LP2 2020 UP1: Carbon and alloy steel line pipe
Conclusion of normal value and export price review
The Canada Border Services Agency (CBSA) has today concluded a normal value and export price review to update all normal values and export prices of certain carbon and alloy steel line pipe (line pipe) exported to Canada from the Republic of Korea by SeAH Steel Corporation (SeAH).
The review follows requests for re‑determination filed by an importer and is part of the CBSA’s enforcement of the Canadian International Trade Tribunal’s (CITT) injury finding issued on January 4, 2018, respecting the dumping of line pipe from the Republic of Korea, in accordance with the Special Import Measures Act (SIMA).
The product definition and the applicable tariff classification numbers of the goods subject to the CITT’s finding are contained in Appendix 1 (subject goods).
Period of investigation
The Period of Investigation (POI) and the Profitability Analysis Period (PAP) for the normal value and export price review were from January 1, 2019 to December 31, 2019.
Normal value review process
At the initiation of this normal value and export price review, the CBSA sent Requests for Information (RFIs) to SeAH and Pusan Pipe America Inc. dba SeAH Steel America Inc. (Pusan) to solicit information on the costs and selling prices of subject goods and like goods. The information was requested for purposes of updating the normal values and export prices applicable to subject goods exported to Canada by SeAH.
As part of the normal value and export price review, case arguments and reply submissions were submitted by counsel on behalf of Canadian producer Evraz Inc. NA Canada (Evraz), SeAH and Pusan. Additional representations were submitted throughout the review, prior to the close of the record. Details of these submissions are provided in Appendix 2. The representations submitted by all parties were given due consideration by the CBSA prior to the conclusion of this normal value and export price review.
Normal values for future shipments
SeAH is located in the Republic of Korea and is a manufacturer and exporter of a variety of steel products, including steel line pipe. SeAH is a public company and has been publically listed on the Korean Stock Exchange since 1969. The company headquarters is located in Seoul. All subject goods shipped to Canada during the POI were produced at the same production facility.
During the course of the review, SeAH provided responses to the CBSA’s Dumping RFI as well as three Supplemental RFIs (SRFIs). Likewise, Pusan provided responses to the CBSA’s Importer RFI and one SRFI. The CBSA also received responses to Part D of the Dumping RFI from POSCO and Hyundai Steel. As a result, specific normal values for future shipments of line pipe have been determined for SeAH. Those specific normal values for future shipments of subject goods are effective today, December 23, 2020.
While SeAH has reported domestic sales of line pipe during the PAP, there were insufficient domestic sales of goods that were identical or similar to the subject goods exported to Canada that complied with all the terms and conditions referred to in sections 15 and 16 of SIMA. As such, it was not possible to determine normal values pursuant to section 15 of SIMA, using domestic sales of like goods.
Normal values were determined in accordance with paragraph 19(b) of SIMA, based on the aggregate of the cost of production, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits. The amount for profits was determined in accordance with subparagraph 11(1)(b)(ii) of the SIMR, based on SeAH’s sales of line pipe in their domestic market, during the PAP, within the same general category as the subject goods sold to Canada.
The normal values and export prices determined as a result of this review may be applied to any requests for re‑determination of importations of subject goods that have not been processed prior to the conclusion of this review, regardless of the date that the requests were received. The normal values and export prices determined as a result of this review may be applied retroactively where the conditions described below are met.
Please note that exporters with normal values are required to promptly inform the CBSA in writing of changes to domestic prices, costs, market conditions or terms of sale associated with the production and sales of the goods. If there are changes to the exporter’s domestic prices, costs, market conditions or terms of sale associated with the production and sales of the goods, and where the CBSA considers such changes to be significant, the normal values and export prices will be updated to reflect current conditions. All parties are cautioned that where there are increases in domestic prices, and/or costs as noted above, the export price should be increased accordingly to ensure that any sale made to Canada is not only above the normal value but at or above selling prices and full costs and profit of the goods in the exporter’s domestic market. If exporters do not properly notify the CBSA of any such changes, do not adjust export prices accordingly, or do not provide the information required to make any necessary adjustments to normal values and export prices, retroactive assessments will be applied where such action is warranted.
Importers are reminded that it is their responsibility to calculate and declare their anti‑dumping duty liability. If importers are using the services of a customs broker to clear importations, the brokerage firm should be advised that the goods are subject to SIMA measures and be provided with sufficient information necessary to clear the shipments. To determine their anti‑dumping liability, importers should contact the exporters to obtain the applicable normal values. For further information on this matter, refer to Memorandum D14‑1‑2, Disclosure of Normal Values, Export Prices, and Amounts of Subsidy Established under the Special Import Measures Act.
The Customs Act (Act) applies, with any modifications that the circumstances require, with respect to the accounting and payment of anti‑dumping duties. As such, failure to pay the duties within the prescribed time will result in the application of the interest provisions of the Act.
Should the importer disagree with the determination made on any importation of goods, a request for re‑determination may be filed. For more information on how to file a request for re‑determination please refer to the Guide for appealing a duty assessment.
Any questions concerning the above should be directed to:
SIMA Registry and Disclosure Unit
Trade and Anti-dumping Programs Directorate
Canada Border Services Agency
11-100 Metcalfe St
Ottawa ON K1A 0L8
Officer name and contact information:
- Laura Fast: 613‑954‑1641
Appendix 1: Product definition
Certain carbon and alloy steel line pipe from the Republic of Korea
Subject goods are defined as:
Carbon and alloy steel line pipe originating in or exported from the Republic of Korea, welded or seamless, having a nominal outside diameter from 2.375 inches (60.3 mm) up to and including 24 inches (610 mm) (with all dimensions being plus or minus allowable tolerances contained in the applicable standards), including line pipe meeting or supplied to meet any one or several of API 5L, CSA Z245.1, ISO 3183, ASTM A333, ASTM A106, ASTM A53‑B or their equivalents, in all grades, whether or not meeting specifications for other end uses (e.g. single‑, dual‑, or multiple certified, for use in oil and gas or other applications), and regardless of end finish (plain ends, beveled ends, threaded ends, or threaded and coupled ends), surface finish (coated or uncoated), wall thickness, or length, excluding galvanized line pipe and excluding stainless steel line pipe (containing 10.5 percent or more by weight of chromium), and excluding goods covered by the Canadian International Trade Tribunal’s Finding in Inquiry No. NQ‑2012‑003.
For greater certainty, the product definition includes:
- unfinished line pipe (including pipe that may or may not already be tested, inspected, and/or certified to line pipe specifications) originating in the Republic of Korea and imported for use in the production or finishing of line pipe meeting final specifications, including outside diameter, grade, wall thickness, length, end finish, or surface finish and
- non‑prime and secondary pipes (“limited service products”)
The Canadian International Trade Tribunal (CITT) excludes from its finding welded line pipe having nominal outside diameters from and including 18 inches to 24 inches (610 mm) (with all dimensions being plus or minus allowable tolerances contained in the applicable standards), regardless of grade and wall thickness, with a manganese content of no less than 16% by weight, for exclusive use in slurry, tailings, and pressure piping systems in oil sands projects, and marked “Not for CSA Z‑662 Applications”. For greater certainty, use in a pipeline meeting CSA Z‑662 is not permitted under this exclusion.
Tariff classification numbers
The subject goods are properly classified under the following 10‑digit tariff classification numbers:
This listing of tariff classification numbers is for convenience of reference only. Refer to the product definition for authoritative details regarding the subject goods.
Appendix 2: Representations
Prior to the close of the record, representations were filed by counsel for Evraz Inc. NA Canada (Evraz) and by LexSage Professional Corporation. Following the closing of the record on October 23, 2020, case briefs were received from counsel representing Evraz, SeAH Steel Corporation (SeAH) and Pusan Pipe America Inc. dba SeAH Steel America Inc. (Pusan). The CBSA also received reply submissions from counsel on behalf of the Evraz, SeAH and Pusan.
Certain details provided in case briefs and reply submissions were designated as confidential information by the submitting counsel. This has restricted the ability of the CBSA to discuss all issues raised in these submissions.
The material issues raised by the parties are summarized as follows and, to the extent possible, the CBSA has provided responses to representations below. The CBSA will not address representations pertaining to enforcement in this notice.
In submissions dated March 31, 2020 and August 24, 2020, counsel for Evraz submitted comments concerning responses to the CBSA’s Dumping RFI and/or SRFI. These submissions included, among other arguments, claims of “associated persons”. Counsel indicated that cost information relating to certain sales of hot rolled coil to SeAH are required in order to calculate normal values in accordance of section 11.2(1) of the SIMR.Footnote 1
With respect to the allegations of “associated persons”, counsel for SeAH and Pusan dispute the claim that SeAH is associated with certain “persons” as alleged by counsel for Evraz.Footnote 2 In support of this, counsel submits arguments relating to the interpretation of “person” under SIMA and also suggests that the CBSA should take into consideration whether the “persons” are dealing with each other at arm’s length. The case brief submitted by counsel for SeAH and Pusan also discusses sections of the WTO Antidumping Agreement concerning related persons and the calculation of costs of production. In this respect, counsel argues that paragraph 2(2)(a) read in conjunction with 2(3) of SIMA is contrary to Canada’s international obligations under the WTO Antidumping Agreement.
The case brief submitted by counsel for Evraz also includes arguments relating to “associated persons”. Counsel claims that the CBSA must value SeAH’s input costs pursuant to section 11.2(1) of the SIMR.Footnote 3
In its reply submission, counsel for SeAH and Pusan stated that there is no basis in SIMA to disregard SeAH’s acquisition cost under section 11.2(1) of the SIMR.Footnote 4
In response to the case brief submitted by counsel for SeAH and Pusan, counsel for Evraz also comments on the interpretation of “person” under SIMA.Footnote 5 Counsel also challenged the allegation made on behalf of SeAH and Pusan concerning consistency with the WTO Antidumping Agreement and states that SIMR subsection 11.2(2) is not contrary to article 188.8.131.52 of the WTO Antidumping Agreement.Footnote 6
In order to respect the confidentiality designations made by interested parties, the CBSA is limited in the information that can be divulged in response to arguments made concerning certain “associated persons”. Nevertheless, the CBSA finds it relevant to raise this as a factor that was subject to several representations from various parties. As such, due consideration has been given to submissions on this topic. Further the CBSA confirms that normal values determined in this review have been calculated in accordance with both SIMA and SIMR. Additional information on the calculation of normal values, including the applicability of subsection 11.2(1) of the SIMR, is provided to SeAH in the confidential conclusion notice issued to the exporter today.
Completeness of information provided and the calculation of normal values
Prior to the close of the record, counsel for Evraz filed several submissions concerning the responses to the Dumping RFI and, where applicable, SRFIs provided by SeAH and POSCO.Footnote 7 Counsel specifically identified issues with the following information provided by or otherwise relating to SeAH: acquisition prices of raw materials, availability of financial reports, allocation of cost of goods sold to third countries, GS&A calculation, discounts, reconciliation of inputs to sales, completeness and accuracy of SeAH’s line pipe sales database, SeAH’s correspondence with certain other parties, other material costs, reconciliation of subject goods produced before the POI to cost and sales appendices, and information needed for purposes of establishing an amount for profit pursuant to subsection 11(1)(b) of the SIMR.Footnote 8
According to counsel for Evraz, there were also issues arising from POSCO’s response to Part D of the CBSA’s RFI.Footnote 9 Included in these submissions was the argument that POSCO has not provided information that would permit the CBSA to calculate the cost of the input under section 11.2(1)(c) of the SIMR. Counsel submitted that SeAH’s failure to provide the required information justifies the use of a Ministerial Specification pursuant to subsection 29(1) of SIMA to determine normal values.Footnote 10
Counsel for SeAH and Pusan submits that SeAH has been fully cooperative in the review and has provided the CBSA with complete responses. Further, counsel for SeAH and Pusan argue that the CBSA is fully capable of determining normal values in accordance with section 15 or 19 of SIMA.Footnote 11
The case brief filed by counsel for Evraz alleges that SeAH failed to provide full and accurate information in response to the CBSA’s questionnaires. In this respect, counsel for Evraz claims issues with costing and pricing information, stating that the CBSA must therefore determine normal values pursuant to section 29 of SIMA.Footnote 12 Counsel for Evraz also argues that a qualitative adjustment should be used in determining an amount for profits in accordance with subsection 11(1)(b) of the SIMR, if the CBSA bases its profit on sales of standard pipe products.Footnote 13
In response to the case brief filed by counsel for Evraz, counsel for SeAH and Pusan submits again that SeAH cooperated fully and that the accusations of non‑compliance are false. Counsel states that SeAH provided complete responses to the CBSA’s questions.Footnote 14 With respect to the arguments made on behalf of Evraz which relate to quality adjustments, counsel for SeAH and Pusan claim that the CBSA does not have statutory authority under section 19 of SIMA “…to adjust profits because the domestic industry wants the CBSA to inflate normal values calculated pursuant to paragraph 19(b) of SIMA.”Footnote 15 Counsel argues that paragraph 11(1)(b) of the SIMR sets out the hierarchy to be used, that paragraphs 11(1)(b)(i) or (ii) apply, and that no quality adjustment should be made.Footnote 16
Despite the claim made by counsel for SeAH and Pusan that the CBSA is fully capable of making the necessary calculations for normal values based on information on the record, counsel for Evraz maintains that SeAH failed to provide the information necessary, including critical cost data, to calculate normal values in accordance with section 15 or paragraph 19(b) of SIMA.Footnote 17 Counsel refers to the CBSA’s 2017 Final Determination whereby cost of production data was not provided for purchased line pipe and normal values for SeAH were determined pursuant to subsection 29(1) of SIMA. Counsel for Evraz argues that the CBSA should again determine SeAH’s normal values pursuant to section 29 of SIMA.
The CBSA determined that the information provided by SeAH, Pusan, POSCO and Hyundai Steel in their RFI and, where applicable, SFRI responses was sufficient for purposes of determining normal values and export prices in this review. Further, normal values and export prices calculated by the CBSA in this review were determined in accordance with both SIMA and the SIMR, as explained in this notice under Normal values for future shipments.
Particular market situation
During the course of this review, counsel for Evraz filed representations alleging that a particular market situation exists in Korea, affecting sales of line pipe such that the sales made in Korea do not permit a proper comparison with the sale of the goods to the importer in Canada. Further, counsel claimed that, as a result of the particular market situation, the acquisition cost of inputs used in the production of line pipe do not reasonably reflect the actual cost of those inputs.Footnote 18 In its submission, counsel for Evraz identified the following factors as evidence of a particular market situation: the presence of Chinese steel (specifically HRC) in the Korean Market, overcapacity in Korea related to the flood of Chinese steel, the Korean government’s reaction to the flood of Chinese steel and intervention in the Korean steel industry, Korean HRC and line pipe producers engaging in anti‑competitive practices through strategic alliances (including bid‑rigging and cartel behaviour), information supplied by Husteel during a previous normal value review (LP2 2018 UP1) concerning the commercial relationship between producers and upstream suppliers, and government subsidization of electricity.Footnote 19
In subsequent submissions relating to the RFI and/or or SRFI responses provided by SeAH and POSCO, counsel for the complainant argued that POSCO’s response provides further evidence of a particular market situation in Korea that distorts the selling price and costs of line pipeFootnote 20 and counsel again comments on supply and demand factors in Korea.Footnote 21
Counsel for SeAH and Pusan submitted that a particular market situation does not exist in South Korea. Counsel states that the CBSA should conclude that a proper comparison can be made and that the acquisition costs reflect the costs of the inputs.Footnote 22
In its case brief, counsel for Evraz refers to its previous submissions and again makes the allegation that a particular market situation exist in Korea’s line pipe market.Footnote 23
Reply submissions filed by counsel for SeAH and Pusan and by counsel for Evraz continue to address the allegations of a particular market situation, often re‑iterating arguments already made in case briefs or through other representations. Counsel for Evraz submits that there is clear evidence that a particular market situation exists in the line pipe market in Korea. Counsel for Evraz states that this evidence would have only been further substantiated by the Government of Korea’s response to a PMS RFI.Footnote 24 Counsel for SeAH and Pusan suggest that the CBSA’s decision not to send a PMS RFI to the Government of Korea signals the CBSA’s decision in this matter.Footnote 25
In accordance with paragraph 16(2)(c) of SIMA, and for purposes of determining normal values under section 15, the CBSA will not consider any sales of like goods for use in the country of export that do not permit a proper comparison with the sale of the goods to the importer in Canada due to the existence of a particular market situation. Further, for the purposes of constructing normal values pursuant to paragraph 19(b), the CBSA will not take into consideration the acquisition price of an input that does not allow a proper comparison as it does not reasonably reflect the actual costs of that input due to a PMS.
Where the CBSA is of the opinion that the domestic sales of like goods in the country of export do not permit a proper comparison with the sales of the goods to the importer in Canada because of a PMS, the normal value of those goods will be determined under section 19, where possible, or section 29.
Where a constructed normal value is used pursuant to paragraph 19(b), input costs that are distorted by the existence of a PMS do not allow for a proper comparison between the constructed normal value of the subject goods and the sale of the subject goods to Canada. For instance, a PMS may be found where evidence shows that the acquisition cost of inputs, which are material in the production of the goods of a particular exporter or a particular country, are distorted.
In these circumstances, to disregard certain acquisition prices used in the cost of production, the CBSA has to first form the opinion that, in accordance with paragraph 16(2)(c) of SIMA, a PMS exists that does not allow for a proper comparison such that normal values cannot be determined in accordance with section 15 of SIMA. The CBSA must also form the opinion under subsection 11.2(2) of SIMR that this PMS further distorts the costs of inputs used in the production of subject goods such that they cannot be used in a constructed normal value methodology of paragraph 19(b).
With respect to the particular market situation allegations made in the course of this normal value and export price review, the CBSA finds that the allegations largely relate to the South Korean line pipe market as a whole, rather than the exporter (SeAH) specifically. The CBSA refers to the Re‑investigation and Normal Value Review Policy outlined in Memorandum D14‑1‑8, which states that the scope of an NVR would be limited to circumstances directly related to the exporter and not the country or market as a whole. While consideration was given to the PMS allegations that relate specifically to the exporter under review, the CBSA did not find that the evidence provided allows the CBSA to form an opinion that a particular market situation exists in respect of the goods of this particular exporter such that the domestic sales do not permit a proper comparison with the sale of goods to the importer in Canada, during the period of investigation. Further, the CBSA finds that allegations of a particular market situation affecting the line pipe market as a whole constitute a broader scope than would be found in a normal value review.
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