RETROACTIVE DUTY ON MASSIVE IMPORTATIONS 23 …

Canada Border Agen08 des servialsSelVices Agency frontaliers du Canada

4214-33AD/13984218-32

CVDI134

OTTAWA, July 31,2012

STATEMENT OF REASONS

Concerning the initiation of investigations into the dumping and subsidizing of

CERTAIN UNITIZED WALL MODULES ORIGINATING IN OR EXPORTED FROMTHE PEOPLE'S REPUBLIC OF CHINA

DECISION

Pursuant to subsection 31 (l) of the Special Import Measures Act, the President of theCanada Border Services Agency initiated investigations on July 16,2012, respecting the allegedinjurious dumping and subsidizing of unitized wall modules, with or without infill, includingfully assembled frames, with or without fasteners, trims, cover caps, window operators, gaskets,load transfer bars, sunshades and anchor assemblies, originating in or exported from thePeople's Republic of China.

Cet enonce des motifs est egalement disponible en franyais.This Statement of Reasons is also available in French.

Canada

TABLE OF CONTENTS

SUMMARy 1

INTERESTED PARTIES 1

Complainants 1

Exporters 3

Importers 3

Government of China 3

PRODUCT INFORMATION 3

Definition 3

Additional Product Information 3

Production Process 5

Classification of Imports 6

LIKE GOODS 6

THE CANADIAN INDUSTRy 7

Standing 7

THE CANADIAN MARKET 7

EVIDENCE OF DUMPING 8

Normal Value 9

Export Price 10

Estimated Margins of Dumping 10

MARGIN OF DUMPING AND VOLUME OF DUMPED GOODS 10

EVIDENCE OF SUBSIDIZING 11

Programs Being Investigated 13

Programs Not Being Investigated 14

Conclusion 14

Estimated Amount of Subsidy 14

AMOUNT OF SUBSIDY AND VOLUME OF SUBSIDIZED GOODS 16

EVIDENCE OF INJURy 17

Lost Sales 17

Price Erosion and Price Suppression 18

Reduced Profitability 18

Anti-dumping and Countervailing Directorate

Loss of Market Share 19

Reduced Employment 19

Underutilization of Capacity 20

THREAT OF INJURy 20

CAUSAL LINK - DUMPING/SUBSIDIZING AND INJURy 21

CONCLUSION ; 21

SCOPE OF INVESTIGATION 21

FUTURE ACTION 22

RETROACTIVE DUTY ON MASSIVE IMPORTATIONS 23

UNDERTAKINGS 23

PUBLICATION 24

INFORMATION 24

APPENDIX 1 - DESCRIPTION OF IDENTIFIED PROGRAMS AND INCENTIVES 26


SUMMARY

[1] On May 24,2012, the Canada Border Services Agency (CBSA) received a writtencomplaint from Allan Window Technologies, Ferguson Neudorf Glass Inc., Flynn Canada Ltd.,Inland Glass & Aluminum Ltd.!Aluminum Curtainwall. Systems Inc., Oldcastle BuildingEnvelope, Sota Glazing Inc., Starline Architectural Windows Ltd. and Toro Aluminum/ToroGlasswall Inc., (hereafter 'the Complainants') alleging that imports of certain unitized wallmodules originating in or exported from the People's Republic of China (China) are beingdumped and subsidized and that the dumping and subsidizing has caused injury and isthreatening to cause injury to the Canadian industry.

[2] On June 14,2012, pursuant to paragraph 32(1)(a) of the Special Import Measures Act(SIMA), the CBSA informed the Complainants that the complaint was properly documented.The CBSA also notified the Government of China (GOC) that a properly documented complainthad been received and provided the GOC with the non-confidential version of the subsidyportion of the complaint.

[3] Although the GOC was informed that it was entitled to consultations prior to theinitiation of the investigations, pursuant to Article 13.1 of the Agreement on Subsidies andCountervailing Measures, the GOC did not request any such consultations.

[4] The Complainant provided evidence to support the allegations that certain unitized wallmodules from China have been dumped and subsidized. The evidence disclosed a reasonableindication that the dumping and subsidizing has caused injury and is threatening to cause injuryto the Canadian industry producing these goods.

[5] On July 16,2012, pursuant to subsection 31(1) of SIMA, the President of the CBSA(President) initiated investigations respecting the dumping and subsidizing of certain unitizedwall modules from China.

INTERESTED PARTIES

Complainants

[6] The Complainants account for a major proportion of the production oflike goods inCanada. The Complainants' goods are produced at manufacturing facilities at various locationsin Canada.

Anti-dumping and Countervailing Directorate 1

[7] The names and addresses of the Complainants are:

Allan Window Technologies131 Caldari Rd., Unit #1Concord, ON L4K 3Z9

Ferguson Neudorf Glass Inc.4275 North Service RoadBeamsville, ON LOR IBI

Flynn Canada Ltd.6435 Northwest DriveMississauga, ON L4V 1K2

Inland Glass & Aluminum Ltd.!Aluminum Curtainwall Systems Inc.1820 Kryczka PlaceKamloops, B.C. VIS IS4

Oldcastle Building Envelope210 Great Gulf DriveConcord, ON L4K 5WI

Sota Glazing Inc.443 Railside DriveBrampton, ON L7A lEI

Starline Architectural Windows Ltd.9380 198th StreetLangley, B.C. VIM 3C8

Toro Aluminum/Toro Glasswall Inc.330 Applewood CrescentConcord, ON L4K 4V2

[8] Other producers of like goods in Canada include: Aluminum Window Design Ltd.,Applewood Glass & Mirror Inc., ENVISION Global Inc., Epsylon Concept Inc., Ferguson Glass(Western) Ltd., Gamma Industries Gamma Windows and Walls International Inc., Merit GlassLtd., Noram Enterprises Inc., OVG Inc., Phoenix Glass Inc., Primeline Window and Doors Inc.,Quest Window Systems Inc., State Window Corporation, Transit Glass Inc., Verval Ltd.,Windsor Glass Company operating as Contract Glaziers, and Zimmcor. All Canadian producerswith the exception of ENVISION Global Inc., Basic Structures Engineering, and GammaIndustries Gamma Windows and Walls International Inc. provided letters supporting thecomplaint l

.

1 Dumping Exhibits 15 (NC), 16 (NC), 17 (NC), 18 (NC), 19 (NC), 20 (NC), 24 (NC), 25 (NC), 26 (NC), 27 (NC),28 (NC), 29 (NC), 30 (NC), 31 (NC), 32 (NC).


Exporters

[9] The CBSA identified 80 potential exporters and producers of certain unitized wallmodules over the period of January 1,2009 to March 31, 2012 from information provided by theComplainants and CBSA import documentation.

Importers

[10] The CBSA identified 17 potential importers of certain unitized wall modules over theperiod of January 1,2009 to March 31,2012 from information provided by the Complainantsand CBSA import documentation.

Government of China

[11 ] For the purpose of these investigations, "Government of China" refers to all levels ofgovernment, i.e. federal, central, provincial/state, regional, municipal, city, township, village,local, legislative, administrative or judicial, singular, collective, elected or appointed. It alsoincludes any person, agency, enterprise, or institution acting for, on behalf of, or under theauthority of, or under the authority of any law passed by, the government ofthat country or thatprovincial, state or municipal or other local or regional government.

PRODUCT INFORMATION

Definition

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

Unitized wall modules, with or without infill, including fully assembled frames,with or without fasteners, trims, cover caps, window operators, gaskets, loadtransfer bars, sunshades and anchor assemblies originating in or exported from thePeople's Republic of China.

Additional Product Information

[13] Subject and like unitized wall modules are an aluminum framed engineered fenestrationproduct which form the building envelope or facade for multi-story buildings; the buildingenvelope or facade is often referred to as curtain wall or window wall. Unitized wall modules aredesigned to be and are interlocking with each other; are assembled at a production facility andshipped to site for installation ("certain unitized wall modules").

[14] Stick system building envelopes or facades are not subject goods as they are not unitized.Unlike unitized wall modules, stick systems are not interlocking and require installation ofindividual framing components on-site to form the supporting grid for the system. Stick systemsare shipped to the project site as vertical and horizontal member components which are theninstalled and connected piece by piece to fmm the structural grid for a stick system envelope orfacade for buildings. Once the grid of support members is secured to the building structure, infill


materials are installed from the exterior and/or interior side of the building. Once a stick systemenvelope or facade is completed, the appearance of the building exterior will be similar to abuilding envelope or facade made up of unitized wall modules. However, a stick systemenvelope or facade is differentiated from a "unitized wall module" building envelope or facadewhen viewed from the building interior, where the vertical frame members in the stick envelopeor facade will be one-piece, and in the "unitized wall module" envelope or facade the verticalframe members will be two interlocked pieces.

[15] Products referred to as "point-fixing glass wall/curtain wall" and "full-glass glasswall/curtain wall" use glass fins, patch fittings, cable supports and other means for structuralsupport and do not rely on the extruded aluminum members used in the subject goods covered bythis complaint. These products cannot be "unitized" and are not subject goods.

[16] Installed unitized wall modules separate the outdoors from a building's indoorenvironment. The unitized wall modules are designed to resist extreme wind pressures, limit airinfiltration and exfiltration, prevent water infiltration and meet heat loss and energy usagecriteria.

.[17] The unitized wall modules are generally designed to meet any of the following orequivalent specifications:

• air infiltration/exfiltration to a minimum 0.10 L/s/m2 when tested in accordance withAmerican Society of Testing and Materials ("ASTM") standard E283 at 0.3kPanegative and positive pressure differential or equivalent proprietary or otherinternationally accepted standard;

• no water infiltration when tested under static wind load in accordance withASTM Standard E331 using 205 liters of water per square meter for 15 minutes at aminimum 0.3kPa negative pressure differential or equivalent proprietary or otherinternationally accepted standard;

• no water infiltration when tested under dynamic wind load in accordance toAmerican Architectural Manufacturers Association ("AAMA") Standard 501.1 using205 liters of water per square meter for 15 minutes at a minimum O.3kPa negativepressure differential or equivalent proprietary or other internationally acceptedstandard;

• structural performance when tested to ASTM Standard E330 by uniform static airpressure at a minimum 0.5kPa for 60 seconds without permanent deformation orequivalent proprietary or other internationally accepted standard; or

• thermal performance calculated in accordance with Canadian Standards Association("CSA") Standard A440.2 to deliver a maximum of3.0 W/m2C for vision glass areasand 1.5 W/m2C for opaque areas (including framing) or equivalent proprietary orother internationally accepted standard".

[18] Unitized wall modules usually consist of three principal components: extruded pre-finished (mill, alodine, painted or anodized) aluminum frame, hardware, and infill materials.


[19] The frame is the structural component that provides support for the infill materials.Hardware consists of fasteners, gaskets & sealants used to attach or sit between the frame and theinfill materials. Infill materials include but are not limited to insulated glass units, monolithicglass, panels of various materials such as stone, granite or limestone, aluminum or galvanizedsteel back pans, insulation, terracotta tiles, ceramic tiles, thin veneer unitized bricks, louvers,grilles and photovoltaic panels. Patio or terrace doors and operable windows also are used asinfill materials.

Production Process

[20] The manufacturing process begins with the fabrication of individual module components.Aluminum extrusions in the required sizes, shapes and finishes are purchased as required foreach project. They are verified for colour and surface quality meeting the applicable standardsand to ensure they meet the specifications of the individual project for which they are destined.

[21] Thermal breaks made from non-metal materials such as PVC or Polyamide extrusions aresized and inserted into the aluminum extrusions to separate interior from exposed exteriorsections of the frame. These composite frame sections are cut to length, if required shaped andmachined to the final size of the unitized wall modules.

[22] The frame sections are then assembled. Typically the vertical mullions and horizontalframe sections are assembled using screws to connect the vertical to the horizontal framesections. Frames are typically rectangular in shape but may also be manufactured to differentshapes by use of various angles and curves.

[23] The frames are prepared for the installation of infill materials. Frame connections aresealed using various sealant such as silicone, butyl, acrylic and elastomeric sealants. Framesections are prepared by installing various types of air seal and glazing gaskets and/or glazingtapes to achieve air and water tight seals between the frame and infill materials.

[24] Once the frames have been prepared the infill materials are added. This can be done in astationary manner on a fixed assembly table or on a conveyor assembly line. The process ofinstallation into the assembled frames varies depending on the type of infill and complexity ofthe final unitized wall modules.

[25] For a typical unitized glazed wall module the following assembly/infill procedures apply:• install aluminum or galvanized steel back pans at spandrel conditions / opaque areas;• seal back pans at the perimeter to the horizontal and vertical frame sections;• install insulation boards of various thickness and materials into the backpan area. The

insulation boards typically used are mineral board and fiberglass board;• install glass panels of various thickness and assemblies into the vision and spandrel

areas;• glass panels or other infill materials are secured to frame sections mechanically using

extruded glass stops, pressure plates and caps, or are glued using structural siliconeor special structural adhesive tapes.


[26] Infill materials can vary in type, thickness, and colour. Materials include but are notlimited to insulated glass units, monolithic glass, aluminum or galvanized steel back pans,insulation, panels of metal, granite, limestone, photovoltaic, fibre reinforced or thin precastconcrete, terra cotta and ceramic tiles, thin veneer unitized bricks, louvers, grilles and fixed oroperable sun shading devices. Patio or terrace doors and operable windows are also used as infillmaterials.

[27] Once the frame assembly and installation of infill materials is completed, the assembledunitized wall modules are protected for shipment using cardboard, wood crating or steel racks.The product is then ready for shipment to the customer.

Classification of Imports

[28] Under the 2011 Customs Tariff, the goods subject to the product definition were normallyimported into Canada under the following Harmonized System (HS) classification numbers:

7610.10.00.207610.90.00.90

[29] Under the 2012 Customs Tariff, the goods subject to the product definition are normallyimported into Canada under the following HS classification numbers:

7610.10.00.207610.90.10.907610.90.90.90

[30] Certain importers may also be classifying the subject goods under the followingHS classification numbers:

6802.23.00.107005.29.00.98

[31] The HS classification numbers identified are for convenience of reference only. TheHS classification numbers include non-subject goods. Also, subject goods may fall underHS classification numbers that are not listed. Refer to the product definition for authoritativedetails regarding the subj ect goods.

LIKE GOODS

[32] Subsection 2(1) of SIMA defines "like goods", in relation to any other goods, as goodsthat are identical in all respects to the other goods, or in the absence of identical goods, goods forwhich the uses and other characteristics closely resemble those of the other goods.


[33] Unitized wall modules produced by the domestic industry compete directly for the samebuilding contracts as the unitized wall modules imported from China. The goods produced inCanada are completely substitutable with unitized wall modules produced in China. Therefore,the CBSA has concluded that unitized wall modules produced by the Canadian industryconstItute like goods to the unitized wall modules produced in China. Unitized wall modules canbe considered as a single class of goods.

THE CANADIAN INDUSTRY

[34] As previously stated, the Complainants account for a major proportion of domesticproduction of like goods.

Standing

[35] Pursuant to subsection 31 (2) of SIMA no investigation may be initiated unless:a) the complaint is supported by domestic producers whose production represents more

than fifty per cent of the total production of like goods by those domestic producerswho express either support for or opposition to the complaint; and

b) the production of the domestic producers who support the complaint representstwenty-five per cent or more of the total production oflike goods by the domesticindustry.

[36] Based on an analysis of the information provided in the complaint and letters of supportprovided by other Canadian producers, the CBSA is satisfied that the complaint is supported bydomestic producers, who represent more than 50 percent of the total production by thosedomestic producers expressing an opinion, and who represent more than 25 percent of unitizedwall modules production in Canada.

THE CANADIAN MARKET

[37] The domestic industry and the Chinese exporters sell certain unitized wall modulesthrough the same channels of distribution to both general contractors and owners of buildingprojects in Canada.

[38] The Complainants estimated the import portion ofthe Canadian market using theircommercial intelligence.

[39] The Complainant's commercial intelligence indicated that China, the Federal Republic ofGermany and the Republic of Korea are the only countries that export certain unitized wallmodules to Canada.


[40] The Complainants provided estimates respecting the Canadian market for certain unitizedwall modules. These figures are based on their own domestic sales reports, commercialintelligence and on publicly available import data.

[41] The CBSA conducted its own analysis of imports of goods based on actual import datafrom CBSA import documentation.

[42] A review of CBSA import data demonstrated a similar pattern to that provided by theComplainants with respect to subject good imports from China. However, the CBSA found thatother countries have exported unitized wall modules in addition to China, the Federal Republicof Germany and the Republic of Korea.

[43] Detailed information regarding the volume of subject imports and domestic productioncannot be divulged for confidentiality reasons. The CBSA has, however, prepared the followingtable to show the estimated import share of certain unitized wall modules in Canada.

CBSA Estimates of Import Share(By Value2

)

Country of Origin 2009 2010 2011 2012-QlChina 13% 38% 50% 22%Korea 9% 3% 1% 0%Germany 1% 1% 2% 7%USA 74% 55% 40% 48%Other Countries 3% 3% 7% 23%Total Imports 100% 100% 100% 100%

EVIDENCE OF DUMPING

[44] The Complainants allege that subject goods from China have been injuriously dumpedinto Canada. Dumping occurs when the normal value of the goods exceeds the export price toimporters in Canada.

[45] Normal value is generally based on the domestic selling price oflike goods in the countryof export where competitive market conditions exist, or on the full cost of the goods plus areasonable amount for profit.

[46] The export price of goods sold to importers in Canada is the lesser of the exporter'sselling price and the importer's purchase price, less all costs, charges, and expenses resultingfrom the expOliation of the goods.

2 Reliable importation volume was unavailable in the CBSA's import documentation so the importation sales valuewas used to create the table.


[47] The Complainants' allegations of dumping are based on a comparison of estimatednormal values of the allegedly dumped goods with estimated export prices to Canada.

[48] The CBSA's analysis of the alleged dumping is based on a comparison of the CBSA'sestimated normal values with the estimated export prices.

[49] Estimates of normal value and export price are discussed below.

Normal Value

[50] The Complainants did not have any information to perform an estimate of normal valuebased on domestic sales of like goods in China.

[51 ] Normal values were estimated by the Complainants based on the estimated costs of likegoods in China plus an amount for profits, a method similar to paragraph 19(b) of SIMA. Thereis no publicly available information on the costs in China of the input materials used in theproduction of certain unitized wall modules. Therefore, the estimated costs for input materials(aluminum extrusions, infill materials, hardware) were determined using the Complainants' owncosts. The estimated conversion costs (labor cost and general selling and administrativeexpense) for producing unitized wall modules from the input materials were based on anestimated percentage of the Complainant's conversion costs adjusted to reflect the differencesbetween the costs in China and Canada. The adjustments to the conversion costs were derivedfrom industry reports.3 The Complainants' estimated an amount for profit using a publiclyavailable annual report.4

[52] The Complainants' normal value estimates appear to be conservative and reasonable innature.

[53] The CBSA did not have any information to perform an estimate of normal value based ondomestic sales of like goods in China.

[54] The CBSA estimated normal values using a similar methodology as described above.Adjustments to the Complainants' estimates were made to the cost of aluminum extrusions,general selling and administrative expense, and the amount for profit to reflect the CBSA'sresearch.

3 Dumping Exhibit 2 (NC) - Complaint Attachment 134 Dumping Exhibit 2 (NC) - Complaint Attachment 14


Export Price

[55] The export price of goods sold to an importer in Canada is generally determined inaccordance with section 24 of SIMA as being an amount equal to the lesser of the exporter'sselling price for the goods and the price at which the importer has purchased or agreed topurchase the goods adjusting by deducting all costs, charges, and expenses, duties and taxesresulting from the exportation of the goods.

[56] The Complainants used a deductive methodology to estimate export prices, beginningwith price quotes for specific projects they were able to obtain from various sources. TheComplainants provided evidence in their complaint to support these price quotes. 5

[57] The Complainants calculated the estimated export prices by deducting amounts forestimated inland freight, ocean freight, Canadian freight and brokerage fees to arrive at anestimated FOB China factory price.

[58] The CBSA estimated the export prices using a similar methodology as used by theComplainants. Adjustments were made to the Complainants' estimates, where betterinformation was available from the CBSA's review of import documentation for items such asfreight and brokerage.

Estimated Margins of Dumping

[59] The CBSA estimated margins of dumping by deducting the CBSA's estimated exportprices from the CBSA's estimated normal values and expressing the result as a percentage of theexport price.

[60] Based on this analysis, the subject goods from China were dumped by an estimatedmargin of dumping of 12%, expressed as a percentage of export price.

MARGIN OF DUMPING AND VOLUME OF DUMPED GOODS

[61] Under section 35 of SIMA, if, at any time before the President makes a preliminarydetermination, the President is satisfied that the margin of dumping of the goods of a country isinsignificant or the actual and potential volume of dumped goods of a country is negligible, thePresident must terminate the investigation with respect to that country.

[62] Pursuant to subsection 2 (1) of SIMA, a margin of dumping ofless than 2% of the exportprice is defined as insignificant and a volume of dumped goods is considered negligible if itaccounts for less than 3% of the total volume of goods that are of the same description as thedumped goods that are released into Canada from all countries.

5 Dumping Exhibit 2 (NC) - Complaint Attachments 6-12


[63] On the basis ofthe estimated margin of dumping and the import data for the period ofJanuary 1,2010 to March 31,2012, summarized in the table below, the estimated margin ofdumping is not insignificant and the estimated volume of dumped goods is not negligible.

Estimated Margin of Dumping and Imports of Certain Unitized Wall ModulesJanuary 1,2010 to March 31, 2012

Country Estimated Share Estimated Estimated Estimatedof Total Imports Dumped Dumped Goods Margin ofby Sales Value6 Goods as % as a % of Total Dumping as a %

of Country Imports of Export PriceTotal

China 41% 100% 41% 12%Korea 1% N/A* N/A* N/A*Germany 2% N/A* N/A* N/A*USA 48% N/A* N/A* N/A*Other Countries 8% N/A* N/A* N/A*Total 100% N/A* N/A* N/A*

* NIA indicates Not Applicable.

EVIDENCE OF SUBSIDIZING

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

[65] Pursuant to subsection 2(1.6) of SIMA, a financial contribution exists where:a) practices of the government involve the direct transfer of funds or liabilities or the

contingent transfer of funds or liabilities;b) 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 notcollected;

c) the government provides goods or services, other than general governmentalinfrastructure, or purchases goods, or;

d) the government permits or directs a non-governmental body to do anything referredto in any of paragraphs (a) to (c) above where the right or obligation to do the thing is

6 The CBSA's import documentation was used to estimate the imports of subject goods during the POI. Sincereliable information on import volume was not contained in the documentation the import sales value was used asthe unit of measure.


normally vested in the government and the manner in which the nongovernmentalbody does the thing does not differ in a meaningful way from the manner in whichthe government would do it.

[66] 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 particularenterprise 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, inwhole or in part, on export performance or on the use of goods that are produced or that originatein the country of export is considered to be a prohibited subsidy and is, therefore, specificaccording to subsection 2(7.2) of SIMA for the purposes of a subsidy investigation.

[67] An enterprise, particularly a state-owned enterprise (SOE), may be considered toconstitute"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, theCBSA 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 some combination thereof.

[68] In accordance with subsection 2(7.3) of SIMA, notwithstanding that a subsidy is notspecific in law, a subsidy may also be considered specific in fact, having regard as to whether:

a) here is exclusive use of the subsidy by a limited number of enterprises;b) there is predominant use of the subsidy by a particular enterprise;c) disproportionately large amounts of the subsidy are granted to a limited number of

enterprises; andd) the manner in which discretion is exercised by the granting authority indicates that

the subsidy is not generally available.

[69] For purposes of a subsidy investigation, the CBSA refers to a subsidy that has been foundto be specific as an "actionable subsidy", meaning that it is countervailable.

[70] The Complainants alleged that the exporters of subject goods originating in China havebenefited from actionable subsidies provided by various levels of the GOC, which may includethe governments of the respective provinces in which the exporters are located and thegovernments of the respective municipalities in which the exporters are located. TheComplainants referred primarily to the CBSA's Statement of Reasons for various investigations,including Certain Aluminum Extrusions (CAE), Certain Seamless Carbon or Alloy Steel Oil andGas Well Casing (SOGWC), Certain Stainless Steel Sinks (CSSS), Certain Pup Joints (CPJ),Certain Copper Pipe Fittings (CCPF), Certain Metal Bar Grating (CMBG), Certain LaminateFlooring (CLF) and Certain Oil Country Tubular Goods (OCTG). The Complainants alsoreferenced some U.S. Department of Commerce (USDOC) Decision Memorandums on theircountervailing investigations involving China, including Coated Free Sheet Paper,Circular Welded Carbon Quality Steel Pipe and Aluminum Extrusions.


[71] Due to the scarcity of publicly available detailed information regarding subsidy programsin China, the Complainants were unable to provide exhaustive information regarding all subsidyprograms. Instead, the Complainants provided all information that was reasonably available tosupport the allegations.

Programs Being Investigated

[72] In reviewing the information provided by the Complainants and obtained by the CBSAthrough its own research, the CBSA has developed the following categories of programs andincentives that may be provided to manufacturers of the subject goods in China:

1. Special Economic Zone (SEZ) Incentives;2. Preferential Loans and Loan Guarantees;3. Grants;4. Preferential Income Tax Programs;5. Relief from Duties and Taxes on Inputs, Materials and Machinery;6. Reduction in Land Use Fees;7. Goods/Services Provided by the Government at Less than Fair Market Value;8. Equity Programs.

[73] A full listing of all 150 programs to be investigated by the CBSA may be found inAppendix 1. As explained in more detail therein, there is sufficient reason to believe that theseprograms provided by the GOC may constitute actionable subsidies and that the exporters andproducers of the subject goods may have benefited from these programs. In fact, most of theseprograms were identified and/or have been investigated by the CBSA in past countervailinginvestigations.

[74] In the case of programs where an enterprise's eligibility or degree of benefit is contingentupon export performance or the use of goods that are produced or originate in the country ofexport, such programs may constitute prohibited subsidies under SIMA.

[75] For the programs where incentives are provided to enterprises operating in specified areassuch as Special Economic Zones, the CBSA considers that these may constitute actionablesubsidies for the reason that eligibility is limited to enterprises operating in such regions or islimited to certain enterprises operating within those regions.

[76] As well, the CBSA is satisfied that there is sufficient evidence indicating that theexporters of subject goods may receive subsidies in the form of grants, preferential loans, relieffrom duties or taxes, and provision of goods and services, which provide a benefit and that arenot generally granted to all companies in China.

[77] The CBSA will investigate whether exporters of subject goods received benefits underthese programs, and whether such programs constitute actionable subsidies.


Programs Not Being Investigated

[78] The following nine alleged subsidy programs were identified by the Complainants underthe category of "Grants". These grant programs were found by the CBSA to be not relevantbecause none of the exporters of subject goods identified for this complaint were located in theregions that would allow them to qualify for these subsidy programs:

• Grant - Changzhou five major industries development special fund;• Grant - Changzhou city key supporting industry upgrading special fund;• Grant - Financial subsides from Wei Hai City Gao Cun Town Government;• Grant - Wendeng Government (Shandong);• Jiangdu City industrial economy performance award (Jiangsu);• Changzhou Qishuyan district environmental protection fund (Jiangsu);• Changzhou technology plan (Jiangsu);• Supportive fund provided by the Government of Xuyi County, Jiangsu;• Enterprise innovation award of Qishuyan District (Jiangsu).

[79] The following four alleged subsidy programs were identified by the Complainants underthe category of "Grants". Based on the CBSA's analysis, the following four programs will notform part of this investigation.

• Grant - Guaranteed Growth Fund (this program was found to be the duplicate of theprogram "Special Fund for Fostering Stable Growth of Foreign Trade");

• Local Government Deposits Funds into Bank Account (this program was found to bethe duplicate of either the program "Research & Development (R&D) Assistance" orthe program "Grants for Export Activities");

• Export Development Fund (this program was found to be the duplicate of theprogram "International Market Fund for Small and Medium Sized ExportCompanies");

• Subsidy Receivable (the CBSA believes that this program is a duplicate of otherprograms).

Conclusion

[80] Sufficient evidence is available to support the allegation that the subsidy programsoutlined in Appendix 1 are available to exporters and producers of the subject goods in China. Ininvestigating these programs, the CBSA has requested information from the GOC, exporters andproducers to determine whether the exporters and/or producers of subject goods received benefitsunder these programs, and whether these programs are "actionable subsidies" and, therefore,countervailable under SIMA.

Estimated Amount of Subsidy

[81] The Complainants stated that they were unable to determine the exact actual amounts ofsubsidy received by the Chinese exporters under each program. The complaint suggested that theamount of subsidy had to be at least equal to the difference between the estimated export priceand the estimated cost of the goods. The Complainants used a deductive methodology toestimate export prices, beginning with price quotes for specific projects obtained from various


sources7 and deducting amounts for estimated inland freight, ocean freight, Canadian freight andbrokerage fees. The cost of the goods was estimated using the estimated costs for input materials(aluminum extrusions, infill materials, hardware), which were determined using theComplainants' costs, and the estimated conversion costs (labor cost and general selling andadministrative expense) for producing unitized wall modules from the input materials. Theestimated conversion costs were based on an estimated percentage ofthe Complainant'sconversion costs adjusted to reflect the differences between the costs in China and Canada. Theadjustments to the conversion costs were derived from industry reports. 8 The amount of subsidywas estimated.by deducting the estimated export price from the estimated cost of the goods.

[82] The CBSA was unable to determine the actual amounts of subsidy received by theChinese exporters under each program. The CBSA estimated the amount of subsidy as thedifference between its estimated export prices and estimated cost of the goods. The CBSAestimated the export prices using a deductive methodology, beginning with price quotes forspecific projects that the Complainants were able to obtain from various sources. Adjustmentswere made by the CBSA to the Complainants' estimates, where better information was availablefrom the CBSA's review of import documentation, for items such as freight and brokerage. TheCBSA estimated the cost of the goods using a similar methodology as used by the Complainantsto estimate normal values. In this regards, the estimated costs for input materials (aluminumextrusions, infill materials, hardware) were determined using the Complainants' own costs. Theestimated conversion costs (labor cost and general selling and administrative expense) forproducing unitized wall modules from the input materials were based on an estimated percentageof the Complainant's conversion costs adjusted to reflect the differences between the costs inChina and Canada. The adjustments to the conversion costs were derived from industry reports.9

The Complainants' estimated an amount for profit using a publicly available annualreport. 10Adjustments to the Complainants' estimates were made by the CBSA to the cost ofaluminum extrusions and general selling and administrative expense to reflect the differencebetween the costs in China and Canada. The amount of subsidy was estimated by deducting theestimated export price from the estimated cost of the goods.

[83] The CBSA's analysis of the information indicates that subject goods imported intoCanada during the period of January 1,2010, to March 31, 2011, were subsidized and that theestimated amount of subsidy is 14% of the export price of the subject goods.

7 Dumping Exhibit 2 (NC) - Complaint Attachments 6-128 Dumping Exhibit 2 (NC) - Complaint Attachment 139 Dumping Exhibit 2 (NC) - Complaint Attachment 1310 Dumping Exhibit 2 (NC) - Complaint Attachment 14


16

AMOUNT OF SUBSIDY AND VOLUME OF SUBSIDIZED GOODS

[84] Under section 35 of SIMA, if, at any time before the President makes a preliminarydetermination, the President is satisfied that the amount of subsidy on the goods of a country isinsignificant or the actual and potential volume of subsidized goods of a country is negligible,the President must terminate the investigation with respect to the goods of that country. Undersubsection 2(1) of SIMA, an amount of subsidy of less than 1% of the export price of the goodsis considered insignificant and a volume of subsidized goods of less than 3% of the total importvolume of goods that are of the same description as the subsidized goods that are released intoCanada from all countries is considered negligible, the same threshold for the volume ofdumped goods.

[85] However, according to section 41.2 of SIMA, the President is required to take intoaccount Article 27.10 of the WTa Agreement on Subsidies and Countervailing Measures whenconducting a subsidy investigation. This provision stipulates that a countervailing dutyinvestigation involving a developing country should be terminated as soon as the authoritiesdetermine that the overall level of subsidies granted upon the product in question does notexceed 2% of its value calculated on a per unit basis or the volume of subsidized importsrepresents less than 4% of the total imports of the like product in the importing Member.

[86] SIMA does not define or provide any guidance regarding the determination of a"developing country" for purposes of Article 27.10 of the WTa Agreement on Subsidies andCountervailing Measures. As an administrative alternative, the CBSA refers to theDevelopment Assistance Committee List ofOfficial Development Assistance Recipients(DAC List of aDA Recipients) for guidance. I I As China is included in the listing, the CBSAextends developing country status to China for purposes of this investigation.

11 The Organization for Economic Co-operation and Development, DAC List ofODA Recipients as ofJanuary 1,2012, the document is available athttp://www.oecd.org/document/45/0,3746,en _2649_34447_209310 l_l_l_l_l,OO.html.


[87] The CBSA used actual import data for all countries for the period of January 1,2010, toMarch 31,2012. On the basis of this information, the volume of subsidized goods as apercentage of the volume of total imports is estimated as follows:

Estimated Amount of SubsidyJanuary 1,2010 to March 31, 2012

Country Estimated Share Estimated Estimated Estimatedof Total Imports Subsidized Subsidized Amount ofby Sales Value12 Goods as % of Goods as % of Subsidy as % of

Country Total Total Imports Export PriceChina 41% 100% 41% 14%Korea 1% N/A* N/A* N/A*Germany 2% N/A* N/A* N/A*USA 48% N/A* N/A* N/A*Other Countries 8% N/A* N/A* N/A*Total 100% N/A* N/A* N/A*

* N/A indicates Not Applicable.

[88] The volume of subsidized goods, estimated to be 41 % of total imports from all countries,is greater than the threshold of 4% and is therefore not negligible. The amount of subsidy,estimated to be 14% of the export price, is greater than the threshold of2% and is therefore notinsignificant.

EVIDENCE OF INJURY

[89] The Complainants allege that the subject goods have been dumped and subsidized andthat such dumping and subsidizing has caused and is threatening to cause material injury to theproduction of certain unitized wall modules in Canada. In support of its allegations, theComplainants provided evidence of lost sales, price erosion, price suppression, reducedprofitability, loss of market share, reduced employment, and underutilization of capacity.

Lost Sales

[90] The Complainants have provided nine examples of lost sales. 13

[91] As a result of the lost sales, detailed through documentation provided in the complaint,the Complainants allege significant lost revenues.

12 The CBSA's import documentation was used to estimate the imports of subject goods during the POI. Sincereliable information regarding import volume was not contained in the documentation the import sales value wasused as the unit of measure.13 Dumping Exhibit 2 (NC) - Complaint Attachments 38-46


[92] The Complainants maintain that these dumped and subsidized imports have been thedirect cause of the Complainants' suppressed sales volumes.

[93] The CBSA finds the Complainants' allegations oflost sales to be reasonable and wellsupported. The lost sales have been reasonably linked to the allegedly dumped and subsidizedimports.

Price Erosion and Price Suppression

[94] The Complainants provided one example of price erosion as a result of the Chinesesubject goodS. 14 One of the Complainants was forced to drop the price of its contract bid in orderto compete with subject goods. The contract was awarded to the Complainant at a lower valuethan it normally would have bid. The complaint also contains numerous other examples ofComplainants dropping their prices in order to compete with subject goods, but were ultimatelynot awarded the contracts.

[95] The Complainants' allege that due to the decrease in shipment volumes combined withincreased costs during the period, additional production costs had to be absorbed by theComplainants over fewer units produced/sold, causing increased costs per unit sold. These costincreases have not been recovered through price increases during the period due to pricesuppression as a result of the subject goods.

[96] The Complainants expect costs to continue to increase through the next 12 to 24 months,which will continue to increase the Complainants' costs per unit sold.

[97] The Complainants maintain that these dumped and subsidized imports have been thedirect cause of the Complainants' eroded and suppressed prices.

[98] The CBSA finds the Complainants' allegations of price erosion and price suppression tobe reasonable and well supported. The price erosion and price suppression have been reasonablylinked to the allegedly dumped and subsidized imports.

Reduced Profitability

[99] The Complainants have provided aggregate income statement highlights containing theirrevenue, cost of goods sold, gross margin, other costs and net income relating to the sales ofcertain unitized wall modules for 2009,2010, and 20llY

[100] The information provided by the Complainants show that their net income has decreasedsteadily from 2009 to 2011.

[101] The Complainants maintain that these dumped and subsidized imports have been thedirect cause ofthe Complainants' reduced profitability.



[102] The CBSA finds the Complainants' allegations of reduced profitability to be reasonableand well supported. The reduced profitability has been reasonably linked to the allegedlydumped and subsidized imports.

Loss of Market Share

[103] The Complainants provided a table showing the evolution of the Chinese exports and theCanadian market as a whole. 16

[104] The Complainants' information shows a rise in market share for Chinese imports from2009 to 2011. This rise in market share for Chinese imports coincided with a decrease in marketshare for the Canadian producers.

[105] The CBSA's analysis of Chinese subject goods imports in the period 2009-2011 supportsthe Complainant's position that subject goods are taking an increasing share of the Canadianmarket.

[106] The Complainants maintain that these dumped and subsidized imports have been thedirect cause of the Complainants' loss of market share.

[107] The CBSA finds the Complainants' allegations of loss of market share to be reasonableand well supported. The loss of market share has been reasonably linked to the allegedlydumped and subsidized imports.

Reduced Employment

[108] The Complainants provided a table that contains the Complainants' direct and indirectemployment for 2009, 2010 and 2011 relating to the production and sales of unitized wallmodules. 17

[109] The information provided by the Complainants show that their number of employeesrelating to unitized wall modules have decreased steadily from 2009 to 2011.

[110] The Complainants maintain that these dumped and subsidized imports have been thedirect cause of the Complainants' reduction in employment.

[111] The CBSA finds the Complainants' allegations of reduced employment to be reasonableand well supported. The reduced employment has been reasonably linked to the allegedlydumped and subsidized imports.



Underutilization of Capacity

[112] The Complainants provided a table that contains the production capacity and utilizationof all the Complainants for 2009, 2010 and 2011 18

.

[113] The information provided by the Complainants show that their capacity utilization hasdecreased steadily from 2009 to 2011.

[114] The Complainants maintain that these dumped and subsidized imports have been thedirect cause of the Complainants' decrease in capacity utilization.

[115] The CBSA finds the Complainants' allegations ofunderutilization of capacity to bereasonable and well supported. However, the CBSA believes that the underutilization ofcapacity can only be partially linked to the allegedly dumped and subsidized imports. TheCBSA's analysis ofthe information in the complaint indicates that other factors may have causedthe underutilization of capacity.

THREAT OF INJURY

[116] The Complainants' view is that demand for unitized wall modules will at best increasesomewhat in 2012 and decline in 2013. This unsteady future demand will exacerbate the injuryto the industry from the dumped and subsidized imports of subject goods and poses a threat ofinjury unless constrained.

[117] As well, there have continued to be significant increases in the domestic industry's costs.These increases will continue even as the Complainants anticipate that pricing of subject and likegoods and consequently profit margins in 2012 will decline from 2011 and continue to declineunless the dumped and subsidized imports of subject goods from China are constrained.

[118] After a review of the injury indicators in the complaint, the CBSA is of the opinion thatthere is evidence that the injury to the Canadian producers has steadily increased from 2009 to2011, and that there is a reasonable indication that the alleged dumping and subsidizing isthreatening to cause injury.

18 Dumping Exhibit 2 (NC) - Complaint Attachment 48


CAUSAL LINK - DUMPING/SUBSIDIZING AND INJURY

[119] The CBSA finds that the Complainants have sufficiently linked the injury it has sufferedto the dumping and subsidizing of subject goods imported into Canada. The injury theComplainants have suffered in terms of lost sales, price erosion, price suppression, reducedprofitability, loss of market share and reduced employment is related to the price advantage thealleged dumping and subsidizing have produced between the subject goods and the Canadianproduced goods. The Complainants also provided sufficient evidence that the continued allegeddumping and subsidizing of subject goods imported into Canada threatens to cause injury to theCanadian industry producing these goods.

[120] In summary, the information provided in the complaint has established a reasonableindication that the apparent dumping and subsidizing has caused injury and is threatening tocause material injury to the Canadian production of like goods.

CONCLUSION

[121] Based on information provided in the complaint, other available information, and theCBSA's import documentation, the President is of the opinion that there is ~vidence that certainunitized wall modules originating in or exported from China have been dumped and subsidized,and there is a reasonable indication that such dumping and subsidizing has caused or isthreatening to cause injury to the Canadian industry. As a result, based on the evidence, thePresident initiated dumping and subsidy investigations on July 16,2012.

SCOPE OF INVESTIGATION

[122] The CBSA is conducting investigations to determine whether the subject goods havebeen dumped and/or subsidized.

[123] The CBSA has requested information relating to the subject goods imported into Canadafrom China during the period of January 1,2010 to June 30, 2012, the selected period ofinvestigation for the dumping investigation. The information requested from identified exportersand importers will be used to determine normal values and export prices and ultimately todetermine whether the subject goods have been dumped.

[124] Information relating to the subject goods imported into Canada from January 1, 2010 toJune 30, 2012, the selected period of investigation for the subsidy investigation, has beenrequested from the GOC and the identified exporters. The information requested will be used todetermine whether the subject goods have been subsidized and to determine the amounts ofsubsidy.


[125] All parties have been clearly advised of the CBSA's information requirements and thetime frames for providing their responses.

FUTURE ACTION

[126] The Canadian International Trade Tribunal (Tribunal) will conduct a preliminary inquiryto determine whether the evidence discloses a reasonable indication that the alleged dumping andsubsidizing of the goods has caused or is threatening to cause injury to the Canadian industry.The Tribunal must make its decision on or before the 60th day after the date of the initiation ofthe investigations. If the Tribunal concludes that the evidence does not disclose a reasonableindication of injury to the Canadian industry, the investigations will be terminated.

[127] If the Tribunal finds that the evidence discloses a reasonable indication of injury to theCanadian industry and the CBSA investigations preliminarily reveal that the goods have beendumped and/or subsidized, the CBSA will make a preliminary determination of dumping and/orsubsidizing within 90 days after the date of the initiation of the investigations, byOctober 15,2012. Where circumstances warrant, this period may be extended to 135 days fromthe date of the initiation of the investigations.

[128] If the CBSA's investigations reveal that imports of the subject goods have not beendumped or subsidized, that the margin of dumping or amount of subsidy is insignificant or thatthe actual and potential volume of dumped or subsidized goods is negligible, the investigationswill be terminated.

[129] Imports of subject goods released by the CBSA on and after the date of a preliminarydetermination of dumping and/or subsidizing may be subject to provisional duty in an amountnot greater than the estimated margin of dumping or the amount of subsidy determined duringthe preliminary phase of the investigations.

[130] Should the CBSA make a preliminary determination of dumping and/or subsidizing, theinvestigations will be continued for the purpose of making a final decision within 90 days afterthe date of the preliminary determinations.

[131] If a final determination of dumping and/or subsidizing is made, the Tribunal will continueits inquiry and hold public hearings into the question of material injury to the Canadian industry.The Tribunal is required to make a finding with respect to the goods to which the finaldetermination of dumping and/or subsidizing applies, not later than 120 days after the CBSA'spreliminary determinations.

[132] In the event of an injury finding by the Tribunal, imports of subject goods released by theCBSA after that date will be subject to anti-dumping duty equal to the applicable margin ofdumping and countervailing duty equal to the amount of subsidy on the imported goods. Shouldboth anti-dumping and countervailing duties be applicable to subject goods, the amount of anyanti-dumping duty may be reduced by the amount of subsidy that is attributable to an exportsubsidy.


RETROACTIVE DUTY ON MASSIVE IMPORTATIONS

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

[134] Should the Tribunal issue such a finding, anti-dumping and countervailing duties may beimposed retroactively on subject goods imported into Canada and released by the CBSA duringthe period of 90 days preceding the day of the CBSA making a preliminary determination ofdumping and/or subsidizing.

[135] In respect of importations of subsidized goods that have caused injury, however, thisprovision is only applicable where the CBSA has determined that the whole or any part ofthesubsidy on the goods is a prohibited subsidy, as explained in the previous section "Evidence ofSubsidizing." In such a case, the amount of countervailing duty applied on a retroactive basiswill be equal to the amount of subsidy on the goods that is a prohibited subsidy.

UNDERTAKINGS

[136] After a preliminary determination of dumping by the CBSA, an exporter may submit awritten undertaking to revise selling prices to Canada so that the margin of dumping or the injurycaused by the dumping is eliminated. An acceptable undertaking must account for all orsubstantially all of the exports to Canada of the dumped goods.

[137] Similarly, after a preliminary determination of subsidizing by the CBSA, a foreigngovernment may submit a written undertaking to eliminate the subsidy on the goods exported orto eliminate the injurious effect of the subsidy, by limiting the amount of the subsidy or thequantity of goods exported to Canada. Alternatively, exporters with the written consent oftheirgovernment may undertake to revise their selling prices so that the amount of the subsidy or theinjurious effect of the subsidy is eliminated.

[138] Interested parties may provide comments regarding the acceptability of undertakingswithin nine days of the receipt of an undertaking by the CBSA. The CBSA will maintain a list ofparties who wish to be notified should an undertaking proposal be received. Those who areinterested in being notified should provide their name, telephone and fax numbers, mailingaddress and e-mail address, if available, to one of the officers identified in the "Information"section of this document.


[139] If an undertaking were to be accepted, the investigations and the collection of provisionalduty would be suspended. Notwithstanding the acceptance of an undertaking, an exporter mayrequest that the CBSA's investigations be completed and that the Tribunal complete its injurymqUIry.

PUBLICATION

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

INFORMATION

[141] Interested parties are invited to file written submissions presenting facts, arguments, andevidence that they feel are relevant to the alleged dumping and subsidizing. Written submissionsshould be forwarded to the attention of one of the officers identified below.

[142] To be given consideration in this phase of these investigations, all information should bereceived by the CBSA by August 23,2012.

[143] Any information submitted to the CBSA by interested parties concerning theseinvestigations is considered to be public information unless clearly marked "confidential." Wherethe submission by an interested party is confidential, a non-confidential version of thesubmission must be provided at the same time. This non-confidential version will be madeavailable to other interested parties upon request.

[144] Confidential information submitted to the President will be disclosed on written requestto independent counsel for parties to these proceedings, subject to conditions to protect theconfidentiality of the information. Confidential information may also be released to the Tribunal,any court in Canada, or a WTOINAFTA dispute settlement panel. Additional informationrespecting the Directorate's policy on the disclosure of information under SIMA may be obtainedby contacting one of the officers identified below or by visiting the CBSA's Web site.

[145] The investigation schedules and a complete listing of all exhibits and information areavailable at http://www.cbsa-asfc.gc.calsima-Imsi/i-e/menu-eng.html. The exhibits listing will beupdated as new exhibits and information are made available.


[146] This Statement ofReasons has been provided to persons directly interested in theseproceedings. It is also posted on the CBSA's Web site at the address below. For furtherinformation, please contact the officers identified as follows:

Mail: SIMA Registry and Disclosure UnitAnti-dumping and Countervailing DirectorateCanada Border Services Agency100 Metcalfe Street, 11 th floorOttawa, ON KIA OL8Canada

Telephone:

Fax:

Dean PollardRobert Wright

613-948-4844

613-954-7410613-954-1643

E-mail:

Website:

[email protected]

http://www.cbsa-asfc.gc.calsima-Imsi/i-e/menu-eng.html

Caterina Ardito-ToffoloA/Director General



APPENDIX 1 - DESCRIPTION OF IDENTIFIED PROGRAMS AND INCENTIVES

Evidence provided by the Complainant or otherwise available to the CBSA suggests that theGovernment of China may have provided support to manufacturers of subject goods in thefollowing manner. For purposes of this investigation, "Government of China" (GOC) refers to alllevels of government, i.e. federal, central, provincial/state, regional municipal, city, township,village, local, legislative, administrative or judicial. Benefits provided by state-ownedenterprises, which possess, exercise or have been vested with governmental authority may alsobe considered to be provided by the GOC for purposes of this investigation.

I. Special Economic Zone (SEZ) Incentives

Program 1:

Program 2:

Program 3:Program 4:Program 5:

Program 6:

Program 7:

Program 8:

Program 9:

Program 10:

Program 11:

Preferential Tax Policies for Enterprises with Foreign Investment (FIEs)Established in Special Economic Zones (SEZs) (excluding ShanghaiPudong Area)Preferential Tax Policies for FIEs Established in the Coastal Economic OpenAreas and in the Economic and Technological Development ZonesPreferential Tax Policies for FIEs Established in the Pudong Area of ShanghaiPreferential Tax Policies in the Western RegionsCorporate Income Tax Exemption and/or Reduction in SEZs and otherDesignated AreasLocal Income Tax Exemption and/or Reduction in SEZs and other DesignatedAreasExemption/Reduction of Special Land Tax and Land Use Fees in SEZs andOther Designated AreasTariff and Value-added Tax (VAT) Exemptions on Imported Materials andEquipment in SEZs and other Designated AreasIncome Tax Refunds where Profits are Re-invested in SEZs and other DesignatedAreasPreferential Costs of Services and/or Goods Provided by Government or Stateowned Enterprises (SOEs) in SEZs and Other Designated AreasVAT Exemptions for the Central Region

II. Preferential Loans and Loan Guarantees

Program 12: Loans and Interest Subsidies Provided Under the Northeast RevitalizationProgram

Program 13: Export Seller's Credit for High- and New-Technology Products by China EMIXBank

Program 14: Preferential Loan for the National/Provincial key Science & TechnologyIndustrialization Projects, High Technology Industrialization Projects,Science & Technology Achievements Commercialization Projects,Modern Equipment Manufacturing Industry and key Information TechnologyIndustrialization Projects by Liaoning Governments


III. Grants

Program 15:Program 16:Program 17:Program 18:Program 19:Program 20:Program 21:

Program 22:Program 23:Program 24:Program 25:Program 26:Program 27:Program 28:

Program 29:Program 30:Program 31:Program 32:Program 33:Program 34:Program 35:Program 36:Program 37:Program 38:Program 39:Program 40:Program 41:Program 42:Program 43:Program 44:Program 45:Program 46:Program 47:Program 48:Program 49:Program 50:Program 51:Program 52:


Repaying Foreign Currency Loan by Returned VATGovernment Export Subsidy and Product Innovation SubsidyExport Assistance GrantResearch & Development (R&D) Assistance GrantInnovative Experimental Enterprise GrantSuperstar Enterprise GrantAwards to Enterprises Whose Products Qualify for "Well-Known Trademarks ofChina" or "Famous Brands of China"Export Brand Development FundProvincial Scientific Development Plan FundTechnical Renovation Loan Interest Discount FundVenture Investment Fund of Hi-Tech IndustryNational Innovation Fund for Technology Based FirmsGuangdong - Hong Kong Technology Cooperation Funding SchemeGrants for Encouraging the Establishment of Headquarters and RegionalHeadquarters with Foreign InvestmentInnovative Small and Medium-Sized Enterprise GrantsProduct Quality Grant2009 Energy-saving FundEnergy-Saving Technique Special FundGrants to Privately-Owned Export EnterprisesGrants for Export ActivitiesGrants for International CertificationEmission Reduction and Energy-saving AwardGrant for Market Promotion and Trade DevelopmentRefund of Land Transfer FeeGrant - Assistance for Exhibition Booth FeesGrant - Patent Application AssistanceGrant - State Service Industry Development FundGrant - Ecological Garden Enterprise RewardGrant - Municipal Construction RewardGrant - Cleaning-production Qualified Enterprise RewardGrant - Provisional Industry Promotion Special FundGrant - Jiangsu Province Finance Supporting FundGrant - Water Pollution Control Special Fund for Taihu LakeGrant - Provincial Foreign Economy and Trade Development Special FundGrant - Subsidy from Water Saving OfficeGrant - Insurance Expense CompensationGrant - Industrial Science and Technology Breakthrough Special FundGrant - Special Supporting Fund for Commercialization of Tec1mologicalInnovation and Research FindingsGrant - Policy on Value-added Tax for Recyclable ResourcesGrant - Large Taxpayer AwardGrant - Resources Conservation and Environment Protection Grant


Program 56:Program 57:Program 58:Program 59:Program 60:Program 61:Program 62:Program 63:Program 64:Program 65:Program 66:

Program 67:

Program 68:Program 69:

Program 70:

Program 71:Program 72:Program 73:Program 74:

Program 75:Program 76:Program 77:Program 78:Program 79:

Program 80:

Program 81:

Program 82:


Program 88:

Program 89:

Environment Protection Award (Jiangsu)Enterprise Technology CentersAllowance to Pay Loan InterestSupporting fund for non-refundable export tax lossInternational market fund for export companiesInternational market fund for small and medium sized export companiesBusiness Development Overseas Support FundRefund from Government for Participating in Trade FairGrant - Special Fund for Fostering Stable Growth of Foreign TradeThe State Key Technology Renovation ProjectsReimbursement of Anti-dumping and/or Countervailing Legal Expenses by theLocal GovernmentsFinancial Special Fund for Supporting High and New Technology IndustryDevelopment ProjectSubsidy for Promoting Energy-saving BuildingsSpecial Fund for the Key Projects in the Cultural Innovation Industry by ShunyiDistrict Local GovernmentSpecial Fund for the Technology Innovation by Niu Lan Shan Township LocalGovernmentSubsidy for the Technology DevelopmentAwards for the Contributions to Local Economy and Industry DevelopmentBeijing Industrial Development FundGrants, Loans, and Other Incentives for Development of Famous Brands, ChinaTop World Brands or other well-known BrandsShunde Famous BrandsGuangdong Supporting Fund"Five Points, One Line" Program of Liaoning ProvinceState Special Fund for Promoting Key Industries and Innovation TechnologiesFund for SME (small and medium size enterprises) Bank-Enterprise CooperationProjects by Guangdong GovernmentsSpecial Fund for Significant Science and Technology by GuangdongGovernmentsFund for Economic, Scientific and Technology Development by the Governmentof Foshan CityProvincial Fund for Fiscal and Technological Innovation by GuangdongGovernmentsProvincial Loan Discount Special Fund for SMEs by Guangdong Governments"Large and Excellent" Enterprises GrantAdvanced Science/Technology Enterprise GrantAward for Excellent EnterpriseFoshan City Government Technology Renovation and Technology InnovationSpecial Fund GrantsNanhai District Grants to State and Provincial Enterprise Technology Centers andEngineering Technology R&D CentersSupporting Fund for the Projects Used to Resolve the Important TechnologicalIssues for Enterprises' Production and R&D by Liaoning Governments


Program 90:

Program 91:

Program 92:

Program 93:


Program 99:




Program 108:


Program 111:

Program 112:Program 113:Program 114:Program 115:



Technology Innovation Fund for Science & Technology Type SMEs by LiaoningGovernmentsSupporting Fund for the Application Technology Research in the Overseas R&DInstitution/Branch by Liaoning GovernmentsSpecial Supporting Fund and Special Loan Assistance by Chinese Ministry ofScience & Technology for revitalizing the Northeast old industrial baseSpecial Supporting Fund for Key Projects of "500 Strong Enterprises inContemporary Industries" by Guangdong GovernmentsFund for Supporting Strategic Emerging Industries by Guangdong GovernmentsMedium Size and Small Size Enterprises Development Special FundMedium Size and Small Size Trading Enterprises Development Special FundSpecial Fund for Export Credit Insurance by Guangdong GovernmentsIndustrial Development Supporting Fund to Key Projects by Shunyi District LocalGovernmentsSupporting Fund for Converting the Industry Technology Achievements/Findingsby Beijing GovernmentsSpecial Development Fund for Beijing Cultural Innovation IndustrySupporting Fund for Becoming Publicly Listed CompanySupporting Fund for Constructing Energy-saving Projects by Niu Lan Shan·Township Local GovernmentsSupporting Fund for the "Working Capital" Loan InterestSupporting Fund for "Information-Technology Application" DemonstrationEnterprises by Niu Lan Shan Township Local GovernmentsSupporting Fund for the Lab by Niu Lan Shan Township Local GovernmentsBrand Development Fund by Shunyi District Local GovernmentsSupporting Fund to Encourage Outwards Development by Niu Lan ShanTownship Local GovernmentsSupporting Fund for the Investments on Key Projects by Niu Lan Shan TownshipLocal GovernmentsAward by Niu Lan Shan Township Local GovernmentsSupporting Fund for the Research of the Key Fire-proofing and Sound-proofingTechnology for Curtain Wall by Beijing GovernmentsLoan Subsidy for the Curtain Wall Technology Renovation Projects by BeijingGovernmentsAward for Maintaining the Growth by Beijing GovernmentsAward by Beijing Technology Trading Encouraging CentreAward by Shunyi District Science and Technology CommitteeSupporting Fund for the New Energy-saving Curtain Wall TechnologyRenovation Project by Shanghai Songjiang Economic CommitteeAward by Shanghai Songjiang Economic CommitteeSupporting Fund for Science and Technology Expenses by Zengcheng LocalGovernmentsSupporting Fund for the Development from Guangzhou Local GovernmentsInterest Assistance for Technology Renovation Projects by LiaoningGovernments


Program 120: Interest Assistance for the Application ofInformation Technology by LiaoningGovernments

Program 121: Loan Guarantee Fund for Science & Technology Enterprises by LiaoningGovernments

Program 122: Fund for Optimizing Import and Export Structure of Mechanical Electronics andHigh and New Technology Products

Program 123: Special Fund for Pollution Control of Three Rivers, Three Lakes, and theSonghua River

IV. Preferential Income Tax Programs Relief from Duties and Taxes on Inputs

Program 124: Reduced Tax Rate for Productive FIEs Scheduled to Operate for a PeriodNot Less Than lOYears

Program 125: Tax Preference Available to Companies that Operate at a Small Profit.Program 126: Preferential Tax Policies for Foreign Invested Export EnterprisesProgram 127: Preferential Tax Policies for FIEs which are Technology Intensive and

Knowledge IntensiveProgram 128: Preferential Tax Policies for the Research and Development ofFIEsProgram 129: Preferential Tax Policies for FIEs and Foreign Enterprises Which Have

Establishments or Places in China and are Engaged in Production or BusinessOperations Purchasing Domestically Produced Equipment

Program 130: Preferential Tax Policies for Domestic Enterprises Purchasing DomesticallyProduced Equipment for Technology Upgrading Purpose

Program 131: Income Tax Refund for Re-investment of FIE Profits by Foreign InvestorsProgram 132: VAT and Income Tax Exemption/Reduction for Enterprises Adopting

Debt-to-Equity SwapsProgram 133: Corporate Income Tax Reduction for New High-Technology Enterprises

V. Materials and Machinery

Program 134: Income Tax Credits on Purchases of Domestically Produced EquipmentProgram 135: Preferential Tax Programs for Encouraged Industries or ProjectsProgram 136: Exemption from City Maintenance and Construction Taxes and Education Fee

Surcharges for FIEsProgram 137: Preferential Tax Program for FIEs Recognized as HNTEs (High and New

Technology Enterprises)Program 138: Tax Offset for R&D Expenses in Guangdong ProvinceProgram 139: Accelerated Depreciation on Fixed AssetsProgram 140: Preferential Tax Treatment for the Technology Development Expenses by

Liaoning GovernmentsProgram 141: Accelerated Depreciation on Intangible Assets for Industrial Enterprises in

Northeast RegionProgram 142: Exemption of Tariff and Import VAT for the Imported Technologies and

EquipmentProgram 143: Relief from Duties and Taxes on Imported Material and Other Manufacturing

Inputs


VI. Reduction in Land Use Fees

Program 144: Reduction in Land Use Fees, Land Rental Rates and Land Purchase PricesProgram 145: Deed Tax Exemptions for Land Transferred through Merger or Restructuring

VII. Goods/Services Provided by the Government at Less than Fair Market Value

Program 146: Raw Materials Provided by the Government at Less than Fair Market ValueProgram 147: Utilities Provided by the Government at Less than Fair Market ValueProgram 148: Acquisition of Government Assets at Less than Fair Market Value

VIII. Equity Programs

Program 149: Debt to Equity SwapsProgram 150: Exemptions for SOEs from Distributing Dividends to the State

Determinations of Subsidy and Specificity

Available information indicates that the programs identified under: SEZ and Other DesignatedAreas Incentives; Preferential Loans; Preferential Income Tax Programs; Relieffrom Dutiesand Taxes on Materials and Machinery; and Reduction in Land Use Fees, may constitute afinancial contribution pursuant to paragraph 2(1. 6) (b) of SIMA, in that amounts that wouldotherwise be owing and due to the government are reduced and/or exempted, and would confer abenefit to the recipient equal to the amount of the reduction/exemption.

Grants and Equity Programs may constitute a financial contribution pursuant toparagraph 2(l.6)(a) of SIMA in that they involve the direct transfer of funds or liabilities or thecontingent transfer of funds or liabilities; and pursuant to paragraph 2 (1. 6)(b) of SIMA asamounts owing and due to the government that are forgiven or not collected.

Goods/Services Provided by Government at Less than Fair Market Value may constitute afinancial contribution pursuant to paragraph 2(1. 6)(c) of SIMA as they involve the provision ofgoods or services, other than general governmental infrastructure.

Benefits provided to certain types of enterprises or limited to enterprises located in certain areasunder program categories: SEZ and Other Designated Areas Incentives; Preferential Loans;Preferential Income Tax Programs; Relieffrom Duties and Taxes on Materials and Machinery;and Reduction in Land Use Fees, may be considered specific pursuant to paragraph 2(7.2)(a) ofSIMA.

As well, Grants, Equity Programs and Goods/Services Provided by Government at Less thanFair Market Value may be considered specific pursuant to subsection 2(7.3) of SIMA in that themanner in which discretion is exercised by the granting authority indicates that the subsidy maynot be generally available.


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