Conclusion of normal value review: Oil country tubular goods, Shandong Continental Petroleum Equipment Co. Ltd
The Canada Border Services Agency (CBSA) has concluded a normal value review to determine normal values, export prices and amount of subsidy applicable to certain oil country tubular goods (OCTG) specific to insulated tubing (IT) and vacuum insulated tubing (VIT) exported from China to Canada by Shandong Continental Petroleum Equipment Co. Ltd. (Shandong Continental).
The review follows the CBSA’s amended scope ruling made on November 26, 2021, regarding IT/VIT and is part of the CBSA’s enforcement of the Canadian International Trade Tribunal’s (CITT) order, respecting the dumping and subsidizing of certain OCTG from China, 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 order are contained in Appendix 1.
Period of investigation
The period of investigation (POI) for the normal value review was from September 6, 2019 to November 30, 2021.
Normal value review process
At the initiation of the normal value review, the CBSA sent requests for information (RFIs) to Shandong Continental, the Government of China (GOC) and an importer in order to solicit information for purposes of determining normal values, export prices, amount of subsidy and subjectivity applicable to IT/VIT exported to Canada by Shandong Continental.
Shandong Continental submitted a response on January 31, 2022 that was substantially complete. Furthermore, Shandong Continental responded adequately to a supplemental request for information (SRFI).
Shandong Meshine Thermal Tech Co., Ltd. (Shandong Meshine) and Zibo Freet Thermal Tech Co., Ltd. (Zibo Freet), IT/VIT producers, also submitted substantially complete responses to the dumping and subsidy RFIs and responded adequately to SRFIs.
The importer, Continental Steel Corporation (CSTL), submitted a response to the Importer RFI on January 21, 2022 that was substantially complete and responded adequately to all SRFIs.
During the course of the review, Shandong Continental, CSTL, Western Alliance Tubulars Ltd. (WAT), the sole Canadian producer of IT/VIT, and two IT/VIT end-users in Canada (Cenovus Energy Inc. and Canadian Natural Resources Ltd.) all responded to the subjectivity RFI. Other interested parties who participated in two other concurrent proceedings involving IT/VIT from China also responded to the subjectivity RFI.
The GOC did not respond to the CBSA’s government subsidy RFI.
A case brief and reply submission were submitted by counsel on behalf of WAT. Counsel on behalf of Shandong Continental, CSTL and Shandong Meshine submitted a joint case brief and reply submission.
The main issue raised in the comments of the case brief concerned the subjectivity of IT/VIT to the OCTG1 finding.
Based on the information on the administrative record, it was found that IT/VIT imported by CSTL during the POI were subsequently sold to IT/VIT end-users in Canada after importation, and all of the imported IT/VIT were exclusively used for steam injection in injection wells in steam-assisted gravity drainage (SAGD) operations in Canada. Counsel for Shandong Continental and CSTL provided supporting documentation and submitted that only API 5CT tubing (not IT/VIT) was used in production wells to convey fluid to the surface.
Counsel for Shandong Continental and CSTL also argued that IT/VIT imported by CSTL were casing products according to the dimension and other characteristics of the imported IT/VIT, therefore, they are not subject to the CITT’s OCTG1 finding.
Counsel for WAT argued that IT/VIT is used in downhole wells to convey fluids and thus meets the functional definition of tubing, regardless of outside diameter (OD), and submitted that “it would be incorrect and contrary to the CITT’s finding to create a distinction between tubing and casing based on OD”. Counsel for WAT further submitted that IT/VIT meets the API specification 5CT mechanical, dimensional and chemical characteristics and thus meets the OCTG1 definition.
In its decision in Appeals No. EA-2019-006 and EA-2019-007, issued on September 2, 2021, the CITT found that “the goods in issue are of the same description as goods subject to the Tribunal’s finding in OCTG I”. As a result, the CBSA is of the opinion that all IT/VIT within an OD of 2 3/8 inches to 13 3/8 inches (60.3 mm to 339.7 mm) is subject to the OCTG1 finding.
Normal values, export prices and amount of subsidy
Specific normal values and an amount for subsidy for future shipments of IT/VIT have been determined for Shandong Continental. An amount of subsidy has also been determined for Shandong Meshine and Zibo Freet. These normal values and amount of subsidy are effective today, December 2, 2022, and anti-dumping and/or countervailing duties may be applicable retroactively on subject IT/VIT originating in or exported from China on or after September 6, 2019, the date of the original scoping ruling and where the conditions described below in the “Exporter Responsibility” section are met.
Where section 20 conditions exist, the CBSA normally determines normal values using the selling price, or the total cost and profit, of like goods sold by producers in a surrogate country pursuant to paragraph 20(1)(c) of SIMA. Alternatively, normal values may be determined under paragraph 20(1)(d) of SIMA, on a deductive basis starting with an examination of the prices of imported goods sold in Canada, from a surrogate country.
A Surrogate Producer RFI was sent to all known IT/VIT producers in surrogate countries at the initiation of the review, however, none of the identified surrogate producers provided a response. As such, sufficient information was not available in this normal value review to determine normal values under these provisions. As a result, normal values were determined under a ministerial specification, pursuant to section 29 of SIMA.
Since both inner and outer pipes used to make IT/VIT are OCTG, the CBSA determined the normal values for IT/VIT based on the normal values of the inner and outer OCTG. The OCTG normal values are based on pricing and costing data from OCTG exporters/producers in surrogate countries, as determined in the most recent proceeding related to these goods (OCTG 2022 RI) which concluded on September 6, 2022.
During the POI, all of the IT/VIT exported by Shandong Continental were sold to CSTL, a related importer. Due to the relationship between the parties, 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 reliability test revealed that the export prices in accordance with section 24 of SIMA were unreliable and, therefore, export prices were determined in accordance with section 25 of SIMA.
The GOC did not respond to the CBSA’s Government Subsidy RFI, which limited the CBSA’s ability to determine the amount of subsidy in the prescribed manner as the required information relating to financial contribution, benefit and specificity was not provided. It also limited the CBSA’s ability to determine whether producers or other suppliers of goods and services are public bodies. Therefore, subsidy amounts were determined pursuant to subsection 30.4(2) of SIMA, based on a ministerial specification.
In consideration of the fact that the exporter and IT/VIT producers provided sufficient information in response to their Subsidy RFI, individual amount of subsidy were determined based on the information provided in response to the Subsidy RFI and obtained through additional SRFIs. The amount of subsidy determined for Shandong Continental is 9.97 RMB per metric tonne. The amount of subsidy determined for Shandong Meshine and Zibo Freet are 9.63 RMB per metric tonne and 26.61 RMB per metric tonne, respectively.
The normal values and amount of subsidy 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 normal value review, regardless of the date that the requests were received. The normal values and amount of subsidy determined as a result of this review may be applied retroactively on subject IT/VIT originating in or exported from China released from the CBSA on or after September 6, 2019, the date of the original scoping ruling. Retroactive assessments may also be applied in the future where the conditions described below are met.
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 and/or countervailing 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 and/or countervailing duty liability, importers should contact the exporters to obtain the applicable normal values and amount of subsidy. 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 and countervailing 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. Such a request must be received within 90 days from the making of the determination in the form and manner outlined in Memorandum D14-1-3, Procedures for making a request for a re-determination or an appeal of goods under the Special Import Measures Act.
Source: Canada Border Services Agency (CBSA)
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