LP2 2020 UP2: Carbon and alloy steel line pipe
Conclusion of normal value and export price review

Ottawa,

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 Husteel Co., Ltd. (Husteel).

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 July 1, 2019 to June 30, 2020.

Normal value review process

At the initiation of this normal value and export price review, the CBSA sent Requests for Information (RFIs) to Husteel and Husteel Canada 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 Husteel.

As part of the normal value and export price review, case arguments and reply submissions were submitted by counsel on behalf of Evraz Inc. NA Canada (Evraz), Husteel and Husteel Canada. Additional representations were submitted throughout the review, prior to the close of the record, by these parties as well as Tenaris Canada. 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

Husteel is a manufacturer and exporter of subject goods located in the Republic of Korea. Husteel was established in 1967 and is listed on the Korean Stock Exchange. All of the subject goods shipped to Canada during the POI were produced at the Dangjin and Daebul plants. The company headquarters is located in Seoul.

During the course of the review, Husteel provided responses to the CBSA’s Dumping RFI as well as two Supplemental RFIs (SRFIs). Likewise, Husteel Canada provided responses to the CBSA’s Importer RFI and one SRFI. As a result, specific normal values for future shipments of line pipe have been determined for Husteel. Those specific normal values for future shipments of subject goods are effective today, June 22, 2021.

While Husteel 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 Special Import Measures Regulations (SIMR), based on Husteel’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.

Export prices for future shipments

During the POI, all of the subject goods exported to Canada by Husteel were sold to a related importer. Due to the relationship between the two companies, a reliability test was performed to determine whether the section 24 export prices were reliable as envisaged by SIMA. This test was conducted by comparing the section 24 export prices with the section 25 export prices. The amount for profit used for the section 25 calculations was determined in accordance with paragraph 22(a) of the SIMR, based on the profit information provided in the original investigation and relating to vendors that operated at a profit during the POI and are at the same or substantially the same trade level as the importer. The test revealed that the export prices determined in accordance with section 24 of SIMA were unreliable. Therefore, export prices for sales to Husteel Canada on or after June 22, 2021 will be determined in accordance with section 25 of SIMA.

Exporter responsibility

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.

Importer responsibility

Importers are reminded that it is their responsibility to calculate and declare their anti‑dumping duty liability. If importers are using the services of a customs broker to clear importations, the brokerage firm should be advised that the goods are subject to SIMA measures and be provided with sufficient information necessary to clear the shipments. To determine their anti‑dumping 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.

Information

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’s name and contact information:

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

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:

  1. 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
  2. non‑prime and secondary pipes (“limited service products”)

Exclusions

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:

  1. 7304.19.00.11
  2. 7304.19.00.12
  3. 7304.19.00.21
  4. 7304.19.00.22
  5. 7305.11.00.12
  6. 7305.11.00.13
  7. 7305.11.00.14
  8. 7305.11.00.15
  9. 7305.12.00.12
  10. 7305.12.00.13
  11. 7305.12.00.14
  12. 7305.12.00.15
  13. 7305.19.00.12
  14. 7305.19.00.13
  15. 7305.19.00.14
  16. 7305.19.00.15
  17. 7306.19.00.10
  18. 7306.19.00.90

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), Tenaris Canada, and by counsel for Husteel Co., Ltd. (Husteel) and Husteel Canada. Following the closing of the record on May 7, 2021, case briefs were received from counsel representing Evraz, Husteel and Husteel Canada. The CBSA also received reply submissions from counsel on behalf of the Evraz, Husteel and Husteel Canada.

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.

Completeness of information provided and the calculation of normal values and export prices

Representations

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 Husteel and Husteel Canada. In these submissions, counsel specifically identified issues with the following information provided by or otherwise relating to Husteel: acquisition prices of raw materials, material costs, allocation of labour and overhead, cost of production reporting methodologies, GS&A calculation and the completeness and accuracy of Husteel’s line pipe sales database.Footnote 1

Counsel for Evraz also made submissions concerning the completeness and reliability of the information provided by Husteel Canada. Specifically, counsel for Evraz argued there were deficiencies in the databases and financial information provided by Husteel Canada and argued that the CBSA request further information and/or make certain adjustments. Counsel for Evraz also made arguments concerning the determination of export prices and the relationship between Husteel and Husteel Canada.Footnote 2

Case briefs

Counsel for Husteel and Husteel Canada submit that the companies have been fully cooperative in the review and have provided the CBSA with complete responses. Further, counsel for Husteel and Husteel Canada argue that the CBSA is fully capable of determining normal values in accordance with section 15 or 19 of SIMA.Footnote 3

The case brief filed by counsel for Evraz alleges that Husteel failed to provide full and accurate information in response to the CBSA’s questionnaires. In this respect, counsel for Evraz claims issues with costing information, stating that the CBSA must therefore determine normal values pursuant to section 29 of SIMA.Footnote 4

Reply submissions

In response to the case brief filed by counsel for Evraz, counsel for Husteel and Husteel Canada again stated that Husteel and Husteel Canada cooperated fully and provided accurate information within the relevant timelines.Footnote 5

In response to the case brief filed by counsel for Husteel and Husteel Canada, counsel for Evraz maintains that Husteel did not provide the information requested by the CBSA and failed to furnish the information required for the purposes of determining normal values.Footnote 6

CBSA’s position

The CBSA determined that the information provided by Husteel and Husteel Canada 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

Representations

During the course of this review, counsel for Evraz filed representations alleging that a particular market situation (PMS) 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 PMS, the acquisition cost of inputs used in the production of line pipe do not reasonably reflect the actual cost of those inputs.Footnote 7

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 8

The CBSA also received representations from counsel for Tenaris Canada regarding the alleged existence of a particular market situation in the line pipe market in Korea. Specifically, counsel for Tenaris argued that the price of HRC in Korea is distorted and that it is further impacted by the presence of in-expensive Chinese HRC.Footnote 9

CBSA’s position

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 PMS. 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 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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