line Pipe I.

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.

Program 30: Debt-to-Equity Swaps for Less than Fair Market Value

The debt-to-equity swap was a measure used in the financial restructuring of China’s state owned enterprises (SOE) and state-owned banks. Pursuant to the Regulations of Asset Management Companies (promulgated by decree on November 20, 2000), the State Council established four asset management companies (AMCs) that were directed to purchase certain non-performing loans from state-owned banks. The four AMCs were supervised and managed by the People's Bank of China, China's Ministry of Finance and the China Securities Regulatory Commission. One of the authorized business activities available for the management of non-performing loans purchased by the AMCs was the debt-to-equity swap. A debt-to-equity swap is a transaction in which a creditor, in this case an AMC, forgives some or all of a company's debt in exchange for equity in the company.

The CBSA has previously countervailed this program in Seamless Casing and OCTG I.

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.