A-272 A-272

CANADA BORDER SERVICES AGENCY

NON-CONFIDENTIAL COMPLAINT

The Dumping and Subsidizing of Certain Welded Large Diameter Carbon and Alloy Steel Line Pipe Originating in or Exported from The People's Republic of China and the Dumping of Certain Welded Large Diameter Carbon and Alloy Steel Line Pipe Originating in or Exported from Japan

Submitted By: EVRAZ Inc. NA Canada

February 5, 2016

CASSIDY LEVY KENT (CANADA) LLP Suite 1470, 55 Metcalfe Street Ottawa, Ontario KIP 6L5 Tel: (613)368-4170 Fax: (613) 368-4171

Christopher J. Kent Christopher J. Cochlin Christopher R.N. McLeod Michael Milne Hugh Seong Seok Lee Susana May Yon Lee

Solicitors for EVRAZ Inc. NA Canada

NON-CONFIDENTIAL

Table of Contents

1. Identification of the Complainant ...... !

2. Imported Goods ...... 2

A. Product Description ...... 2

B. Product Characteristics and Product Use ...... 2

C. Production Process ...... 4

D. Tariff Classification ...... 7

E. Countries of Export ...... 7

F. Known Exporters ...... 7

G. Known Canadian Importers ...... 9

H. Marketing and Distribution ...... 9

3. Domestic Like Goods ...... ! 0

4. Single Class of Like Goods ...... ! I s. The Canadian Industry ...... 11

6. Dumping ...... 11

A. Introduction ...... I I

B. Section I9 Nonnal Value Analysis ...... I2

I. China ...... I2

11. Japan ...... I4

c. Section 20 Nonnal Value Analysis ...... l6

I. China as a Non-Market Economy ...... I 6

ii. Surrogate Nonnal Value ...... 28

D. Export Price ...... 29 NON-CONFIDENTIAL

E. Margins of Dumping ...... 30

7. Subsidization ...... 31

8. Demonstrating lnjury ...... 31

A. Injury ...... } I

l. Volume Effects of Dumped and Subsidized Imports ...... 32

11. Undercutting, Depression and Suppression ofPrices ...... 33

lll. Impact of Subject Goods on the State of the Domestic lndustry ...... 36

IV. Additional Evidence of Causation: Account-Specific Allegations ...... 39

v. Summary ...... 39

B. Threat of Injury ...... 40

l. Significant Rate of Increase in Imports of Subject Goods ...... 41

11. The Domestic Industry Currently is Particularly Vulnerable to Imports of Subject Goods ...... 43

111. Japan and China have Freely Disposable and Growing Capacity, which will Encourage Exports of Dumped and Subsidized Goods to Canada ...... 46

iv. Market Conditions will Encourage Increased Exports to Canada ...... 51

v. The Government of China and Japan Actively Encourage Exports of Dumped and Subsidized Subject Goods to Relieve Excess Capacity ...... 51

vi. Potential Impact of the Subject Goods on the Prices of the Like Goods ...... 58

vii. The Imposition of Antidumping or Countervailing Measures by the Authorities of a Country other than Canada ...... , ...... 59

viii. The Magnitude of the Dumping and Subsidization ...... 61

ix. Conclusion ...... 62

9. Conclusion ...... 62

1. Introduction: Line Pipe from China is Subsidized ...... 64

2. Provision of Goods and Services at Less Than Fair Market Value by the GOC ...... 66

11 NON-CONFIDENTIAL

A. Provision of Goods and Services, and Purchase of Goods by the State-owned enterprises ("SOEs") at Less Than Fair Market Value ...... 66

1. Provision of Steel Inputs by the SOEs at Less than Fair Market Value ...... 69

B. Provision of Land and/or Land Use Rights for Less Than Adequate Remuneration ..... 72

ii. Provision of Land for Less Than Adequate Remuneration Within the Economic and Technology Development Zone for Less Than Adequate Remuneration ...... 72

iii. Provision of Land for Less Than Adequate Remuneration by Jiangsu Province ...... 74

iv. Provision of Land tor Less Than Adequate Remuneration within the Wuxi High-tech Development Zone ...... 75

C. Provision of Electricity at Less Than Fair Market Value ...... 76

D. Provision of Government Assets at Less Than Fair Market Value through Privatization ...... 78

3. Preferential Loans Provided by the GOC and State-owned Banks ("S0Bs") ...... 80

A. Preferential Loans and Financing Provided by the GOC through the SOBs ...... SO

B. Export Seller's Credit Provided by the Export-Import Bank of China ...... 85

C. Export Buyer's Credit Provided by the Export-Import Bank ofChina ...... 87

D. Import Credit Provided by the Export-Import Bank ofChina ...... 88

E. Onlending Support Provided by the Export-Import Bank of China through Loan Guarantees or Loan Repayment...... 89

F. Trade Financing Services Provided by the Export-Import Bank ofChina ...... 90

G. Preferential Loans and Other Financial Services Provided by the Export-Import Bank "Going-out" for Outbound Investments ...... 91

H. Discounted Loans for Export-oriented Enterprises ...... 93

4. Preferential Export Guarantee and Insurance Provided by the GOC ...... 94

A. Export Guarantees Provided by the GOC ...... 94

B. Preferential Export Credit Insurance Provided by the China Export and Credit Insurance Corporation, Including Grants Provided by the GOC to Cover Export Credit Insurance Fees.95

111 NON-CONFIDENTIAL

5. Debt-to-equity Swaps by China's Asset Management Companies ...... 98

6. Debt Forgiveness by the GOC ...... ! 00

7. Income Tax Benefits Provided by the GOC ...... IOI

A. Preferential Income Tax Benefits for Foreign Invested Enterprises ...... ! 01

v. Income Tax Reduction for F!Es Designated as HNTEs and Located in Designated Areas ...... 102

v1. Reduced Tax Rate for Productive F!Es Scheduled to Operate for a Period not Less Than Ten Years ...... I 03

vii. Income Tax Refund for Re-investment of FIE Profits by Foreign Investors ...... 104

viii. Preferential Tax Policies for Foreign Invested Export Enterprises ...... 105

IX. Preferential Tax Policies for the R&D of F!Es ...... l 06

x. FIEs and Foreign Enterprises which have Establishments or Places in China and are Engaged in Production or Business Operations Purchasing Domestically Produced Equipment ...... I 06

xi. Preferential Tax Policies for Enterprises with F!Es Established in Special Economic Zones ("SEZs") Excluding Shanghai Pudong Area ...... ! 07

xii. Preferential Income Policies for F!Es Established in Open Coastal Cities or SEZs in Old Urban Cities ...... ! 08

xiii. Preferential Income Policies for Technology Intensive or Knowledge Intensive FIEs Established in Open Coastal Cities or SEZs in Old Urban Cities ...... ! 09

xiv. Local Income Tax Exemptions and Reductions in SEZs and Other Designated Areas ...... 11 0

B. Other Preferential Income Tax Policies Provided by theN ational Govemment...... lll

xv. Income Tax Reductions for the Enterprises Designated as "High and New Technology Enterprises" ...... 111

xvi. Preferential Tax Policies for Domestic Enterprises Purchasing Domestically Produced Equipment for Technology Upgrading Purpose ...... 112

xv11. Preferential Tax Policies for F!Es Established in the Pudong Area of Shanghai .. 113

IV NON-CONFIDENTIAL

xvu1. Income Tax Refund Where Profits Re-invested in SEZs and Other Designated Areas of Guangdong Province ...... 114

xix. Preferential Tax Policies in the Western Region ...... 115

C. Preferential Income Tax Policies Provided by Sub-national Governments ...... 116

xx. Income Tax Refund for Enterprises Located in Tianjin Jinnan Economic Development Area ...... 117

xxi. Accelerated Depreciation on Fixed Assets in Binhai New Area ofTianjin ...... 118

8. Exemption or Reduction of Indirect Taxes and Other Governmental Charges and Fees ...... 119

A. Value-added Tax ("VAT") Reduction and Exemption for Recycled Products ...... 120

B. VAT Retltnds under the Foreign Trade Development Fund Program ...... I 2 I

C. Exemption of Tariff and Import VAT for the Imported Technologies and Equipment ...... 122

D. VAT Exemptions for State-authorized Enterprise Technical Centers ...... 123

E. VAT Refunds for FIEs Purchasing Domestically-Produced Equipment ...... 123

F. Import tariff and VAT exemptions for F!Es and certain domestic enterprises using imported equipment in encouraged industries ...... 124

G. VAT and Income Tax Exemption/Reduction for Enterprises Adopting Debt-to-Equity Swaps ...... 126

H. Tariff and Value-added Tax (VAT) Exemptions on Imported Materials and Equipment in SEZs and other Designated Areas Located in Guangdong Province ...... 126

I. VAT Exemptions for Central Region ...... I 27

J. Refund of Land Transfer Fees ...... 128

K. Exemption of Local Miscellaneous Taxes for F!Es ...... 128

9. Grants Provided by the National and Sub-national Authorities in of the GOC ...... 129

A. Grants for Funding Research. Science and Technology Related Activities ...... 129

XXII. R&D Assistance Grant ...... 130

v NON-CONFIDENTIAL

xxm. National Innovation Fund for Technology Based Firms ...... 131

xxiv. Provincial Scientific Development Plan Fund ...... 131

xxv. Special Supporting Fund for Commercialization of Technological Innovation and Research Findings ...... l32

XXVI. Venture Investment Fund of Hi-tech Industry ...... 133

xxv11. National High-Tech R&D Program (Also Known as the 863 Program) ...... 133

B. Export Promotion Grants ...... 134

xxvm. Export Assistance Grant...... l35

xxix. Export Brand Development Fund ...... 136

xxx. Grants for Export Activities ...... l3 7

xxxi. Grants for Top Ten Privately-owned Export Enterprises of Tianjin for the Year of 2008 ...... 137

xxxii. Local and Provincial Government Reimbursement Grants on Export Credit Insurance Fees ...... 13 8

xxxiii. Special Fund for Fostering Stable Growth of Foreign Trade ...... 138

xxxiv. Liaoning High-Tech Products & Equipment Export Interest Assistance ...... l39

C. Environmental Grants ...... 140

xxxv. Emission Reduction and Energy-saving Award ...... 140

xxxv1. 2009 Energy-saving Fund in Jiangsu Province ...... 141

xxxvn. Environment Protection Award in Jiangsu Province ...... 141

xxxviii. 2007 and 2008 Energy-saving Grant in Changzhou City ...... 142

xxxix. Water Saving Enterprise ...... l43

D. Other Grants ...... l43

xl. Innovative SME Grants ...... 143

xli. Allowance to Pay Loan Interest in Support of Small and Medium Sized Businesses .145

Vl NON-CONFIDENTIAL

xlii. Enterprise Innovation Award ofQishuyan District ...... l45

xliii. Jiangdu City Industrial Economy Performance Award ...... 146

xliv. Gaocun Government Grant ...... l47

xl v. Wend eng Government Grant ...... 14 7

xlvi. Grant for key enterprises in equipment manufacturing industry of Zhongshan .... 148

xlvii. Superstar or Famous Enterprise Grant...... l49

xlviii. Awards to Enterprises Whose Products Qualify for "Well-Known Trademarks of China" or "Famous Brands of China" ...... 149

xlix. Repaying Foreign Currency Loan by Returned VAT ...... 151

!. Special Fund for Fostering Stable Growth of Foreign Trade in 2009 ...... 152

li. Award of Taxpayers in Yanghang Industrial Park ...... l52

10. Various Additional Subsidics ...... 153

A. Various Subsidies Provided in Liaoning Province Under the Five Points and One Line Development Strategy ...... 153

B. The "Torch Project" ...... 156

C. There are Numerous Other Chinese Subsidies Programs the Agency found Countervailable in Previous Cases: ...... 157

D. The Agency found additional programs potentially actionable in the Preliminary Detennination of Certain Carbon and Alloy Steel Line Pipe fi'om China ...... 160

Vll NON-CONFIDENTIAL

Table of Exhibits

I Exhibit Description l Designation 1 I Number 1 Exhibit 2-1 1 List of known Chinese and Japanese Producers or I Confidential l I I Exporters of Subject Goods I I Exhibit 2-2 I Excerpts of Simdex Steel Manufacturers Worldwide Guide Confidential I 1 Exhibit 2-3 [ List of known Canadian Importers of Chinese and Japanese t Confidential \ 1 Subject Goods I I I Exhibit 5-l Evraz Canada Income Statement Confidential Exhibit 6-l I Evraz Canada Product Costing Information I Confidential I I Exhibit 6-2 I Section 19 Normal Values Calculation for China I Confidential Exhibit 6-3 I Labour Adjustment Rate Public I Exhibit 6-4

I Exhibit 6-5 I ~Exhibit 6-6 \ Limited, "20 14 Annual Report of Chu Kong Petroleum and I I Natural Gas Steel Pipe Holdings Limited" 1 ---1 Exhibit 6-7 1 Shengli 01l & Gas Pipe Holdings Ltd "20 14 Annual Report Public of Shengli Oil & Gas Pipe Holdings Limited" I Exhibit 6-8 Baoshan Iron & Steel Co., Ltd., "2014 Annual Report of I Public · Baoshan Iron & Steel Co., Ltd." Exhibit 6-9 Yulong, "2014 Financial Statements of China Yulong Public Company", with English translations ---1 1 Exhibit 6-10 I JFE Holdings, "2014 Financial Statements of JFE Public Holding;s" I .. ~ Exh1b1t 6-11 , N1ppon Steel & Sum1tomo Metal CorporatiOn "2014 \ Pubhc I Financial Statements of Nippon Steel & Sumitomo Metal I Corporation" .. 6-12 Marmch1, "20 15 Annual Report of Marui chi Steel Tube Public ~Exhibit I1 I I Ltd." (Year ended March 31, 2015) ~ Exhibit 6-13 Section 19 Nonnal Value Calculations for Japan .. I Confidential rE=-:xlcc1i::-b""it""6=--""'I4""""'~+1-.G""o~v~e~m-m-e~n-t--:of China, "Development Policies for the Iron IIPublic and Steel Industry- Order of theN ational Development I and Refonn Commission (No. 35)", with English ~anslation""s~~;-; .. --:~- 1 Exhibit 6- fs 1 Uovernment of China, "Blueprint for the Adjustment and Public I Revitalization of the Steel Industry", with English I I . ~7""'~+-1c=::tr:"a"'ns atwns . -::--~~+::-c:-7e~~---i 6-16 1\ Tianjin Shiming Yuweiye Steel Trade Co., Ltd., "L245 Public . Line Pipe's Severe Overcapacity Pressure Like Being Born I I Down by the Weight of Mount Taishan", with English L I translations

viii NON-CONFIDENTIAL

I Exhibit 6-17 Chinapipe.net, "Steel Pipe Industry's Excess capacity I Public Problem Got Worse: Seamless Steel Pipe Production's Capacity utilization is only 67.14%", with English I I translations I I Exhibit 6-18 Hebei Steel Pipe Factory, "Most Fundamental Reasons to \ Public I Why Line Pipe Capacity is in Excess", with English translations 1 Exhibit 6-19 Peop1e.com.cn; "Opinions of State Council Issued I Public Directives on Resolving Severely Excess capacity Problems, Guo Fa (20 13) No. 41 ", with English translations I Exhibit 6-20 The People's Government of Hunan Province, 1 I Public I "Implementation Measures from the Hunan Provincial I I Government on Resolving the Problem of Severe I l Overcapacity, XiangZhengFa (2014) No. 15", with English I translations I ~ I I Exhibit 6-21 Reuters, "FACTBOX- China's 10 biggest steel mills in Public I 2012" I Exhibit 6-22 State-Owned Steel Enterprises 1 Public I I Exhibit 6-23 I Shangdong Steel Pipe Co., Ltd, "Private line pipe Public / comeanies reaching an end?", with English translations I I Exhibit 6-24 I "Guizhou News, "Pipeline Companies Monopolize 'Three Public I Barrels of Oil': Is it facing a Split?'', with English I I I translations I I I Exhibit 6-25 1 PetroChina Company Lnnited, "About PetroChma" Public I J Exhibit 6-26 I Sina Finance, "PetroChina Monopolizes the Transportation Public~ I ofNatural Gas: Accused oflncreasing Gas Price", with I English Translations Exhibit 6-27 SteelFirst, "China to impose tax on steel imported for re- Public ~ ex ort" . I · Exhibit 6-28 1 Tianjin Guanghengrun Steel Co., "(X42 Line Pipes) Local I Public I j Governments Don't Dare to be Bold and Resolute- 1 S~eki~1g for St~bility", with English Translations Exhibit 6-29 i TtanJm TtanYtXmgLong Iron & Steel Trade Co., Ltd., I,,hlfc--j l Government Subsidization is the Miraculous Medicine to

1 Curing Deficits Expetienced by X60 Line Pipe ' Enterprises", with English Translations I Exhibit 6-30 Metal Expert, "World Pipes Markets", January 2015 Confidential~ Exhibit 6-31 Section 20 Surrogate Normal Values Coo fidoo

Exhibit 6-33 j Chinese HS Codes Public Exhibit 6-34 Japanese HS Codes Public 1 1 Exhibit 6-35 I Statistics Canada Import Data for the Chinese and Japanese Public I • I I j Subject Goods Margin of dumping calculations for Chinese subject goods J' Exhibit 6-36 1 Confidenti~ I using section 19 nonnal values ·----~·~--·~~---~

lX NON-CONFIDENTIAL

1 j Exhibit 6-37 Margin of dumping calculations for Japanese subject goods \ Confidential \ usmg sect10n 19 nonnal values _ I _ ----1 I Exhibit 6-~3~8- Margin of dumping calculation for Chinese subject goods ; Confidential i I using section 20 surrogate normal values \ i j Exhibit 7-A-1 Shashi Steel Pipe Works, "President's Speech" \ Public ,

1 Exhibit 7-A-2 ; Exhibit 7-A-3 ; I j Exhibit 7-A-4

I Exhibit 7 -A-5 Hengyang Valin Steel Tube Co., Ltd., "Company \ Public ~ Introduction" - I I Exhibit 7-A-6 Hengyang Valin Steel Tube Co., Ltd., "Products: Line j Public l\ Pipe" • I Exhibit 7-A-7 Holdings Limited, "About Us" I Public ~ i Exhibit 7 -A-8 WSP Holdings Limited, "Products Overview" 1 Pubhc ; I Exhibit 7-A -9

I Exhibit 7-A-10 I Exhibit 7-A-11 Chu Kong Petroleum and Natural Gas Steel Pipe Holdings i Public I Limited, "Annual Re ort 20 14" i [Exhibit 7-A-12 R. Tang, US Congressional Research Service, "China's 1 Public j Steel Industry and Its Impact on the United States: Issues ) I i i for Congress", September 21, 20 I 0 I I Exhibit 7-A-13 I Industry Today, "Chinese Steel Industry: China Deploys Public I I State Power to Dominate Global Steel Industry" Exhibit 7-A-14 I CNOOC Kingland Pipeline Ltd., "Company Introduction" Public Exhibit 7 -A-15 CNOOC Kingland Pipeline Ltd., "CNOOC Kingland Public Pipeline Ltd. Boosts Overseas Sales ofERW Pipes", March 4,2008

Exhibit 7-A-16 1 CNOOC, "2014 Annual Report" \ Public j Exhibit 7-A-17 [ China Daily, "Hunan Valin Iron and Steel Group Co., Public

1 Ltd.", January 29,2012 Exhibit 7-A-18 I Hunan Valin Steel Co., "Valin Group Signed Strategic 1 Public Cooperation Agreement with China Resources ' Co oratiOn'' March I, 2012 I I ' 'uuu~ -l Exhibit 7-A-19 The United States Department of Commerce, Issues and ~ Decision Memorandum for Final Detennination: Circular ; Welded Carbon Quality Steel Line Pipe from the People's ~ 1 Re ublic of China, C-570-936, November 17, 2008. 1 i Exhibit 7-A-20 The United States Department ofCommerce,-Issues and \Pttblic

, Decision Memorandum for the Final Determination: Drill 1 ~ I 1 Pi e from the Peo le's ReJublic of China, C-570-966 __i Exhibit 7-A-21 , The United States Department of Commerce, Issues and I Public i Decision Memorandum for the Final Dete_::n;;n::in=a=ti.::o::n:_:L=t._.·g"'hcct- ___j__~--~

X NON-CONFIDENTIAL

1 walled Rectangular Pipe and Tube from the People's \ [Republic of China, C-570-915 . !Exhibit 7-A-2:::2~+,-O;T;;'h"'e-":u•'Cn.o:l""te""d7-::0S'"ta.o:te"'s:::D::=-e-=p 1a-"rt-=m~e'"'n=-t-o~f -=c~o-m-m-er_c_e_,7"Is_s_u-es._an-d~-rl\ "'P-cub:-cl~i· c-----i

I. 'j Decision Memorandum for the Final Detennination: 1 I 1 Certain Steel Grating from the People's Republic of China, fc::t 1 C-570-948, May 28, 20 I 0

I Exhibit 7-A-23 1 The United States Department of Commerce, Issues and \Public I 1 Decision Memorandum for the Final Detennination: · 1 \,' I Certain Steel Wheels from the People's Republic of China, II I C-570-974 . Exhibit 7-A-24 I The United States Department of Commerce, Issues and Public , Decision Memorandum for the Final Detennination: Utility I 1 i Scale Wind Towers from the People's Republic of China, 1, C-570-982, December 17, 2012

I Exhibit 7-A-25 1 The United States Department of Commerce, Issues and 1 Public 1 Decision Memorandum for the Final Detennination:

1 Certain Tow-behind Lawn Groomers and Certain Parts I I Thereof from the People's Republic of China, C-570-940 I Exhibit 7-A-26 The United States Department of Commerce, Issues and I Public 1 Decision Memorandum for the Final Determination: High [ Pressure Steel Cylinders from the People's Republic of

1 China, C-570-978, A ril30, 2012 I Exhibit 7-A-27 I The United States Department of Commerce, Issues and Public I Decision Memorandum for the Final Detennination: Wire I I I Decking from the People's Republic of China, C-570-950, 1

I June 3, 2010 .1

Exhibit 7-A-30 Ministry of Land and Resources of the People's Republic Public of China, "Public Notice on the Technical Evaluations and Standards for the Selling Price of State-owned Construction Land Use Rights and Pilot Implementations, I General Office of the Ministry of Land and Resources (2013) No 20", with English translations. Exhibit 7-A-31 Ministry of Commerce of the People's Republic of China, "List ofNational Economic and Technology Development Zones", with English translations. l'"b:j

XI NON-CONFIDENTIAL

L::hibit 7-A-32 ~de in China.com, "Company Marketing Webpage for 1 Public 1,, I Qmgdao Kwayt Co., Ltd." . -~-+.::,~::-"~~ ~-4 I Exhibit 7-A-33 : American Petroleum Institute, API Standard API-5L \ Public ' I Certified Companies Located in the People's Republic of I I China I Exhibit 7-A-34 Department of Land and Resources of J iangsu Province & I Public ~ Jiangsu Development and Refonn Commission, "Public I' Notice Pertaining to the Implementing the Adjustment I Standards of the Lowest Selling Price of Industrial Land ' I Use", LGTZF (2009) No 175, with English translations. I' I ---i' Exhibit 7-A-35 Globalization Monitor, "Wuxi New District" I Public Exhibit 7-A-36 New District ofWuxi Municipal People's Government I Public I Management Committee & Wuxi National High-tech I Industrial Development Zone Management Committee, I I i "Preferential Policies for Wuxi HTDZ: Preferential Policies I I for Encouraging Foreign Invested Enterprises Invest in I I New and High Technology Enterprises," January 1998, 1 I with English translations. I I I Exhibit 7-A-37 United States Energy Infonnation Administration "China" Public I I Februar 4, 2014

Exhibit 7-A-38 1 Global Times, "NDRC to Increase Electricity Prices in 1 Public I Five Provinces", May 18, 2011 I Exhibit 7-A-39 '! The United States Department of Commerce, Issues and Public . Decision Memorandum for the Final Detennination:

l. Lightweight Thermal Paper from the People's Republic of ,1 China, C-570-921, Se tember 25, 2008 Exhibit 7 A -40 1 The United States Department of Commerce Issues and ' Public - i I Decision Memorandum for the Final Detennination: Pre- I' stressed Concrete Steel Wire Strand from the People's I Republic of China, C-570-946, May 14, 20 I 0

1 Exhibit 7-A-41 The United States Department of Commerce, Issues and Public Decision Memorandum for the Final Detennination: I' Certain Kitchen Appliance Shelving and Racks from the i People's Republic of China, C-570-942, July 20, 2009 I Exhibit 7-A-42 The United States Department of Commerce, Issues and Public I i Decision Memorandum for the Final Detennination: i Certain Oil Country Tubular Goods from the People's Republic of China, C-570-944, November 23, 2009 I ' Exhibit 7-A-43 The United States Department of Commerce, Issues and Public Decision Memorandum for the Final Detennination: Galvanized Steel Wire from the People's Republic of I China, C-570-976, March 19,2012 I I 1 Exhibit 7-A-44 The United States Department of Commerce, Issues and I Public .. i I I DecisiOn Memorandum for the Fmal Detenmnal!on. i Lightweight Thermal Paper from the People's Republic of China, C-570-921, Se !ember 25, 2008

XII NON-CONFIDENTIAL

[ Exhibit 7-A-45 The United States Department of Commerce, Issues and 1 Public Decision Memorandum for the Final Detennination: I I Certain Magnesia Carbon Bricks from the People's Re ublic of China, C-570-955, July 26, 20_,_1 0~----:-+-----c~------j Exhibit 7-A-46 The United States Department of Commerce, Issues and I Public Decision Memorandum for the Final Detennination: \ Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe from the People's Republic of China, C- I 570-957, Se !ember I 0, 20 l 0 l Exhibit 7-A-47 The United States Department of Commerce, Issues and Public I Decision Memorandum for the Final Determination: Certain Coated Paper Suitable for High-quality Print Graphics Using Sheet-fed Presses from the People's I Republic of China, C-570-959, September 20,2010 i / Exhibit 7-A -48 The United States Department of Commerce, Issues and 1 Public

Decision Memorandum for the Final Detennination: 1 Multilayered Wood Flooring from the People's Republic of I I China, C-570-971, October II, 20 ll I [ Exhibit 7-A-49 The United States Department of Commerce, Issues and Public 1 Decision Memorandum for the Final Detennination: I

Crystalline Silicon Photovoltaic Cells, Whether or Not !' I

Assembled into Modules, from the People's Republic of \.·'II China, C-570-980, o.:::ct,o~.::be""r-'9"''-=2-::,0c-;12:o----~-~----~-+-;;-;-;7----i· 1 Exhibit 7-A-50 The United States Department of Commerce, Issues and ; Public Decision Memorandum for the Final Determination: Drawn Stainless Steel Sinks from the People's Republic of I China, C-570-984, February 19,2013 1 J Exhibit 7-A-51 . Chun Chun Ni, The Institute of Energy Economics of Public i I Japan, "China's Electric Power Industry and Its Trend", A ri12006 Exhibit 7-A-52 Shengli Oilfield Freet Petroleum Co., Ltd., "Company Public I Profile" I Exhibit 7-A-53 I "The People's Republic of China's 12th Five-year Plan", Mlie with English translations. I Ibhibit7-A-54 I Global Times, "Chma to encourage mcreased pnvate Public investment in banking sector" June ?8 201? i I ' - ' - I - , Exhibit 7-A-55 I The Export-Import Bank of China, "Export Seller's Credit" Public

Exhibit 7-A-56 1 Qingdao Economic and Trade Bureau, "Notice Pertaining Public

\ to the Foreign Trade Enterprises' Financing Research i i I , Requirements," May 22,2013, with English translations. i I Exhibit 7-A-57 I Great Wall Equipment, "About Us" tPublic , Exhibit 7-A-58 I Cardofcom, "Company Introduction of Hengyang Valin Public i Steel Tube Co., Ltd" I Exhibit 7-- A 59 Shandong' Shengh' Steel Pipe Co., Ltd., "About Us " i Public Exhibit 7 -A-60 The Export-Import Bank of China, "Export Buyer's Credit"j_I,_ub_l_ic___ j

X Ill NON-CONFIDENTIAL

I Exhibit 7-A-61 I The Export-Import Bank of China, "2014 Annual Report" [Public ~

1-1E::::-cxlcc1i::--b::--it-:7:--A-:c--6::2~+~-:::T::che Export-Import Bank of China, "Brieflntroduction" I Public 1 L§xhibit 7-A-63 I The Export-Import Bank of China, "Import Credit" . -- \ Public I

1 Exhibit 7-A-64 I The Export-Import Bank ofChina, "Onlending Loans of 1 Public i,· 1 f Foreign Governments and International Financial ) I

~ 1 Institutions" 1 , 1 Exhibit 7:A-65 l Fmancial Tunes, "Hu Rejects Calls to Reform State's --i-:1Pub!;;;-~ 1 Role", November 8, 2012

1-1E-xlcc1i~b-,-it-7,--A--6-6-+I-=-T=h:_:_e::._E_z_x:.p:_:oc.:rt.~-l:::m:.::pc:o:_.rtc::L:B:.:an:.ck::_o-:f-C~h.,-in-a-, -,T-r-a-cd·e~-F-cir-1a_n_c~in-g~,---1~-Public [ Exhibit 7-A-67 [ Organisation for Economic Co-operation and Public -r I I Development, "Trade and Agriculture Directorate Trade ) I k II Committee", March 16,2015 1 _j 1 Exhibit 7-A-68 , Ting Xu, China Brief Volume II Issue 17, "Destmatwn I Public I I I Unknown: Investment in China's 'Go Out' Policy", , I I I September-::1-=6'-'·2_0_1_1--c-.,.-::---:-:=---:---::::-: -~--+-\::-:-;:------1\ ~7-A-69 1 M. Martin, "Congressional Research Service, China's Public 1 \Banking System: Issues for Congress", February 20, 2012 I hExhibit 7-A-70 i Shengli Oil & Gas Pipe Holdings Limited, "Annual Report Public I 2013" Exhibit 7-A-71 1 Caijing.com.cn, "China's Policy Banks", September 9, Public '2009 Exhibit 7-A-72 1' China Daily USA, Steel Firms to Relocate Capacity \Public

I 1 Abroad, November 27, 2013 -:--:----::---\t-.:-~:------1 7 7 I Exhibit 7:--Ac-:-7:::3:--+1 ::T"'h-e-::P:-e...cop-l:-e 's~B=a-J-=1k_o_f~C=hr:-.n-a-,t h-e-c:S-:-t-at-e-:-Administration of : Public I

j Foreign Exchange, the Ministry of Foreign Tradeand 1 1, 1 Economic Cooperation and the State Adrmmstratron of 1 I / Taxation, Circular Concerning Printing and Distributing / Detailed Rules on Rewarding and Punishment Concerning

1 Provisional Regulations over Examination of Export I Collections of Foreign Exchange, YinFa (2000) No 58, 'I ~ I February I 7, 2000 r=~:-:--:::-~~,_~~~~~~~---~~~~~~------~~~----· Exhibit 7-A-74 1 Guangzhou Mayer Corp., Ltd., "About Us" 1 Public 1 1 Exhibit 7-A-75 I Baosteel, "Public Acknowledgement" I Public~ - Exhibit 7 - A 76 ' The Export- Import Bank of China' "Intermediary Public -~ \ Business" Exhibit 7-A-77 [ China Export and Cn.!dit Insurance Company, "Company Public I . Profile" I Exhibit 7-A-78 [ China Export and Credit Insurance Company, "20 11 Public I Annual Report" Exhibit 7-A-79 I China Export and Credit Insurance Company, "20 10 Public I Annual Report" . . ~ [ Exhibit 7-A-80 ( China Export and Credit Insurance Company, "2009 Public I Annual Report" .. l / Exhibit 7-A-81 I China Export and Credit Insurance Company, "2008 Public L I Annual Report" _j

xiv NON-CONFIDENTIAL i Exhibit 7-A-82 [ China Export and Credit Insurance Company, "2007 I Public l j 1 Annual Report" , I i I Exhibit 7-A-83 1 Steel Orbis, "Handan Steel Produces 30,000 MT ofX80 I Public ! i I Line Pipe Steel in Jan-Feb", March 8, 7013 =:-:---+-1 ~;-;-;-----!,[ I Exhibit 7-A-84 \ China Export and Credit Insurance Corporation, "2011 i Public I

L 1' Annals Highlights" I i Exhibit 7-A-85 1 Angang Steel Company Lumted, "Summary of Core I Public J', I I k, 1 Business" Exhibit 7-A-86 \ Shengli Oilfield Freet Petroleum Steel Pipe Co., Ltd., 1 Public 1 , \ "Corporate Profile" I I I,~-cE:::::x-chc-iocb-cit'""7=---:A--""8:::7-t- 1 F:::::a::.r:::a"'y"'P~e"'trc:oc:l-=eu~I....:nc=cS:-t-e-:el:-P=-I~p-e-:C::-o-·.-,"'L-td"'.-, '"'"A"C7'b_o_u·t-U~s"'"------1-:P:-t"""Ib"'l.,-ic~~ Exhibit 7-A-88 1 Shandong Shengli Steel Pipe Co., Ltd., "About Us" \ Public Exhibit 7-A-89 [' Shandong Shengli Steel Pipe Co., Ltd., "Xinjiang- Brief Public Introduction" . 1 Exhibit 7-A-90 / FEMCO, "Kunshan Pearl Machinery" 1 Public Exhibit 7-A-91 I Liaoning Northern Steel Pipe Co., Ltd., "Introduction" I Public Exhibit 7-A-92 [ KPMG, "PRC Corporate Income Tax Law" Pubhc

Exhibit 7-A-93 1 Constitutional and Mainland Affairs Bureau of the I Public i I Government of the Hong Kong Special Administrative \ l Region, "The HKSAR's Work in Complementing the I I. National 12th Five-year Plan" 1. ____j 1 Exhibit 7-A-94 China Knowledge, "Tianjin Jinnan Economic Development I Public 1

A~" ' I

1 1 Exhibit 7-A-95 Tianjin Dehua Petroleum Equipment Manufacturing Co., Public 1 Ltd., "Company Profile" I I Exhibit 7-A-96 I Tianjin Delma Petroleum Equipment Manufacturing Co., : Public \ Ltd., "Contact Us" I Exhibit 7-A-97 1 Tianjin Delma Petroleum Equipment Manufacturing Co., : Public 1 Ltd ., "P ro d uc ts: L.me p·!PC " I 1, Exhibit 7-A-98 I Tianjin Pipe Group Corporation, "Company Profile" Public I I Exhibit 7-A-99 I China Briefing, "China Expands Tax Incentives to Promote \ Public i Circular Economy", November 28,2011 Exhibit 7-A-100 Baosteel Group Co., "Developing Recycle Economy" Public Exhibit 7-A-101 ' Panyu Chu Kong Steel Co., Ltd., "Company News: PCK Public was Selected as the First 'National Recognized Corporate Techmcal Center '.m the Industry " e ) i-cE=-xl"'11-;;'.b7it-,7=--""A--"'!-::0'1:'2+1:::T"'ia"'n;c.;ji:c. n-P:i:-pc:..e_G:::::r-oc..u_p""c::o'r"-p'-o""r-at 7io""I""'1,"'':-::'R:-&::-::D-C::-en-t-e"'r•"'•------1 Public Exhibit 7-A-1 03 Hengyang Valin Steel Tube Co., Ltd., "Products: Acid Public I Resistance Line Pipe" Exhibit 7:A-1041 The United States Department of Commerce, Issues and \Public I 1 Decision Memorandum for the Final Detennination: 1 I . [Aluminum Extrusion from the People's Republic of China, I L ~~----LiC:::..-570,968, March 28,2011 -~-...... L.-·---,__.J 1

XV NON-CONFIDENTIAL

[Exhibit 7-A-105 I Wiley Rein & Fielding LLP, "The China Syndrome: How \ Public I I Subsidies and Government Intervention Created the ' I \ I V>'9rld's Largest Steel Industry", July 2006 I 1 Exhibit 7-A-106 [Oilfield International Trading, "Products: Oil Special Pipe 1 Public I I & Accessories" ) Public I Exhibit 7 -A-I 08 I East Re~~ources, "Marketing Webpage of Shandong ) Public b )Xinyuan Steel Pipe Manufacturing Co., Ltd." 1 Exhibit 7-A-1 09 ) Huludao City Steel Pipe Industrial Co., Ltd., "About Us" Public I Exhibit 7-A-110 I Australian Anti-dumping Commission, Report to the [Public l Minister No. 148: Certain Aluminum Extrusions Exported I I. \ to Australia from the People's Republic of China, April 15, \ 20]0 I I Exhibit 7-A-111 1 The Ministry of Science and Technology of the People's I Public 1 I Re ublic of China, "National High-tech R&D Prob>ram" I Exhibit 7-A-112 [Insight at Pacific Community Ventures & the Initiative for I Public

1 Responsible Investment at Harvard University, "Case li.l I , Study 13: National High-tech R&D (863) Program", I 1 b ,January 2011 ,~--:---~:::7--=:---:--:c-~+=~:-:-~~---J 'I Exhibit 7~A-113 [The Ministry of Science and Technology of the People's '['Public I 1 Republic of China, "China Science and Technology I I Newsletter", September 30, 2004 I Exhibit 7-A-114 Baosteel, "Social Responsibility: Value Creation" Public I Exhibit 7-A-115 1 Jiangsu Chang Bao Steel Tube Co., Ltd., "About Us" I Public I Exhibit 7-A-116 , Ansteel Group: "Shareholders" Public Exhibit 7 -A-117 I An gang Steel Company Limited, "20 13 Annual Report" Public Exhibit 7-A-118 [ Ningbo Jun Cheng Metal Pipe Co., Ltd., "Products: API 5L Public , Piee" 1 1 Exhibit 7-A-119 Ningbo Jun Cheng Metal Pipe Co., Ltd., "Group Profile" Public i Exhibit 7-A-120 f Changzhou Yuanyang Steel Tube, "Product Introduction: i Public I i Brief Introduction" br I Exhibit 7-A-121 I Changzhou Yuanyang Steel Tube, "Contact Us" I Pu 1c Exhibit 7-A-122 Changzhou Yuanyang Steel Tube, "Sales Network" Public I Exhibit 7-A-123 I The Simdex Steel Tube Manufacturers Worldwide Guide, Public i "Y angzhou Lontrin Steel Tube" I Exhibit 7-A-124 1 Zhongshan Walchamp Steel Pipe Company Ltd., "Contact Public I iUs" I Exhibit 7-A-125 / Zhongshan Walchamp Steel Pipe Company Ltd., "Survey I Public i ) of the Comeanyand Products " ) Exhibit 7-A-126 ['Australian Anti-dumping Commission, Investigation mto I Public the Alleged Subsidisation of Certain Toilet Paper Exported 1 from the People's Republic of China: Preliminary Report l -~----L~ ::.~~=-0:::~:.-x_istence of Countervailable Subsidies, September

xvi NON-CONFIDENTIAL

I Exhibit 7-A-127 China Daily, '"Five Points, One Line' Strategy Guiding I Public I Light for Liaoning", March 9, 2007 , Exhibit 7 -~A~-~12~8::-~-c'M=."in=:i'-st"'ry~of7' C~om~m2..e"""r'-ce.cco''rc:-P7R::z::Cc,~'c, S:Cp-e-e·cl-~1 7b_y_t1""1e-·""G_o_v-ern-·-o-r -~ecP':'t-:tb-:1:-ic-----1, I of Liaoning Province", April 24, 2007 1 j

[Exhibit 7-A-129 The Government of Liaoning Province, "Several Policy l Public :1 1 Suggestions of the People's Government of Liaoning I

[ Province on Encouraging Coastal Major Development 1,

1

:11 Regions to Expand Opening-up to the Outside World", 1 I January 23, 2006 1

n ro uc ton I Exhibit 7-A-134 1 Jiangsu Valin-Xigang Special Steel Co., Ltd., "Product I Public I Catalogue: Line PiJ:le" -lI Exhibit 7-A-135 \ Tianjin Pipe Corporation Enterprise, Inc., "Tianjin Pipe \ Public (Group) Corporation: Products" I I Exhibit 7-A-136 Ministry of Science and Technology of the People's Public. I Republic of China, "Administration of Key High-tech I Enterprises under the National Torch Project", April 25, 2011, with English translations. j Exhibit 7-A-137 Ministry of Science and Technology of the People's / Public Republic of China, "Notice on the Issuance of the I I Administrative Measures for Detennining New High-tech I Enterprises", April28, 2008, with English translations. I Exhibit 7-A-138 Wenzhou Municipal Sci- Tech Bureau, "National Torch I Public ' 1 Program of China" I I Exhibit 8-1 I Economic Indicators Confidential I I 1 Exhtbtt 8-2 • Declarallon of Dave Coffin . Confidentw~

1 Exhibit 8-3 I Moody's Investors Service, "Rating Action: Moody's places . Public 1 I \ Evraz North America PLC's ratings (Ba3 CFR) under ~~ review for downgrade", October 13,2015 I Exhibit 8-4 I GTIS, Chinese and Japanese Exports of Welded LP over I Public I 16mches, January to November 2015 Exhibit 8-5 I Steel Business Briefing 2015, "China's welded pipe output, I Confidential I exports down amid summer lull", August 28, 2015 I Exhibit 8-6 1 MBR, Market Tracker, "MBR Welded Linepipe & Confidential I OCTG", December 22,2015 ~ lExhibit 8-7 [ MBR Market Tracker, "MBR Welded Linepipe & OCTG", I Confidential 1 January 29, 2016 .

xvii NON-CONFIDENTIAL

1 Exhibit 8-8 OECD, "Excess Capacity in the Global Steel Industry: The I Public [ I Current Situation and Ways Forward", 2015 ~~:--~~-j \ Exhibit 8-9 OECD, "Developments in Steelmaking Capacity of Non- Public 1 1 OECD Economies", 2013 ' ,--~~----~~~~----4 i Exhibit 8-10 CPCN News, "How to Deal with the Four Industries' 1 Public I Severely Excess Production Capacity", August I, 2014, [ with English translations I I Exhibit 8-1 I OECD, "Industry and globalisation: Excess capacity and [ Public

risks of trade friction cloud the outlook for the global steel 1

I industry", December 12,2014 1 I Exhibit 8-12

' Exhibit 8-13

~xhibit 8-14

\ Exhibit 8-15

I Exhibit 8-16 I \ Exhibit 8-17

I Exhibit 8-18

~~hibit 8-19 1 Exhibit 8-20

I Exhibit 8-21 I

I Exhibit 8-22 1 Nippon Steel & Sumitomo Metal, "Annual Report 2013, [ Public I (Year Ended March 31, 2013) I Exhibit 8-23 , The World Bank, "Chma 1s adjusting to slower econom1c I Public \growth, says new world bank re ort", Jul I, 2015 Exhibit 8-24 - / The Wall Street Journal, Lingling Wei "China Moves to / Public I I Devalue Yuan", August II, 2015 1

\ Exhibit 8-25 I The Globe and Mail, Pete Sweeney and Lu J ianxin "China[1, Public [ devalues yuan by 2%, sees biggest one-day fall since 1994" IE 'hihi• 8-26 I Steel Business Briefing 2015, "Special report: Yuan I Confidential I devaluation poses problems for EU steel", August 20, 2015 I 1ibit 8-27 \ MBR, Market Tracker, "MBR Welded Linepipe & \ Confidential I OCTG", April 30, 2015 I I Exhibit 8-28 Steel Business Briefing, "China's Chu Kong squeezed by \. Confidential I delays of new pipeline in 2013", April I, 2014 ' 1

xviii NON-CONFIDENTIAL

I Exhibit 8-29 1 Steel Business Briefing, "L;-~ver investment and corruption I Confidential I I hit China eneq,'Y pipe demand", March24, 2014 I .~ I Exhibit 8-30 1 SBB Insight, Platts, "Pipemakers adapt to oil price plunge", l Confidential 1 : i January 30 7015 I : I Exhibit 8-31 I Steel Busi~e~s Briefing, "China's Nov daily output hits the Confidential I I year's low", December 15, 2015 I Exhibit 8-32 I The U.S. International Trade Commission, "Certain Public

: \ Welded Large Diameter Line Pipe from Japan (Second I I Review)", Investigation No. 731-TA-919, September 2013 [ Exhibit 8-33 1 The U.S. International Trade Commission, "Certain Public \ Welded Line Pipe from Korea and Turkey", Investigation j Nos. 701-TA-524-525 and 731-TA-1260-1261 : I I 1 (Preliminary) ~ rExhibit 8-34 I JFE, "JFE Holdings' Financial Results for Fiscal" (Year Public : : I [2014 Ended March 31, 2015) !' I Exhibit 8-35 1 MBR, "Strategic prospects for the global transmtssion Confidential l' IJinepipe market by type, size, range, and grade", 2014 : [ Exhibit 8-36 MBR, "Whitepaper- MBR's Outlook for 2015" ' Confidential I Exhibit 8-3 7 I Petroleum Services Association of Canada, "20 15 Confidential I Canadian Drilling Activity Forecast", April 30, 2015 i Exhibit 8-38 Metal Expert, "World Pipes Markets" January 2015 Confidential I Exhibit.. 8-39 PWC, "Japan: Foreign Tax Credit' Public I Exhtbtt 8 -40 1' JFE Holdmgs,' Inc., "JFE Groups' Ftfth Medmm -term 1 Publ!c J Business Plan", April23, 2015 1 Nippon Steel & Sumitomo Metal "Annual Report ?015" I Exhibit 8-41 ' - ' I Public J (Year Ended March 31, 2015)

1 Exhibit 8-42 J The U.S. International Trade Commission, "Circular Public 1 Welded Carbon Quality Steel Line Pipe from China", 1 Investigation No. 731-TA-1149 (Final), May 2009 -- Exhibit 8-43 I The U.S. International Trade Commission, "Certain Public

J Seamless Carbon and Alloy Steel Standard, Line, and I I Pressure Pipe from China", Investigation Nos. 701-TA-469 I and 731-TA-1168 (Final), November 2010 I I Exhibit 8-44 I Evraz Canada, Internal Planning Document, Novetnber Confidential [2016

XIX NON-CONFIDENTIAL

1. Identification of the Complainant

I. This Complaint is filed with the Canada Border Services Agency ("CBSA" or the

"Agency"), pursuant to s. 31 of the Special Import Measures Act ("SIMA"), by EVRAZ Inc. NA

Canada and its affiliate Canadian National Steel Corporation (collectively, "Evraz Canada"). To the best ofEvraz Canada's knowledge, Evraz Canada is the only producer oflike goods in Canada.

2. Contact infonnation for Evraz Canada is as follows:

EVRAZ Inc. NA Canada P.O. Box 1670, I 00 Annour Road Regina, SK S4P 3C7

Canadian National Steel Corporation 5302 39 Street Camrose, AB T4V 2N8

Tel: (403) 543-8000 Fax: (403) 543-8008 E-mail: [email protected] Contact: Brian Kristofic, Director- Trade and Govemment Affairs Direct: +1(312) 533-3618

3. Evraz Canada operates large diameter line p1pe manufacturing facilities in Regina,

Saskatchewan and in Camrose, Alberta. As a Canadian subsidiary of EVRAZ Inc. NA headquartered in Chicago, IL, the financial data of Canadian National Steel Corporation have been consolidated with those of its sister company Evraz Inc. NA Canada for purposes of reporting the domestic industry financial perfonnance in this Complaint.

4. As noted above, to the best of Evraz Canada's knowledge, Evraz Canada accounts for the entirety of production oflike goods in Canada and the company is not aware of any other producers oflike goods in Canada. NON-CONFIDENTIAL

2. Imported Goods

A. Product Description

5. The goods that are the subject of this Complaint ("subject goods" or "subject imports") are defined as:

Certain welded large diameter carbon and alloy steel line pipe originating in or exported ±rom the People's Republic of China and Japan with an outside diameter greater than 24 inches (609.6 mm), and less than or equal to 60 inches (1524 mm), regardless of wall thickness, length, surface finish (coated or uncoated), end tinish (plain end or beveled end), or stencilling and certification (including multiple-stenciledimultiple-certitied line pipe for oil and gas transmission and other applications).

For 1,>reater certainty, the product definition includes:

a) line pipe produced to American Petroleum Institute ("API") specification 5L, in Grades A25, A, B and X f,>rades up to and including XI 00, or equivalent specifications and grades, including specification CSA Z245.1 up to and including Grade 690.

b) unfinished line pipe (including pipe that may or may not already be tested, inspected, andior certified to line pipe specifications) originating in China and Japan, and imported for use in the production or finishing ofline pipe meeting final specifications, including outside diameter, f,>rade, wall-thickness, length, end finish, or surface finish; and

c) non-prime and secondary pipes ("limited service products").

B. Product Characteristics and Product Usc

6. The subject goods are used in the oil and gas sector primarily in pipelines for the transmission of oil and natural gas products over long distances but also in a variety of mining applications, including as shnTy pipe in oil sands operations.

7. The Canadian market for large diameter line pipe is governed by applicable line pipe specifications including CSA specification Z245.1 for line pipe used in pipeline applications. Oil and gas transmission pipelines must, in tum, for example, confonn to CSA Z662 (Oil and Gas

2 NON-CONFIDENTIAL

Pipeline Systems). That said, international trade in line pipe (including sales into the United States) is governed primary by API specification 5L. For example, CSA Z245.1 Grade 448 pipe is considered to be equivalent to API 5L Grade X65. The API SL X grade numbers define the minimum yield strength required of the grade in kilopounds per square inch. This equivalency applies to other specifications, including ISO, which means that a particular line pipe may be certified and stenciled as complying with multiple standards if all the requirements of each standard/grade are met (leading to dual-, triple-, and further multiple-stenciled line pipe). Indeed, it is common practice to certify multiple grades of pipe on a Mill Test Report. It is also common practice to substitute grades other than that initially requested by a customer with an equivalent grade. Mill Test Reports are provided to show that the properties of the supplied pipe meet the requirements of the actual grade supplied.

8. Evraz Canada manufactures or is capable of manufacturing line p1pe to API 5 L specifications in grades up to and including XI 00 and to all equivalent grades under CSA Z245.l, and in all outside diameter sizes covered by this Complaint.

9. The Subject Goods cover all large diameter line pipe meeting or supplied to meet the above specifications and grades, as well as equivalent specifications and grades, regardless of whether the line pipe has been multiple-stenciled to indicate that it meets or is supplied to meet additional end-use specifications. For purposes of !,>reater clarity, all large diameter line pipe stenciled or otherwise marked as meeting or supplied to meet API 5L (or equivalent specifications) for use as oil and gas pipelines are covered in this Complaint as Subject Goods regardless of whether the pipe is marked as meeting any other end-uses or is supplied to meet any other end-uses. Line pipe that is manufactured and tested to meet higher API specifications (or equivalent CSA and ISO specifications) automatically confonns to lower specifications and may therefore have multiple

3 NON-CONFIDENTIAL stencils identifying additional end uses, such as American Society for Testing and Materials

("ASTM"), and equivalent specifications for end use as standard pipe (for low-pressure conveyance of steam, water, natural gas, air and other liquids in plumbing and heating applications), piling pipe, and other such end uses.

I 0. Large diameter line pipe has notable product characteristics that distinguish it trom other pipe products. These include being more resistant to highly corrosive ("sour") environments, which is accomplished by a secondary refining process in the production of the steel to increase the purity of the steel, thereby making it more resistant to corrosion from sour gas. The grain size of the steel plate used as an input into the production of large diameter line pipe is also more refined, which affects the low-temperature toughness of the steel. Large diameter line pipe also typically is sold in API grades ofX70 or greater, which speaks to higher strengths of steel. Finally, large diameter line pipe is characterized by higher defonnability and higher pressure-crushing properties.

11. The Subject Goods may be manufactured by one of three welded processes, as described immediately below. The typical end tinish is a beveled end to allow for welding in the field, although large diameter line pipe could also be supplied as plain end (square cut).

C. Production Process

12. The production processes for welded large diameter line pipe are as follows.

13. Submerged arc welded ("SAW") large diameter line pipe derives its name from the stage in the production process wherein the welding arc is submerged in flux while the welding occurs.

The flux protects the steel in the weld area from impurities found in the air when heated to welding temperatures. Large diameter double submerged arc welded ("DSA W") line pipe requires both inside and outside welds, which are accomplished in separate processes, hence the "double" prefix.

4 NON-CONFIDENTIAL

DSAW encompasses both longitudinally welded SAW ("LSAW") and helical (or spiral) welded

SAW ("HSA W").

14. Large diameter LSA W line pipe is most often produced using either the pyramid rolls method (also known as the rolled and welded method) or the U&O method (also known as the

"U-0-E" method). The difference between these two processes exists only in the method of forming the steel cylinder. The pyramid rolls method begins with three rolls arranged in a pyramidal structure, between which the steel plate is pressed until it is fonned into a cylinder- the time required depends on the grade and thickness of the plate. In the U&O method, the cylinder is first tonned into aU shape using a "U" press, then curled into an 0 shape (i.e., a cylinder) using an "0" press. Under this method, the "E" in the U-0-E descriptor signifies the press process in which the pipe is trade (or "stitch") welded until further SAW welding is perfonned.

15. Once fonned, the cylinder is then welded both from the inside and the outside longitudinally along the Jen1,>ih of the cylinder using the SAW process, with up to five welding wires, which in the end results in a welded pipe.

16. Stages in the LSA W production process typically include: cutting and baiting the steel into strips ("skelp"); pre-bending; fonning; stitch and pre-welding; internal and external SAW processing; finishing; straightening; cold expanding (for yield strength); demagnetization; seam removal, and bevelling (depending on the order in question).

17. Large diameter HSA W (or "spiral weld") line pipe is characterized as a steel pipe having a

DSAW seam the entire length of the pipe in a spiral fonn. HSAW is produced using hot-rolled coil that is tonned into a hollow cylinder by twisting the skelp as it is unrolled (in the same manner that the cardboard core in a roll of paper towel is forn1ed) and then welded as the edges come

5 NON-CONFIDENTIAL together using an automated SAW process both inside the cylinder and outside the cylinder. The end product is a welded pipe.

18. Stages in the HSA W production process typically include: de-coiling and leveling; skelp end welding for continuous rolling; edge trimming and bevelling; forming and tack welding; cutting to length; skelp and repair welding; inside cleaning of pipe; intemal and extemal SAW; further inside cleaning; weld seam removal at pipe ends; and beveling of pipe ends (depending on the order in question).

19. Both LSA Wand HSA W line pipe production processes also comprise a number of quality control steps including, but not limited to, the following: skelp and edge ultrasonic testing; sampling and destructive testing; inspection of SAW; tack weld inspection; hydrostatic testing; ultrasonic testing; x-ray weld inspection/filmless radiography; final inspection; and generation of certificates. Evraz Canada employs both the LSA W process and the HSA W process for its production oflarge diameter line pipe.

20. Using the U&O method, large diameter line pipe is generally produced in 40-foot lengths

(commonly known as "double random lengths" or "DRL"). Using the pyramid roll method, however, large diameter line pipe is most often produced in 20-foot lengths ("single random lengths" or "SRL") or shorter; this may require producers to girth-weld multiple sections together to achieve greater lengths, as needed. Using the spiral weld method, large diameter line pipe can be rolled into exact lengths up to approximately 115 feet (including "triple random lengths"/"TRL" of 60 feet and "quadruple random lengths"/"QRL" of 80 feet).

21. Small diameter line pipe (i.e., line pipe with an outside diameter of up to 24 inches) is a separate product, with wholly difTerent costs, production processes and sales considerations.

Among other characteristics of distinction, the DSA W, HSA W and LSA W processes used to

6 NON-CONFIDENTIAL produce large diameter line pipe are different and distinct from the electric resistance weld

("ERW") process used to produce small diameter line pipe. Moreover, a significant proportion of small diameter line pipe is sold through distributors, while large diameter line pipe is almost entirely sold directly by Evraz Canada to end users.

D. Tariff Classification

22. The Subject Goods are normally imported under the following tariff codes for line pipe

(Customs Tariff):

• 7305.11.00.21 • 7305.11.00.29 • 7305.12.00.20 • 7305.19.00.21 • 7305.19.00.29 E. Countries of Export

23. This Complaint is with respect to line pipe originating in or exported from China and Japan.

F. Known Exporters

24. The companies known to be producers or exporters of subject goods are listed in

Confidential Exhibit 2-1. Detailed descriptions of the production facilities of a number of the

producer-exporters are contained in the Simdex Steel Tube Manufacturers Worldwide Guide;

relevant excerpts are attached in Confidential Exhibit 2-2. Specifically, Chinese exporters

include:

• Baoji Petroleum Steel Pipe Co., Ltd ("Baoji") o Liaoyang Steel Pipe o Zhongyou BSS PetroPipe o Ziyang Pipe Mill o Baoji SMI Steel Petroleum Pipe

7 NON-CONFIDENTIAL

o Shanghai BSW Petro-Pipe • Baoshan Iron & Steel Co., Ltd. ("Baosteel") • Huludao City Steel Pipe Industrial Co., Ltd. ("Huludao") • Hunan Shinestar Steel Industries Corporation ("Shinestar") • Liaoyang Steel Tube Co., Ltd ("LST") • Panyu Chu Kong Pipe Co., Ltd ("PCK") • Shengli Oil & Gas Pipe Holding Ltd ("Shengli") • Threeway Steel Co., Ltd. ("Threeway") • Tianjin Pipe (Group) Company ("TPCO") • Yulong Steel Pipe Co., Ltd ("Yulong")

25. Japanese exporters include:

• JFE Steel Corporation ("JFE Steel") o JFE Steel Corporation/Chita Works o JFE Steel Corporation/East Japan Works (Keihin)

• Nippon Steel and Sumitomo Metal Corporation ("NSSMC") o Nippon Steel & Sumikin Fine Technology Co., Ltd./Kashiwara Works o Nippon Steel & Sumitomo Metal Corporation/Kashima Works o Nippon Steel & Sumitomo Metal Corporation/Kimitsu Warks o Nippon Steel & Sumitomo Metal Corporation/Kimitsu Works (Tokyo Area) o Nippon Steel & Sumitomo Metal Corporation/Nagoya Works o Nippon Steel & Sumitomo Metal Corporation/OIT A WORKS (Hikari Pipe & Tube) o Nippon Steel & Sumitomo Metal Corporation/Wakayama Works (Kainan) o Nippon Steel & Sumitomo Metal Corporation/Wakayama Works (Wakayama)

• Marui chi Steel Tube Ltd. ("MKK")

• Nishimura Koki Co., Ltd.

• Osaka Tokushu Kokan Mfg. Co., Ltd.

8 NON-CONFIDENTIAL

G. Known Canadian Importers

26. The importers listed in Confidential Exhibit 2-3 are believed to account for the majority of subject goods (which include distributors, brokers, traders, and end users).

H. Marketing and Distribution

27. There is no one model for marketing and distribution for Subject Goods. However, the use of large diameter line pipe generally involves procurement for very large transmission projects.

Pipeline planning is a long process including pennitting, land acquisition, government approvals, stakeholder relations, and procurement of labor and materials to construct a pipeline. As such, decisions made currently will affect production years in the future. For instance, the typical timeline for projects involving subject goods may be as follows: pipeline is announced in 2015;

RFP issued in 2017; pipe production may start in2018; pipeline construction may run from 2018-

2019; and full pipeline service may not occur until 2020 or later.

28. Generally, impotis of subject goods are either (I) marketed and sold through to supply distributors (including international traders), who then in turn sell to end-users, or (2) sold direct by the mill, typically in large volumes, to end-users. Large diameter line pipe is generally delivered directly from the pipe manufacturer to the end-user at the pipeline project location. A significant proportion of market sales of subject goods is destined to large exploration and production

("E&P") companies and pipeline companies who purchase the line pipe for oil & gas transmission purposes.

29. Given the nature of the large-scale projects for which subject goods are sourced, it is most common for manufacturers to be required to submit a bid directly to prospective end-users in response to an RFP issued by that end-user customer. If a bid is successful, the line pipe

9 NON-CONFIDENTIAL manufacturer typically sells the pipe directly to that end user and arranges for delivery directly to the pipeline project location.

30. Imports of subject goods are typically sold by agents, brokers, or trading companies to domestic distributors, or are sold directly by the Chinese or Japanese pipe mill to distributors, who then market them to end-users. In this supply chain model, the large diameter line pipe may not always be paid for upon receipt. Rather, the pipe may be sold on consignment to the distributor and billed only when the pipe is shipped by the domestic distributor to the end user. There are many distributors in Canada selling subject goods. These companies are well-financed and range from smaller enterprises to large multinational publicly-traded finns.

3. Domestic Like Goods

31. The large diameter line pipe produced by Evraz Canada are "like goods," within the meaning of section 2 of the SIMA, to the subject goods.

32. First, the subject goods compete directly in the Canadian market with the large diameter line pipe produced by Evraz Canada. Large diameter line pipe produced in Canada and the subject goods are also commodity products, which are fully interchangeable and fully substitutable for each other in the marketplace.

33. Second, the subject goods are sold through the same channels of distribution and have the same end uses as the large diameter line pipe produced by Evraz Canada in Canada. Generally, both the large diameter line pipe produced in Canada and imports of subject goods either are sold to distributors who sell the products to the end user, or they are sold directly to large volume end-user customers. These market sales are, in large part, destined for the oil and gas industry. The subject goods and the large diameter line pipe produced in Canada by Evraz Canada, in this way, compete directly in the same distribution channels and for the same end-user customers.

10 NON-CONFIDENTIAL

34. For the foregoing reasons, domestically-produced large diameter line pipe are like goods to the subject goods.

4. Single Class of Like Goods

35. The like goods produced by Evraz Canada constitute a single class of! ike goods. There are no material distinctions to be made based on product characteristics, channels of distribution, product methods, or other factors that would justifY separate classes.

5. The Canadian Industrv

36. To the best of its knowledge, Evraz Canada, on its own, represents the entirety of production in Canada of like goods. Specifically, Evraz Canada produces large diameter line pipe in outside diameters of above 24 inches through 60 inches, using DSA W production method (both

LSA W and HSAW, as described above.).

37. Evraz Canada does not import subject goods from either China or Japan.

6. Dumping

A. Introduction

38. For reasons elaborated below, Evraz Canada submits that the Chinese large diameter line pipe industry does not operate under market economy conditions and therefore dumping margins should be calculated pursuant to section 20 of SIMA. It is therefore requested that the CBSA initiate a section 20 investigation. Evraz Canada has provided evidence that large diameter line pipe from

China has been dumped at substantial margins using the methodologies provided under subsection 19(b) and section 20 of SIMA.

39. In addition, Evraz Canada has not been able to procure Japanese domestic market pricing for large diameter line pipe based on the infonnation reasonably available to Evraz Canada.

II NON-CONFIDENTIAL

However, Evraz Canada will show that large diameter line pipe from Japan has been dumped at substantial margins using the methodology under subsection 19(b) of SilviA based on the positive evidence.

B. Section 19 Normal Value Analysis

i. China

40. Evraz Canada has been unable to obtain reliable domestic market sales information for

Chinese producers upon which to estimate normal values and, in any event, such pricing would be distorted and not in the ordinary course of trade for reasons elaborated below.

41. Evraz Canada has, therefore, estimated nonnal values pursuant to subsection 19(b) of SIMA on the basis of its own cost of production of the goods, a reasonable amount for administrative selling and other costs, and a reasonable amount for profit, adjusted for known differences in factors of production between Canadian and Chinese producers. The supporting product costing infonnation is provided at Confidential Exhibit 6-1, and the calculated section 19 normal values for the Chinese exporters are provided at Confidential Exhibit 6-2.

42. Normal value calculations have been provided for longitudinally and helically welded large diameter line pipe across a range of outer diameters accounting for all of Evraz Canada's production in Canada in 2015, and for which the domestic industry experienced substantial losses of sales and/or revenue to imported Subject Goods. Notably, all tubular goods for use in oil and gas pipelines are of "X" grade (specifically X-42 and higher), and production costs do not vary materially within the X-grade and even between the X-grade and lower A and B grades. In addition, separate normal values have been calculated for each quarter in 2015, 1 and, when there

l Nonnal values, as well as export prices and margins of dumping, were calculated on quarterly basis in order to reduce the distortions caused by aberrational month-to-month data resulting from extremely small volumes of production (in the case of normal values) and imports (in the case of export prices). 12 NON-CONFIDENTIAL were no production data for a given quarter, the normal value has been calculated using the combined quarterly data for the other quarters for which data were available.

43. Given that the material inputs for Canadian and Chinese-produced line pipe are similar and are available and traded globally, no adjustment was made for material costs. With respect to direct labour costs, monthly mean wage data provided by the International Labour Organization ("ILO") was used in order to account for wage differences between China and Canada. Specifically, according to the latest ILO data, the Chinese monthly mean wage was 18.21 percent of the

Canadian monthly mean wage in 2013.2 This adjustment factor was applied to I 00 percent of the labour costs.

44. In addition, Evraz adjusted half of both overhead and SG&A costs by the lLO labour rate

(i.e., applied the 18.21 percent adjustment factor to 50 percent of overhead and SG&A costs with a resulting calculation of9.11 percent, and added this to 50 percent of overhead and SG&A, which resulted in a grand total rate of 59.11 percent). Based on the infonnation reasonably available to

Evraz Canada, Evraz Canada believes that both of these calculations are conservative. With respect to the overhead, [

]. With respect to the SG&A, publicly available financial infonnation of the known Chinese exporters of the subject goods shows that the SG&A rate for all of these exporters ranged between 5.88 percent and 25 percent of the cost of goods sold. See Public Exhibit 6-5. [

2 Public Exhibit 6-3, Labour Adjustment Rate. Exchange rate used for the calculation of the labour adjustment rate is derived from the Bank of Canada at Public Exhibit 6-4. 3 Confidential Exhibit 5-1, Evraz Income Statement. 13 NON-CONFIDENTIAL

45. Financial expenses have been conservatively excluded from the cost-build up.

46. In order to calculate a protit rate, the Complainant surveyed publicly available profit information of the known Chinese exporters of the subject goods as identified in section 2.F above. 4 Of the ten known exporters, publicly available profit infom1ation was not reasonably available for six companies (i.e. BSG, Huludao, Shinestar, LST, Threeway and TPCO). Two of the four remaining companies, PCK and Shengli, reported losses.5 Accordingly, Evraz Camada derived the weighted average profit rate from the operating pro tit of the remaining two companies, namely Baosteel and Yulong Steel Pipe, and obtained a rate of 4.53 percent of their cost of goods sold. Evraz Canada therefore used this rate as a basis for calculating the Chinese amount for profit for section 19 normal values. See Public Exhibit 6-5.

ii, Japan

47. Similar to the calculation of nonnal values for China, Evraz Canada has estimated nom1al values for Japanese exporters pursuant to subsection 19(b) of SIMA on the basis of its own cost of production, a reasonable amount for administrative selling and other costs, and a reasonable amount for profit, adjusted for known differences in factors of production between Canadian and

Japanese producers. The supporting product costing infonnation is provided at

Confidential Exhibit 6-1, and the calculated section 19 nonnal values for the Japanese exporters are provided at Confidential Exhibit 6-13.

48. Here again, normal value calculations have been provided for longitudinally and helically welded large diameter line pipe across a range of outer diameters accounting tor all of Evraz

Canada's production in Canada in 2015, and for which the domestic industry experienced

4 Public Exhibit 6-5, Profit Survey of the Known Chinese and Japanese Subject Goods Exporters. 5 See Public Exhibits 6-6,2014 Annual Report ofPCK, and Public Exhibit 6-7,2014 Annual Report ofShengli Oil & Gas Pipe Holding Ltd. 14 NON-CONFIDENTIAL substantial losses of sales and/or revenue to imported Subject Goods. Notably, all tubular goods for use in oil and gas pipelines are of '"X" grade (specifically X-42 and higher), and production costs do not vary materially within the X-grade and even between the X-grade and lower A and B grades. In addition, separate normal values have been calculated for each quarter in 2015,6 and, when there were no production data for a given quarter, the normal value has been calculated using the combined quarterly data for the other quarters for which data were available.

49. Again, as for the Chinese section 19 nonnal value estimates, because the material inputs tor Canadian and Japanese-produced line pipe are similar and are available and traded globally, no adjustment was made tor material costs.

50. With respect to direct labour costs, as was done for China, monthly mean wage data provided by the JLO was used in order to account for wage difference between Japan and Canada.

Specifically, according to the latest ILO data, Japanese monthly mean wage was 86.78 percent of

Canadian monthly mean wage in 2013.7 This adjustment factor was applied to 100 percent of labour costs.

51. In addition, Evraz adjusted half of both overhead and SG&A costs by the ILO labour rate

(i.e., applied the 86.78 percent adjustment factor to 50 percent of overhead and SG&A costs with a resulting calculation of 43.39 percent, and added this to 50 percent of overhead and SG&A, which resulted in a grand total rate of 93.39 percent). Based on the infonnation reasonably available to Evraz Canada, Evraz Canada believes that both of these calculations are conservative.

With respect to the overhead, [

6 Normal values, as well as export prices and margins of dumping, were calculated on quarterly basis in order to reduce the distortions caused by aberrational month-to-month data resulting from extremely small volumes of production (in the case of nom1al values) and imports (in the case of export prices). 7 Public Exhibit 6-3, Labour Adjustment Rate. Exchange rates used for the calculation of the labour adjustment rate are based on the exchange rates published by the Bank of Canada at Public Exhibit 6-4. 15 NON-CONFIDENTIAL

]. With respect to the

SG&A, publicly available financial infonnation of the known Japanese exporters of the subject goods shows that the SG&A rate for all of these exporters was approximately 10 percent of the cost of goods sold. See Public Exhibit 6-5. [

52. Financial expenses have been conservatively excluded from the cost-build up.

53. In order to calculate profit rate, the Complainant surveyed publicly available profit information of the known Japanese exporters of the Subject Goods as identified in section 2.F above. 9 Of the five known exporters, publicly available profit infonnation was not reasonably available for two companies (i.e., Nishimura Koki Co., Ltd. and Osaka Tokushu Kokan Mfg. Co.,

Ltd.). Evraz Canada therefore calculated a weighted average profit rate based on the financial data of the remaining three companies, namely JFE, NSSMC and Marui chi, and obtained a profit rate of7.16 percent of their costs of goods sold. Evraz Canada therefore used this rate as an appropriate representation of the Japanese domestic profit of the subject goods. See Public Exhibit 6-5.

C. Section 20 Normal Value Analysis

i. China as a Non-Market Economy

54. China operates as a non-market economy in the steel sector, including in the production of line pipe. This absence of an open and free market economy results in a situation where the prices for line pipe are substantially detennined by the Govemment of China and those prices are not

'Confidential Exhibit 5-1, Evraz Income Statement. "Public Exhibit 6-5, Profit Survey of the Known Chinese and Japanese Subject Goods Exporters.

16 NON-CONFIDENTIAL substantially the same as they would be if they were determined in a competitive market. As such, normal values should be determined using the methodologies provided under s. 20 of SIMA.

55. In determining whether domestic prices are substantially determined by the government of an exporting country under investigation, the Agency will consider whether:

• the government or a government body sets minimum andior maximum price levels; • the government or a government body sets absolute pricing; • the government or a government body sets recommended or guidance pricing at which it is expected that sellers will adhere to within a margin of appreciation; • government or regulatory bodies establish prices levels and regulate and enforce price levels; and, • govemment-owned or controlled enterprises set the price of their goods in consultation with the govemment or as a result of government-mandated pricing policies and, because of their market share or dominance, become price-leaders in the domestic market. 10 56. The Agency will also consider whether the govemment indirectly determines pricing through mechanisms that can involve the supply or price of inputs used in the production of the

Subject Goods or by influencing the supply of Subject Goods in order to affect their price. In particular, the President will consider whether:

• the govemment controls import and export levels through licensing, quotas, duties, or taxes to maintain domestic prices at a certain level; • the govemment subsidizes producers by providing direct financial subsidies or low-priced inputs in order to maintain selling price; • the govemment purchases goods in sufficient quantities to raise the domestic price of the goods or sells stockpiled good to put downward pressure on prices; • the govemment uses taxation or other policies to regulate the level of profits that a company can eam, which will affect selling prices; and, • the government regulates or controls production levels or the number of producers or sellers permitted in the market in order to affect domestic prices. 11

1°Final Determination Statem(!nt oj'Reasonsfor Certain Steel Piling Pipe (November 15, 2012) at para. 57. 11 Ibid. at para. 58.

17 NON-CONFIDENTIAL

57. These factors have been examined by the Agency in respect of the steel pipe sector. The

CBSA has conducted five investigations involving closely-related Chinese OCTG and other carbon steel pipe products and has detennined that SL\JA s. 20 conditions were found to exist:

• Certain Steel Piling Pipe (20 12), • Certain Pup Joints (2011 ), • Certain Oil Country Tubular Goods (201 0), • Certain Carbon Steel Welded Pipe (2008), and • Certain Seamless Carbon or Alloy Steel Oil and Gas Well Casing (2008). 58. The GOC's pervasive intervention in these sectors as described in these case, provides significant evidence that SIMA s. 20 conditions exist in the steel industry in China, including the line pipe industry. Indeed, the Agency has consistently found the SIMA s. 20 factors to exist and the considerations from those prior cases are equally applicable to the production ofSubject Goods in this case. Leaving aside this substantial existing evidence, the Complainant have obtained further evidence demonstrating SIMA s. 20 conditions apply in respect of the Chinese line pipe sector.

I) GOC Industrial Policies: Various Measures Used to Indirectly Determine Domestic Prices

59. Over the past ten years, the GOC has promulgated a number of industrial policies in the steel sector and, more particularly, the steel pipe sector, that result in the GOC indirectly detennining pricing.

60. On July 8, 2005, the GOC promulgated Development Policies for the Iron and Steel

Indust1y - Order of the National Development and Reform Commission (No. 35) (the "NSP"), which had a number of key objectives focused around the control and management of the steel sector in its contribution to China's economic and social development. 12 In particular, the NSP

12 Government of China, Development Policies for the Iron and Steel Industry~ Order r~lthe National Development and Rcjimn Commission (No. 35), Ariicle I, Public Exhibit 6-14.

18 NON-CONFIDENTIAL called for a significant structural adjustment of the steel sector by 2020. 13 The Agency has previously found the major objectives of the NSP to be:

• The structural adjustment of Chinese domestic steel industry; • Industry consolidations through mergers and acquisitions; • The regulation of technological upgrading with new standards for the steel industry; • Measures to reduce material and energy consumption and enhance environmental protection; and, • Government supervision and management in the steel industry. 14 61. The GOC continued to issue directives throughout the late 2000s that sought to realize the objectives of the NSP. For example, in 2006, the State Council promulgated the Notice on

Accelerating Structural Adjustment on Industries with Excessive Production Capacity, which implemented restrictions on new iron and steel projects and encouraged the elimination of outdated production capacity. 15 In 2007, the National Development and Refonn Commission released the

Emergency Notice Concerning Accelerating Srructura/ Adjusrment of Industries, prohibiting investment in new projects or "renovation" of existing projects that have high energy consumption. 16

62. In 2009, the GOC General Office of the State Council promulgated the Blueprint for the

Adjustment and Revitalization of the Steel Indust1y (the "2009 Revitalization Plan"), which was the GOC's response to the global financial crisis. The 2009 Revitalization Plan recognized serious issues with the Chinese steel industry aggravated by the "spill-over and spreading ... effect of the financial crisis" including "blind investment based on misperception of market demands and overexpansion of aggregate capacity," "weak ... innovation," "poor geographic location of

l.l !hid. 14 Final Determination Statement ofReasonsfiJr Certain Ga/nmi::ed Steel Wire (August 6, 2013) at para 86. Sec also Final Determination Statement of Reasons for Certain Steel Piling P1jJe (November 15, 2012) at para 68. 15 Final Determination Statement f~(ReasonsfiJr Certain Steel Piling Pipe (November 15, 2012) at para 73. 16 Ibid. at para 75.

19 NON-CONFIDENTIAL production capacity," "low concentration rate," "weak ... resource reserve," and "disorder in circulation markets." 17 As the Agency noted in Certain Steel Piling Pipe, the plan included the following major tasks:

• Maintain the stability of the domestic market and improve the export environment; • Strictly control the total output of steel and accelerate the process of eliminating what is backward (obsolete); • Enhance enterprise reorganization and improve the industrial concentration level; • Spend more on technical transformation and promote technical progress; • Optimize the layout of the steel industry and overall arrangements of its development; • Adjust the steel product mix and improve the product quality; • Maintain stable import of iron ore resources and rectify the market order; and, • Develop domestic and overseas resources and guarantee the safety of the industry. 18 63. The Agency concluded in Certain Steel Piling Pipe " {t} he 2009 plan is an acceleration of the major objectives of the 2005 policy." 19

64. More recently, the GOC promulgated two Five-Year Plans in 2011: one dealing with the steel sector generally and one dealing specifically with the steel pipe industry. The GOC's Ministry

1 of Industry and lnfonnation Technology released the 12 " Five-Year Plan: Iron and Steel ("2011

Steel Development Plan") on November 7, 2011. 20 The goals of the 2011 Steel Development Plan

are:

• increased mergers and acquisitions to create larger, more efficient steel companies; • restrictions on steel capacity expansion; • upgrading of steel industry technology; • greater emphasis on high-end steel products; and,

17 Government of China, Blueprint for the At{justment and Rel'itali::ation of the Steel Industry at 2, Public Exhibit 6-15. "Final Determination Statement oj'Reasonsjo1· Certain Steel Piling PijJe (November 15, 2012) at para 78. See also Final Determination Statement ofReasonsfbr Certain Gal\·mzi:ed Steel Wire (August 6, 20 13) at para 87. 19 Final Determination Statement q{Reasonsfor Certain Steel Piling Pipe (November 15, 2012) at para 79. See also Final Determination Statement of Reasons/or Certain Galnuli=ed Steel Wire (August 6, 2013)at para 88. 2°Final Determination Statement of Reasonsjbr Certain Ga/nmi::ed Steel Wire (August 6, 2013 )at para 90; Final Determination Statement ofReasonsfor Certain Steel Piling Pipe (November 15, 2012) at para 81.

20 NON-CONFIDENTIAL

• directed relocation of iron and steel companies to coastal areas. 21 65. The new item in the 201 I Steel Development Plan that distinguishes it from previous plans

is a minimum requirement for steel production, which was put in place to eliminate smaller

producers in the market.22 The Plan sought to consolidate the steel industry such that the top ten

steel producers composed 60% of total steel output. 23 As the Agency noted in previous steel

investigations, " {t) his 20 I I plan is the next development stage of GOC plans aimed at achieving

this long-range 2020 target."24 The measures under the 201 I Steel Development Plan are:

• Improve the industry management system. This would include the GOC's Criterion for the Production and Operation of the Steel Industry (Steel Operations Standards) released in 2010; • Create an environment for fair competition, strengthen and improve macro adjustment and control; • Regulate the production and operation of the steel industry; • Standardize the operation of the industry; • Strengthen the macro guidance of the policy; • Promote international exchange and co-operation; • Improve industry infonnation flow, capital flow and material flow. Support enterprise groups to establish and improve the infonnation system in different regions; and, • Improve planning by regional authorities of industries to develop the steel industry, combine the regional mergers and reconstruction, and eliminate obsolete construction. Related enterprises should put forward the planning scheme corresponding to the foregoing plan. The China Iron and Steel Industry should assist and put forward advice on the policy.25 66. In short, the 2011 Steel Development Plan demonstrates that the GOC's heavy regulation

of steel capacity results in the Chinese steel industry being under the purview of the GOC.

67. The Steel Pipe Branch Association, an organization supervised by the State-owned Assets

Supervision and Administration Commission of the State Council and an organization previously

21 Final Determination Statement ofReasonsfbr Certain Gah'ani::ed Steel Wire (August 6, 20 13) at para 90; Final Determination Statement ofReasons for Certain Steel Piling Pipe (November 1St 2012) at para 81. 21 Final Determination Statement ofReasonsfor Certain Steel Piling Pipe (November 15, 2012) at para 82. " Ibid. at para 82. 24 Ibid. 25 Ibid. at para 85.

21 NON-CONFIDENTIAL considered by the Agency to be "government," released the more specific 12th Five Year Plan for the Steel Pipe Indus II)' ("20 II Steel Pipe Plan") on June 23, 20 II Y' Under the previous Five-Year

Plan, the steel pipe sector experienced rapid growth with the construction of new facilities allowing the "industry to shift production to higher value pipe products, such as submerged arc welded pipe, high frequency resistance welded pipe, oil country tubular goods ( OCTG) and line pipe.'m The result of this expansion was excess production capacity, intensified market competition, backward production, and low industry concentration.28

68. The 20 II Steel Pipe Plan, covering the period 20 ll-20 15, directed a maximum output of steel pipe at 67-75 million tonnes and estimated excess capacity to be 15 million tonnes.29 The

Plan further states that the top 20 pipe producers are to be responsible for more than 60% of production, with concentration achieved through merges and acquisitions. 30 As the Agency previously noted "{t}hese GOC objectives are likely to cont1iet with the commercial interests of steel pipe producers by affecting production volumes, competition and ultimately prices."31

69. Unsurprisingly, Chinese line pipe producers are plagued with the same excess capacity as the rest of the steel pipe industry. In 2012, one article reported that in the line pipe sector, "the severe pressure of overcapacity is like being bom down by the weight of Mount Taishan."32 More recently, one article found capacity utilization for line pipe producers to be just under 76% and another article reported seamless line pipe capacity utilization to be at just over 67%.JJ Indeed,

"'Ibid. at para 88. 27 Ibid. at para 89. 2H Ibid. 29 Ibid. at para 90. 30 Ibid. at para 91. 31 Ibid. at para 92. 31 Tianjin Shiming Yuweiye Steel Trade Co., Ltd., "L245 Line Pipe's Severe Overcapacity Pressure Like Being Bora Down by the Weight of Mount Taishan" (7 June 2012), Public Exhibit 6-16. 33 Chinapipe.nct, "Steel Pipe Industry's Excess capacity Problem Got Worse: Seamless Steel Pipe Production's Capacity utilization is only 67.14%" (28 April 20 13) Public Exhibit 6-17. 22 NON-CONFIDENTIAL

Hebei Steel Pipe Factory, a line pipe producer issued a report on April I, 2013 entitled "The

Fundamental Reasons as to Why Line Pipe Capacity is in Excess."34 In that report, Hebei Steel

Pipe Factory decried the GOC steel development policies that have led to the disastrous excess line pipe capacity in China.

70. There is no doubt that line pipe production is one of the steel sectors targeted by the excess capacity policies.

7!. Lastly, on October 15, 2013, the GOC put in force the Directives on Resolving Severe

Excess Capacity (the "2013 Directives"), which targeted the excess capacity problems faced by the steel sector and several other key industries in China.35 Under the 2013 Directives, the GOC set out eight major measures:

• Prohibit projects aimed at increasing capacity; • Reorganize existing projects; • Remove older steelmaking capacity so as to eliminate production; • Promote mergers and restructurings; • Exploit efficient domestic demand and focus on improving the demand structure; • Consolidate the larger international market and expand on foreign investment cooperation; • Encourage and promote technological innovation; and, • Implement market-based policies.36 72. In the 2013 Directives, the GOC holds steady the position that it must resolutely control increases in capacity in order to resolve the problem of excess production capacity. 37

73. The 2013 Directives provide a number of indirect mechanisms to influence the supply of goods and, in tum, affect the price of those goods. First, the Directives set up a capacity quota.

One of the proposed measures is the reduction of iron and steel capacity from 976 million tonnes

34 I-Iebei Steel Pipe Factory, "Most Fundamental Reasons to Why Line Pipe Capacity is in Excess" (1 Apri12013), Public Exhibit 6-18. 35 People.com.cn; Opinions ofState Council issued Directit·es on Resoh·ing Se,·erely Excess capacity Problems, GuoFa (2013) No. 41, Public Exhibit 6-19. 36 Ibid. 37 Ibid.

23 NON-CONFIDENTIAL to 80 million tonnes.38 Second, the 2013 Directives provide a policy measure of implementing preferential tax policies to promote mergers and restructuring.39 Lastly, the 2013 Directives also propose increasing the government's role as a user of steel to absorb the excess capacity through public projects and government-invested projects. 40

74. The Implementation lvleasures .fi·om the Hunan Provincial Government on Resolving the

Problem a./Severe Overcapaci(v provides a more recent example of how Chinese provinces are implementing the 2013 Directive.41 Implemented in May 2014, Hunan province sets out policies such as encouraging enterprises to "go abroad" by actively participating in trade promotion activities and increasing credit and financial support for freight costs.

75. These measures all substantiate the fact that the GOC is utilizing mechanisms to indirectly affect steel, and more particularly line pipe, pricing in China.

2) GOC Ownership and Control of Line Pipe Producers and Input Suppliers

76. The GOC also controls pricing through state-owned steel manufacturers and their subsidiaries in both the line pipe sector and in the inputs sector.

77. First, as the Agency has previously noted, the top steelmaking companies in China are largely state-owned. Table 1 sets out the top ten Chinese steel producers in 2012. These mills represent a combined output ofjust under 46% of China's steel production. Of these ten producers, eight are state-owned enterprises. In effect, this means that over one third of all of China's steel production is sourced in state-owned enterprises.

"Ibid., s. 3, para. 3. " !bid., s. 5, para. 6. 40 Ibid., s., s. 5, para. 3. 41 The People's Government ofi-Iunan Province, Implementation Measures from the Hunan Provincial Government on Resolving the Problem of Severe Overcapacity, XiangZhengFa (20 14) No 15 (4 May 2014), Public Exhibit 6- 20. 24 NON-CONFIDENTIAL

Table 1 China's Top 10 Steel Producers in 2012 and Status as State-Owned Enterprise."

78. These state-owned enterprises produce flat steel products and billets, and in tum provide these inputs to line pipe producers in China. The GOC can use its control and ownership to affect the price of these input supplies and in tum affect the pricing of line pipe. Indeed, the GOC has often pressured these state-owned mills to avoid cutbacks in bids to maintain economic growth, which consequently drives steel input pricing downward.43

79. In addition to controlling steel input suppliers, the GOC owns or controls a number ofline pipe producers, including but not limited to: Anshan Iron & Steel Group; Baosteel Group/Baoshan

Iron & Steel; China National Petroleum Corporation/CNOOC; Wuhan Iron & Steel Group/Wuhan

Wugang Group. Some reports have estimated that 50% of line pipe manufacturers in China are state-owned enterprises.44 TI1e significant market share and sheer number of government-owned line pipe producers likely allows the GOC to impose and influence pricing in the market, just as it does with steel production more broadly, driving the price of steel as it sees fit.

42 Reuters, "FACTBOX ~China's I 0 biggest steel mills in 20 12" (January 31, 20 13), Public Exhibit 6-21; State­ Owned Steel Enterprises, Public Exhibit 6-22. 43 Final Determination Statement ofReasonsfor Certain Gall'llni=ed Steel Wire (August 6, 20 13) at para 93. " Shangdong Steel Pipe Co., Ltd, "Private line pipe companies reaching an end?", Public Exhibit 6-23.

25 NON-CONFIDENTIAL

80. Lastly, the GOC is a significant purchaser ofline pipe as the ultimate owner ofPetroChina,

China's dominant oil and natural gas pipeline transporter.45 Thus, the GOC possesses the ability to influence the prices of line pipe through purchases of line pipe by PetroChina.

81. In sum, the GOC's high degree of control of steel input suppliers, line pipe producers, and line pipe purchasers strongly demonstrate its control ofline pipe pricing in the Chinese market.

3) GOC Import and Export Duties

82. As the Agency has previously noted, the GOC maintains a number of export controls on raw materials used in the production of steel.46 These measures limit or prevent the export of raw materials, create an increase supply of these goods in the Chinese domestic market, and cause downward pressure on domestic prices.

83. Additionally, as of July 31, 2014, the GOC has implanted tariffs and import taxes on 78 steel products that are produced in the domestic marketY The taxes are applied on finished steel materials that are re-exported after further domestic processing. The products subject to this tariff include key line pipe inputs such as hot-rolled coil.

4) Massive Subsidization of the Chinese Steellndustry. Including Line Pipe Producers

84. As set out in more detail in Section 7 and Annex A, the GOC engages in massive subsidization of the line pipe sector. As recently as November 2014, reports indicated that

"govemment subsidization played a major role in "beautifying" the financial statement for many enterprises. Taking line pipe producer Valin Steel, for example, the net profit for HI 2014 was

45 "Guizhou News, "Pipeline Company's Monopolizes 'Three Barrels of Oil': [sit facing a Split''" (10 October 2013), Public Exhibit 6-24; PetroChina Company Limited, "About PetroChina", Public Exhibit 6-25; Sina Finance, "PetroChina Monopolizes the Transportation of Natural Gas: Accused oflncreasing Gas Price" (13 April 2013), Public Exhibit 6-26. 46 Final Determination Statement ofReasons for Certain Ga/l'(mi:::ed Steel Wire {August 6, 2013) at para. 96. 47 SteelFirst, "China to impose tax on steel imported for re-export" (14 July 2014 ), Public Exhibit 6-27.

26 NON-CONFIDENTIAL

19.01 million RMB. However, the amount of government subsidization it received during that

4 period was 79.41 million RBM- 4.17 times its net profit." R

5) Domestic Price Analysis

85. Sufficient information with respect to world market prices for line pipe is available, albeit limited, for comparison with Chinese domestic line pipe prices. The Complainant has gathered the best information available on Chinese line pipe prices.

86. Metal Expert collects and reports on seamless and welded Chinese line pipe prices as well as prices from other jurisdictions, although it does not report the data on a per diameter basis. The reported domestic selling prices in China for November and April2014 are replicated in Table 2.

Table 2 Metal Expert Home Market Chinese Pricing in USD/tonne."

87. Based on this information, domestic pricing of line pipe across all grades and production methods in China ranged from $61 0/tonne to $700/tonne during the last quarter of 2014.

88. When compared with the pricing of line pipe in other markets sold on a similar basis (i.e.

FOB or CFR) as reported by Metal Expert (see Table 3), the Chinese prices are in every instance lower than others are. For example, for Grade B Seamless line pipe, Chinese pricing is anywhere from 7% to 50% lower than the pricing in other markets. For Seamless Grade X65, the Chinese

43 Tianjin Guanghengrun Steel Co., "(X42 Line Pipes) Local Governments Don't Dare to be Bold and Resolute­ Seeking for Stability" (18 November 2014), Public Exhibit 6-28. See also, TianJin TianYiXingLong Iron & Steel Trade Co., Ltd., Government Subsidization is the Miraculous Medicine to Curing DeficiL< Experienced by X60 Line Pipe Enterprises" (20 August 2014), Public Exhibit 6-29. 49 Metal Expert, "World Pipes Markets" (January 2015), Confidential Exhibit 6-30.

27 NON-CONFIDENTIAL home market pricing is 52% lower than pricing in Japan. And for Welded Grade X42, the Chinese pricing is 20% to 23% below the pricing in the United States and Japan.

Table 3 Metal Expert Line Pipe Pricing (EXW FOB or CFR basis) in USD/tonne.50

Country Grade Nov Dec Q4 2014 2014 2014 1 i USA I Seamless GrBc i }190 1 1180 l 1190 1 Middle East Seamless Gr B 1 680 i 680 ]}@ -. --. 1 : Japan~--. Seamless Gr B .1250 _:___j1250_· _I 126~_! JaE.,~"---~- Seamless X65 . I 1450 .. ..;J 45Q__ ~J 1450 .. ~ f USA iWeldedX42 1760 · ! 760 · I 760 .· .· I [Japan __ ...... \,\1~~~~);;'!:2, __ lz2.Q._ ____ L7?Q ...... l7JQ .....J

6) Conclusions

89. The pervasive, wide ranging, and material GOC measures have no doubt resulted in si6'11ificant influence on the Chinese steel industry and more particularly the line pipe sector. The conditions described ins. 20(a) of the SIMA therefore exist in the sector and domestic prices are substantially determined by the GOC. The domestic selling prices of line pipe are not substantially the same as they would be in a competitive market. As such, the Agency should initiate a s. 20 investigation.

ii. Surrogate Normal Value

90. Normal values for China should be determined based on domestic selling prices or on the full costs of goods plus profits as the conditions of s. 20 of the SIMA exist in the line pipe sector in China. Pursuant to SIMAs. 20(l)(c), normal values may be calculated based on surrogate country data.

91. Evraz Canada has provided ex-mill domestic market pricing in the US, EU and Russia for welded large diameter line pipe collected and reported by Metal Bulletin Research ("MBR") as

50 Ibid. 28 NON-CONFIDENTIAL appropriate for surrogate pricing data based on the information currently and reasonably available to the Complainant. See Confidential Exhibit 6-31. In particular, the markets for large diameter

1 line pipe in the US, EU and Russia are each comparable to the Chinese market. 5 In addition, the

MBR data provide quarterly pricing for longitudinally welded line pipe for the US, EU and Russian market, and also helically welded line pipe for the US and EU market. As such, the MBR data allow for sufficiently specific nonnal values. Moreover, given that the MBR data represent ex-mill sales prices, no adjustments were necessary.

92. Given the above, the Complainant has estimated nonnal values with reference to the average of applicable quarterly large diameter line pipe prices as published by MBR. Specifically, the Complainant used the average price of the US, EU and Russian markets for longitudinally welded line pipe, and average price of the US and EU markets for helically welded line pipe.

Additionally, the prices in the MBR report are reported in U.S. dollars or Euro per tonne. As such, the Complainant has converted the prices to Canadian dollars using the quarterly average exchange rates provided by the Bank of Canada. Details of the calculations of these surrogate nonnal values pursuant to s. 20 of SIMA are provided at Confidential Exhibit 6-31.

D. Export Price

93. There is a significant discrepancy in the data reported as VFD in the Statistics Canada data, and the available data on exports from the China and Japan, e.g., HS Codes 7305.11, 7305.!2 and

7305.19. The amount of this differential, even using annual average exchange rates, is in the range of the costs one would expect to be associated with CIF charges. The evidence therefore indicates that these data have likely been reported on Canadian customs documents on a delivered basis

51 See CONFIDENTIAL Exhibit 8-17 at 12, 14, which shows the market demand in China for LSAW and HSAW line pipe in 20 ll was approximately just over 4.4 million tonnes, whereas the demand in the CIS region were over 4.12 million tonnes, and the demands in the NAFTA and EU regions were around 2 million tonnes.

29 NON-CONFIDENTIAL rather than FOB China or Japan point of direct shipment. Accordingly, the estimated export prices for both subject countries have been based on Chinese and Japanese export data. See Public

Exhibit 6-32.52

94. The Chinese and Japanese tariff codes distinguish between longitudinally welded line pipe

3 and helically welded line pipe. 5 However, they do not breakout welded line pipe at 24" in outside dimneter,54 and as such, export data are provided for all exports of welded line pipe exceeding 16" in outside diameter. That said, based on Evraz's experience, the differences in sizes in outside diameters do not result in significant differences in pricing and costs per tonne. Equally importantly, Canadian import data, which breaks welded line pipe out at 24", show that a vast majority of the Chinese and Japanese imports ofline pipe over 16" are in fact over 24" in outside diameter. See Public Exhibit 6-35. As such, export prices reported in the Chinese and Japanese export data constitute the most reliable and accurate source of export prices for the subject imports.

E. Margins of Dumping

95. Based upon the analysis discussed above, Chinese subject goods have been dumped at margins of dumping ranging from [ ]% to [ ]'Yo using s. I 9 nonnal values, and [ ]% to [ ]% using s. 20 nonnal values. Confidential Exhibits 6-36 and 6-38 provide a detailed breakdown of all the margins calculated for each benchmark product.

96. Based upon the analysis discussed above, Japanese subject goods have been dumped at margins of dumping ranging from [ ]% to [ ]% for the significant MODs, using s. 19 nonnal values. Confidential Exhibit 6-37 provides a detailed breakdown of all the margins calculated for each benchmark product.

52 See also Public Exhibit 6-33 for the Chinese HS codes and Public Exhibit 6-34 for the Japanese HS codes for the definition of the products surveyed for the export price determination. 53 !hid. 54 Ibid.

30 NON-CONFIDENTIAL

7. Subsidization

97. The Complainant hereby requests that the Agency initiate a countervailing duty investigation and have provided evidence of countervailable subsidies to Chinese producers and exporters of subject goods on a pro!,'l'am-by-program basis in Annex A.

8. Demonstrating Injurv

A. In,jury

98. The dumped and subsidized subject goods from China and the dumped line pipe from Japan have caused very material injury to the domestic industry. This injury is evidenced by the significant increase in import volumes from the Subject Countries, the rampant undercutting, depression and suppression of domestic industry prices by the Subject Goods and the resulting impact on the domestic industry. In particular, Evraz Canada has suffered a decline in its market share, sales volumes (as detailed in Confidential Exhibit 8-2), profits, productivity, capacity utilization, return on investments and employment numbers. Further, the dumped and subsidized

Chinese and dumped Japanese large diameter line pipe are threatening to cause material injury, as set out in more detail below.

99. Confidential Exhibit 8-1 provides the apparent Canadian market, showing Evraz

Canada's consolidated domestic shipments (i.e., domestic sales from Canadian production), as well as imports by major import source. Canadian sales data are taken from

Confidential Exhibit 5-1. Import volumes and values are based on Statistics Canada import

55 As of the date of the filing of this Complaint, import data for December 2015 from Statistics Canada were not available. As a result, 2014 December import volumes and values were used as a proxy of2015 December import volumes and values to construct lull year 2015 import data. Import data for January to November 2015 are based on actual import data provided by Statistics Canada.

31 NON-CONFIDENTIAL

i. Volume Effects of Dumped and Subsidized Imports

100. In both real and relative terms, the increase of subject imports has been nothing short of mass1ve over the relevant period tor this Complaint. As demonstrated m

Confidential Exhibit 8-1, imports from China and Japan have grown from 37,746 tonnes, or

( ] percent of the estimated apparent Canadian market in 2013, to 71,009 tonnes, or [ percent of the estimated apparent Canadian market in 2014, to an estimated 142,481 tonnes, or

( ] percent of the estimated apparent Canadian market in 2015.

101. During the same period, domestic sales from domestic production declined precipitously, from [ ] tonnes, or [ ] percent of the estimated apparent Canadian market in 2013, to

[ ] tonnes, or [ ] percent of the estimated apparent Canadian market in 2015.

102. Put another way, subject imports almost quadrupled in absolute terms and [

] relative to the total apparent market between 2013 and the first nine months of2015, while domestic sales from domestic production decreased to [ ] of their absolute levels and the market share relative to the total apparent market [ l during the same period.

103. By any standard, these volume effects have been devastating to Evraz's profitability. As discussed below, this massive displacement of domestic sales by imports of subject goods can be directly linked to losses by Evraz Canada of major RFPs to dumped and subsidized import pricing.

For example, as set out in detail in Confidential Exhibit 8-2, [

], Evraz Canada lost a total of [ ], representing more than [ ] in sales revenue. [

32 NON-CONFIDENTIAL

].56 Notably [

].

104. Evraz Canada further believes these recent massive import volumes of subject goods warrant an examination as to whether the conditions of section 42(\)(b) of SIMA apply, which would lead to the imposition of duties from the date of initiation of the CBSA investigation in this matter. Evraz Canada will provide additional evidence and argument on this issue in due course.

ii. Undercutting, Depression and Suppression of Prices

I 05. The evidence in this Complaint, particularly in the account-specific allegations provided herein, demonstrates that significant undercutting by dumped and subsidized subject goods in the bidding processes has caused Evraz Canada to significantly decrease its prices ([

]) in order to remain competitive in these processes. Even after decreasing its pricing, Evraz Canada has lost significant sales to unfairly traded imports from China and Japan. Confidential Exhibit 8-2 contains the account-specific evidence oflost sales and lost revenue by Evraz Canada to dumped and subsidized imports of subject goods.

I 06. Large diameter line pipe products are sold on a specific project or bid basis, and the pricing oflarge diameter line pipe products would therefore vary from project to project. As such, average unit selling prices across multiple projects and bids need to be carefully examined in order to

56 See Confidential Exhibit 8-2. Attachment.

33 NON-CONFIDENTIAL properly assess the relevance and significance of such data. In this regard, what is most telling is:

(I) the relationship of Evraz's average unit selling price to the average unit values of subject imports (and in this regard the data, as summarized in Table 4 below, show that [

)); and (2) the relationship ofEvraz's selling prices to Evraz's costs (and in this regard the data show [

Table 4: Average Unit Values

Evrao Canada sales and production data, Confidential Exhibit 5-I

I 07. More specifically, in 2013, the average unit sales values for Evraz Canada's domestic sales from domestic production of like goods stood at [ ] per tonne. The average unit value of imports from Japan was [

].

108. In 2014, the average unit values of imports from both Japan and China showed modest increases from their 2013 levels, standing at $1,413 per tonne and $1,312 per tonne, respectively.

Notably, however, by 2014, [

]. Also notably, the unit values for subject imports

57 Confidential Exhibit 5-1, Evraz Income Statement.

34 NON-CONFIDENTIAL from Japan and China were significantly lower than the unit values for non-subject imports, which stood at $2,027 per tonne in 2014.

109. In 2015, the average unit values of imports of subject goods from China and Japan have quite simply plummeted, dropping in the case of Japan by 13 percent compared to 2014 to S I ,233 per tonne and dropping by 4 percent in the case of China to $1,265 per tonne. This very si1,,>ni ficant drop in average unit values for subject imports stands in contrast with an increase in the average unit import value from non-subject imports, from $2,027 per tonne in 2014, to $2,051 per tonne in

2015. The massive drop in the average unit values of subject imports also corresponds with the period of most dramatic growth in volumes of subject imports. Specifically, subject import volumes increased from 71,009 tonnes in 2014, or [ ] percent of the total apparent market estimated for large diameter line pipe, to an estimated 142,481 tonnes or [ ] percent of the total apparent market in 2015.

110. During this same period, Evraz Canada's average sales value from domestic production

[

]. At the same time, Evraz Canada's domestic sales volumes

[

]. Notably, [

]. The gravity of this situation for Evraz Canada is made evident by the company's financial perfonnance over the same period, as well as by the implications tor Evraz Canada's future financial performance discussed further below.

35 NON-CONFIDENTIAL

iii. Impact of Subject Goods on the State of the Domestic Industry

I) Profits

Ill. Confidential Exhibit 5-l contains the income statement for Evraz Canada's production and sale of like goods. The data provided in the income statement demonstrate that while Evraz

Canada's financial perfonnance [

]. Moreover, as detailed in Confidential Exhibit 8-2 and immediately below,

Evraz Canada [

] Evraz's very recent and significant investments made towards upgrades dedicated to Evraz Canada's Canadian production oflarge diameter line pipe and to upstream steelmaking are now also at stake.

2) Production

112. As demonstrated by Confidential Exhibit 8-1, Evraz Canada's production has [

]in2015.

113. Regarding Evraz Canada's Canadian production capacity for like goods, in late 2013,

Evraz Canada [

], Evraz Canada's Canadian production capacity for large diameter line pipe was [ ] tonnes ([ ] short tons) in 2013 and [ ] tonnes

([ ] short tons) in 2014 and 2015. This translates into capacity utilization rates of[ ] percent, [ ] percent and [ ] percent for each of2013, 2014 and 2015 respectively. By any

36 NON-CONFIDENTIAL standard, [

].

3) Capacity

114. This [

]. Indeed, a significant portion of the volume from

] described in detail in Confidential Exhibit 8-2, which Evraz

Canada lost to dumped and subsidized subject imports, would have been produced [

]. Without this volume, [

l

4) Return on Investments

I I 5. The massive lost sales volumes and significant price effects caused by dumped and subsidized imports also jeopardize the very significant investment made by Evraz Canada to improve the efficiency and increase the capacity of Evraz Canada's large diameter line pipe production at its Regina facility. At the end of2014, based on Evraz Canada's [

] combined with the absolute need to reduce costs to be able to compete with low-priced imports for new significant pipeline projects on the horizon in Canada

37 NON-CONFIDENTIAL

Evraz Canada approved an investment program in its Regina facility that included an approximate

] upt,>Tade to Evraz Canada's large diameter line pipe production line. With this

investment, Evraz Canada's expects to achieve production cost savings as well as an increase in

production capacity for large diameter line pipe of approximately [

] this would increase the production capacity tor large diameter line pipe of Evraz Canada's Regina facility to approximately [

], Evraz Canada's total Canadian production capacity for

like goods would be [ ] tonnes. [

]. However, the simple reality is that

Evraz Canada's total sales volumes in 2015 of[ ] tonnes (of which [ ] tonnes

was for domestic sales), which are also increasingly less profitable sales, is [

].

116. Moreover, on October 13, 2015, Moody's Investors Service placed Evraz Canada's Ba3

senior secured notes under review for downt,>Tade. In doing so, Moody's stated that Evraz North

America, Evraz Canada's parent company, continued to "struggle with challenging market

conditions with 2015 evidencing weaker capacity utilization rates and meaningful price

deterioration." See Public Exhibit 8-3. This downgrade will [

].

5) Employment

!1 7. As discussed above, the [

].

38 NON-CONFIDENTIAL

iv. Additional Evidence of Causation: Account-Specific Allegations

118. The Complainant has provided account-specific allegations, detailing evidence of material injury through lost sales, price suppression, and price depression. See Confidential Exhibit 8-2.

This infonnation serves to corroborate the correlational market share evidence and relative average price infonnation discussed above by providing direct examples of the devastating commercial impact to Evraz Canada by dumped and subsidized subject goods at an account-specific level.

119. Notably, these account-specific allegations demonstrate that Evraz Canada has suffered material injury and will continue to suffer material injury. Evraz Canada has suffered a loss of critical orders, which has already [ ].

Evraz Canada has also suffered severe pricing pressure that has forced, and will continue to force,

Evraz Canada into the unenviable position of having to decide between (I) competing with the subject goods [ ] and (2) forgoing the business-critical volumes associated with those sales entirely. Evraz Canada [

]. Each of these are [

].

v. Summary

120. The injury factors discussed above demonstrate that unfairly priced imports of subject goods from both China and Japan have caused significant injury to the domestic large diameter

line pipe industry in Canada. There has been a significant increase in the volume of imports of

subject goods, both in absolute tenns and relative to the production and consumption of the like

39 NON-CONFIDENTIAL goods in Canada. Moreover, the effect of the dumped and subsidized goods trom China and the dumped goods from Japan has been to significantly undercut, depress and suppress the prices of

Canadian-produced large diameter line pipe. As a result, the impact of the presence of the subject goods in Canada has been that Evraz Canada's profits have declined significantly, along with its production, capacity utilization, employment, Canadian sales volumes and values, and domestic market share, particularly in 2015. Evraz Canada has also been [

]. Evraz Canada has provided infonnation on an account-specific basis that demonstrate injury to the domestic industry through lost sales volumes, price depression, and price suppresswn.

121. In combination with the average pricing data, the evidence of a causal connection between dumped and subsidized imports of subject goods from China, dumped imports of subject goods from Japan, and material injury suffered by Evraz Canada is indisputable. The average unit values of the subject goods are [

] and there has been significant decrease in the average unit values of the subject goods in 20 I 5 when the volume of subject goods increased massively.

B. Threat of Injury

I 22. Dumped and subsidized large diameter line pipe from China and dumped large diameter line pipe from Japan pose an imminent and foreseeable threat of injury to Evraz Canada over the next I 8 to 24 months. Given the standard lead-time between RFPs and delivery for subject goods, most of which are completed over a two-year period, threat of injury should be evaluated over a

18- to 24-month forward-looking basis rather than on a 12- to IS-month forward-looking basis.

40 NON-CONFIDENTIAL

123. This imminent and foreseeable threat of injury is evidenced based on a number of factors, including:

• the significant rate of increase in imports of dumped and subsidized subject goods, signifying a likelihood of continual increased imports into Canada of dumped and subsidized subject goods; • the particular vulnerability of the domestic industry that produces subject goods; • the export orientation, freely disposable capacity, and imminent increase in capacity of subject good producers; • the inability of other export markets to absorb any increase in subject goods; • the likelihood that significant price undercutting of domestic like goods will continue, resulting in further price depression and suppression; and • the likelihood of injury, which is already impacting the domestic industry.

i. Significant Rate of Increase in Imports of Subject Goods

124. As discussed further above in relation to the injury currently suffered by Evraz Canada, there has been a significant increase in the volume of subject goods imported into the Canadian market from both China and Japan, both in absolute tenns and relative to the consumption in

Canada oflike goods from 2013 through 2015. Confidential Exhibit 8-1 shows that imports from subject countries have grown from 37,746 tonnes, or [ ] percent of the estimated apparent

Canadian market in 2013, to 71,009 tonnes, or [ ] percent of the estimated apparent Canadian market in 2014, to an estimated 142,481 tonnes, or [ ] percent of the estimated apparent

Canadian market in 2015. Clearly, given this inexorable increase in the volume of imports of subject goods from both China and Japan, imports of subject goods can be expected to continue to grow over the next 18-24 months if SIMA duties are not put in place.

41 NON-CONFIDENTIAL

125. Indeed, Canada was the number one destination for Chinese welded line pipe from January to November 2015,58 During the first II months of20 15, Canada was the single largest destination for welded line pipe over 16" in OD from China, taking in 121,828 tonnes, as evidenced in the

Chinese export data compiled by GTIS in Public Exhibit 8-4. According to the Canadian import data from Statistics Canada, approximately 80.88 percent of the imports of Chinese welded line pipe over 16" in OD were over 24" in OD over the same period (see Public Exhibit 6-35), which translates into 98,534 tonnes of Chinese exports oflarge diameter line pipe based on the Chinese export data. These volumes are particularly devastating in the context of overall consumption of line pipe in the Canadian market, as compared to other countries, 59 signalling particular vulnerability to further increased volumes of subject goods over the next 18 to 24 months.

126. As for the subject imports from Japan, it is a well-known fact that the Canadian market is

"a target region for Japanese {line pipe} mills."60 During 2015, Canada was the second largest export market for Japanese welded line pipe over 16" in 0Ds.61 The total volume of Japanese subject imports into Canada increased by more than 50 percent from 2013 to 2014, before increasing by almost 130 percent from 2014 to 2015 at 77,543 tonnes (see Confidential Exhibit

8-1). These increasing Japanese exports to Canada, coupled with decreasing exports to markets in which there has been a significant Chinese presence, demonstrates that Japanese exporters, faced with competition from Chinese exporters in these markets, are increasingly looking to Canada to offload excess production of subject goods.

58 Confidential Exhibit 8-4, GTJS, China Export Data. See also Steel Business Briefing 2015, Yuelin Dai "China's Welded Pipe Output, Exports Down Amid Summer Lull" (August 15, 2015), Confidential Exhibit 8-5. 59 See "M13R Welded Linepipe & OCTG Market Tracker" (December 22, 2015) Confidential Exhibit 8-6 at page 4 where the Canada market consumed only 393,000 tonnes of welded LSAW and HSAW line pipe in 2014, whereas the United State market consumed 708,000 tonnes during the same time period. r.o See "MI3R Welded Linepipe & OCTG Markel Tracker" (January 29, 2016) Confidenthd Exhibit 8-7 at page I. 61 Public Exhibit 8-4, GTJS Japanese Export Data.

42 NON-CONFIDENTIAL

127. Confirming the clear pattern of increasing exports to Canada observable from the data,

MBR as recently as on December 22, 2015 reported that " {s} uppliers in {Japan and China} are targeting the large Canadian pipeline projects, especially the offshore west-coast lines ... year-to- date October 2015 arrivals amounted to 75kt oflarge-diameter linepipe from Japan and 66kt from

China. The tonnage from China represents an increase of 30kt from the same period in 2014."62

Given this increase in volume, and decrease in pricing of subject goods discussed below, MBR presciently noted that "it is only a matter of time before producers are petitioning for linepipe investigation on the over-24" OD sizes" from Japan and China. 63

ii. The Domestic Industry Currently is Particularly Vulnerable to Imports of Subject Goods

A) Further Loss of RFPs and [ l

128. The apparent market table at Confidential Exhibit 8-1 shows that [

].

Notwithstanding this [ ] in demand, subject imports more than doubled, from

71,009 tonnes in 2014 to an estimated 142,481 tonnes in 2015.

129. In light of the current market conditions and the injury already suffered, Evraz Canada

[ ]. Evraz Canada currently foresees [ ] opportunities tor large diameter line pipe [ ] which are crucial to Evraz

Canada's [

] these opportunities represent

62 See "MBR Welded Linepipe & OCTO Market Tracker" (December 22, 2015) Confidentinl Exhibit 8-6 at page 5. 63 !bicl.

43 NON-CONFIDENTIAL

130. Although [ ], Evraz Canada has already suffered the effects of significant price depression and expects to be pressured further to lower its prices going forward. [ ], Evraz Canada has [

].

131. Evraz Canada expects that these [ l:

132. [

] Evraz Canada initially quoted a price of ] but has since been forced to reduce its price to [ ] to compete with dumped and subsidized imports from China and dumped imports from Japan. Evraz Canada's price reduction already represents a loss of ] and Evraz Canada expects to [

]. Moreover, Evraz Canada expects that [

l

133.

] and Evraz Canada quoted a price of[ ] at that time. Since then, [ ]lower priced offshore imports to bring Evraz Canada's price down to [ ], which represents a [

] reduction equivalent to approximately [ ]. At [ ] USD/tonne, Evraz

44 NON-CONFIDENTIAL

Canada a Iready expects [ J compared to Evraz Canada's projected fully burdened costs which are [ Evraz Canada expects [

]. Evraz Canada has received market intelligence indicating that Japanese mills were pricing similar pipe [ ].

134.

]. Evraz Canada has already suffered a Joss of approximately [ ] as a result of the competition it is facing from unfairly traded Chinese and Japanese large diameter line pipe. ( this dumped and subsidized pipe to force Evraz Canada to lower its price from [ to [ ]. Evraz Canada has already [

]. Moreover, at a price of [

135.

J As noted above, Moody's has put Evraz Canada on a credit rating wanning as of October 2015, [

].

45 NON-CONFIDENTIAL

B) Further loss on Investment Expected

136. As discussed, Evraz Canada had made a major investment in its Regina large diameter line pipe production facilities in 2014. Evraz Canada had hoped that expanded production capabilities and the improved efficiencies in the large diameter line pipe production process stemming from this investment would make the Regina mill even more competitive in the industry. However, the continued increase in volumes of imports of subject goods coupled with the continued decrease in pricing of subject goods from China and Japan has not pennitted, and will not pennit, Evraz

Canada to compete on an even-playing field. SIMA duties are required to ensure fair competition that will allow Evraz Canada to achieve reasonable returns on its investment.

iii. Japan and China have Freely Disposable and Growing Capacity, which will Encourage Exports of Dumped and Subsidized Goods to Canada

137. The global industry is currently facing a situation of chronic overcapacity.64 One of the drivers of this situation is the illogical capacity expansions taking place in non-OECD countries, spurred by government subsidization.65

138. In 2011, China was estimated to have a steelmaking capacity of 863.3 million tonnes.66

Between 2011 and 2014, China's capacity continued to grow to an estimated 995.6 to I ,007 million tonnes.67 The GOC has acknowledged a "total overcapacity" problem as recently as July 2014 due to the "senselessly expanding" of Chinese steel capacity. 68 This chronic and excess capacity is a

64 Organization for Economic and Co-Operation and Development, "Excess capacity in the global steel industry: The current situation and ways forward" (January 2015), Public Exhibit 8-8. 65 Organization for Economic and Co-Operation and Development, "Excess capacity in the global steel industry: The current situation and ways forward" (January 2015), Public Exhibit 8-8. 66 Organization for Economic and Co-Operation and Development, "2013 Developments in Steelmaking Capacity of Non-OECD Economies, Public Exhibit 8-9. 67 Organization for Economic and Co-Operation and Development, "2013 Developments in Steelmaking Capacity of Non-OECD Economies, Public Exhibit 8-9. "'"How to Deal with the Four Industries' Severely Excess Production Capacity", (August I, 2014), Public Exhibit 8-10.

46 NON-CONFIDENTIAL direct result of the massive and prolonged campaign of steel industry subsidization by the GOC .6''

The Chinese domestic steel pipe market is unprofitable, with supply significantly exceeding demand. The GOC's 12'11 Five-Year Plan for the Steel Pipe Industry stated that "the {Chinese} steel pipe industry's average profit has hit a historical low point, even lower than the general steel industry's average profit level" by mid-2011. 70 By 2014, the problem in the Chinese steel pipe industry has worsened to an even greater extent:

In recent years, newly added steel pipe assembling units aggravated the problem of production capacity, which caused the imbalance between the steel pipe industry's structure and the product's structure; and the situation of disorderly competition and low enterprise revenue. 71

139. Japan has also expanded its steelmaking capacity in recent years. A December 2011

Organization for Economic Cooperation and Development ("OECD") report found that Japan's steelmaking capacity had been steadily increasing since 2005, and was expected to continue increasing into 2014. Altogether, this represents a total capacity increase of 9.5 million tonnes, from 124.1 million tonnes in 2005 to 133.6 million tonnes in 2014.72

140. Production has not kept up with the expansion in steelmaking capacity. Over the same period of2005 to 2014, while steelmaking capacity expanded, Japan's steelmaking production fell almost 2 million tonnes, from 112.5 million tonnes in 2005 to 110.7 million tonnes in 2014.73 The result is a I 0% increase in excess capacity.

69 Organization for Economic Co-Operation and Development, "Excess capacity and risks of trade friction cloud the outlook for the global steel industry" (December 12, 2014), Public Exhibit 8-ll. See also Economic Policy Institute & Stewart and Stewart, "Surging Steel Imports Put up to Half a Million US Jobs at Risks" (May 13, 2014) at 36-38, Public Exhibit 8-12. 70 12th Five-Year Plan for the Steel Pipe Industry" (June 14, 2011), Public Exhibit 8-13. 71 "The Steel Pipe Industry Must Become Accustomed to the New Conditions" (March 31, 2014), Public Exhibit 8- 14. 71 Organization for Economic and Co-Operation and Development, "Regional capacity" (December 20 II), Public Exhibit 8-15. 73 World Steel Association, "Crude Steel Production", Public Exhibit 8-16. 47 NON-CONFIDENTIAL

141. The excess and [,'TOWing capacity problem plaguing the steel sectors in China and Japan are likewise a persistent issue in the line pipe sector. Meta!Bulletin sets out the current capacity for large diameter line pipe producers in China and Japan producing LSAW and HSA W large diameter line pipe. That data show that China's capacity to produce large diameter line pipe is approximately 9.2 million tonnes and Japan's capacity is approximately 2.6 million tonnes.

Table 5: Production Capacity of Chinese and Japanese Line Pipe Producers ('000 tonnes)"

74 MetaiBulletin, The Five Year Strategic Outlook for the Global Large-diameter Linepipe Market (2014) at 166, 206, Confidential Exhibit 8-17. 75 Nishimura Koki operates as a subsidiary ofNSSMC as of November 30, 2010 (See Bloomberg Business, Company Overview of Nishimura Koki Co., Ltd., Public Exhibit 8-18) and consist of i20,000 tonnes ofNSSMC's I ,200,000 tonnes production capacity. 48 NON-CONFIDENTIAL

142. To estimate capacity utilization, Meta!Bulletin reports production forecasts of LSAW and

HSA W line pipe for Chinese large diameter line pipe producers. While Meta!Bulletin does not report a Japan-specific forecast, Meta!Bulletin forecasts the other-Asia production (which includes

Japan) to be flat or declining through to 2017. As such, it is reasonable to assume Japanese output

is more or Jess flat through to 2017, using the most recent actual HSAW and LSAW Japanese output data of 7. 7 million tonnes reported by Meta!Bulletin. The resulting large diameter line pipe

production estimate for 2015 through 2017 is reproduced at Table 6.

Table 6 Forecast Production Output ('000 tonnes)76 2015 2016 2017

143. The combined capacity and output data reveal that China and Japan have massive excess

capacity. As Table 7 shows, Chinese and Japanese large diameter line pipe producers currently

operate at less than 60% capacity and utilization is expected to fall by 3 percentage points by 2017

to 56%. The excess capacity from these dismal utilization rates is at a staggering 4.9 million tonnes

-which will grow to 5.2 million tonnes by 2017 -and represents [ ] the total

apparent market for large diameter line pipe in Canada in 2015.

76 Meta!Bulletin, The Five Year Strategic Outlook for the Global Large-diameter Linepipe Market (20 14) at 186, 224-225, 231, Confidential Exhibit 8-17.

49 NON-CONFIDENTIAL

Table 7 Estimated Combined Excess Capacity for Japan and China

2015 2016 2017 Capacity ('000 tonne8) 11,936 '·. H,936 ! 11;9361

Production ('000 tonnes) 7,015 6,870 I 6,720 1

1 Excess CapacitJ(

1 Excess CapaCitY(%) •·. · · i 41% : 42% l 44%

144. The fact that China has over 310 facilities with either active or pending API 5L certification and that Japan has additional facilities with active or pending certifications than those surveyed by

MetalBulletin underscores the fact that the above data are extremely conservative and likely underestimate line pipe capacity and excess capacity in China and Japan. 77 An OECD report has also suggested that Chinese steelmaking capacities are larger than estimated, corroborating the

MetalBulletin data of underestimated Chinese line pipe capacity. 78

145. These facts, combined with the sudden and massive increase in the volume of subject imports from China and Japan between 2013 and 2015, underline the fact that China and Japan have significant unused capacity to flood the Canadian market with dumped and subsidized line pipe several times over.

146. Despite existing excess capacity, Chinese and Japanese producers continue to add more capacity. In China, steelmakers have invested in new steel making production capacities in

Xinjiang, a raw resource rich region. 79 Additionally, other Chinese companies are also increasing their steelmaking capacities, including Baosteel who has commissioned the building of two 5,050 m3 blast furnaces. 80 In the case of Japan, NSSMC and JFE are planning to increase their

77 API Certification List, Public Exhibit 8-19. 78 OECD, "Excess Capacity in UJe Global Steel Industry and the Implications of New Investment Projecl''" (2015) at 18, Public Exhibit 8-20. 79 Ibid at 15. 80 !hid. 50 NON-CONFIDENTIAL steelmaking capacities. JFE Corporation acquired a 5% stake in a Vietnamese steel company,

Fonnosa Plastics, in July 2015. JFE plans to invest $10 billion to assist Formosa Plastics in increasing its steelmaking capacity to 22 million tons. 81 NSSMC explicitly stated in its 2013

Annual Report that it plans to achieve 60-70 million tons of overall steel production capacity within the next 5-l 0 years.82

147. Based on the above, the freely disposable and increasing capacity of Chinese and Japanese large diameter line pipe producers will lead to an increase in exports of the dumped and subsidized line pipe into Canada in the next 18 to 24 months.

iv. Market Conditions will Encourage Increased Exports to Canada

1) Chinese Market Conditions Encourage Exports

148. Demand for Chinese large diameter line pipe is far below production. One explanation for this low demand is that the Chinese economy has experienced decelerated growth in recent years; a trend that is predicted to continue into 2017.83 Worried about China's decelerated growth, the

GOC has undertaken a number of measures to boost its economy.84

149. On August 11, 2015, China's central bank, a GOC entity, devalued its currency by 2%, the biggest one-day fall since 1994.85 The GOC tightly controls the value of the Chinese Yuan. Before this sudden devaluation, the GOC has seen to it that the Yuan sharply raised in value over the last

81 DealStreetAsia, "Japan's JFE Steel mulls $242m investment in Vietnam-based Formosa Plastic project" (26 July 2015) at I, Public Exhibit 8-21. "Nippon Steel & Summitomo Metal Corporation, "Annual Report 2013" (2013) at 6-7, Public Exhibit 8-22. 83 The World Bank, "China is Adjusting to Slower Economic Growth, Says New World Bank Report" (1 July 2015) at 1, Public Exhibit 8-23. 84 The Wall Street Journal, China Moves to Devalue Yuan (II August 20 15) at I, Public Exhibit 8-24. 85 The Globe and Mail, China devalues yuan by 2'Yo, sees biggest one-day fall since 1994 (I 1 August 2015) at I, Pnblic Exhibit 8-25. 51 NON-CONFIDENTIAL

I 0 years.86 Arguably, the GOC's currency devaluation move is an attempt to increase Chinese exports, boosting the economy when other measures have proven ineffectiveP

150. While many Canadian industries will be negatively affected by increased Chinese exports,

Steel Business Briefing has predicted that the Yuan's devaluation will have a particular devastating effect on the overseas steel industry. 88 The article specifies that "{i}n the short tenn, the yuan devaluation should make Chinese steel makers more competitive in the seabome market."89

151. Chinese line pipe producers will be encouraged to export their products in the next 18 to

24 months as demand for line pipe is far below production and due to struggling home market prices. While the line pipe industry in China has been in a downtum since 2013, there was some belief that a number of pipeline infrastructure projects will come online in 2015 and raise demand to approximately 4.3 million tonnes.90 Even with demand at 4.3 million tonnes, as described above,

Chinese capacity to produce line pipe is far greater than market demand.

152. That said, the future of some of the large pipeline projects relied upon by Meta!Bulletin to forecast demand are now in question. More recent repmis suggest that the cancellation of a number of significant oil and gas transmission projects could result in a more significant reduction in the demand for line pipe in China. China National Petroleum Company, China's main pipeline developer, has halted new pipeline construction since the fourth quarter of 2013. 91 While there have been some reports that China's fifth west-to-east gas pipeline may begin soon, approval is

8" The Wall Street Journal, China Moves to Devalue Yuan (II August 2015) at 4, Public Exhibit 8-24. 87 Ibid. 88 Steel Business Briefing, "Special report: Yuan devaluation poses problems for EU steel" (20 August 2015) at 2, Confidential Exhibit 8-26. 89 Ibid. •w Metal Bulletin, "MBR Welded Linepipc & OCTO Market Tracker" (30 April2014), Confidential Exhibit 8-27. '"Steel Business Briefing, "China's Chu Kong squeezed by delays of new pipeline in2013" (I April2014), Confidential Exhibit 8-28; Steel Business Briefing, "Lower Investment and comtption hit China energy pipe demand" (25 March 2014), Confidential Exhibit 8-29. 52 NON-CONFIDENTIAL still needed for the final design and the projects timing remains uncertain.91 There has been no progress on a proposed $26 billion pipeline to be constructed by Sinopec. 93 Thus, there is a real possibility that demand could be lower than what Meta!Bulletin predicts.

153. Despite this reduction in demand, the GOC encourages steelmakers to maintain, if not increase, their current level of production. In fact, an article published on December 15, 2015 suggests that "local {Chinese} govemment approval was needed before steelmakers could make any large cuts in production"Y4

154. Importantly, pricing in the Chinese market is reported to be at an all-time low. According to Metal Bulletin, LSA W line pipe grade API 5L X60 remains at an all-time lowY 5 The benchmark price has been unchanged tor three consecutive months and are half the value they were tour years ago.'> 6 As discussed in greater detail below, the opportunity tor higher pricing in export markets

like Canada encourages Chinese producers to focus on the export market and abandon the domestic market.

155. With the home market unable to absorb the volume from the extraordinary capacity and with pricing at all-time lows, China will be forced to export the dumped and subsidized line pipe to more attractive markets such as Canada. Exports represent the only option tor subject line pipe producers to address excess production and production capacity.

92 See also production data in Platts, "Pipemakers adapt to oil price plunge" (30 January 20 15), Confidential Exhibit 8-30. "'Steel Business Briefing, "China's Chu Kong squeezed by delays of new pipeline in 2013" (I April2014), Confidential Exhibit 8-28; Steel Business Briefing, "Lower Investment and corruption hit China energy pipe demand" (25 March 2014), Confidential Exhibit 8-29. "'Steel Business Briefing 2015 (15 December 2015), Confidential Exhibit 8-31. 95 Metal Bulletin, "MBR Welded Linepipe & OCTO Market Tracker" (30 April2015), Confidential Exhibit 8-27. 96 Ibid. 53 NON-CONFIDENTIAL

2) Japan Has No Home Market Demand

156. Japan has very limited oil resources and relies almost solely on imports to meet consumption needs. Limited domestic oil resources have translated to making Japan the third largest net oil importer in the world.97 Therefore, there is virtually no domestic need for subject line pipe produced by NSSMC and JFE. The USITC has confirmed that" {t}he Japanese CWLDLP

{"Certain Welded Large Diameter Line Pipe"} industry is export-oriented with virtually no home market demand"98 and "Japanese energy companies have actively pursued upstream oil and natural gas projects abroad, and provide construction for energy projects worldwide. Japan is a major exporter of energy - sector capital equipment."99

157. JFE, the exporter with the largest line pipe capacity in Japan, has stated in its March 2014-

2015 fiscal year update that it plans to "enhanc{ e} the company's production capability, a task that has been undertaken since the last medium tenn. Also, JFE Steel aims to increase its steel sales ... overseas, and is focusing on improving profitability to raise its rate of sales (ROS) to I 0% in the fiscal year ending March 2018 ... "{emphasis added}. 100

158. Since the Japanese home market has virtually no demand for subject goods, Japanese producers and exporters will be forced, and indeed are already exporting massive volumes of dumped and subsidized line pipe into markets such as Canada.

'!7 USITC, Certain Welded Large Diameter Line Pipe ji·om Jopan (Second Rel'ie1t~, 731-T A-919, September 2013, Public Exhibit 8-32. 98 USITC, Certain Welded Large Diameter Line Pipe Ji'om Japan (Second Reviell'), 731-T A-919, September 2013, Public Exhibit 8-32. 99 USJTC, Certain Welded Line Pipe Ji'om Korea and Turkey (Preliminary Determination), 701-T A-524-525, 731- T A-1260-1261, December 2014, Public Exhibit 8-33. 100 JFE Holdings' Financial Results for Fiscal Year 2014 ended March 31, 2015, Public Exhibit 8-34. 54 NON-CONFIDENTIAL

3) Soft Global Market Demand

159. Global demand for line pipe is expected to remain weak in the next 18 to 24 months.

Meta!Bulletin reports that demand for line pipe with an outside diameter of between 22" and 30" will fall from 4.524 million tonnes in 2014, to 4.459 million tonnes in 2015, to 4.351 million tonnes in 2016, and further to 4.343 million tonnes in 2017. 101 This represents a reduction in demand of

4% between 2014 and 2017. Moreover, the recent collapse in oil prices has created concern among end users ofline pipe who will be forced to delay or cancel projects due to the reduced profitability of their pipeline initiatives. 102 As such, the reduction in demand could be greater than what

Meta!Bulletin previously forecasted.

160. In light of this decrease in demand, there is little prospect for other markets to absorb any increase in exports of line pipe from subject country producers.

4) Canada Remains an Attractive Market for Subject Line Pipe and Has Little Ability to Absorb any Increase in Imports

161. As with the subject country demand and global demand, little growth is expected in the

Canadian market and, therefore, there is little likelihood that the Canadian market could absorb an increase of dumped and subsidized imports from the Subject Countries. Indeed, as with the demand globally and in Subject Coun!Iies, Meta!Bulletin reports that demand for line pipe with an outside diameter of22" to 30" will fall by 4.7% between 2014 and 2017. Meta!Bulletin reports that demand will fall from 150,000 tonnes in 2014, to 148,000 tonnes in 2015, to 144,000 thousand tonnes in

2016, and even further to 143,000 tonnes in 2017. 103

101 Meta!Bulletin, Strategic Prospects for the Global Transmission Linepipe Market (2014) at 120, Confidential Exhibit 8-35. 102 Metal Bulletin, "Outlook for 2015" (2015), Confidential Exhibit 8-36. 103 Meta!Bulletin, Strategic Prospects for the Global Transmission Linepipe Market (2014) atl9l, Confidential Exhibit 8-35. 55 NON-CONFIDENTIAL

162. End users use line pipe for gathering oil and gas from the point of production, as well as for distributing oil and gas to consumers. Demand for line pipe, therefore, is partially correlated with oil and gas exploration. In this respect, the Petroleum Services Association forecasts for 2015 a decrease in wells drilled of 53 percent, down from 11,193 wells in 2014 to 5,320 wells. 104

Nevertheless, 5,320 new wells represents significant activity compared to other markets and provide many opportunities for sales of Chinese line pipe.

163. Even with these demand estimates, the relative pricing of line pipe between Canada, and

China and Japan makes Canada an attractive market for exports of dumped and subsidized line ptpe.

164. The average unit value of line ptpe 111 the Canadian market, as reported in

Confidential Exhibit 8-1, is approximately $[ ] (or USD [ ] using the 2014 annual average exchange rate of 1.10 CAD to USD) per tonne in 2014 while Chinese home market prices in 2014, as reported in Table 8 below vary from USD 655 to USD 770 per tonne, or [ ] percent lower than prevailing average prices in Canada. As for Japan, no Japanese home market prices are available, as the country has virtually no home market. Thus, even in a slow market, the pricing in Canada will continue to attract Chinese and Japanese exports of subject goods.

Table 8 Metal Expert Home Market Chinese Pricing in USD/tonne. 105

Grade 2014 !Seam]ess GrB ' 689 · Seamless X 65 755 I WeldedX:42 655 -1 ~~~lde!l__)(SL__Lll()__ ___j

J().j Petroleum Services Association of Canada, "20 15 Canadian Drilling Activity Forecast Update" (April 30, 2015), Confidential Exhibit 8-37. '"'Metal Expert, "World Pipes Markets" (January 2015), Confidential Exhibit 8-38. Data calculated using an average of the quarterly reported prices.

56 NON-CONFIDENTIAL

v. The Government of China and Japan Actively Encourage Exports of Dumped and Subsidized Subject Goods to Relieve Excess Capacity

165. The GOC's key policy to resolve the overcapacity issue is a mandate tor producers to export their steel products. The GOC's 12'11 Five-Year Plan tor the Steel Pipe Industry ("12'11 FYP") provides, as one of its main objectives, " {to} export I 0 million tons of steel pipe ... having a steady average annual increase of 9.0%" so that 18 percent of China's seamless pipe production and II percent of China's welded pipe production becomes exported. 106 The GOC's 12'11 FYP, the overall purpose of which is to alleviate China's severe overcapacity problem, thus directs the Chinese industry to export increased production into other markets as a way to resolve the chronic excess capacity aft1icting China's domestic market. In a more recent announcement, the GOC restated its policy goal of "transferring" excess domestic production and "promot {ing) the export of domestic ... products." 107

166. Far from relieving excess capacity, however, the GOC' s policies have led to the perverse result of actually incentivizing Chinese producers to further expand their capacity. Chinese media, as recently as in August 2014, reports that the Chinese steel industry continues to vigorously and irrationally expand its production capacity despite an already severe level of unused capacity. 108

167. In Japan, the 2015 Income Tax Refonn now offers tax incentives for corporations to invest in new production facilities, which means that Japanese steelmaking capacity will likely increase going forward. Specifically, these incentives include a 30'Yo special depreciation or 3% tax credit on acquisition cost. 109 The two subject goods producers and exporters in Japan have already made plans to expand and benefit from these tax incentives. JFE specified in its 2015 business plan that

106 12th Five-Year Plan for the Steel Pipe Industry"' (June 14, 20 II), Public Exhibit 8-13. 107 Pcople.com.cn; Opinions ofState Council Issued Directives on Resolving Set·erely Etcess capacity Problems, GuoFa (2013) No. 41, Public Exhibit 6-19. 108 Ibid. 0 1 ' ' PWC, Japan Corporate Tax Credits and Incentives, Public Exhibit 8-39.

57 NON-CONFIDENTIAL it "will make capital investments worth 650 billion yen over the next three years". 110 NSSMC plans to invest more than double this amount, up to S 1,350 billion yen over the next three years. 111

vi. Potential Impact of the Subject Goods on the Prices of the Like Goods

168. Subject exporter's aggressive pricing will continue to exert a strong downward pressure on the pricing of like goods, [

]. Subject Goods have significantly undercut Evraz Canada's pricing in Canada and there are clear instances of lost sales accounts [

J where customers have chosen unfairly priced subject goods.

169. As discussed further above regarding the injury currently suffered by Evraz Canada, average unit values of subject imports from Japan fell trom $1,413 per tonne in 2014 to $1,233 per tonne in 2015, a fall of almost 15 percent. 112 Subject imports from China also fell from 2014 to

2015, from $1,312 per tonne to $1 ,265 per tonne respectively. 113 There is no reason to believe that this trend will not continue. In fact, MBR forecasted as recently as on December 22, 2015 that export prices for Chinese welded LSA W line pipe are forecast to fall from an average ofUSD 710 per tonne in December 2014 to USD 490 per tonne by Q2 of2016, representing over a 30 percent decrease. 114 Export prices for Japanese line pipe are also forecast to fall even more dramatically, from USD 1,550 per tonne in December 2014 to USD 490 per tonne by Q2 of2016, representing an astonishing 316 percent decrease. 115

110 JFE Group, Fil\h Medium-Term Business Plan (April23, 2015), Public Exhibit 8-40. 111 Nippon Steel & Sumitomo Metal, 2015 Annual Report, Public Exhibit 8-41. !t:?. Confidential Exhibit 8-1! Economic Indicators. 113 Confidential Exhibit 8-1, Economic Indicators. 114 See "MBR Welded Linepipe & OCTG Market Tracker" (December 22, 20 15) Confidential Exhibit 8-6 at page 2. 115 Ibid.

58 NON-CONFIDENTIAL

vii. The Imposition of Antidumping or Countervailing Measures by the Authorities of a Country other than Canada

170. A number of countries have imposed anti-dumping or countervailing duties on line pipe from China and Japan as well as for seamless and welded tubular products, which can be made on the certain of the same equipment as line pipe. Table 9 below outlines these measures.

Table9 Anti-Dumping and Countervailing Duty Measures in Place. Source: World Trade Organization, Semi-annual Reports of the Committee on Anti-dumping Practices under Article 16.4 of the Agreement

Country Subject Investigation and Actions Imposing Country Measure Affected

I Brazil i China IBrazil I China ·. ! Ha:simposed an AD dutyoidine pipes less thari5" iri OD frorilCliinaoil April .. [European I China i ~~~~..~~osed an AJ)~uty on seamless pipes and tubes of iron and steel ·~j''- ' Union I (including line pipe) from China on October 6, 2009. _ .•. Mexico. China }l~~·illlposeclanAD duty on seiiml

runited I' Japan -T-Has imposed an AD duty on certain carbon and alloy seamless line and -~ i States I pressure pipe over 4.5 inches from Japan on June 26, 2000. The order was L_ 1 continued on October II, 20 II. ~-~ I Jnclia : China & 1 Safeguard measures on tubular products ...... ~an _ I -~--'----~ With Respect to Other Steel Pipe and Tubular Products 1 r Chin• . . ; Japan .. j Has 1m posed iin AD duty on certain alloy-steelseanlless tubes and pipesfor

I C~;o~bia :l, China . \ ~~!';o7:~u;;;ad~~~~~~e:~~.. :::c: :~:ounn~~~l;~ ~~~ode . ·.• .· · I 1~~·---. ~.--··-~·-·173Q4.29.00.00 from China onJan.u.a..•·~_ll,,2012. . . . i .European· i China i Has imposed ail AD duty on certain welded rubes and pipeS of iron or non-alloy I Unlon l~~-- I steelfrc:>Jn china. R.eVlewofthlsorderc6rrunencedonDecemberl9,2013. . !Peru. JCh:n•_j~o~s:~;~~e~h~~a~ ~~;:~~~a~~,n2~~~bes and pipes made fromhot-rolledsteel.' rTur~ey i China i !iaSJmr>;'sedan Ail dutyonwelded stamless steeltnbes, ptpes andprofiles I . . . . , frnm China on h'!arch 15, 2013...... ·.·.·· ...... ----1 !united r China ' I Has imposed an AD duty on the OCTO from China on May 21' 20 I 0. This was. .I -~- i extended on Apnl7, 2015. -·-·-· i China ·. f Ha~irllposedan AI) dUty on ce~iu weldedcarb()n qualify steel pipe fro01 . . , '-"'="-··~-~---J- Chma on July 22,2008; and contmued the order on December4, 2013. · J

59 NON-CONFIDENTIAL

United Japan 'fias imposed~n AD~duty on certain carbon steel butt-weld pipe fittingsfro1~ States Japan on February 10, 1987. The order was continued on Aprill5, 2011. ! . Russia I China & fHas imposed a global SG measure on pii)es nnd tubes of stainless steel on~~ ·~•-~~__l~nn __ I August23, 2012. .. Ukraine China & Has imposed a global SG measure on casing and pump-compressor seamless ... Japan_ ...... -~steelpip_l' Qll_l!Jly~3,20Q_8_,~ Th"()r~er\vn_Sc(!ntinue~gntvlarcl1~7,_:ZO_l5, _

171. For China, of particular significance is the United States International Trade Commission

("USITC") decision to continue its order against circular welded carbon quality steel line pipe from China. 116 The continuation of this order, together with the existing order against Certain

Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe ji·om China means that the entire range of subject goods from China is subject to anti-dumping and countervailing duty measures in the United States. 117 The experience of the domestic industry in recent years shows the result of these orders: increasing volumes of subject goods from China at decreasing prices.

With these orders in place, diverted subject goods that would have been destined to the U.S. market will continue to accelerate the rise in volumes and fall in prices.

172. For Japan, the United States currently has an anti-dumping order in place tor Certain

Welded Large Diameter Line Pipe ("CWLDLP") with the product scope including "certain welded carbon and alloy line pipe, of circular cross section and with an outside diameter greater than 16 inches, but less than 64 inches, in diameter, whether or not stenciled." 118 This project description includes the entirety of the subject goods alleged in this complaint. The United State anti-dumping order was first imposed on December 6, 2001, where the U.S. Commission unanimously decided that the U.S. industry was materially injured by the dumping of Japanese produced CWLDLP. In

116 USITC, Circular Welded Carbon Quality Steel Line Pipe ji'om China, Investigation No. 70 1-TA-455 and 731· TA-1149 (Review) (May 201), Public Exhibit 8-42. 117 USlTC, Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipeji·om China, Inv. Nos. 701- TA-469 and 731-T A-1168 (Final), Public Exhibit 8-43. 118 USITC, Certain Welded Large Diameter Line Pipeji·om Japan (Second Review), 731-T A-919, September 20 13 at 5, Public Exhibit 8-32. 60 NON-CONFIDENTIAL both of the First and Second Review of this order, 2007 and 2013 respectively, the Commission determined that revocation of the order would likely lead to continuation or recurring of material injury to the U.S. domestic industry. 119 The fact that the United States remains the third largest export market for the Japanese producers for large diameter line pipe speaks to the strength of

Japanese export directed industry for line pipe. 120

173. The absence of anti-dumping and countervailing duty protection in Canada and the presence of export barriers on line pipe and other seamless and welded tubular products creates a strong encouragement for Chinese and Japanese large diameter line pipe producers to direct exports to Canada and exacerbate the injury already sustained by the domestic industry.

viii. The Magnitude of the Dumping and Subsidization

174. As set out in Section 6 and its exhibits, exporters and importers of subject goods result to substantial dumping margins in order to secure orders for large diameter line pipe in Canada. For

China, the Evraz Canada estimates subject goods are dumped at margins of dumping ranging from

]% to [ ]% using s. 19 normal values. Specifically, Evraz Canada finds that all of the

Chinese benchmark products were dumped at more than significant level throughout 2015. For

Japan, Evraz Canada estimates that subject goods are dumped at significant margins of dumping ranging from [ ]% to [ ]'Yo of dumping margin. As with China, all the Japanese benchmark products were dumped throughout 2015, and all the mar1,>ins of dumping were significant. Based on the magnitude of these margins, the threat posed by the dumped subject goods is real.

1" US!TC, Certain Welded Large Diameter Line Pipe ji'

61 NON-CONFIDENTIAL

ix. Conclusion

175. For all of the reasons noted above, Evraz Canada submits that dumped and subsidized line pipe from China and Japan constitutes a foreseeable and imminent threat to the production in

Canada of! ike goods.

9. Conclusion

176. Subject imports from China at dumped and subsidized prices and subject imports from

Japan at dumped prices have caused injury to the domestic industry producing large diameter line pipe in Canada. Evraz Canada has suffered lost sales, price depression and price suppression, lost revenues, reduced gross margins, reduced profitability, loss of market share, loss of employment, reduced returns on investment, and underutilization of capacity.

177. Production in Canada oflarge diameter line pipe is further threatened with material injury.

This threat is based on: evidence of the significant rate of increase of dumped and subsidized imports; the substantial increase in freely disposable capacity in the subject countries and its impact on other markets; the significantly lower subject country prices; existing inventories in

Canada; the substantial margins of dumping and subsidization; and the number of trade cases against Chinese line pipe and similar goods, in other jurisdictions, particularly the United States.

178. Evraz Canada therefore submits that the dumping and subsidization of subject goods originating in or exported from China and the dumping of subject goods from Japan has caused material injury to domestic production of like goods, and further threatens to cause additional material injury if not remedied.

179. Accordingly, Evraz Canada hereby requests that the President of the Canada Border

Services Agency initiate an investigation into the injurious dumping and subsidization of these

62 NON-CONFIDENTIAL subject goods originating in or exported from China and an investigation into the injurious dumping of these goods originating in or exported from Japan.

63 NON-CONFIDENTIAL

ANNEX A: Line Pipe from China is Subsidized

1. Introduction: Line Pipe from China is Subsidized

180. The Chinese steel industry, and steel pipe industry in particular, is notoriously subsidized by the GOC. In fact, in numerous previous cases, the Agency has found that the GOC has provided massive government subsidies to this industry for steel tubular goods such as OCTO, carbon steel welded pipes, seamless casings, piling pipes, and pup joints.

181. It is no secret that the Chinese line pipe producers and exporters have also received massive subsidies from the GOC. The China SIN OPEC Corporation ("SIN OPEC"), a parent of a Chinese line pipe producer Shashi Steel Pipe Works,t 2t acknowledges in its 2014 Annual Report that it has received over RMB 3.165 billion, 2.368 billion, and 2.814 billion of government grants alone in

2014, 2013, and 2012, respectively. 122 Shengli Oil & Gas Pipe Holdings Ltd., another line pipe producer,t 23 reported in its 2015 Interim Report that it received over RMB 2 million in government grants for the first six months of 20 15.t 24 Hunan Valin Iron & Steel Group Co., Ltd. and WSP

Holdings Ltd. are holding companies of two large line pipe producers and exporters.t 25 Hunan

Valin reported receiving over RMB 175 million government grants in its 2014 financial statement.t 26 The company broke down the types of grants it received in 2014, which included almost 8.5 million for energy saving and 131.4 million in tax refunds designated for full utilization

121 Shashi Steel Pipe Works, President's Speech, Public Exhibit 7-A-1. 122 Sinopec, 2014 Annual Report at 4, Public Exhibit 7-A-2. 123 Shengli Oil & Gas Pipe Holdings Ltd., Product Infonnation, Public Exhibit 7-A-3. 124 Shengli Oil & Gas Pipe Holdings Ltd., 2015 Interim Report at 38, Public Exhibit 7-A-4. 125 See Hengyang Valin Steel Tube Co., Ltd., Company Introduction, Public Exhibit 7-A-5, 1-Iengyang Valin Steel Tube Co., Ltd., Products: Line Pipe, Public Exhibit 7-A-6, WSP Holdings Limited, About Us, l'ublic Exhibit 7-A- 7, and WSP Holdings Limited, Products Overview, Public Exhibit 7-A-8. 126 Hunan Valin Steel Co, Ltd., 2014 Annual Report at 141, Public Exhibit 7-A-9; See also WSP Holdings Limited, Form 20-F at section F-15, Public Exhibit 7-A-10. 64 NON-CONFIDENTIAL of resources. 127 Another company, Chu Kong Pipe, who proclaimed that it is the largest Chinese

LSA W steel pipe producer, simply states in its 2014 Annual Report:

"{o}ur Group is capable of manufacturing subsea pipes and drilling platform for offshore projects and is being classified under the Offshore Engineering Equipment Industry .. .in the 12th Five-Year Plan. We are benefited and supported by China's strategic policies and received supports by policy banks and insurance institutions in China. We have maintained good relationships with and have obtained medium-tenn loans and credit facilities from the China Development Bank, the Export-Import Bank of China, and the China Export & Credit Insurance Corporation.'' 128

182. In consideration of the foregoing, the fact that the Chinese line pipe producers and exporters are being subsidized by the GOC is undisputable. Specifically, reasonably available infonnation leads the Complainant to believe that the Chinese large diameter line pipe producers and exporters have been receiving largely the same countervailable subsidies provided to the

Chinese producers and exporters of OCTG, welded pipes, seamless casings, piling pipes, and pup joints. This is not a coincidence. As such, the Complainant respectfully requests that the Agency fully investigate the subsidy programs that the Agency already found to be countervailable in prior tubular cases.

183. In the paragraphs that follow, the Complainant provides the best available infonnation it has regarding various Chinese subsidy programs that have already been found to be countervail able by the Agency. In addition, the Complainant identified and included a number of subsidy programs that have not been countervailed by the Agency before. Generally, these Chinese subsidy programs fall in the following broad categories:

• provision of goods and services by the GOC at less than fair market value; • preferential loans provided by the state-owned-banks;

127 Hunan Valin Steel Co, Ltd., 2014 Annual Report at 141, Public Exhibit 7-A-9. 128 Chu Kong Petroleum and Natural Gas Steel Pipe Holdings Limited Overcoming Headwind Sailing Ahead-­ Annual Report 2014 at 19, Public Exhibit 7-A-11.

65 NON-CONFIDENTIAL

• preferential export guarantee and insurance provided by the GOC; • preferential national income tax policies; • preferential sub-national income tax policies; • preferential indirect taxes and other governmental charges and fees; and • various !,>rants provided by the national and sub-national authorities.

2. Provision of Goods and Services at Less Than Fair Market Value bv the GOC

A. Provision of Goods and Services, and Purchase of Goods by the State-owned enterprises ("SOEs") at Less Than Fair Market Value

184. One of the defining characteristics of the Chinese steel industry is that a substantial share of the industry is government controlled, as demonstrated by the US Congressional Research

Service study, which found all but one major Chinese steel producers to be state-owned. 129 "By the end of 2009, eight of the 10 largest Chinese steel groups were 100-percent owned and controlled by the Chinese government, while 16 of the top 20 steel !,>TOups were 100-percent owned and controlled by the government. More than 95 percent of the production of the top 20 steel

!,>TOups was subject to some government ownership."130

185. Policy guidelines have also been used by the GOC to further strengthen its control over the steel industry. For example, "Shagang {the only major Chinese steel producer found to be privately owned by the US Congressional Research Service study} follows the guidelines that govern other

Chinese steel companies; business expansion programs must be approved by the central and/or local government; the local government collects a portion of its value added taxes; and the top management personnel ofShagang are Communist Party Members." 131

12'> R. Tang, US Congressional Research Service, China's Steel Industry and Its Impact on the United States: Issues for Congress, September 21, 20 I 0 at 7. l'ublic Exhibit 7-A-12. 130 Industry Today, Chinese Steel Industry: China Deploys State Power to Dominate Global Steel Industry, Public Exhibit 7-A-13. 131 R. Tang, US Congressional Research Service, China's Steel Industry and Its Impact on the United States: Issues for Congress, September 21, 20 I 0 at 7-8, Public Exhibit 7-A-12.

66 NON-CONFIDENTIAL

186. The pervasive government influence-by direct government ownership and by other means such as guidelines and appointments of the Communist Party Members as decision makers in the companies- plays a vital role for the GOC, as this influence is a mechanism by which the GOC implements its policy objectives. As an expert report puts it, the "massive degree of state ownership allows the government to exercise extensive control over the steel industry and to direct steel producers to act in ways that further governmental aims, such as maximizing tax revenue and employment." 132

187. A case in point is CNOOC K.ingland Pipe, a Chinese line pipe producer and exporter133 that is 51% owned by CNOOC, 134 a self-proclaimed "mega-state-owned company operating under the control of the {SASAC) of the State Council of the {PRC) ." 135 CNOOC demonstrated that it has the same goals as the state, rather than profit maximization, when it stated in its 2014 Annual

Report that the company has been developing "in line with the Second Leap Forward Development

Program" 136

188. Hunan Valin Group, an ultimate holding company (through its subsidiary Hunan Valin

Iron & Steel Group) 137 of a line pipe producer and exporter Hengyang Valin Steel Tube Co.,

Ltd., 138 is also an SOE operating under the SASAC's authority, 139 carrying out the GOC policy

132 Industry Today, Chinese Steel Industry: China Deploys State Power to Dominate Global Steel Industry, Public Exhibit 7-A-13. l3l CNOOC Kingland Pipeline Ltd., Company Introduction, Public Exhibit 7-A-14. IJJ CNOOC Kin gland Pipeline Ltd., CNOOC Kin gland Pipeline Ltd. Boosts Overseas Sales of ERW Pipes, March 4, 2008, Public Exhibit 7-A-15. " 5 CNOOC, 2014 Annual Report at 8, Public Exhibit 7-A-16. 136 !hid. 137 China Daily, Hunan Valie Iron and Steel Group Co., Ltd., January 29,2012, Public Exhibit 7-A-17. 138 Hengyang Valin Steel Tube Co., Ltd., Products: Line Pipe, Public Exhibit 7-A-6. '-'"China Daily, Hunan Valie Iron and Steel Group Co., Ltd., January 29,2012, Public Exhibit 7-A-17.

67 NON-CONFIDENTIAL objectives. For example, it has signed a number of agreements with China Resource Corporation, yet another SOE under the SASAC, "in order to implement the central government policy." 140

189. In essence, the GOC effectively controls the SOE steel producers through government ownership, i.e., majority share ownership, and authority, i.e., guidelines and appointment of decision makers in the companies, and uses this influence to fultil its national policies. Simply put, the Chinese SOE steel producers, including the line pipe producers, are "government" in a sense prescribed by the SIMAs. 2. As such, purchasing any goods and services from, and selling of any goods to an SOE constitute financial contribution within the SIMA s. 2(1.6)(c). Such financial contribution includes, but is not limited to: ( l) purchases by SOE line pipe producers and exporters from its affiliates or non-affiliated SOE suppliers; (2) sales made by SOE line pipe producers and exporters to its affiliates or non-affiliated SOE consumers; (3) purchases by non-SOE line pipe producers and exporters from SOE suppliers; and (4) sales made by non-SOE line pipe producers and exporters to SOE consumers.

190. Such government provided or purchased goods or services confer benefits equal to the difference between the actual amount transacted and the fair market value of the transacted goods or services under the SIMR ss. 35.2 and 36. In addition, these benefits are de jure and de facto specific to the steel industry within the meaning of the SIMA ss. 2(7.2) and (7.3), given that the government provision and purchase at issue are limited to the steel industry.

191. In consideration of the foregoing, the Complainant respectfully requests that the Agency carefully investigate all transactions involving SOEs at either or both ends of the bargain. That said, the Complainant notes that such subsidization through SOE-provided goods and services is

140 Hunan Valin Steel Co., Valin Group Signed Strategic Cooperation Agreement with China Resources Corporation, March I, 2012, Public Exhibit 7-A-18.

68 NON-CONFIDENTIAL the most rampant in the fonn of government provision of steel inputs to the line pipe producers.

As such, the Complainant provides further details in this regard below.

i. Provision of Steel Inputs by the SOEs at Less than Fair Market Value

192. As described above, the GOC, through its numerous raw steel producing SOEs and national policies governing the steel industry, has distorted the market for steel inputs that are used in the production and exportation of line pipe. The distortive effects of the GOC' s intervention through the SOEs are best illustrated by the Agency's prior Findings. Specifically, the Agency detennined that s. 20 conditions exist in the flat-rolled steel sector in China in the expiry reviews of Flat Hot- rolled Steel Sheet and Stripfi'om China, 141 and Steel Plates fi'om China. 142 Such flat-rolled steel products are primary inputs of welded line pipe. Likewise, the Agency in OCTG.fi'om China also found that "SOE crude steel producers account for a significant proportion of crude steel production in China," and that "a number of GOC industrial policies in relation to the Chinese steel industry would likely have a material impact on the prevailing price of billets in China."143

Such billets are used for the production of seamless line pipes.

193. Much of these steel inputs are provided directly and indirectly by the SOEs. In this regard, the Agency found in Welded Pipes .fi'om China that SOEs supply 79% of the hot-rolled steel purchased by welded pipe producers. 144 Given that the subject welded pipe in that case and welded line pipe are produced using the essentially the same flat-rolled steel inputs, the Complainant believes that a vast majority of the steel inputs used by the Chinese welded line pipe producers are also procured from SOEs. With respect to the inputs for seamless line pipes, the Agency previously

141 Expiry Review Determination Regarding Certain Flat Hot-rolled Carbon and Alloy Steel Sheet and Strip Originating in or Exported/rom Bra::il, the People's Republic of China, Chinese Taipei, India, South .!{/hat and Ukraine, RR-2010-001, Apri115, 2011. l·t1 Expby Ret•iew Determination Statement ofReasons fOr Certain Hot-Rolled Steel Plate (September 7, 20 12). 143 Final Determination Statement ofReasonsfbr Certain Oil CouniiJ' Tubular Goods (March 9, 20 I0). 144 Final Determination Statement £~/'Reasonsfhr Certain Carhon Steel Welded Pipe (August 5, 2008). 69 NON-CONFIDENTIAL found that "SOE crude steel producers account for a significant proportion of crude steel production in China." 145 The Complainant notes that there is nothing to suggest that the SOEs' predominance in the Chinese crude steel supply has diminished since this finding. To the contrary, as demonstrated in the US Congressional Research Service study and other expert reports quoted above, most of the Chinese steel industry remains in the GOC' s control.

194. A direct result of the government's predominance in the Chinese steel industry has been felt in the price of steel inputs that are less than the price that would have prevailed in the free market. Notably, the Agency previously found that hot-rolled steel sheets and billets in China were provided to the Chinese tubular producers and exporters at less than fair market value in OCTG

.fi'om China (input materials provided by the government at less than fair market value), Welded

Pipes fi'om China (hot-rolled steel provided by government at less than fair market value), and

Piling Pipesfi·om China (steel and hot-rolled steel input materials provided by government at less than fair market value), and countervailed these as subsidies. 146

195. In addition, the Agency found that the GOC provided steel inputs for less than fair market value for the production of other steel products, such as steel gratings (input materials provided by government at less than fair market value) and stainless steel sinks (cold-rolled stainless steel sheet provided by the government at less than fair market value). 147

196. Notably, the U.S. Department of Commerce ("US DOC") found that the GOC provided hot-rolled steel inputs at less than adequate remuneration to the Chinese welded line pipe producers

145 Final Determination Statement ofReasonsfiJr Certain Oil Count/)! Tubular Good\' (Afarch 9, 201 0). 146 Final Determination Statement q/Reasonsfor Certain Oil Count!)' Tubular Goods (March 9, 2010); Final Determination Statement ofReasons for Certain Carbon Steel Welded Pipe (August 5, 2008); Final Determination Statement of Reasons for Certain Steel Piling Pipe (November 15, 20 12). 147 Final Determination Statement ofRewums in Steel Grating (May 7, 20 ll ); Final Determination Statement of Reasons in Stainless Steel Sin/c, (May 9, 2012).

70 NON-CONFIDENTIAL specifically, 148 as well as other producers of other steel-using products (namely producers and exporters of drill pipes, rectangular pipes and tubes, steel gratings, steel wheels, wind towers, lawn groomers, high pressure cylinders, wire decking). 149 In addition, the USDOC also found that the

GOC provided other steel inputs such as steel billets ( OCTG ji-om China, Seamless Pipe .fi"om

China, Steel Cylinders.fi·om China) and !,'Teen tubes (Drill Pipes .fl-am China) at less than adequate remuneration. The Australian Antidumping Commission also found that the GOC provided hot- rolled steel at less than adequate remuneration (Hollow Structural Sections .fi-om China). 150 In consideration of the foregoing, the Complainant believes that the Chinese line pipe producers and exporters are, in particular, receiving steel inputs, flat hot-rolled steel, steel plates, and billets, at less than fair market value.

197. Direct and indirect provision of steel inputs by the Chinese SOEs constitutes a financial contribution in the fonn of govemment provision of goods within the meaning of the SIMA s.

2(1.6)(c). The steel inputs provided by the SOEs confer benefits equal to the difference between

148 The United States Department of Commerce, issues and Decision .Nfemorandwnfor the Final Determination: Circular Welded Carbon Quality Steel Line Pipe ji·om the People's Republic of China, C-570-936, November 17, 2008, Public Exhibit 7-A-19. 149 The United States Department of Commerce, Issues and Decision.A1emorandum/(J1·the Final Determination: Drill Pipe fi'om the People's Republic iJ(China, C-570-966, Public Exhibit 7-A-20; The United States Department of Commerce, Issues and Decision lv!emorandwnfor the Final Determination: Light-walled Rectangular Pipe and Tubefi'om the People's Republic of China, C-570-915, Public Exhibit 7-A-21; The United States Department of Commerce, Issues and Decision Memorandum/or the Final Determination: Certain Steel Gratingji·om the People's Republic of China, C-570-948, May 28,2010, Public Exhibit 7-A-22; The United States Department of Commerce, Issues and Decision A1emormulumfbr the Final Determination: Certain Steel Wheelsfimn the People's Republic of China, C-570-974, Public Exhibit 7-A-23; The United States Department of Commerce, Issues and Decision Alemorandumjbr the Final Determination: Utility Scale Wind TowersjiYmt the People's Republic of China, C-570- 982, December 17,2012, Public Exhibit 7-A-24; The United States Department of Commerce, Issues and Decision Jvfemorandumfor the Final Determinmion: Certain Tow-behind Lawn Groomers and Certain Part.'l· Thereoffi'Om the People's Republic of China, C-570-940, June 12, 2009, Public Exhibit 7-A-25; The United States Department of Commerce, Issues and Decision lvfemorandumjhr the Final Determination: High Pressure Steel Cylindersfi-cJm the People's Republic of China, C-570-978, April30, 2012, Public Exhibit 7-A-26; and The United States Department of Commerce, issues and Decision lvfemorandumfor the Final Determination: Wire Deckingji·om the People's Republic of China, C-570-950, June 3, 2010, Public Exhibit 7-A-27. 150 Australian Anti-dumping Commission, Report to the lllinister No. 177: Certain Hollow Structural Sections Exportedfi'om the People's Republic of China, the Republic()[ Korea, Malaysia, Taiwan and the Kingdom of Thailand, June 7, 2012, at 223-228 Public Exhibit 7-A-28. 71 NON-CONFIDENTIAL the actual price paid and fair market price. The Complainant notes that the Agency previously found the Chinese domestic prices of flat hot-rolled steel products, steel billets and green tubes to be substantially int1uenced by the GOC, and as a result, such prices could not be used as benchmark fair market prices. The Complainant believes that this approach is warranted in the current case as well, given the GOC's predominant int1uence in and control of the steel sector.

198. In addition, provision of steel inputs is specific within the meaning of the SIMA ss. 2(7 .2) and/or 2(7.3) as only a limited number of industries, namely the industries that use steel inputs as input of production, receive benefits of this subsidy.

B. Provision of Land and/or Land Use Rights for Less Than Adequate Remuneration

ii. Provision of Land for Less Than Adequate Remuneration Within the Economic and Technology Development Zone for Less Than Adequate Remuneration

199. According to the regulations, 151 enacted under the State Pr~ferential Policies for

Supporting State-level Economic and Technology Development Zones, 152 the price of land usage rights in the Economic and Technology Development Zones ("ETDZs") may be reduced by RMB

I 0,000 to 50,000 per hectare depending on the scale of an investment and other factors. Once recognized by the province or the municipality as a high-tech project, the allowable land price deduction is increased to between RMB 30,000 to 60,000 per hectare. The list of the ETDZs in which this program applies is enumerated by the Ministry of Commerce ("MOFCOM"). 153

151 Ministry of Land and Resource• of tl1e People's Republic of China, Public Notice Issued by tile State's Land Resources i\1inistJy on 'Technical Standards for Calculating the Land Sell Price for the PwyJose (~/'Seiling State­ owned Construction Land Usage Rights", November 20,2012, Public Exhibit 7-A-29. 151 Ministry of Land and Resources of the People's Republic of China, Public Notice on the Technical Evaluation• and Standards for the Selling Price of State-owned Construction Land Use Rights and Pilot Implementations, General Office oftile Minisuy ofLand and Resources {20 I 3/ No 20, Public Exhibit 7-A-30. 151 Ministry of Commerce of the People's Republic of China, List of National Economic and Technology Development Zones, Public Exhibit 7-A-3 I.

72 NON-CONFIDENTIAL

200. The Complainant has identified the following potential Chinese line pipe producers to be located within the enumerated ETDZs:

• Qingdao Kwayt Co., Ltd., advertised to be a producer and seller of API 5L X70 seamless line pipe is reportedly located in the "Qingdao Economic and Technical Development Zone"; 154 • Hebei Zhongdeli Seamless Steel Pipe Manufacturing Co., Ltd, Heibei Yuancheng Industry Co., Ltd., and Hebei Changfeng Steel Tube Manufacturing Group Co., Ltd., Chinese certificate holders of API 5L, are located in the Economic and Technical Development Zone of Cangzhou City; 155 • Kunshsan Pearl Machinery Industry Co., Ltd., a Chinese certificate holder of API 5L, is located in the Economic Technical Development Zone ofKunshan City; 156 • Tianjin De Hua Petroleum Equipment Manufacturing Co., Ltd., a Chinese certificate holder of API5L, is located in the No. 42 Economic and Technology Development Area ofTianjin city; 157 and • Wan Chi Steel Pipe (Qinhuangdao) Co., Ltd., a Chinese certificate holder of API 5L, is located in the Economic and Technological Development Zone ofQinhuangdao city; 158

201. Information reasonably available to the Complainant does not allow the Complainant to identify all the Chinese producers located within the ETDZs. However, given that many Chinese line pipe producers are located within the ETDZs, the Complainant believes that many more

Chinese line pipe producers could also be located within such zones, and thereby benefit from the preferential land use rights.

202. Provision of land use rights is a financial contribution in the form of provision of goods within the SIMAs. 2(1.6)(c). Pursuant to the SJMR s. 36, benefits conferred equal the difference between the fair market value of the land use rights and the actual price paid to the govemment, i.e., discounts between RMB I 0,000 and RMB 60,000 per hectare provided to the companies

154 Made in China.com, Company Marketing Webpage for Qingdao Kwayt Co., Ltd., Public Exhibit 7-A-32. 155 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 156 Ibid. 157 Ibid. 158 Ibid.

73 NON-CONFIDENTIAL setting up within the ETDZs. This program is geographically specific under the SIMAs. 2(7.2)(a), as the ETDZs are clearly designated and defined.

iii. Provision of Land for Less Than Adequate Remuneration by Jiangsu Province

203. According to the Policy Adjustment Goals and Lowering Land Standards, 159 eligible priority development projects can obtain land for a transfer fee no less than 70% of the minimum price. In other words, the authorities in Jiangsu province may provide land at discount, as low as

30% below the minimum price otherwise allowed.

204. There are close to 50 APL 5L certified Chinese producers located in Jiangsu province, according to the list of API 5L holders provided by the API. 160 By virtue of their location, they would be eligible to benefit from the Provincial policy that allows transfer of land use at 70% of the minimum price or higher.

205. Provision of land use rights is a financial contribution in the fmm of provision of goods pursuant to the SIMA s. 2(1.6)(c). Pursuant to the SIMR s. 36, benefits conferred equal the difTerence between the fair market value of the land rights and the actual price provided by the government, i.e., as much as 30% of the minimum price. Based on the infom1ation reasonably available, the discounts are provided to the "priority development projects," and as such, this program appears to be de jure and/or de facto specific within the SIMA ss. 2(7.2)(a) and/or 2(7.3).

159 Department of Land and Resources of Jiangsu Province & Jiangsu Development and Refonn Commission, Puh!ic Notice Pertaining to the Implementing the Adjustment Standards ofthe Lmt'est Selling Price of Industrial Land Use, LGTZF {2009} Na 175, Public Exhibit 7-A-34. "'"American Petroleum Institute, API Standard API-5!. Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 74 NON-CONFIDENTIAL

iv. Provision of Land for Less Than Adequate Remuneration within the Wuxi High-tech Development Zone

206. Wuxi New District is a PRC state-level industrial park located in Wuxi city. 161 It is composed of eight development zones, of which the Wuxi National High-tech Development Zone and Wuxi Singapore Industrial Park are the two main ones. 162

207. In particular, Wuxi National High-tech Development Zone is the crown jewel of the Wuxi

New District, as it is a state-level high-tech development zone approved by the State Council.

Accordingly, Hong Kong based NGO Globalization Monitor reports that the Zone is "enjoying various preferential treatment from the state and local government." 163 A case in point is the

Preferential policies for encouraging foreign investors make investments in lzigh-teclmologies ente1prises in the Wuxi National High-tech Development Zone, which provides that certain enterprises in the Zone could benefit from the following preferential land policies:

• Exemption from the land-use fee for the first I 0 years of investment; • Land price reduction by I 0%; and • Exemption from land deed tax. 164

208. In order to qualify, the enterprise must designated as a "high-tech enterprise filling the gap in the domestic market," or an "enterprise with large scale potential."165

209. Provision of discounted land use rights is a financial contribution in the fonn of provision of goods pursuant to the SIMAs. 2(1.6)(c). Pursuant to the SIMR s. 36, benefits confetTed equal to the difference between the fair market value of the land rights and the actual price provided by

161 Globalization Monitor. Wuxi New District. Public Exhibit 7-A-35. t(J:! Ibid. 163 Ibid. 164 New District ofWuxi Municipal People's Government Management Committee & \Vuxi National High-tech Industrial Development Zone Management Committee, Preferential Policiesfor Wuxi HTDZ: Preferential Policies fbr Encouraging Foreign Invested Ente1prises Invest in Neu' and High Teclmologv Enterprises, January 1998, Public Exhibit 7-A-36. 165 Ibid. 75 NON-CONFIDENTIAL the government. This pro!,>ram is geographically specific under the SIMA s. 2(7.2)(a), as Wuxi

National High-tech Development Zone is clearly designated and defined.

210. A number of Chinese line pipe producers are known to be located within the Wuxi New

District. For example, Wuxi SP Steel Tube Manufacturing Co., Ltd and Wuxi Nanfang Steel Co.,

Ltd. are located within the Wuxi New District, where as Wuxi Seamless Oil Pipe Co., Ltd. is

located within the "High & New Technology Industrial Development Zone" in Wuxi city.t 66 Based

on the foregoing consideration, the Complainant believe that the Chinese line pipe producers and

exporters may have received benefits under this program.

C. Provision of Electricity at Less Than Fair Market Value

211. According to the study by the US Energy Infonnation Administration ("USEIA"), "{t}he

National Development and Refonn Commission {"NDRC"}, a department of China's State

Council, is the primary policymaking, planning, and regulatory authority in the energy sector" in

China.t 67 "The NEA {or the National Energy Administration}, linked with the NDRC, is charged

with approving new energy projects in China, setting domestic wholesale energy prices, and

implementing the central government's energy policies." ti>S In addition, the NDRC also

detennines the price that coal companies should receive from power producers, i.e., cost of

electricity. t69

212. The result of these government interventions, - based on policy objectives, not market

principles- and in particular the government-set electricity price, has highly distorted electricity

price in China. For example, the USEIA found that the "{h}igh coal prices in 2011 and lower

'"'American Petroleum Institute, API Standard AP!-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. "'7 United States Energy Infonnation Administration, China, February 4, 2014 at 5, Public Exhibit 7-A-37. 168 Ibid. !M Ibid. at 32-33. 76 NON-CONFIDENTIAL government-controlled power tariffs contributed to financial losses for electric generators." 170 In other words, electricity generators were forced to sell electricity at a lower price, despite the spike in the cost of producing electricity.

213. In addition, it has also been found that the NDRC sets different electricity rates from one region to another. 171 In this regard, the US DOC verified in Lightweight Thermal Paperfi'om China that electricity rate in one city differed from that of another city. 172 The US DOC also found that the provision of electricity at less than adequate remuneration to be countervailable in 19 investigations, including investigations of steel tubular goods like OCTG, seamless pipes, and drill pipes from China. 173

170 Ibid. 171 Global Times, NDRC to Increase Electricity Prices in Five Provinces, May 18,2011, Public Exhibit 7-A-38. See also The United States Department of Commerce, Issues and Decision }Jemorandumfor the Final Determination: Lightll'eight Thermal Paper }Tom the People's Republic of China, C-570-921, September 25, 2008, at 22 Public Exhibit 7-A-39. 172 The United States Department of Commerce, Issues and Decision AfemorandumjOr the Final Determination: Lighll\'eight Thermal Paper }Tom the People's liepublic of China, C-570-921, September 25, 2008, at 22 Public Exhibit 7-A-39. 173 The US DOC found GOC's provision of electricity to be countervailable in the following investigations: The United States Department of Commerce, Issues and Decision 1\IemorandumjOr the Final Determination: Drill Pipe fi'om the People's Republic of China, C-570-966, Public Exhibit 7-A-20; The United States Department of Commerce, Issues and Decision Aiemorandumfor the Final Determination: Certain Steel Gratingfi·om the People's Republic of China, C-570-948, May 28,2010, Public Exhibit 7-A-22; The United States Department of Commerce, [<;sues and Decision A4emorandumfor the Final Determination: Certain Steel Wheels from the People's Republic of China, C-570-974, Public Exhibit 7-A-23; The United States Department of Commerce, Issues and Decision iV!emorandumfor the Final Determination: Utility Scale Wind Towers from the People's Republic (~{China, C-570- 982, December 17, 2012, Public Exhibit 7-A-24; The United States Department of Commerce, lssues and Decision JV!emorandumfOr the Final Determination: High Pressure Steel Cylindersf;-cJm the People's Republic of China, C- 570-978, April30, 2012, Public Exhibit 7-A-26; The United States Department of Commerce, Issues and Decision }v/emorandumJOr the Final Determination: Wire Deckingfhnn the People's Republic q{China, C-570-950, June 3, 20l0, Public Exhibit 7~A~27; The United States Department of Commerce, b;sues and Decision Afemorandwnfhr the Final Determination: Pre-stressed Concrete Steel Wire Strandfi·om the People's Republic of China, C-570-946, May 14, 20 I 0, Public Exhibit 7-A-40; The United States Department of Commerce, Issues and Decision 1\rfemorandumfor the Final Determination: Certain Kitchen Appliance Shelving and Racksfi·om the People's llepublic of China, C-570-942, July 20,2009, l'ublie Exhibit 7-A-41; The United States Department of Commerce, Issues and Decisionlvfemormulumfhr the Final Determination: Certain Oil Country Tubular Goodsf;·om the People's llepuhlic of China, C-570-944, November 23,2009, Public Exhibit 7-A-42; The United States Department of Commerce, Issues and Decision Memorandum fOr the Final Determination: Galwmi:ed Steel Wireji·om the People's Republic of China, C-570-976, March 19, 2012, l'ublie Exhibit 7-A-43; The United States Department of Commerce, Issues am! Decision lvfemorandumjhr the Final Determination: Lightweight Thermal Paperfi·om the People's llepuhlic of China, C-570-921, September 25, 2008, Public Exhibit 7-A-44; The United States Department of Commerce, Issues and Decision .Memorandum for the Final Determination: Certainlvfagnesia Carbon Bricksfi·om the People's Republic r>{China, C-570-955, July 26, 2010, Public Exhibit 7-A-45; The United

77 NON-CONFIDENTIAL

214. Provision of electricity is a financial contribution in the fonn of provision of goods within

the meaning of the SIMAs. 2(1.6)(c), to the extent that the Chinese producers or exporters procure

their electricity from the government and/or state-owned electricity providers. To this end, the

Institute of Energy Economics of Japan found that 90% of the Chinese power generation is

provided by the central and local Chinese government owned companies. 174 Given the

predominance of the government electricity suppliers in China and the Agency's countervailable

findings in previous steel tubular goods cases, the Complainant believe that the Chinese line pipe

producers and exporters likely procure electricity from such government suppliers.

215. The benefit is the amount of difference between the actual electricity rates paid and the fair

market value as provided by the SIMR s. 36. Given that the NDRC and NEA are state-level

authorities, the fair market benchmark is to be determined within China. In addition, China's

provision of! ow cost electricity is geographically specific to the regions where the NDRC granted

a preferential electricity rate under the SIMAs. 2(7.2)(a).

D. Provision of Government Assets at Less Than Fair Market Value through Privatization

216. According to the Agency's Finding in OCTG .fi·om China, "within the past ten years,

several of the cooperative exporters had changed their ownership status from that ofSOEs to either

States Department of Commerce, Issues and Decision Aiemorandumfor the Final Determination: Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe jhnn the People's Republic of China, C-570-957, September 10,2010, Public Exhibit 7-A-46; The United States Department of Commerce, Issues and Decision Aiemorandum for the Final Determination: Certain Coated Paper Suitable fOr High-quali~y Print Graphics Using Sheet-fed Pressesfi'om the People's Republic of China, C-570-959, September 20,2010, Public Exhibit 7-A-47; The United States Department of Commerce! bisues and Decision Alemorandwn for the Final Determination: Multilayered Wood Flooringfi'om the People's Republic of China, C-570-971, October II, 2011, Public Exhibit 7- A-48; The United States Department of Commerce, Issues and Decision lvfemorandumfbr the Final Determination: Cl}'stalline Silicon PhotoFoltaic Cells, Whether or Not Assembled into Modules,ji·om the People's Republic of China, C-570-980, October 9, 2012, Public Exhibit 7-A-49; and The United Stales Department of Commerce, ls·sues and Decision kfemorandumjOr the Final Determination: Drawn Stainless Steel Sinks from the People's Republic IJ(China, C-570-984, February 19, 2013, Public Exhibit 7-A-50. 174 Chun Chun Ni, The Institute of Energy Economics of Japan, China's Electric Power Industry and Its Trend, April 2006, Public Exhibit 7-A-51.

78 NON-CONFIDENTIAL

Foreign Invested Enterprises ("F!Es") or private limited enterprises. Information received further indicated that, during this time, China's state-owned oil companies shitled their focus toward core businesses and moved to divest themselves of peripheral operations such as production ofOCTG.

The CBSA ascertained that, during the privatization process for one of the cooperative exporters, the majority of the government-owned assets had been distributed to company employees at no cost." 175 The Agency found this program to be countervailable.

217. The Agency's investigation of subsidy in the fonn of government provision of assets is warranted with respect to the Chinese line pipe producers and exporters. For example, Shengli

Oilfield Freet Petroleum Equipment Company ("Shengli Freet"), a line pipe producer, was previously an SOE, owned by the China's state-owned oil company Sinopec Corp since its establishment in 1964 until May 2005, when it was "restructured according to the modern corporate system." 176 As such, the Complainant believes that Shengli Freet could have benefited from the government provided assets during its privatization, similarly to the Agency's Finding in

OCTG.from China.

2 I 8. Provision of assets constitutes a financial contribution pursuant to the SIMA s. 2( 1.6)( c).

The benefits equal to the difference between the actual price paid and the fair market value of the assets. This program is specific in law orland in fact under the SIMA ss. 2(7.2)(a) and/or 2(7.3), since the provision of assets were given to certain SOEs undergoing privatization.

t'ls Final Determination Statement ofReasonsfor Certain Oil CounfTJ' Tubular Goods (March 9, 2010). 176 Shengli Oilfield Freet Petroleum Co., Ltd., Company Profile, Public Exhibit 7-A-51.

79 NON-CONFIDENTIAL

3. Preferential Loans Provided bv the GOC and State-owned Banks {"SOBs")

A. Preferential Loans and Financing Provided by the GOC through the SOBs

219. The GOC provides preferential loans through its policy SOBs, as well as the so-called

"commercial" banks to the enterprises and industries in line with its policy objectives. Such policy objectives are contained in the national and provincial Five-year plans, industrial plans, catalogues of encouraged industries, and other Jaws and re!,'lJlations, and many of these instruments target the steel industry. 177 For example, the Agency found in Welded Pipe .fi"om China that "under the

'Encouraged Investment Industries' is the development and application of modern hot-rolled broad band (wide strip) steel rolling; the production of oil well pipe for petroleum exploration; high pressure boiler pipe for power stations and steel pipe used in the long distance transportation of oil

178 1 and gas." Likewise, the 12 h Five-year Plan enumerates certain "Iron & Steel" as one of the "key fields of development of manufacturing."179

220. The existence of the state-Jed preferential loans is well established. The Agency found and countervailed in Copper Tube ji·om China and Unitized Wall Modulesji·om China such preferential loans. 180 In Fasteners .fi"om China, the Agency found that the preferential loans are also implemented by sub-national Chinese govemments, based on the" {p )rovincial budget documents submitted by the GOC ... {indicating} that low-interest or discount loans may be available in China to companies based on their export activities." 181

221. Chief among the Chinese SOBs mandated to carry out the GOC policy objectives are the banks in which the GOC has a controlling ownership interest, namely Agricultural Development

177 The People's Republic of China's 12'" Five-year Plan at 6-9, Public Exhibit 7-A-53. 178 Final Determination Statement qj'Reasons for Carbon Stee/1Ve/ded Pipe (August 5, 2008). 179 The People's Republic of China's 12'" Five-year Plan at 6-9, Public Exhibit 7-A-53. tHo Final Determination Statement ofReasonsfor Copper Tube (December 3, 20 13); Final Determination Statement ofReasonsfor Certain Unitized Wall Modoles (October 25, 2013). 181 Final Determination Statement ofReasonsfOr Carbon Steel and Stainless Steel Fasteners (December 24, 2004). 80 NON-CONFIDENTIAL

Bank of China ("ADBC"), Bank of China ("BOC"), China Constmction Bank ("CCB"), and

Industrial and Commercial Bank of China ("ICBC"). China Development Bank ("COB"), and the

1 2 Export Import Bank of China ("EXIM bank"). H

222. Among them, the ADBC, COB, and EXIMbank are considered "wholly state-owned," and each of these banks has a distinct policy mandate. 183 The ADBC is mandated to support development of a!,,'Ticulture and mral areas; the COB is mandated to support large infrastmcture projects, among others; and the EXIM bank is mandated to support exports and key imports. 184

Given that these three banks are mandated to carry out government policies rather than profit, it is not surprising that they report directly to the State Council. 185 In fact, these banks were found to

"frequently rely on the State Council's directives in establishing their operational priorities."186 In addition, the GOC's cabinet appoints the board of directors and senior officers of these three banks. 187

223. The non-wholly owned SOBs (also known as equitized SOBs) namely BOC, CCB, and

ICBC, were all once fonnerly wholly state-owned as well until they were recently equitized. 188

Although the ostensible intent of equitizing these banks was to "create the space and the incentives ... to operate ... as a for-profit commercial bank with less interference from China's central government," the GOC essentially continues to run these banks through the "board of directors and senior officers ... {who} are generally appointed in some fashion by the central

1 9 govenunent." H In fact, senior bank officers of all of China's banks are members of the Chinese

182 M. Martin, Congressional Research Service, China's Banking System: Issues for Congress, February 20,2012, at 2-4, Public Exhibit 7-A-69. 181 Ibid. at 2. '"'Ibid. 185 Ibid. 186 !hid. I 87 Ibid. 188 Ibid. at 3. 189 !hid.

81 NON-CONFIDENTIAL

Communist Party ("CCP") and are appointed by the CCP. 190 The officers are also assigned ranks in the Chinese government's hierarchy. 191

224. The board of directors of the equitized SOBs are appointed by the GOC because it is the majority shareholder of each. 192 The last piece of the organ that constitutes Chinese banks' governance stmcture is the board of supervisors, whose role is "to monitor the financial activity, risk management and risk control of the banks, as well as the performance of the board of directors and the senior officials of the bank." 193 The supervisors too are usually appointed by the CCP. 194

In this background of the GOC's total control over the key decision making personnel, some commentators maintain that "China's banks continue to operate as direct tools of the Chinese government." 195

225. In addition, the SOBs dominate the Chinese banking market. Specifically, the wholly- owned policy banks account for 8% of the market, whereas the equitized banks account for another

49.2%. 196 Equally importantly, the GOC maintains absolute control over the remaining financial industry through its regulatory measures. In addition to the traditional monetary instnnnents generally available to the financial regulators elsewhere in the world, the GOC's regulators are equipped with power to set the benchmark interest rates for RMB-denominated deposits and loans, and to allocate credit limits to the Chinese banks. 197 In other words, the GOC has the authority to set loan interest rates of the Chinese banks, regardless of the state ownership (although note that the banks are allowed to offer interest rates within a certain range above and below the

190 Ibid. at 26. 191 Ibid. 192 Ibid. at 26-27. 193 Ibid. at 27. 194 Ibid. 195 ibid. t% !hid. at 7. 197 Ibid. at 9. 82 NON-CONFIDENTIAL government-set benchmark). Also, remember that the CCP appoints officials, senior officials, and the board of supervisors of all banks in China. 198

226. One of the purposes of the GOC's tight grip over its financial industry is to provide targeted benefits to certain enterprises or industries. "{T} he Chinese banks are constrained by various circumstances that periodically require that the banks acquiesce to external pressures" and "{t}he central government at times will pressure the banks to align their credit allocation along with national economic policy." 199 Tellingly, a draft Guideline issued by the China Banking Regulatory

Commission ("CBRC") to the "commercial" banks contained a "requirement that the bank

'support national policies on industrial transformation and environmental protection, protect and save resources, and promote sustainable development of the society. "'200

227. Massive discount loans provided to the targeted few is so serious that it created an absurd phenomenon. Recipients of heavily discounted loans turnaround and re-lend the loans at a higher interest rate to smaller banks. According to the deputy director of the National Economic Research

Institute (under the China Refonn Foundation) Wang Xiaolu,21n " {s }ome State-owned enterprises get bank loans at low interest rates and then offer it as a loan to small banks in order to reap an interest margin".

228. Based on the foregoing information, the Complainant believes that all banks in China, and especially the SOBs (whether or not they are wholly-owned), are the "government" within s. 2 of the SIMA. Specifically, all Chinese banks: (I) are required to support the national policies; (2) ran by the senior officers, officers, and board of supervisors appointed by the CCP; and (3) follow the

198 Ibid. at 26-27. 199 Ibid at 27. 200 !hid at 27-28. 101 Global Times, China to encourage increased private investment in banking sector, June 28,2012, Public Exhibit 7-A-54.

83 NON-CONFIDENTIAL

operational guidelines set by the GOC, including the setting of loan interest rates. In the case of

the SOBs, the GOC's control is ensured by its ability to appoint the board of directors.

229. The loans provided by the Chinese banks, especially the SOBs, therefore constitute

financial contribution in the fonn of direct transfer offunds within the SIMAs. 1.6(a). The benefits

equal the difference between the interest actually paid and the interest that would have been

incurred for a comparable non-guaranteed commercial loan under the SIMR s. 29( 1).

230. The SOBs have specific mandates and these mandates are carried out in conjunction with

the govemment policies. As such, these loans are de jure and/or defi:tcto specific within the SIMA

s. 2(7.2)(a) and/or 2(7.3). Likewise, the so-called Chinese "commercial" banks are also required

by law to support the GOC's national policies. For this reason, the Complainant also believes that

these loans are de jure or de .facto specific to the enterprises and industries targeted by the national

policies within the SIMA s. 2(7.2)(a) and/or 2(7.3). Specifically, as mentioned above, the 12'"

Five-year Plan stipulates certain "Iron & Steel" to be among the key fields of development, and

the list of the encouraged industries explicitly lists "steel pipe used in the long distance

transportation of oil and gas." Given these national policies promoting the steel industry, the

Complainant believes that the Chinese banks, especially the SOBs, support the steel industry in

order to comply with the requirement to support such national policies.

The Agency found preferential loans provided by a SOB to be countervailable in Copper Tube

.fi"om China and Unitized Wall Modules .fi"om China. Evidence also suggests that the Chinese line

pipe producers have benefited from preferential loans from the Chinese banks, in particular the

SOBs. For example, Chu Kong Pipe, a Chinese line pipe producer, reported in its 2014 Annual

Report that "{w}e are benefited and supported by China's strategic policies and received supports

by policy banks and insurance institutions in China. We have maintained good relationships with

84 NON-CONFIDENTIAL and have obtained medium-tenn loans and credit facilities from the China Development Bank, the

Export-Import Bank of China, and the China Export & Credit Insurance Corporation."202

B. Export Seller's Credit Provided by the Export-Import Bank of China

231. As described above, the EXIM bank is wholly-owned by the GOC and reports directly to the State Council. In addition, senior officers, officers, and supervisors of the EXIM bank are appointed by the CCP, as with all other banks in China. Since the bank is wholly-owned by the

GOC, its board of directors is also appointed by the GOC. In these considerations, the EXIM bank is the "government" within the meaning of the SIMAs. 2, and the Agency indeed previously found this to be the case in Unitized Wall Modulesfi·om China. 2113

232. According to the bank's website, the EXIMbank provides "export seller's credit," which

"refers to loans provided to an exporter to finance its export of manufactured or purchased mechanical and electronic products, complete sets of equipment, and high- and new-tech products as well as the provision of labor services."2114 The EXIMbank further states that the "{e)xport seller's credit program provided by China Eximbank is not profit-oriented" and "{t)he credit is provided for the purpose of lending strong government support in line with relevant national, industrial, foreign trade and fiscal policies."205

233. Given that this pro!,'fam is "not profit-oriented," and is provided to support national policies, it is not surprising that the credits are being provided at sub-commercial interest rates. According to the loan document published by the EXIMbank's Qingdao city branch, in May 2013, annual

201 Chu Kong Petroleum and Natural Gas Steel Pipe Holdings Limited---- Overcoming Headwind--- Sailing Ahead Annual Report 2014 at I 9, Public Exhibit 7-A-11. 203 Final Determination Statement ofReasonsfbr Uniti::ed Wall Alodules (October 25, 20 13). ""The Export Import Bank of China, Export Seller"s Credit, Public Exhibit 7-A-55. 205 Ibid.

85 NON-CONFIDENTIAL

interest rate applicable for this program are lower than interest rates on 'commercial loans. ' 206 This document also demonstrates that the losses from such sub-commercial loans are entirely paid by

the government, in stating that all losses are undertaken by the national treasury.207

234. Many Chinese line pipe producers have been designated to be "high and new technology

enterprises" ("HNTEs"), which suggests that these companies would be eligible to receive benefits

under this program for exports of"high- and new-tech products." For example, Shijiazhuang Great

Wall Welded Pipe Equipment Co., Ltd. identifies itself as a "high and new technology enterprise

specialize in ... manufacture of' various steel pipes. 208 Likewise, WSP Holdings Ltd, a parent

company of a line producing Wuxi Seamless, reports that it is a HNTE, and that it has renewed

this status until the end of 2013.209 Hengyang Steel Tube, another line pipe producer, calls itself a

"national high and new technology enterprise."210 Shandong Shengli Steel Pipe Co., Ltd. also

proclaims itself to be a "Shandong Province high-tech enterprise."211 In addition, the Agency also

found that a Chinese OCTO exporter received benefits under the Liaoning High-tech Products &

Equipment Exports Interest Assistance grant, ostensibly as the exporter exported a "high-tech

product. "212

235. Credits provided by the EXIMbank constitute financial contribution in the fonn of direct

transfer of funds within the SIMAs. 1.6(a). The benefits equal the difference between the interest

actually paid and the interest that would have been incurred for a comparable non-guaranteed

commercial loan under the SIMR s. 29(1 ).

206 Qingdao Economic and Trade Bureau, Notice Pertaining to the Foreign Trade Enfi.!Jprises ·Financing Research Requirements, May 22, 2013, Public Exhibit 7-A-56. 207 Ibid. 20' Great Wall Equipment, About Us, Public Exhibit 7-A-57. 209 WSP Holdings Limited, Fonn 20-F, at21, Public Exhibit 7-A-10. 210 Cardofcom, Company Introduction ofHengyang Valin Steel Tube Co., Ltd., Public Exhibit 7-A-58. 211 Shandong Shengli Steel Pipe Co., Ltd., About Us, Public Exhibit 7-A-59. 212 Final Determination Statement ofReasonsfor Certain Oil Count!)' Tubular Goods (March 9, 201 0).

86 NON-CONFIDENTIAL

236. In order to receive the "export seller's credit," the recipient must have actual or anticipated exportation or export earnings. As such, this program is a prohibited subsidy and is specific under the SIMAs. 2(7.2)(b). To this end, the Agency already found this program to be countervailable in Certain Unitized Wall Modules.fi·om China. 213

C. Export Buyer's Credit Provided by the Export-Import Bank of China

237. The EXIM bank also provides "export buyer's credit,"214 which refers to "medium and long term credit provided to foreign borrowers to finance their imports of Chinese products, technologies and services ... It is designed to facilitate foreign importer's payment at sight of commercial contracts to Chinese exporters."215 This program constitutes an indirect subsidy in the form of export financing provided to the importer or purchaser as provided by the SIMA Handbook pp. 553-556.

238. The "expert buyer's credit" amount appears to grow year after year. In its 2014 Annual

Report, EXIM bank acknowledged that "{i}n 2014, the newly signed export buyer's credit amounted to RMB53.612 billion with disbursement of RMB59.443 billion. The year-end outstanding {sic} registered RMB222.295 billion, an increase of RMB32.527 billion over the previous year."216

239. Credits provided by the EXIMbank constitute financial contribution in the form of direct transfer of funds within the SIMAs. 1.6(a). The benefits equal the difference between the interest actually paid and the interest that would have been incurred for a comparable non-guaranteed commercial loan under the SIMR s. 29(1 ). In addition, this program is specific within the definition

:m Final Determination Statement r~lReasonsfor Uniti:=ed Wall Aiodules (October 25, 2013). 214 The Export Import Bank of China, Export Buyer's Credit, Public Exhibit 7-A-60. 215 Ibid. 216 The Export Import Bank of China, 2014 Annual Report at 22, Public Exhibit 7-A-61. 87 NON-CONFIDENTIAL of a prohibited subsidy under SIMA s. 2(7 .2)(b) because the recipient must have actual or anticipated exportation or export earnings.

D. Import Credit Provided by the Export-Import Bank of China

240. According to the EXIM bank's website, one of its loan programs is an import credit program. 217 This credit facility is provided for "importing resources, and technology and equipment."218 Credit for resources importation refers to loans designed to finance resources imports by the Chinese companies. Credit for importing technology and equipment is designed to finance importation of technology and equipment by the Chinese companies.219

241. To be eligible tor an import credit for resources importation, an applicant must be a manufacturer or an import agent importing resources mainly for intemal use or for domestic sales, with yearly imports exceeding USD $10 million. 220 To be eligible for an import credit for technology and equipment importation, an applicant must be a Chinese company registered with the Chinese Administration of Industry and Commerce. Once these thresholds are satisfied, the

EXIMbank appears to have discretion to decide whether an applicant ultimately qualifies for this program. For example, with respect to the import credit for technology and equipment importation, the bank must be satisfied, inter alia, that: the applicant have demonstrated "sound management and operation, reliable credit standing and good debt servicing capacity," and; "the supporting requirements on the projects are satisfied, with favourable estimates on economic retums and reliable capacity of loan repayment."221

117 The Export-Import Bank of China, Brieflntroduction, Public Exhibit 7-A-62. 118 The Export-Import Bank of China, Import Credit, Public Exhibit 7-A-63. 219 Ibid. 220 Ibid. :m Ibid.

88 NON-CONFIDENTIAL

242. The Complainant believes that Chinese Line pipe producers are eligible for this program because they receive this subsidy through importing line pipe parts, such as sheet metals, before manufacturing and exporting the line pipe to China for sale.

243. Credits provided by the EXIM bank constitute financial contribution in the fonn of direct transfer of funds within the SIMAs. 1.6(a). The benefits equal the difference between the interest actually paid and the interest that would have been incurred for a comparable non-guaranteed commercial loan under the SIMR s. 29(1 ).

244. Import credit for importation of resources is de jure specific within the meaning of the

SIMA s. 7.2(a), in that the prospective borrowers are limited to the manufacturers and import agents with annual resource imports exceeding USD $10 million, and who uses imported resources for internal use or for domestic sales. In the case of technology and equipment import credit, this pro!,'Tam may be de .facto specific by virtue of the bank's exercise of discretion.

E. Onlending Support Provided by the Export-Import Bank of China through Loan Guarantees or Loan Repayment

245. According to the EXIM bank's website, "onlending" refers to loans from foreign governments or international financial institutions. Such onlending will be provided for the

Chinese companies, but the GOC will either provide a guarantee or commit to "shoulder the responsibility of repayment" if the borrower (i.e., the recipient Chinese company) fails to repay. 222

The EXIMbank stipulates that the onlending loans are provided for businesses that carry out state industrial policy, projects in key sectors including energy conservation, projects in west, central and northeast regions, restmcturing of the national economy, and for importation of advanced equipment and technology.223

222 The Export-Import Bank of China, Onlending Loans of Foreign Governments and International Financial Institutions, Public Exhibit 7-A-64. 223 Ibid. 89 NON-CONFIDENTIAL

246. In addition, the EXIM bank states that the terms and conditions of on! ending loans are

"preferential with its long maturity and low interest rate."224 In addition, "{c}redit tenns of the loan by foreign government and international financial institutions are the most favourable among the nation's extemal debts, with its grant element mostly greater than 35 per cent".225

24 7. The EXIM bank explains that the Chinese government acts as a representative of the recipient Chinese companies in dealing with the foreign lender.226 By this mechanism, the EX!M bank effectively provides loans directly to the Chinese companies. As such, these loans constitute financial contribution in the form of direct transfer of funds within the SIMAs. 1.6(a). The benefits equal the difference between the interest actually paid and the interest that would have been incurred for a comparable non-1,'11aranteed commercial loan under the SIMR s. 29(1 ).

248. This program is de jure specific within the SIMAs. 7.2(a) to the industry that are specified in the state industrial policy or designated to be "key sectors," which would include the steel industry enumerated by the GOC to be one of its "pillar industries."227 In addition, this pro1,>Tam is further specific in that the benefits are limited to particular enterprises that import "advanced equipment and technology."

F. Trade Financing Services Provided by the Export-Import Bank of China

249. According to the EXIM bank's website, it provides various financing and credit facility services such as packing loans, export bill purchases, letter of credit opening, letter of guarantee opening, inward bill advance, delivery against guarantee, factoring, and forfeiting to the exporters.228 The stated objective of these programs is "to fultill its duties entrusted by the state".229

22 -t Ibid. 225 Ibid. 226 Ibid. 227 Financial Times, Hu Rejects Calls to Reform State's Role, November 8, 2012, Public Exhibit 7-A-65. 2" The Export and Import Bank of China, Trade Financing, l'nblic Exhibit 7-A-66. 229 !hid. 90 NON-CONFIDENTIAL

According to the bank's 2014 Annual Report, "trade finance maintained a strong momentum of

growth. Throughout the year, the Bank handled trade finance transactions worth USD45.655 billion, up by 19.12% year-on-year." 230 Details of the services offered under this program include

the following:

• Packing loans: financing provided by the bank to an exporter for exporter's pre-shipment operational activities; • Export bill purchases: financing by the bank to the exporter after goods are delivered against export document as collateral; • Letter of credit opening: issuance of import Jetter of credit without collecting the full amount of caution money; • Export factoting: financing and payment collection management provided by the bank to the exporter after goods are delivered, through a transfer of accounts receivable to the bank; • Discount of export commercial invoices: purchase of accounts receivable by the bank in the fonn of discount with recourse; • Import factoting: bank provides services such as collecting payment of accounts receivable and credit standing investigation to the overseas exporters; and • Forfeiting: facility in which the bank buys without recourse the usance drafts or promissory notes that are held by the exporter and accepted by other banks.231

250. These financing services constitute financial conttibution in the fonn of direct transfer of

funds within the SIMA s. 1.6(a). The benefits equal the difference between the interest actually

paid and the interest that would have been incurred for a comparable non-guaranteed commercial

Joan under the SIMR s. 29(1 ). This program is specific within the meaning of the SIMA s. 7 .2(b ),

in that the companies must export in order to be eligible under the program.

G. Preferential Loans and Other Financial Services Provided by the Export- Import Bank "Going-out" for Outbound Investments

251. The GOC first established the "Go-out" strategy during the I O'" Five-year Plan (eftective

in between 200 I and 2005), in where it was listed as one of the four main development

230 The Export and Import Bank of China, 2014 Annual Report at28, Public Exhibit 7-A-61. 231 The Export and Import Bank of China, Trade Financing, Public Exhibit 7-A-66.

91 NON-CONFIDENTIAL strategies.D2 This strategy has been embodied in the 12 111 Five-year Plan, and as such, continues to be in etlect to date. Specifically, s. 2 of Chapter 52 of the 12'11 Five-year Plan is titled "Speeding up the implementation of the 'Go out' strategy"233 This section provides that "China will increase its ability of comprehensive all-round consideration, optimize the cross-agency coordination system, and enhance the guidance and services to enforce the 'going out' strategy."234 Moreover,

"China's overseas investment promotional system will be improved to increase the level of investment facilitation for enterprises to invest overseas.235

252. The EXIM bank's 2014 Annual Report states that "overseas Chinese enterprises development loans were launched {in 2014}, which created a more comprehensive and integrated mechanism for conducting policy based businesses to support the "going global" efforts of Chinese companies"236 An earlier media report also echoes that the EXIM bank has played a central role in the "going-out" strategy.237 The bank explains that its primary policy objective in carrying out this strategy is "the promotion of forei!,>TI trade and diplomacy by capitalizing domestic exporters and exporting credit to potentially profitable foreign projects." With this objective, the bank reports that it was "able to provide preferential loans with very flexible payment schedules at less than half the interest offered by any of the commercial banks.'ms

253. In particular, the Chinese steel industry is widely reported to have been the key industry promoted to "go-global" by the GOC. Specifically, China made a plan to "relocate some {steel sector} factories and encourage more {steel sector} companies to invest in overseas projects" to

032 Ting Xu, China Brief Volume II Issue 17, Destination Unknown: Investment in China's 'Go Out' Policy, September 16,2011, Public Exhibit 7-A-68. 233 The People's Republic of China's 12th Five-year Plan at 56-57, Public Exhibit 7-A-53. 234 !hid. at 56-57. 235 Ibid. at 56-57. ""The Export Import Bank of China, 2014 Annual Report at33, Public Exhibit 7-A-61. 237 Caijing.com.cn, China's Policy Banks, September 9, 2009, Public Exhibit 7-A-71. 238 Ibid. 92 NON-CONFIDENTIAL combat overcapacity, according to an ofticial of the NDRC.239 Likewise, the deputy director of the

Ministry of Industry and lnfonnation Technology ("MilT") also stated that "to support steel companies in their 'going-out' strategy will be a key task for the MIIT."2411 In light of the foregoing, the Complainant believes that the EXIMbank's "going-out" financing scheme is de jure and/or de facto specific to the steel industry according to the policy objectives that encourages steel industry to "go-out."

254. In addition, preferential loans constitute financial contribution in the fonn of direct transfer offunds within the SIMAs. 1.6(a). The benefits equal the difference between the interest actually paid and the interest that would have been incurred for a comparable non-guaranteed commercial loan under the SIMR s. 29(1). The program is specific within the SIMAs. 7.2(b) because the enterprise must export to be eligible for this prof,'!'am.

H. Discounted Loans for Export-oriented Enterprises

255. According to the Circular 58 of the People's Bank a,[ China, it provides preferential loans to certain "honorable enterprises for collection of export receipts of foreign exchange."241 This program is designed to encourage large-scale enterprises to export, provided that they meet the following criteria: (I) their annual export value reached $200 million; (2) their ratio of exports to foreign exchange is above 85%, and; (3) their ratios of surrendered verification fonns of export receipts are above 80%.242

2J

93 NON-CONFIDENTIAL

256. Preferential loans provided to the "honorable enterprises" constitute financial contribution in the fonn of direct transfer of funds within the SIMAs. 1.6(a). The benefits equal the difference between the interest actually paid and the interest that would have been incurred for a comparable non-guaranteed commercial loan under the SIMR s. 29( I).

257. This program is specific within the meaning of the SIMA s. 2(7 .2)(b ), as the designation of an "honorable enterprise" is granted only to those that meet certain export threshold. In addition, a number of Chinese steel pipe producers are known to have received "honorable enterprise" designations, such as Guangzhou Mayer Corp.243 and Baosteel.244 As such, these subject goods producers and exporters would be eligible to receive discounted loans under this program.

4. Preferential Export Guarantee and Insurance Provided bv the GOC

A. Export Guarantees Provided by the GOC

258. According to the EXIM bank's website, the "International Guarantee" service refers to various types of letters of guarantee issued to overseas creditors or beneficiaries that commit to fulfill the obligations stated in the letter of guarantee when the debtor fails to service a debt. 145 The guarantee is stated to be provided for the "export of Chinese-made ... high- and new-tech products" among others. 246 A number of Chinese line pipe producers are known to be high- and new- technology enterprises. These producers include Shengli Oil Field Freet,247 Shijiazhuang Great

Wall Equipment,248 Hengyang Steel Tube,249 and WSP Holdings Ltd. 250 as described above. The

Agency also found that a Chinese OCTO exporter received benefits under the Liaoning High-teclz

243 Guangzhou Mayer Corp., Ltd., About Us, Public Exhibit 7-A-74. 244 Baosteel, Public Acknowledgement, Public Exhibit 7-A-75. 245 The Export Import Bank of China, Intermediary Business, Public Exhibit 7-A-76. 246 Ibid. 247 Shengli Oilfield Freet Petroleum Co., Ltd., Company Profile, Public Exhibit 7-A-52. 48 ' Great Wall Equipment, About Us, Public Exhibit 7-A-57. 49 ' Cardofcom, Company Introduction ofHengyang Valin Steel Tube Co., Ltd, Public Exhibit 7-A-58. 2511 WSP Holdings Limited, Fom1 20-F at 2 I, Public Exhibit 7-A-10. 94 NON-CONFIDENTIAL

Products & Equipment Exports Interest Assistance grant, ostensibly as the exporter exported a

"high-tech product. "251

259. Provision ofloan guarantees constitutes a financial contribution in the fonn of contingent

transfer of liabilities within the meaning of the SIMAs. 2(1.6)(a). Pursuant to SIMR s. 31.1, the benefit from the government-provided loan guarantee is the present value of the difference between the interest and administrative fees actually paid, and the interest and administrative fees that would have had to been pay in the absence of the guarantee. In addition, this program is

specific under the SIMAs. 2(7.2)(b), as the guarantee is provided only for export sales.

B. Preferential Export Credit Insurance Provided by the China Export and Credit Insurance Corporation, Including Grants Provided by the GOC to Cover Export Credit Insurance Fees

260. According to the China Export & Credit Insurance Corporation's ("SINOSURE") website,

SINOSURE is a "state-funded policy-oriented insurance company ... established for promoting

China's foreign trade and economic cooperation."252 Its business mandate is to "fully support

... the development of foreign trade and economic cooperation" through "means of insurance

service for foreign trade and investment."253 Specifically, "SINOSURE is mandated, in accordance

with the Chinese government's diplomatic, international trade, industrial, fiscal and financial

policies, to promote Chinese exports of goods, technologies and service ... by means of export

credit insurance against non-payment risks.'m4 Given that China is the world's largest providers

of export credits, the exposure growth of the total insured amount as compared to the premium

Given that the mandate of the SINOSURE is to carry out the GOC policy objectives, rather

than to maximize profit, it is not surprising that SINOSURE's export credit insurance portfolio is

251 Final Determination Statement ofReasons.fbr Certain Oil Country-· Tubular Goods (March 9, 2010). 252 China Export and Credit Insurance Company, Company Protile, Public Exhibit 7-A-77. 253 Ibid. 254 Ibid.

95 NON-CONFIDENTIAL highly risky. Premium earnings are negligible and have grown less than the total insured amount.

Specitically, the SINOSURE insured USD $275 million in 2002 for a premium ofUSD $5 million,

which provides a sums insured to premium ratio of 55. By 2011, this ratio has tripled, with sums

insured of USD $25.39 billion compared to a mea_!,'fe premium of USD S 15 I million. 255

Furthennore, by 2013, SINOSURE's export credit insurance has increased exponentially to USD

327 billion.256

Table 1: Overview of Performance over the Past 10 Years (unit USD 10 milliou) 257

! Item i 2011 2010 2009 I 2008 2007 2006 2005 2004 I 2003 I 2002 I Sums , I I i ! I I 2,538.9 I I ,964.3 1,166 I 6?7- .:>- I .)'96 ·3 ! 295.7 1212.1 133 157.1 1 27.5 I insured I I I i ! 'P1 re~ruum . I _ I 1 15 1 13.1 9.9 5 4.4 13.6 12.8 1.9 I 1 0.5 I wntten i I ! I I Claims I 9.3 5 5.2 3.8 12.8 lu 1.1 I 1 1 o.7 I paid I I I 1 I

262. In financial tenns, increasingly risky insurance portfolio has increased SINOSURE's

potential losses. Specifically, SINOSURE's total premium earnings were less than the total claims

paid and the operating expenses between 2007 and 20 II, which is the entire period tor which the

Complainant was able to procure SINOSURE's financial intorn1ation. In total, premiums earned

by SINOSURE from 2007 to 201 I were RMB 2.4 billion less than the claims paid and expenses

incurred for operations. Taking income taxes paid into account, SINOSURE's premium earnings

were less than the breakeven point in all years from 2007 to 2011, with a total shortfall of almost

RMB 3.5 billion. Although the 2015 OECD repmi stated that it is "misleading in a rapidly

expanding business to compare claims paid in one year with the same year's premium income,''258

255 China Export and Credit Insurance Company, 2011 Annual Report at 12, Public Exhibit 7-A-78. 256 OCED. Working Party on Export Credits and Credit Guarantees (March 16, 2015) at 2, Public Exhibit 7-A-67. 257 China Export and Credit Insurance Company, 2011 Annual Report at 12, Public Exhibit 7-A-78; SJNOSURE's 20 I I Annual Report is the latest the Complaint could locate online. 258 OCED, Working Party on Export Credits and Credit Guarantees (March 16, 2015) at 8, Public Exhibit 7-A-67.

96 NON-CONFIDENTIAL the amounts above for 2007 to 2011 suggest that Sinosure, as a whole is likely not self-sustainable.

Additionally, the OECD report stated "Sinosure received a capital injection from state funds amounting to CNY 20 billion (equal to around USD 3.2 billion) in 2012".259

Table 2: Profitability of the SINOSURE's Insurance Business (RMB)

2011* ' 2010** 2009*** ZOOS'"*** 2007***** Total

Net profit 847,613,000 695,566,000 458,126,000 ~1,615,249,000 43,431,000 429,487,000

Net premiums earned (A) 3,587,256,000 4,425,626,000 1,147,801,000 2,223,056,000 1,892,725,000 13,276,464,000

Claims paid (B) 3,456,497,000 4,025,474,000 1,214,270,000 3,428,878,000 1,776,183 12,126,895,183 Gross profit from insurance 130,759,000 4oo,ts2,oaa ' ·66,469,000 ·1,205,822,000 1,890,948,817 1,149,568,817 1 business (A·B) I Total expenses Including claims 3;627,765,000 4,213,809,000 1,734,687,000 3,987,488,000 2,151,976,000 15,715,725,000 paid (D) Premium after operating *40,509,000 211,817,000 ·586,886,000 I -1,764,432,000 ·259,251,000 ·2,439,261,000 expenses (A-D) ! Income tax (E) . 3321920,000 336,481,000 "219,094,000 207,264,000 151,806,000 809,377,000

1 Gross profit from insurance -373,429,000 ·124,664,000 1 -367,792,ooo ·1,971,696,ooo I ·41l,o57,ooo i ·3,248,638,000 I minus all other expenses (A~D·E) i *See SINOSURE s 2011 Fmancwl Statements.-' 60 **Sec SJNOSURE's 2010 Financial Statcmcnts.261 ***Sec SINOSURE's 2009 Financial Statcments.262 **** Sec SINOSURE's 2008 Financial Statcmcnts.263 i *****Sec SINOSURE's 2007 Financial Statcmcnts.264 ------~~ 263. Government provision of export credit insurance is a financial contribution in the fonn of the government provision of services within the meaning of the SIMAs. 2(1.6)(c). The amount of the benefit is the amount contributed by the GOC into the SINOSURE's insurance program, either in the fonn of premium support or in the reimbursement of operating expenses and losses pursuant to the Agency's practice provided in the SIMA Handbook at 665-668. In addition, this program is specific under the SIMAs. 7.2(b), since it is granted only for export sales.

264. The Chinese steel industry has been reported to have benefited from the S!NOSURE's export insurance services. For example, S!NOSURE guaranteed bond repayment obligation of

259 Ibid. 260 Ibid. 161 China Export and Credit Insurance Company, 2010 Annual Report, Public Exhibit 7-A-79. 161 China Export and Credit Insurance Company, 2009 Annual Report, Public Exhibit 7-A-80. "'3 China Export and Credit Insurance Company, 2008 Annual Report, Public Exhibit 7-A-81. 164 China Export and Credit Insurance Company, 2007 Annual Report, Public Exhibit 7-A-82.

97 NON-CONFIDENTIAL

USD $149 million owed by Hebei Iron & Steel in 2013, a parent of a line pipe producing subsidiary

Hebei Iron & Steel. 165 In 2011, SINOSURE reported that it also "executed the Strategic

Cooperation Agreement with Anshan Iron and Steel Group Corporation"166 which owns steel pipe producing subsidiary Angang SteeJ.1 67

5. Debt-to-equity Swaps bv China's Asset Management Companies

265. According to the Agency's Finding in Seamless Casing.fi'om China, "{t)he debt-to equity swap is one of the most significant measures used in the financial restructuring of China's {SOEs} and {SOBs). Pursuant to the Regulation of Assets Management Companies ... the State Council of the {PRC} established four asset management companies (AMCs) that were directed to purchase certain non-performing loans from {SOBs) including the {BOC, ICBC, CCB and the

ABC}. According to the Regulations of Asset Management Companies, the AMCs are supervised and managed by the People's Bank of China, China's Ministry of Finance, and the China Securities

Regulatory Commission. The four AMCs are China Orient AMCC (paired with the BOC), China

Huarong AMC (paired with the ABC), China Xinda AMC (paired with the CCB) and Great Wall

AMC (paired with the ABC).

266. One of the authorized business activities for the management of non-perfonning loans purchased by the AMCs is the debt-to-equity swap ... The Regulation of Asset Management

Companies (2000) set forth that the State Economic and Trade Commission (SETC) would recommend companies to the AMCs for debt-to-equity swap consideration and that, ultimately, any plans or agreements related to a specific debt-to-equity swap required final approval from the

265 Steel Orbis, Handan Steel Produces 30,000 MT ofXSO Line Pipe Steel in Jan-feb, March 8, 2013, Public Exhibit 7-A-83. "'''China Export and Credit Insurance Corporation, 2011 Annals Highlights, Public Exhibit 7-A-84. 67 ='- Angang Steel Company Limited, Summary of Core Business, Public Exhibit 7-A-85. 98 NON-CONFIDENTIAL

State Council. Based on the infonnation available, 580 SOEs were officially approved for debt-to-

equity swaps with AMCS."268

267. It has been reported that the Chinese steel industry has been among the pnmary beneficiaries of debt-to-equity transactions. According to one report, " {s} ince 2000, 37 different

Chinese steel companies have benefited from debt-to-equity swaps worth at least $8.4 billion as

part of the government's plan to restmcture and consolidate the steel industry. Two of China's

largest steel producers, Shanghai Baosteel and Anshan, both benefited from this process. In both

cases, non-performing loans to the company were transferred from {SOBs) to {SOB AMCs}. The

{AMCs} then exchanged the debt for shares in the companies. The OECD reported that these

transactions involved 'substantial reductions in debt loads in return for restructuring arrangements

whose details have not been fully revealed."269 Notably, both Baosteel270 and Anshan Iron & Steel

Group271 produces line pipe through their respective subsidiaries.

268. Debt-to-equity swap constitutes financial contribution in the tonn of a direct transfer of

funds or liabilities, and government forgiveness of amounts owed under the SIMA ss. 2(1.6)(a)

and (b). Benefit to the recipient is conferred to the extent that the equity infusion is inconsistent

with the usual investment practice of private investors in PRC. The Agency has found this program

to be countervailable and that two Chinese seamless casing exporters received benefits.272

268 Final Determination Statement qfReasons for Seamless Casing (August 5, 2008). '""Wiley Rein & Fielding LLP, The China Syndrome: How Subsidies and Government Intervention Created ti1e World's Largest Steel Industry, July 2006, Public Exhibit 7-A-105. 270 Baoshan Iron & Steel Co., Ltd., Baosteei Pipe & Tube: Create Value for Customers, June 9, 2006, Public Exhibit 7-A-132. 271 Angang Steel Company Limited, Summary of Core Business, Public Exhibit 7-A-85. 2i2 Final Determination Statement qfReasonsj(Jr Seamless Casing (August 5, 2008). 99 NON-CONFIDENTIAL

6. Debt Forgiveness bv the GOC

269. According to the USDOC's finding in Seamless Pipe fi'om China, 273 the GOC forgave debts of Xi gang Group, a subsidiary line pipe producer of Hunan Valin Group, 274 now known as

Jiangsu Valin-Xigang Special Steel Co., Ltd. 275 Specifically, it was found that "Xigang Group and

Resources Steel underwent loan restructuring since December II, 200 I" and that " {a }pproval for forgiveness of debt occurred in 2005, 2006, 2007, and 2008."276

270. In addition, the US DOC found that the GOC also forgave debts ofTianjin Pipe Corporation

("TPCO"). In this instance, "TPCO reported that in 2006 and 2008 it settled claims related to loans that continued to be outstanding after a debt-to-equity transaction occurring in 20 II. TPCO settled debt held by China Orient Asset Management Corporation and Cinda ... Forgiveness of part of the debt occurred in 2006, and approval for forgiveness of the remainder of the debt occurred in

2008."277 As with Xi gang Group, TPCO is a Chinese line pipe producer.278

271. Debt forgiveness is a financial contribution in the form of govemment forgiveness of amounts otherwise owing or due pursuant to the SIMA s. 2( 1.6)(b ). Benefit is the amount of the debt forgiven under the SIMR s. 27.1. The debt forgiveness appears to be de .facto specific to a limited number of enterprises, in that it was not widely available or by the exercise of the granting authority's discretion under the SIMAs. 2 (7.3). The debts forgiven at any time between 2004 and

273 The United States Department of Commerce, Issues and Decision Memorandum for the Final Determination: Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe from the People's Republic of China, C- 570-957, September 10,2010, Public Exhibit 7-A-46. 274 Jiangsu Valin-Xigang Special Steel Co., Ltd., Product Catalogue: Line Pipe, Public Exhibit 7-A-134. 275 Jiangsu Valin-Xigang Special Steel Co., Ltd., Introduction, Public Exhibit 7-A-133. 276 The United States Department of Commerce, Issues and Decision Memorandum for the Final Detem1ination: Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe from the People's Republic of China, C- 570-957, September 10,2010, at 27-28, Public Exhibit 7-A-46. 277 Ibid at 27-28. 278 Tim1jin Pipe Corporation Enterprise, Inc., Tianjin Pipe (Group) Corporation: Products, Public Exhibit 7-A-135. 100 NON-CONFIDENTIAL the end of 2013 are non-recurring in nature, and as such, should be allocated over an appropriate average useful life not exceeding I 0 years.

7. Income Tax Benefits Provided bv the GOC

A. Preferential Income Tax Benefits for Foreign Invested Enterprises

272. The GOC provides numerous preferential income tax measures to F!Es. According to the

Agency's prior Finding, an enterprise is considered to be foreign-invested where 100% of shares of the foreign investor enterprise is foreign-owned and located outside China.279 However, non- wholly foreign owned F!Es may also be considered to be "F!Es" if the granting authority allows.280

273. Infonnation reasonably available to the Complainant does not allow the Complainant to identify all the Chinese subject good producers and exporters that could qualify as FIEs. However, the Complainant believes that at least some Chinese line pipe producers and exporters are indeed

FIEs. Chinese line pipe producers such as Faray Petroleum Steel Pipe Co., Ltd. and Shengli Oil

Field Freet Petroleum Steel Pipe Co., Ltd are examples of non-wholly foreign owned F!Es producing line pipe; they are stated to be joint ventures between Chinese and foreign investors.281

274. In addition, the Agency found in prior cases that some Chinese steel pipe producers and exporters did in fact qualify as FIEs and benefited under various F!Es specific programs. For example, the Agency found that a number of Chinese exporters of OCTG, welded pipe and pup joints received benefits from preferential tax policies provided to the F!Es.282

:n9 Final Determination Statement ofReasonsfor Seamless Casing (August 5, 2008). 28° For example, see Fi11al Determination Statement qfReasonsjbr Carbon Steel Welded Pipe (August 5, 2008) at 80 under the Program "Preferential Tax Policies for Enterprises with Foreign Investment Established in Special Economic Zones (excluding Shanghai Pudong Area)." 081 Shengli Oillield Freet Petroleum Steel Pipe Co., Ltd., Corporate Profile, Public Exhibit 7-A-86; Faray Petroleum Steel Pipe Co., Ltd., About Us, Public Exhibit 7-A-87. 282 Final Determination Statemelll ofReasonsfor Certain Oil Counti:V Tubular Goods (March 9, 20 l 0); Final Determination Statement ofReasonsfor Carbon Steel Welded Pipe (August 5! 2008); Final Determination Statement of Reasons in Pup Joints (March 12, 20 12). 101 NON-CONFIDENTIAL

275. Preferential income tax policies provide financial contribution in fonns of revenue forgone

(in the case of tax exemption or reduction) or direct transfer offi.mds (in the case of tax refunds) within the meaning of the SIMA s.2(1.6)(a) and (b), respectively. Recipients of these programs obtain benefits in the amount equal to the government revenue foregone or the refunds provided pursuant to the SIMR s. 27 and 27.1. These programs are limited in law to a particular enterprise pursuant to paragraph 2(7.2)(a) of SIMA, i.e., foreign-invested enterprises. The following are the specific preferential tax policies for the FlEs that the Complainant believes to have been made available to the Chinese line pipe producers and exporters.

v. Income Tax Reduction for FIEs Designated as HNTEs and Located in Designated Areas

276. According to the Agency's finding in Seamless Casing.fi·om China, the GOC provides a reduced corporate income tax rate of 15% to F!Es recognized as HNTEs and established in the designated new and high-tech industrial development zones.283 "This program was established under the Rules for the Implementation of the Income Ta.;; Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises ("FIE Income Tax Law"), which was promulgated on June 30, 1991, and came into effect on July I, 1991. The program was established to absorb investment in special economic zones (SEZs) and designated areas to take the lead in their economic development. The program is administered by the State Administration

2 4 of Taxation and local tax authorities." R The Agency found this program to confer countervailable subsidies in Seamless Casing.fi·om China.m

277. The Complainant believes that the Chinese line pipe producers benefit from this program.

For example, Shandong Shengli Steel Pipe Co., Ltd - a I 00%-owned subsidiary of a company

2113 Final Determination Statement ofReasonsfor Seamless Casing (August 5, 2008). :!S.J- Ibid. 285 Ibid.

102 NON-CONFIDENTIAL

incorporated in the Cayman islands ~ proclaims itself to be a "Shandong Province high-tech enterprise," 286 and it has production facilities in Urumqi high-tech development zone and

Canquanpu Industrial Park, which are two designated areas under this program.287 On its face,

Shengli Steel Pipe Co., Ltd. appears to be a FIE, designated as a high-tech enterprise by the

Provincial authority, that is located within a designated zone. Such Chinese line pipe producers and exporters would be eligible under this program.

vi. Reduced Tax Rate for Productive FIEs Scheduled to Operate for a Period not Less Than Ten Years

278. According to the Agency's finding in OCTG ji·om China, " {t} his program was established in the {FIE Income Tax Law), which was promulgated on April9, 1991, and came into effect on

July I, 1991. This program was established in order to encourage foreign investment. The granting authority responsible for this program is the State Administration of Taxation and the program is administered by local tax authorities.

279. Under this program, from the year an FIE begins to make a profit, they may apply for and receive an exemption from income tax in the first and second years and a 50% reduction in the third, fourth, and fifth years of profitable operation. Should an FIE cease its operation following a period of less than I 0 years, that enterprise will be responsible for repaying the amount of tax that has been reduced or exempted under this program.

280. The pro1;ram was tenninated when the Income Tax Law of the People's Republic of China for Enterprises came into effect on January I, 2008. However, according to Article 57 of the

Income Tax Law of the People's Republic of China for Enterprises and the Notification of the State

Council on Carrying out the Transitional Preferential Policies concerning Enterprise Income Tax,

186 Shandong Shengli Steel Pipe Co., Ltd., About Us, Public Exhibit 7-A-88. 7 " Shandong Shengli Steel Pipe Co., Ltd., Brief Introduction of Xinjiang Subsidiary, Public Exhibit 7-A-89.

103 NON-CONFIDENTIAL

Guo Fa (2007), No. 39, enterprises currently receiving the benefits under this program as of

January I, 2008, can continue to receive the relevant preferential treatments set forth in the

previous tax laws and administrative regulations until the end of the fifth profitable year."288 Since the fifth year beginning January I, 2008 ends on December 31, 2012, qualifying Chinese FIEs

could have benefited under this program in the fonn of reduced tax payable in 2013 (based on the

2012 tax retum filed in 2013).

281. In fact, Shengli Oil & Gas Pipe Holdings Ltd., a parent of a line pipe producer Shengli

Steel Pipe Co., Ltd., unequivocally states that it utilized this program for the tax year 2012 in its

2013 Annual Report:

{a} s a foreign invested enterprise, Shandong Shengli (being the major operating entity and a wholly-owned subsidiary of the Group) is eligible for certain tax holidays and concessions, namely, two­ year exemption from PRC entemrise income tax starting from 2008, which was the Group's first profitable year and followed by a 50% deduction on PRC entemrise income tax for the three years from 2010 to 2012.289

282. The Agency found this program to be countervailable in Certain Stainless Steel Sinks.fi·om

China. 290

vii. Income Tax Refund for Re-investment of FIE Profits by Foreign Investors

283. According to the Agency's finding in Seamless Casing.fi·om China, " {t} his program was

established in the {FIE Income Tax Law}, which was promulgated on April9, 1991, and came

into effect on July 1, 1991. This program was established in order to encourage foreign investors

to reinvest profits into businesses in China. The authorities responsible for administering this

program are the State Administration of Taxation and the local tax offices.

288 Final Determination Statement ofReasonsfbr Certain Oil CountJ)' Tubular Good...,- (March 9~ 2010). '" Shengli Oil & Gas Pipe Holdings Ltd., 2013 Annual Report at 18, Public Exhibit 7-A-70. 29°Final Determination Statement of Reasons in Stainless Steel Sinks (May 9, 20l2). 104 NON-CONFIDENTIAL

284. Article I 0 of the FIE Income Tax Law identifies that any foreign investors who directly reinvest their after tax profit into the organization from which they received the profit from, or use the profits to establish a new foreign enterprise, will be refunded 40% of the tax paid on the profit amount directly invested. Moreover, "where a foreit,'l1 investor directly reinvests profits to establish or expand export oriented enterprises or advanced technology enterprises, 100% of the income tax paid on the reinvested profit will be refunded."291 The foreign-owned Chinese line pipe producers and exporters would be eligible under this program. The Agency found this program to be countervailable in Certain Unitized Wall Modules fiwn China. 292

viii. Preferential Tax Policies for Foreign Invested Export Enterprises

285. According to the Agency's Finding in Seamless Casing.fi·om China, "{t}his program was established in the {FIE Income Tax Law) ... to expand foreign economic cooperation. The authorities responsible for administering this program are the State Administration of Taxation and local tax authorities.

286. Under this program, export oriented enterprises invested in and operated by foreign businesses may pay a reduced income tax rate of 15% if their annual output value of all export products amounts to 70% or more of the output value of the enterprise's products for that year.

Export oriented enterprises in the SEZs and ETDZs and other such enterprises subject to enterprise income tax at the rate of 15% that qualify under the abovementioned conditions, shall pay enterprise income tax at the tax rate of I 0%."293

287. As explained above, Chinese line pipe producers such as Shandong Shengli Steel Pipe Co.,

Ltd are F!Es located in a SEZ, and as such, would be eligible to receive benefits under this

:m Final Determination Statement of Reasons for Seamless Casing (August 5, 2008). 2 1 ( .:! Final Determination Statement ofReasunsjbr Uniti:::ed Wall Jv!odules (October 25, 2013). 293 Final Determination Statement ofReasonsfor Seamless Casing (August 5, 2008). 105 NON-CONFIDENTIAL program. The Agency found this program to be countervailable in Laminated Flooring .fi"om

China.294

ix. Preferential Tax Policies for the R&D of FIEs

288. According to the Agency's Finding in Seamless Casing from China, "{t}his program was established in the Circular of the State Administration of Taxation on the Issues Related with the

Offset Taxable Income on Technology Development Fee for Foreign Investment Enterprises (Guo

Simi Fa (1999) No. 173 ... This program was established to encourage the research and development of enterprises. The authorities responsible for administering this program are the

State Administration of Taxation and local tax authorities.

289. Under this program, certain foreit,'ll investment enterprises may offset their taxable income by 150% of their R&D expenses for the same year, not to exceed the taxable income tor the year."

The foreign-owned Chinese line pipe producers and exporters would be eligible under this program.

290. The Agency found this program to be countervailable and that a cooperative Chinese seamless casing exporter to have used this program in Seamless Casing from China. The agency also found this program to be potentially countervailable in OCTG from China.295

x. FIEs and Foreign Enterprises which have Establishments or Places in China and arc Engaged in Production or Business Operations Purchasing Domestically Produced Equipment

29 I. According to OCTG from China, " {t} his program was established in the Circular of the

Ministry of Finance and State Administration of Taxation Concerning the Issue of Tax Credit for

Business Income Tax for Homemade Equipment Purchased by Enterprises with Foreign

294 Final Determination Statement ofReasons for Laminate Flooring (June 16, 2005). 95 ::. Final Determination Statement of Reasons for Certain Oil Coun/1)1 Tubular Goods (March 9, 2010).

106 NON-CONFIDENTIAL

Investment and Foreign Enterprises (Cai Shui Zi (2000) No. 49), which came into force on July I,

1999. This program was established to attract foreign investment and support technology innovation. The granting authmity responsible tor this program is the State Administration of

Taxation and the program is administered by local tax authorities.

292. Under this program, 40% of the expenses incurred by certain FlEs and foreign enterprises on purchasing domestically produced equipment are deducted from the increment of income tax of that year compared to the previous year. The deducted portion shaJlnot exceed that year's total increment of income tax, and in the case where the total increment of income tax is less than 40% of such expenses; the exceeding part of the deductible expenses can be deducted from the next year's increment of income tax. Such postponement of deductibility shall not last for more than five years."296 The foreign-owned Chinese line pipe producers and exporters would be eligible under this program.

293. Moreover, this program is specific as it is a prohibited import substitution subsidy under the SIMAs. 2(7.2)(b), in addition to being specific to the FIEs under the SIMAs. 2(7.2)(a). The agency also found this program to be countervailable in OCTG from China.297

xi. Preferential Tax Policies for Enterprises with FIEs Established in Special Economic Zones ("SEZs") Excluding Shanghai Pudong Area

294. According to the Agency's Finding in Welded Pipe fi'om China, "{t}his program was established in the {FIE Income Tax Law} ... in order to absorb foreign investment, expand the

'open-up policy' and enhance development in {SEZs}. The granting authority responsible for this program is the State Administration of Taxation and the program is administered by local tax authorities.

296 Final Determination Statement ofReasonsfor Certain Oil Counfl)' Tubular Goods (March 9, 2010). 297 /hid.

107 NON-CONFIDENTIAL

295. Under this program, non-wholly foreign owned FlEs established in SEZs and Foreign

Enterprises (wholly foreign owned FlEs) established in SEZs engaging in production or business operations shall pay income tax at a reduced rate of 15%."298 As explained above, Chinese line pipe producers such as Shandong Shengli Steel Pipe Co., Ltd are FlEs located in a SEZ, and as

such, would be eligible to receive benefits under this program.

296. The Agency found that this program conferred countervailable subsidies to a cooperative

Chinese exporter in Pup Jointsfi·om China.299 The Agency also found this program actionable in

Welded Pipe fi"om China.

xii. Preferential Income Policies for FIEs Established in Open Coastal Cities or SEZs in Old Urban Cities

297. According to the Agency's Finding in Seamless Casingfi·om China, "{t}his prO!,'TUm was

established in the {FIE Income Tax Law) ... in order to encourage foreign investment in Economic

and Technical Development Zones (ETDZs) in open coastal cities and encourage some districts to

take the lead in development. The authorities responsible for administering this program are the

State Administration of Taxation and local tax offices.

298. Under this program, FIEs of a productive nature established in coastal economic open

zones or in the old urban districts of cities where the SEZs or the ETDZs are located shall pay

income tax at a reduced rate of24%."300

299. Based on the reasonably available infonnation, the Complainant identified that a number

of Chinese line pipe producers and exporters are located in such ETDZs. For example, Kunshan

Pearl Machinery Industry Co., Ltd. is located in an ETDZ in Kunshan, which is among the

:!iJB Final Determination Statement(~( Reasonsfor Carbon Steel fVdded Pipe (August 5, 2008). 299 Final Determination Statement ofReasons in Pup Joints (March 12, 20 12). 30°Final Determination Statement ofReasons fOr Seamless Casing (August 5, 2008). 108 NON-CONFIDENTIAL designated areas under this program.301 In addition, this company is founded by a Taiwanese pipe producer, Far East Machinery Co., Ltd. 302 Northern Steel Pipe is also located in ETDZs in Hai

303 30 Cheng, which are also among the designated areas under this program. • This company is also known to be a Sino-Hong Kong joint venture. 305 Such foreign-invested Chinese line pipe

producers located in the designated zones would be eligible for this program.

xiii. Preferential Income Policies for Technology Intensive or Knowledge Intensive FIEs Established in Open Coastal Cities or SEZs in Old Urban Cities

300. According to the Agency's Finding in Seamless Casing.fi'om China," {t} his program was

established in the {FIE Income Tax Law} ... to further utilize foreign capital, introduce foreign

advanced technology and equipment and accelerate industry stmctural adjustment. The authorities

responsible for administering this pro!,'Tam are the State Administration of Taxation and local tax

authorities.

30 I. Under this program, production oriented enterprises with foreign investment established in

the coastal economic open zones, SEZs, and in the old urban districts of municipalities where

ETDZs are located and which are engaged in technology intensive and knowledge intensive

projects, may receive a reduced income tax rate of 15%."306

302. As noted above, a number of Chinese line pipe producers are known to be located within

ETDZs in the designated municipalities. To the extent that these enterprises are also classified as

"technology intensive" or "knowledge intensive," they would be eligible to receive a heightened

301 !hid. 301 FEMCO, Kunshan Pearl Machinery, Public Exhibit 7-A-90. 303 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 304 Final Determination Statement ofReasons for Seamless Casing (August 5, 2008). 305 Liaoning Northern Steel Pipe Co., Ltd., Introduction, Public Exhibit 7-A-91. 306 Final Determination Statement ofReasonsfhr Seamless Casing (August 5, 2008).

109 NON-CONFIDENTIAL reduction of income tax rate, from 24% to 15%, under this program. The Agency found this

program to be countervailable in Laminated Flooring.fi·om China. 307

xiv. Local Income Tax Exemptions and Reductions in SEZs and Other Designated Areas

303. According to the Agency's Finding in Welded Pipe fi'om China, "{t}his program was established in the {FIE Income Tax Law} ... to provide preferential tax treatment to FIEs to accelerate the development oflocal economies. The granting authority responsible for this program is the State Administration of Taxation and the program is administered by local tax authorities.

304. Under this program, any FIE that operates in an industry or undertakes a project encouraged by the State may receive an exemption or reduction in local income taxes."308 As such, this

prot,'fam is de jure specific to the enterprises undertaking the encouraged projects within the meaning of the SIMAs. 2(7.2)(a), in addition to being specific to the FIEs.

305. A list of the Chinese API SL certificate holders show a large number of the certificate holders to be within a specially designated "parks," "zones," or "areas." 3119 The Complainant

believes that all such enterprises are eligible to receive benefits under this program. In addition, the Agency previously found this program to be countervailable and that a Chinese welded pipe

exporter to have benefited from this program. 3!0 The Agency also found this program to be

countervailable in Certain Seamless Carbon or Alloy Steel Oil and gas Well Casing.fi·om China. 311

307 Final Determination Statement of Reasons j(Jr Laminate Flooring (June 16 1 2005). 308 Final Determination Statement c~fReasonsfOr Carbon Steel Welded Pipe (August 5, 2008). 309 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 31 °Final Determination Swtement of Reasons for Carbon Steel Welded Pipe (August 5, 2008). 311 Final Determination Statement ofReasonsfhr Seamless Casing (August 5, 2008). II 0 NON-CONFIDENTIAL

B. Other Preferential Income Tax Policies Provided by the National Government

306. As with preferential income tax policies geared specifically to gamer foreign investments, the GOC also provides numerous other preferential income tax policies for the purpose of carrying out various other national policies. These preferential income tax policies constitute financial contribution in the form of government revenue forgone within the meaning of the SIMA s.

2( 1.6)(b ). Recipients of these programs receive benefits in the amount equal to the amount foregone pursuant to the SIMR s. 27.1. In addition, the GOC limits these benefits to particular enterprises and/or industries by various manner in order to carry out the corresponding national policy imperatives. These mechanisms are further elaborated for each program below.

xv. Income Tax Reductions for the Enterprises Designated as "High and New Technology Enterprises"

307. Paragraph 2 of Article 28 of the PRC's Corporate Income Tax Law ("CIT Law") 312 provides that High and New Technology Enterprises ("HNTE") are subject to a reduced income tax rate of 15%, 10% lower than the regular CIT rate of 25% set out by Article 4 of Law.m

According to the Agency's Finding in OCTO .fi'om China, this program came into eftect as of

January I, 2008. The granting authority responsible for this program is the State Administration of Taxation and the program is administered by local tax authorities.314 Only certain enterprises designated by the State to be HNTEs benefits from the reduced income tax rate.

308. It is an established fact that the Chinese line pipe producers and exporters are HNTEs and benefit from the reduced income tax. For example, WSP Holdings Ltd- the parent company of

Wuxi Seamless, a main Chinese steel producer- reported in its Form 20-F submitted to the United

312 KPMG, PRC Corporate Income Tax Law, Public Exhibit 7-A-92 at 8. 311 Ibid, al4. 3l4 Final Determination Statement ofReasonsjbr Certain Oil Coun!IJ Tubular Goods (March 9, 20 l 0).

Ill NON-CONFIDENTIAL

States Securities and Exchange Commission for the year ending 2012 that it '"enjoy {s} a preferential tax rate of 15%" by virtue of being an HNTE, and that it has renewed this status until

the end of2013.315 In addition, the Agency countervailed this program against the Chinese OCTG producers after finding that '"four of the cooperative exporters have received benefits under this

progrmn."316

309. The reduced tax rate of 15% is granted only to particular enterprises designated as HNTEs.

As such, this program is de jure specific within the meaning of the SIMAs. 2(7.2)(a). In OCTG

.fi'om China, the Agency found this program to have conferred countervailable subsidy benefits.

xvi. Preferential Tax Policies for Domestic Enterprises Purchasing Domestically Produced Equipment for Technology Upgrading Purpose

3 I 0. According to the Agency's Finding in OCTG from China, '"{t }his program was established

in the Circular Concerning Printing and Distributing Interim Measures on Business Income Tax

Credit Applicable to Technological Transfonnation Domestic Equipment Investment (Cui Simi Zi

(1999) No. 290), which came into force on July I, 1999. This program was established to

encourage domestic investment and support the technology upgrading of enterprises. The granting

authority responsible for this program is the State Administration of Taxation and the program is

administered by local tax authorities.

311. Under this program, for all enterprises with investment on the technological transfonnation

projects confonning to the State Industrial Policy in the nation, 40% of the expenses on purchasing

domestically produced equipment shall be deducted from the increment of income tax ofthat year

compared to the previous year. In the case where the total increment of income tax is less than

315 WSP Holdings Limited, Fom1 20-F, Public Exhibit 7-A-10 at 21. 316 Final Determination Statement (~( Reasons.fbr Certain Oil Country Tubular Goods (March 9, 20 I 0).

112 NON-CONFIDENTIAL

40%, of such expenses, the exceeding part of the deductible expenses can be deducted from the next year's increment of income tax. Such postponement of deductibility shall not last for more than five years. "317

312. This program appears to be de jure specific under the SIMAs. 2(7.2)(a), as the benefits are limited to the projects designated as "technological transfonnation projects."

313. The Agency found this program to be countervailable in Seamless Casing.fi·om China and

OCTG fi'om China. The Agency found that a number of cooperative Chinese seamless casing and

OCTO exporters have received benefits under this program. 318

xvii. Preferential Tax Policies for FIEs Established in the Pudong Area of Shanghai

314. According to the Agency's Finding in Seamless Casing.from China, "{t}his program was established in the {FIE Income Tax Law} ... in order to encourage foreign investment in the SEZs of the Pudong Area of Shanghai. The authority responsible for administering this program is the

State Administration of Taxation.''319 That said, " {u }nder this program, FIEs, FEs, joint-venture

DIEs and single-investor DIEs established in the SEZs of the Pudong New Area of Shanghai shall pay income tax at a reduced rate of 15%."320

315. The Complainant has identified a number of Chinese line pipe producers located in the

Pudong area, including Shanghai Third Navigation ASP Steel Pipe, 321 and Sino-American

Shanghai Pacific Pipe. 322 Such Chinese line pipe producers would be eligible under this pro1,>ram.

317 Ibid. 318 Final Determination Statement ofReasons for Certain Oil CountJ}' Tubular Goods (March 9, 2010). Jt!J Final Determination Statement l~{ Reasons for Seamless Casing (August 5, 2008) at 65-66. 0 " Ibid. at 65-66. J2l American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 312 Ibid. 113 NON-CONFIDENTIAL

316. The reduced tax rate of 15%, is limited to particular enterprises located in Pudong New

Area within the jurisdiction of the j,'Tanting authority, namely all of China, and therefore it is geographically specific within the meaning of the SIMA s. 2(7.2)(a). The Agency found this program to be potentially actionable Stainless Steel Sinks fi"om China. 323

xviii. Income Tax Refund Where Profits Re-invested in SEZs and Other Designated Areas of Guangdong Province

317. According to the Agency's Finding in Welded Pipeji·om China, "{t)his program was established in the Regulations on Special Economic Zones in Guangdong Province ... to encourage the reinvestment of profits into businesses located in the SEZs of Guangdong province. The granting authority responsible for this program is the State Administration of Taxation and the program is administered by local tax authorities.

318. Under this program, businesses that reinvest profits derived in the SEZs of Guangdong province for a period of five years or longer are eligible to receive a refund of the income tax already paid on the profit that was reinvested. "324

319. Chinese line pipe producers are known to be located within the SEZs of Guangdong province, including the following companies:325

• Guangzhou Juyi Steel Pipes Co., Ltd. located in Sanlian Industrial Park in Guangzhou city, Guangdong; • Guangzhou Steel Pipe Mill Co., located in Huangpu Industrial District in Guangzhou city, Guangdong; and • Tai Feng Qiao Metal Products Co., Ltd. located in Jiedong Economic Development Testing Zone in Jieyang city, Guangdong. 320. Such Chinese line pipe producers would be eligible to receive benefits under this program.

323 Final Determination Statement of Reasons in Stainless Steel Sinks (May 9, 2012). 324 Final Determination Statement of Reasons for Carbon Steel Welded Pipe (August 5, 2008). 315 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 114 NON-CONFIDENTIAL

32 I. This program is provided by the State Administration of Taxation with a national jurisdiction, but is limited to particular enterprises located in the SEZs ofGuangdong province. As such, this program is geographically specific under the SIMAs. 2(7.2)(a). The Agency found this program to be countervail able in Cooper Pipe Fittings .fi·om China.326

xix. Preferential Tax Policies in the Western Region

322. According to the Agency's Finding in Welded Pipe from China, "{t}his program was established for DIEs and FIEs in the Circular of the Ministry of Finance, State Administration of

Taxation and General Administration of Customs on the Preferential Tax Policy of Development of the Western Region ... in order to encourage investment in the western region of China. The granting authority responsible for this prot,>Tam is that State Administration of Taxation and the program is administered by local tax authorities.

323. Under this program, DIEs in industries classified in the encouraged category in the Guiding

Catalogue for Industrial Structure Regulation ... and FIEs classified in the encouraged category in the Guideline Catalogue for Foreign Investment Industries and the Guideline Catalogue of the

Advantageous Industries in the western Central and Western Regions for Foreign Investment, and who are located in the western region and other specified locations are eligible for a preferential income tax rate of 15%." 327 This program is limited to a particular enterprise classified as

"encouraged" located in a specific geographic area, and for this reason, it is specific within the meaning of the SIMAs. 2(7.2)(a).

324. A list of Chinese API 5L certificate holders shows that there are many API 5L certificate holders located in the following provinces, 328 as found by the Agency in the Certain Seamless

326 Final Determination Statement ofReasonsjOr Copper Tube (December 3, 2013). 327 Final Determination Statement <~f Reasonsfhr Carbon Steel Welded Pipe (August 5, 2008). "'American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, l'ublic Exhibit 7-A-33. 115 NON-CONFIDENTIAL

Carbon or Alloy Steel Oil and Gas Well Casing fi'om China investigation to be provinces designated as "western region": 329 Shanxi province; Jilin Province, Heilongjiang province, Anhui province; Hubei province, Sichuan province; Shaanxi province; Inner Mongolia; and Guangxi -

Southeast330 Since some of these provinces, such as Jilin and Heilongjiang, are geographically located in the northeast rather than the western region of China, Evraz encourages the CBSA to conduct further investigations as to whether companies producing and exporting subject goods in these provinces benefited from this program, as many companies had in the Carbon Steel Welded

Pipe investigation.

325. The Agency found this program potentially actionable in OCTG fi'om China and Piling

Pipe.fi·om China. 331

C. Preferential Income Tax Policies Provided by Sub-national Governments

326. One of the hallmarks of the centrally planned economy like that of China's is that centrally set national policies "flow down" to the sub-national governments. In this regard, Hong Kong's

Constitutional and Mainland Affairs Bureau states that "{the National Five-year Plan} serves as the blueprint and action agenda for national development and the work basis of government agencies at alllevels."332 As such, these Five-year Plans are implemented at various levels of the government, namely at "national, provincial/municipal and individual specific project" levels. 333

329 CBSA Final Determination Statement of Reasons for Carbon Steel Welded Pipe (February 22,2008) at pg 68; Here, the Agency found that the following regions constitute the "western region" in Welded Pipe from China: Shanxi province, Jilin province, Heilongjiang province, Anhui province, Jiangxi province, Henan province, Hubei province, Hunan province, Chongqing municipality, Sichuan province, Guizhou province, Yunnan province, Tibet autonomous region, Shaattxi province, Gansu province, Ningxia Hui autonomous region, Qinghai province, Xinjiang Uygur autonomous region, Inner Mongolia autonomous region, and Guangxi Zhuang autonomous region. 310 American Petroleum Institute, API Standard APl-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 331 Final Determination Stmcment ofReasons fOr Certain Oil CountJy Tubulat Goods (March 9, 2010); Final Determination Statement of Reasons/or Certain Steel Piling Pipe (November 15, 20 12). 332 Constitutional and Mainland Affairs Bureau of the Government of the Hong Kong Special Administrative Region, The HKSAR's Work in Complementing the National 12'" Five-year Plan. Public Exhibit 7-A-93. J)) !hid.

116 NON-CONFIDENTIAL

327. A case in point is local tax policies aligned with preferential tax policies provided by the national government. Like their national counterparts, local authorities provide preferential tax policies with a view to carry out the national policies. These tax policies could take the fonn of tax exemptions or reductions that constitute a financial contribution within the meaning of government revenue forgone under the SIMAs. 2(1.6)(b ). On the other hand, tax refunds constitute a financial contribution within the meaning of direct transfer of funds under the SIMAs. 2( 1.6)(a).

In both cases, recipients of these preferential income tax policies receive benefits in the amount equal to the amount foregone or refunded pursuant to the SIMR ss. 27 and 27. I. In addition, these programs are designed to target particular enterprises or industries pursuant to the corresponding national policies, as further elaborated below for each program.

xx. Income Tax Refund for Enterprises Located in Tianjin Jinnan Economic Development Area

328. According to the Agency's Finding in OCTG.fi·om China, "this program was established by governments at the local level to provide income tax refund for domestic invested enterprises"

("DIEs"), "located in Tianjin Jinnan Economic Development Area. The granting authority responsible for this pro!,'Tam is the Management Committee of Tianjin Jinnan Economic

Development Area. Under this pro!,'Tam, DIEs may apply for and receive income tax refunds up to

50%, of the income tax paid to the local government."334 The Agency in that case found this program to be countervailable and also found that "one of the cooperative exporters has received benefits under this program:ms

329. Tianjin Jinnan Economic Development Area is a home to a thriving steel processing industry. It IS reported that there are 55 compames 111 the "machinery industry," including

334 Final Determination Statement ofReasonsfhr Certain Oil CountJ}' Tubular Goods (March 9, 2010). m Ibid. 1 I 7 NON-CONFIDENTIAL producers of oil pipe casing and drills, which together process five million tons of steel per year. 336

Tianjin Delma Petroleum Equipment Manufacturing Co., Ltd., a self-proclaimed operator of"one of the largest oilfield pipes and equipment production plants in China," 337 is one of such companies. 338 This company produces line pipe, 339 and it advertises of having export clients, including those in Canada. 340 Tianjin Delma Petroleum Equipment Manufacturing Co., Ltd., and other Chinese line pipe producers located in Tianjin Jinnan Economic Development Area, would therefore be eligible to receive income tax refunds under this program.

330. The income tax refund is granted only to particular enterprises located in Tianjin Jinnan

Economic Development Area, namely the domestic invested enterprises. As such, this program is de jure specific within the meaning of the SIMAs. 2(7.2)(a).

xxi. Accelerated Depreciation on Fixed Assets in Binhai New Area of Tianjin

331. According to the Agency's Finding in OCTG from China, "{t}his program was established in the Notice of the Ministry of Finance and the State Administration of Taxation on the Relevant

Preferential Enterprise Income Tax Policies for Supporting the Development and Openness of

Binhai New Area ofTianjin, Cai Simi (2006) No. 130, which came into effect as of July I, 2006.

This program was established in order to promote the development of the Binhai New Area of

Tianjin. The authorities responsible for administering this program are the Department of Public

Finance ofTianjin Municipality, the State Taxation Bureau ofTianjin Municipality and the Local

Taxation Bureau ofTianjin Municipality.

33 '' China Knowledge, Tianjin Jinnan Economic Development Area, Public Exhibit 7-A-94. 337 Tianjin Dehua Petroleum Equipment Manufacturing Co., Ltd., Company Profile, Public Exhibit 7-A-95. 338 Tianjin Del111a Petroleum Equipment Manufacturing Co., Ltd., Contact Us, Public Exhibit 7-A-96. 339 Tianjin Del111a Petroleum Equipment Manufacturing Co., Ltd., Products; Line Pipe, Public Exhibit 7-A-97. 340 Tianjin Del111a Petroleum Equipment Manufacturing Co., Ltd., Company Profile, Public Exhibit 7-A-95. 118 NON-CONFIDENTIAL

332. Under this program, enterprises located in the Binhai New Area of Tianjin are eligible to reduce the depreciation period of eligible fixed assets (excluding houses and buildings) by up to

40%."341 Tianjin Pipe Group Corporation is a major line pipe producer located in Tianjin Binhai

New Area, 342 and such Chinese line pipe producers would be eligible to receive benefits under this program. In addition, The Agency found this program to be countervailable and that Chinese tubular producers received benefits under this program in both OCTO trom China and Seamless

Casing from China.343

333. This program is limited to a particular enterprise located in the Binhai New Area, itself located within the jurisdiction of the granting authority, namely the municipality of Tianjin. As such, this program is de jure specific within the meaning of the SIMAs. 2(7.2)(a).

8. Exemption or Reduction of Indirect Taxes and Other Governmental Charges and Fees

334. The GOC also provides numerous subsidies in fonn of exemption or reduction of indirect taxes, tariffs, and other govemment charges and fees. The exemptions and reductions of such taxes, tariffs, and charges and fees constitute a financial contribution in the form of govemment revenue foregone under the SIMAs. 2(1.6)(b). The benefits equal to the difference between the amount that would have been otherwise payable, and the amount actually paid pursuant to the SIMR s.

27.1 (2). The mechanism by which the granting authotities target these subsidies in order to carry out discrete policy objectives vary trom program to program, and is further described in detail below for each program.

341 Final Determination Statement ofReasonsfor Certain Oil Count1y Tubular Goods (March 9, 2010). 342 Tianjin Pipe Group Corporation, Company Profile, Public Exhibit 7-A-98. 343 Final Determination Statement (~(Reasonsjbr Certain Oil Cowwy Tubular Goods (March 9, 2010); Final Determination Statement of Reasons fOr Seamless Casing (August 5, 2008). 119 NON-CONFIDENTIAL

A. Value-added Tax ("VAT") Reduction and Exemption for Recycled Products

335. In November 20I I, the GOC reduced or eliminated VAT burdens on enterprises that recycle waste resources ostensibly for the purpose of promoting environmentally friendly industrial manufacturing. 344 This policy was implemented through a document entitled "Circular on Adjustmelll of VAT Treatment to Products and Serl'ices Output through Comprehensive

Utilization of Resources (caishui (2011) No. 115)," released by the State Administration of

Taxation and Ministry of Finance on November 20 I I. 345

336. Under this prot,'fam, there are three eligible classes of products and services. Under the tirst, including products such as electricity and certain chemicals, the entire VAT is exempted.

Under the second, including products such as certain fiberboards and cardboards, 80% of VAT is refunded upon collection. Under the last, which includes "{a} collection of metals ... produced with the use of industrial wastes," 50% of VAT is refunded upon collection. 346 Since the authorizing document lists a number of products for which the VAT exemption and reduction apply, this program is de jure specific pursuant to the SIMAs. 2(7.2)(a).

337. Baosteel, a major Chinese line pipe producer, advocates that the "so-caHed 'discarded substance' is also a resource, a secondary resource generated from production process."347 To this end, the company boasts that it "produced 12.94 million tons of all kinds of industrial solid secondary resource, among which I 2. 72 million tons were used in a comprehensive way with a utilization rate of98.32%."348 Of this amount, "2.9I million tons were returned to production for use, accounting for 22.48% of total solid secondary resource ... {and} realizing RMB I ,024 million

344 China Briefing, China Expands Tax Incentives to Promote Circular Economy, November 28, 2011, Public Exhibit 7-A-99. 145 !hid. 146 Ibid. 147 Baosteel Group Co., Developing Recycle Economy, Public Exhibit 7-A-100. 148 Ibid. I20 NON-CONFIDENTIAL of replacement profit."349 Such Chinese line pipe producers would be eligible to receive VAT reduction tor sales of the metal products using the industrial wastes.

B. VAT Refunds under the Foreign Trade Development Fund Program

338. According to the USDOC's finding in Welded Carbon Quality Steel Line Pipe from China, this program "was established on September 14,2004 by the 'Circular of the Ministry of Finance and State Tax Administration on Printing and Distributing the Regulations on Relevant Issues with

Respect to Expansion of VAT Deduction Scope in the Northeast Areas.' The Huludao State Tax

Administration administers the pro!,>ram. Under the program, VAT taxpayers that are members of the equipment manufacturing, petrochemical, metallurgical, shipbuilding, automobile, and agricultural products industries may deduct VAT for purchases of fixed assets from the VAT for sales of finished goods. The cap for such VAT deductions is the incremental increase in VAT liability from the previous year. According to Article 2 of the 'Circular of the Ministry of Finance and State Tax Administration on Printing and Distributing the Regulations on Relevant Issues with

Respect to Expansion of VAT Deduction Scope in the Northeast Areas,' the VAT exemption is limited to finns located in the northeast region of the PRC."350

339. This program is de jure specific within the meaning of s. 2(7.2)(a), since the benefits under this pro1,>ram are limited to a member of the enumerated industries, which include metallurgical industry. Moreover, this program is also de jure specific as it is geographically limited to the northeast region of China.

)41) /hid. 350 The United States Department of Commerce, Issues and Decision Aiemorandum fhr Final Determination: Circular Welded Carbon Quality Steel Line Pipe.fi"om the People's Republic of China, C-570-936, November 17, 2008, Public Exhibit 7-A-19.

121 NON-CONFIDENTIAL

340. This pro!,'fam was countervailed by the USDOC, as a Chinese line pipe producer Huludao

Steel Pipe was found to have received benefits under this pro!,'fam. 351

C. Exemption of Tariff and Import VAT for the Imported Technologies and Equipment

341. According to the Agency's Finding in OCTG.fi-om China," {t )he exemptions of tariffs and import VAT is provided for and administered in accordance with the Circular a./the State Council

Concerning the Adjustment in the Taxation Policy a./Import Equipment ... to further expand foreign capital utilization, attract technologies and equipment from abroad, promote structural adjustments in industry and technological advancement and to maintain the sustained, rapid and healthy development of the national economy. The granting authorities responsible for this program are the Ministry of Finance and the General Administration of Customs, and the program is administered by local provincial and municipal customs branches.

342. Under this program, enterprises meeting certain eligibility criteria may apply for exemption from tariffs and VAT on imported equipment and its related technologies, components and parts.

The enterprise must receive approval of its application from the appropriate authority and, subsequently, that application is submitted to the local officials who verify that the documents presented are adequate and that the imported items are not listed in the catalogues of commodities that are not eligible for tax exemptions."353 The Agency found this program to be countervailable and that Chinese exporters of OCTG received benefits under this program.353

343. As stated in the Agency's Finding in Seamless Casing.fi·om China, this program is specific to the state-owned-enterprises.354 As such, Chinese SOE line pipe producers would be eligible to

351 Ibid. 352 Final Determination Statement of Reasons for Certain Oil Counll)' Tubular Goods (March 9, 201 0). 353 Ibid. 354 Final Determination Statement ofReasonsjbr Seamless Casing (August 5, 2008) at 53. 122 NON-CONFIDENTIAL receive benefits under this program, given that many major line pipe producers are state-owned, including CNOOC Kingland Pipe and Hengyang Valin Steel Tube as described above, and

Baosteel. 355

D. VAT Exemptions for State-authorized Enterprise Technical Centers

344. According to the Chu Kong Pipe's website, the GOC recognized Cho Kong as the first

"State-authorized Enterprise Technical Center," and granted preferential policies such as exemption of import VAT on imported goods.356 Other Chinese line pipe producers with nationally recognized technical centers, such as TPC0,357 would therefore also be eligible to receive VAT exemptions on imports.

345. This program is de jure specific under the SIMAs. 2(7.2)(a) as it is only given to companies recognized by the national-level authorities as "Technical Centers."

E. VAT Refunds for FIEs Purchasing Domestically-Produced Equipment

346. According to the USDOC's finding in Wire Decking.fi·om China, "the GOC refunds the

VAT on purchases of certain domestic equipment to F!Es if the purchases are within the enterprise's investment amount and if the equipment falls under a tax-free category." 358 This program was established by the Notice ()/the State Administration ()/Taxation Concerning the

Trial Administrative Measures on Purchase ()/ Domestically-Produced Equipment by FIEs

(GUOSHUIFA (1999) No. 171).

347. "Article 3 specifies that this program is limited to F!Es with completed tax registrations and with foreign investment in excess of25 percent of the total investment in the enterprise. Article

355 Baosteel, Public Acknowledgement, Public Exhibit 7-A-75. m. Panyu Chu Kong Steel Co., Ltd., Company News: PCK was Selected as the First 'National Recognized Corporate Technical Center' in the Industry, Public Exhibit 7-A-101. 357 Tianjin Pipe Group Corporation, R&D Center, Public Exhibit 7-A-102. 35 R The United States Department of Commerce, l\·sues and DecisionJ\4emorandumfor the Final Determination: Wire Decking.fi·om the People's Republic of China, C-570-950, June 3, 20 I 0, Public Exhibit 7-A-27. 123 NON-CONFIDENTIAL

4 defines the type of equipment eligible for the VAT exemption, which includes equipment falling under the Encouraged and Restricted B categories listed in the Notice of the State Council

Concerning the Adjustment of Taxation Policies for Imported Equipment (No. 37 (1997)) and equipment for projects listed in the Catalogue of Key Industries, Products and Technologies

Encouraged for Development by the State."359

348. This program is de jure specific within the meaning of the SIMAs. 7.2(a) in that only the

FIEs are eligible. In addition, the program is further restricted to enterprises purchasing such

equipment falling under the "Encouraged" and "Restricted B" category, or purchased for projects

listed as a key industry encouraged by the state.

349. The Agency found in Welded Pipe .fi'om China that "under the 'Encouraged Investment

Industries' is the development and application of modem hot-rolled broad band (wide strip) steel

rolling; the production of oil well pipe for petroleum exploration; high pressure boiler pipe for

power stations and steel pipe used in the long distance transportation of oil and gas."360 Given that

there are foreign invested Chinese line pipe producers, as mentioned above, and line pipe

production falls within the "Encouraged Industries," such enterprises would be eligible to receive

benefits under this program.

F. Import tariff and VAT exemptions for FIEs and certain domestic enterprises using imported equipment iu encouraged industries

350. Under this pro1,>ram, enterprises meeting the eligibility criteria ... may apply for exemption

from tariffs and VAT on imported equipment and its related technologies, components, and

parts."361 According to the Agency's Finding in Laminated Flooring.fi'om China, {t} he immediate

VAT exemption provided under this program is administered in accordance with the Circular of

359 Ibid. JM Final Determination Statement of Reasons for Carbon Steel Welded Pipe (AugustS, 2008). 36 l Final Determination Statement ofReasonsfor Laminate Flooring (June 16, 2005). 124 NON-CONFIDENTIAL the State Council Concerning the Adjustment in the Taxation Policy a./Import Equipment. Article

12 of the Measures a./the People's Republic of' China on Control Over and Taxation for Import and Export Goods a./Enterprises with Foreign Investment provides for preferential reductions and exemptions of tariffs and taxes on imported equipment as provided for in the circular."362

351. In this regard, the Agency found that "in order for a domestic invested enterprise (DIE) to be eligible for tariff and VAT exemptions on imported equipment, the domestic investment project the equipment relates to must be listed in The Current Catalogue ofKey Industries. Products and

Technologies The Development of Which is Encouraged by the State (Provisional). In addition, the equipment must be tor the applicant's own use and the value of the equipment must be within the total amount of investment in the domestic project. Finally, any type of equipment that is imported and listed in The Directo1y o.f'Jmported Commodities o.l Non-Tax Exemption to be used in Domestic Invested Projects is not eligible for the exemptions under this program.

352. In order for an FIE to be eligible for tariff and VAT exemptions on imported equipment, the foreign investment project that the equipment relates to must relate to the projects listed in the

Guideline Catalogue for Foreign Investment Industries under the encouragement category or the restricted B category. In addition, the equipment must be for the applicant's own use and the value of the equipment must be within the total amount of investment in the foreign project. Finally, any type of equipment that is imported and listed in The Direct01y ofImported Commodities ofNon-

Tax Exemption to be used in Foreign Invested Projects is not eligible tor the exemptions under

this program."363

353. As shown above, the line pipe industry is enumerated as one of the encouraged industries,

and as such, the Chinese line pipe producers would be eligible to benefit under this pro),,'ram.

36 :! Ibid. 363 Ibid. 125 NON-CONFIDENTIAL

354. In addition, this program is de jure specific, as the benefits under this program is available only to the applicants within the enumerated "encouraged."364

G. VAT and Income Tax Exemption/Reduction for Enterprises Adopting Debt- to-Equity Swaps

355. According to the Agency's Finding in Welded Pipe Fom China, "{t}his program was established in the Notice on the Tax Policies for Debt-to-equity Swap Enterprises, Cai Simi (2005)

No. 29 ... in order to exert further efforts for the debt-to-equity work and support the refonn of enterprises. The granting authority responsible for this program is the State Administration of

Taxation.

356. Under this program, enterprises adopting debt-to-equity swaps, pursuant to the debt-to- equity swap agreement signed between the enterprise and a financial asset management company, are exempted from paying value-added tax and/or consumption tax."365

357. As the Agency found in that case, this program is "limited, in Jaw, to a particular enterprise, pursuant to paragraph 2(7.2)(a) of SIMA."

H. Tariff and Value-added Tax (VAT) Exemptions on Imported Materials and Equipment in SEZs and other Designated Areas Located in Guangdong Province

358. According to the Agency's Finding in Welded Pipesfi·om China, "{!}his program was established in the Regulations on Special Economic Zones in Guangdong Prorince ... to absorb investment in SEZs and encourage districts to take the lead in development. The granting authority responsible for this program is the General Administration of Customs and this program is administered by local customs authorities.

}(J-t !hid, JbS Final Determination Statement qfReasonsjbr Carbon Steel TVelded Pipe (August 5, 2008). 126 NON-CONFIDENTIAL

359. Under this program, machinery and equipment, spare parts, raw and semi-processed materials, means of transportation and other capital goods necessary tor production that are imported by enterprises in SEZs shall be exempted from import duties."366 The Agency found this program to be countervailable in Welded Pipes.fi·om China.

360. According to the list of API5L certificate holders in China, there are 31 API 5L certificate holders located in specially designated zones, parks and areas. 367 Such Chinese line pipe producers would be eligible to benefit under this program.

361. In addition, this program is de jure specific within the meaning of the SIMA s. 2(7.2)(a), as the benefits under this program are limited to particular enterprises located within designated areas.

I. VAT Exemptions for Central Region

362. According to the USDOC's finding in Seamless Pipe .fi·om China, a Chinese line pipe producer Hengyang 368 reported of receiving VAT refunds on purchases of equipment by

Hengyang Valin and Hengyang MPM.369 The US DOC explained that " {t} he GOC state {d} that eligibility for this program is extended to nonnal VAT tax payers that participate in any of eight industries, including the metallurgy industry, the equipment manufacture industry, and new and high technology industry. The GOC also identified location as a requirement for the program, which is extended to 26 municipalities of six provinces in the Central Region of the PRC."370

366 Ibid. 367 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic o[ China, Public Exhibit 7-A-33. 368 Hengyang Valin Steel Tube Co., Ltd., ProducL" Acid Resistance Line Pipe, Public Exhibit 7-A-103. 369 The United States Department of Commerce, Issues and Decision Afemorandumjbr the Final Determination: Certain Seamless Carbon and Alloy Steel Standard, Line, and Pressure PipejhJJn the People's Republic q[China, C-570-957, September 10,2010, Public Exhibit 7-A-46. 370 Ibid. 127 NON-CONFIDENTIAL

363. This program is de jure specific, since the benefits under this program is limited to a particular enterprise within the enumerated list of industries and designated geographic areas. As such, Chinese line pipe producers located in the designated areas would be eligible to receive benefits under this program. In fact, the US DOC found that this program was used by Hengyang, a known Chinese producer and exporter of line pipe.

J. Refund of Land Transfer Fees

364. According to the Agency's Finding in OCTG.fi·om China, "this program was established by governments at the local level to provide refunds ofland transfer fees to enterprises located in the Jinnan Development Zone ofTianjin City. The granting authority responsible for this program is Jinnan Branch Bureau of Tianjin National Land and Resource Administration Bureau.''371 The

Agency found this pro1,'!'am to be countervailable and that a Chinese OCTG producer received benefits under this program. 372 As mentioned above, Tianjin Delma Petroleum Equipment

Manufacturing Co., Ltd. is located in one of the designated Development Zones within Tianjin city, and such Chinese line pipe producers would be eligible to receive benefits under this program.

365. This program is de jure specific within the meaning of the SIMAs. 2(7.2)(a), as the benefits under this program is limited to particular enterprises located in the designated areas, i.e.,

Development Zones, within the jurisdiction of the I,'Tanting authority, namely Tianjin city.

K. Exemption of Local Miscellaneous Taxes for FIEs

366. According to the USDOC's finding in Drill Pipe .fi'om China, the "local tax authorities exempt all FlEs and foreign enterprises from the constmction tax and education fee surcharges" pursuant to the Circular Concerning Temporm:v Exemption .fi'om Urban Maintenance and

371 Final Determination Statement ofReasonsjbr Certain Oil Count!)' Tubular Goods (March 9, 2010). 37 ' Ibid. 128 NON-CONFIDENTIAL

Construction Tax and Additional Education Fees for Foreign:fimded and Foreign Enterprises

(Guo Shui Fa (1994) No. 38)."

367. "The construction tax is based on the amount of product tax, VAT, and/or business tax actually paid by the taxpayer. For taxpayers located in urban areas, the rate is seven percent; for taxpayers located in counties or townships, the rate is five percent; and for taxpayers located in areas other than urban areas, counties, and townships, the rate is one percent. Regarding the education fee surcharge, F!Es pay only one percent of the actual amount of the product tax, VAT, and business tax paid, whereas other entities pay four percent of that amount."373 The US DOC found this program to be countervailable in a number of CVD investigations against China, including in Drill Pipes.fi'om China. 374

368. As explained above, Chinese line pipe producers, such as Shandong Shengli Steel Pipe

Co., Ltd, are F!Es, and as such, would be eligible to receive benefits under this program.

369. In addition, this program is de jure specific within the meaning of the SIMAs. 2(7.2)(a), as it is limited to F!Es and FEs.

9. Grants Provided bv the National and Sub-national Authorities in of the GOC

A. Grants for Funding Research, Science and Technology Related Activities

3 70. As the Agency found on numerous occasions in the past, the Chinese govemment provides a significant amount of grants for promoting research, science and technology of the Chinese steel

373 The United States Department of Commerce, Issues and Decision J\1emorandumfbr the Final Determination: Alwninum Extrusion[l·om the People's Republic of China, C-570,968, March 28, 2011, Public Exhibit 7-A-104. 374 The US DOC also found this program to be countervailab1e in The United States Department of Commerce, Issues and Decision Memorandum for the Final Determination: Aluminum Extrusionfi·om the People's Republic f~( China, C-570,968, March 28,2011, Public Exhibit 7-A-104, The United States Department of Commerce, Issues and Ded'}ion Afemorandttm fOr the Final Determination: Certain Kitchen Appliance Sheh·ing and Racksji·om the People's Republic of China, C-570-942, July 20, 2009, Public Exhibit 7-A-4, and The United States Department of Commerce, Issues and Decision .N!emorandumfor the Final Determination: Certain Coated Paper Suitable for High-quality Print Gmphics Using Sheet-fed Pressesfi'om the People's Republic of China, C-570-959, September 20, 2010, Public Exhibit 7-A-47.

129 NON-CONFIDENTIAL and steel pipe industries. 375 These grants constitute a financial contribution in the fonn of direct transfer of funds within the meaning of SIMAs. 2( 1.6) (a). Benefits of these programs equal to the amount of the grant pursuant to the SIMR s. 27. Precise mechanisms used by the GOC to target these !,'Tants to a particular enterprise in line with the relevant national policy varies from program- to-program, as are described below for each program.

xxii. R&D Assistance Grant

371. According to the Agency's Finding in OCTG.fi·om China, "this program was established by governments at local level to encourage and support enterprises in developing new technologies and products, to promote energy savings, to enhance product quality, to improve export structure, and to cultivate and develop high-tech industries and new pillar industries."376 The Agency found this program to be countervailable and that a cooperative Chinese OCTG producer received the grants.

3 72. Earlier cases establish that this R&D Assistance Grant is provided in various parts of China, as the Agency found the same program to have been granted by different authorities in different places, namely in Wuxing District377 and Jiangmen City.378 R&D conducting Chinese line pipe producers and exporters, such as Oilfield International Trading ("Oilfield")379 located in J iangmen

City,380 would be eligible to receive this !,'Tant.

373. The R&D Assistance Grant is specific in law pursuant to the SIMA s. 2(7.2)(a), as the recipients are limited to certain companies enumerated in the granting authority. To quote the

375 Wiley Rein & Fielding LLP, The China Syndrome: How Subsidies and Government Intervention Created the World's Largest Steel Industry, July 2006, Public Exhibit 7-A-105. 376 Final Determination Statement C?[Reasonsjbr Certain Oil Counfl)' Tubular Goods (March 9, 2010). 377 Final Determination Statement ofReasonsjiJr Carbon Steel Welded P1j1e (August 5, 2008) at 73. 378 Final Determination Statement (~f Reasons for Certain Aluminum Extrusions (March 3, 2009). 379 Oilfield International Trading, Products: Oil Special Pipe & Accessories, Public Exhibit 7-A-106. 380 Oilfield International Trading, Company Profile, Public Exhibit 7-A-107.

130 NON-CONFIDENTIAL

Agency in Welded Pipe .fi'om China, this program was limited to "major scientific research and technology enterprises" listed by a local Science & Technology Bureau381

xxiii. National Innovation Fund for Technology Based Firms

374. According to the Agency in Unitized Wall Modules .fi'om China, "this program was administered by the Beijing Municipal Commission of Development and Refonn ... to support innovations in the Beijing manufacturing industry." 382 The Agency found this program to be countervailable and that a Chinese exporter received benefits under this program. l83

375. This program appears to be de jure specific within the meaning of the SIMAs. 2(7.2){a), as it is limited to the enterprises designated to be "technology based finns." Shandong Xinyuan

Steel Pipe Manufacturing Co., Ltd. is a "large steel pipe manufacturing enterprise" (including API

SL seamless line pipe) by its own account, which has "successively for twenty years is a

'technology-based enterprise. '"384 Such Chinese line pipe producers would be eligible to receive funding under this program.

xxiv. Provincial Scientific Development Plan Fund

376. The Agency in Aluminum Extrusions .fi'om China found that the "projects launched by

{non-state-owned-enterprises}, which boast intellectual properties and good marketing prospects, can be included in the projects that enjoy the support of the {Yunnan} province's special funding such as the Provincial Scientific Development Plan Fund," pursuant to the Notions Concerning

Accelerating the Growth of the Non-state-owned Economy.385 In addition, the Agency concluded that "{t}his program does not appear to be limited to the province of Yunnan as, in the current

JXJ Final Determination Statement ofReasons/Or Carbon Steel Welded Pipe (August 5, 2008). 382 Final Determination Statement ofReasonsfor Uniti=ed Wall Aiodules (October 25, 2013). 383 Ibid. 384 East Resources, Marketing Webpage ofShandong Xinyuan Steel Pipe Manufacturing Co .• Ltd., Public Exhibit 7-A-108. 385 Final Determination Statement qf Reasonsfor Certain Aluminum Extrusions (March 3, 2009).

131 NON-CONFIDENTIAL investigation, a cooperative exporter located in a different province received awards under this program."386 The Agency found this program to be countervailable and that a Chinese exporter received benefits under this pr01,>ram.

377. Based on the infonnation available from the Agency's prior Finding, and reasonably available public sources, this program does not appear to have any detailed eligibility criteria.

Instead, it appears that the local authorities exercise their discretion to decide whether an applicant

"boasts intellectual properties and good marketing prospects." In this consideration, it appears that the Chinese line pipe producers and exporters could also be eligible to benefit from this program.

xxv. Special Supporting Fund for Commercialization of Technological Innovation and Research Findings

378. According to the Agency's finding in Piling Pipes .fi'om China, a Chinese steel pipe producer Huludao City Steel Pipe Industrial Co., Ltd. ("HLD") acknowledged receiving a !,>rant under this program. The Agency found this program to be countervailable. No further details about this program were provided by the respondent exporter or the GOC in Piling Pipes.fi'om China.

379. HLD is also an API 5L certified387 producer and exporter of line pipe.388 An appropriate amount of benefits under this program found to have been provided to HLD in Piling Pipes fi·om

China should therefore be properly attributed to the company's line pipe production.389 In addition, given that a Chinese line pipe producer qualified and receive benefits under this pro1,>ram, the

Complainant respectfully requests that the Agency carefully investigate whether other line pipe producers and exporters also received this funding.

386 lhid. 387 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 388 Huludao City Steel Pipe Industrial Co., Ltd., About Us, Public Exhibit 7-A-109. 389 Final Determination Statement of Reasonsjbr Certain Steel Piling Pipe {November 15, 20 12).

132 NON-CONFIDENTIAL

xxvi. Venture Investment Fund of Hi-tech Industry

380. According to the Australian Anti-dumping Commission's finding in Aluminum Extrusions from China, this program is established in the Circular ofChongqing People's Govemment Office on Temporary Administration Measures on Venture Investment Fund of High-tech Industry in

Chongqing.390 The so-called "venture investment funds" are provided to certain companies located in the High-tech Zone or the High-tech Park of the new Northem District. 391 "In addition, the program must meet the following conditions:

• have a leading technological position in its field, and sufficient expertise to enter the industrialisation development phase (industrialisation programs with intellectual property rights are given priority); • the products must be of high quality and have potential economic benefit to the collective development of the Chongqing High-tech Industry Zone; • the department supporting the program must have good credit, excellent operation mechanisms and strong innovation abilities; • the enterprise must have good legal standing; and • the total investment must be RMB I 00 million or more."392

38 I. This program is geographically specific to the enterprises in the High-tech Zones and High- tech Parks within the meaning of the SIMAs. 2(7.2)(a).

382. There are identified line pipe producers and exporters located in Chongqing. Such Chinese line pipe producers and exporters would be eligible to qualify under this program.

xxvii. National High-Tech R&D Program (Also Known as the 863 Program)

383. According to the Ministry of Science and Technology ("MOST") website regarding this program,393 the objectives of the 863 Program are: (I) to boost innovation capacity in the high- tech sectors to gain a foothold in the world arena; (2) to strive to achieve breakthrough in key

390 Australian Anti-dumping Commission, Report to the Jvfinister No, 148: Certain Aluminum Extrusions Exported to Australia fi"om the People's Republic of China, April 15, 20 I 0, l'ublic Exhibit 7-A-11 0. 391 Ibid. 392 ibid. m The Ministry of Science and Technology of the People's Republic of China, National High-tech R&D Program (863 Program), l'ublic Exhibit 7-A-111. 133 NON-CONFIDENTIAL technical fields that concem the national economic lifeline and national security; and (3) to achieve

"leap-frog" development in key high-tech fields in which China enjoys relative advantages or should take strategic positions. To this end, the GOC channels govemment investment capital in the fonn of research J,'l'ants to eligible research institutions, 12% of which are private enterprises. 394

Specifically, research institutions focussed in the following fields are supported under the proJ,'l'am:

o key technologies for the construction of China's infonnation infrastructure; • development of key biological, agricultural and phannaceutical technologies; o to master key new materials and advanced manufacturing technologies to boost industrial competitiveness; and o key technologies for environmental protection, resources and energy development.

384. Producers of steel products are known to have benefited ±rom the research fund under the

863 Program. For one, the MOST itself advertised "{t}he super strength steel study {that} improved the perfonnance of traditional carbon steel" as one of the "China's 863 ProJ,'l'am

Harvested."395 In addition, Baosteel indicates that it has undertaken a "State 863 Program" through a research institution it jointly founded with a local university.396 As such, the Chinese line pipe producers like Baosteel would be eligible to receive grants under this program.

385. In addition, this program is de jure specific within the meaning of the SIMAs. 2(7.2)(a) in that the eligible applicants are limited to the applicants with focus on one of the four enumerated technology fields.

B. Export Promotion Grants

386. As the Agency found on numerous occasions in the past, the Chinese govemment provides a significant amount of grants for promoting exports of the Chinese steel products. These J,'l'ants

YJ.t Insight at Pacific Community Ventures & the Initiative for Responsible Investment at Harvard University, Case Study 13: National High-tech R&D (863) Program, January 2011, Public Exhibit 7-A-112. 395 The Ministry of Science and Technology of the People's Republic of China, China Science and Technology Newsletter, September 30,2004, Public Exhibit 7-A-113. 3"" Baosteel, Social Responsibility: Value Creation, Public Exhibit 7-A-114. 134 NON-CONFIDENTIAL could take a fonn of certain "awards" provided to those who meet certain threshold ( eg. export perfonnance target), or granted for specific export-related purpose ( eg. to cover the costs of export market marketing). All such grants share one common feature that they are all export contingent grants, and as such, are prohibited and specific export subsidy under the SIMA ss. 2 and 2(7.2)(b).

In addition, these grants constitute financial contribution in the fonn of direct transfer of funds under the SIMAs. 2(1.6)(a) and provide benefits in the amount of the grant under the SIMR s. 27.

xxviii. Export Assistance Grant

387. According to the Agency's Finding in Welded Pipe.fi"om China, the "Export Assistance

Grant" refers to cash grants provided to small and medium-sized enterprises ("SMEs"), who export products into foreign markets. "This program was established in the Circular o.fthe Trial Measures o.fthe Administration ofinternational Market Development Funds (Cai Qi No. 467, 2000)."397 The program came into force on October 24, 2000 with purposes of supporting the development of

Chinese SMEs in the competitive international markets, reducing the enterprises' business risks, and promoting national economy development.398 Once the funds are receive, they are to be used for the following purposes: "(i) holding or participating in overseas exhibitions, (ii) providing accreditation fees for quality management system, environment management system or tor the product, (iii) promoting international market, (iv) exploring a new market, (v) holding training seminars and symposiums, and (vi) bidding overseas."399

388. The Agency found this program to be countervailable and that the Chinese steel pipe exporters received benefits under this program in Welded Pipes.fi'om China,400 and OCTG.fi·om

397 Final Determination Statement ofReasonsfhr Carbon Steel Welded Pipe (August 5, 2008), 398 Ibid. 399 Ibid. 4oo Ibid.

135 NON-CONFIDENTIAL

China.401 In addition, Chinese line pipe producers also appear to be eligible to receive this export assistance grant. For example, Jiangsu Chang Bao Steel Tube Co. Ltd ("Jiangsu") is both a Chinese

API SL line pipe producer and is listed in the Shenzhen SME Board,402 who also is advertised to be an exporter.403 Such Chinese line pipe producer and exporters would be eligible to receive this export assistance grant.

xxix. Export Brand Development Fund

389. According to the Agency's Finding in Aluminum Extrusionsfi·om China, this program was established pursuant to the Notice on Issuing Directive on Supporting the Development of Name

Brands for Export.404 The Notice provides that "the state shall arrange a special item under the heading 'export brand development fund' to support enterprises in building up their independent brands and nurture and develop name brand exports." The Agency found this program to be countervailable and that a Chinese exporter received benefits under this program in Aluminum

Extrusions.fi·om China.405

390. Although the Complainant is unable to verify whether any Chinese line pipe exporters in fact received benefits under this program based on the reasonably available infonnation, there is nothing that would preclude these exporters from receiving benefits under this program.

401 Final Determination Statement ofReasonsfor Certain Oil Count1y Tuhu!ar Goods (March 9, 2010). "" Jiangsu Chang Baa Steel Tube Co., Ltd., About Us, Public Exhibit 7-A-115. 403 Ibid. 404 Final Determination Statement ofReasons for Certain A lwninwn Extrusions (March 3, 2009). 405 Ibid.

136 NON-CONFIDENTIAL

xxx. Grants for Export Activities

391. According to the Agency's Finding in Pup Jointsfi·om China, the GOC provides "grant for market promotion and trade development."406 This program was countervailed by the Agency, as the !,>rants were found to have been granted to a Chinese producer of pup joints407

392. Although the Complainant is unable to verify whether any Chinese line pipe exporters in fact received benefits under this program based on the reasonably available infonnation, there is nothing that would preclude these exporters from receiving benefits under this program.

xxxi. Grants for Top Ten Privately-owned Export Enterprises ofTianjin for the Year of 2008

393. According to the Agency's Finding in OCTG.fi·om China, "enterprises located in Tianjin city and elected as 'Top Ten Privately-owned Export Enterprise ofTianjin for the Year of 2008' may receive grants from the local government. The granting authority responsible for this program is the Government of Tianjin City."408 The Agency found this program to be countervailable in

OCTG fi'om China, as these grants were found to have been granted to a cooperative OCTG producer.'09

394. Major Chinese line pipe producers and exporters are located in Tianjin city as shown in the list of the API 5L certificate holders.4 10 Such Chinese producers and exporters of line pipe would be eligible to receive benefits under this program. Among many, TPCO stands out as particularly notable. 1t was once the "largest manufacturer of tubular goods in technology and scale in China," and it continues to be among the "China's top 500 enterprises and top 500 manufacturers."411 The

406 Final Determination Statement(~( Reasons in Pup Joints (March 12. 20 12). 407 Ibid. 408 Final Determination Statement of Reasonsjbr Certain Oil CountiJ' Tubular Goods (March 9, 201 0). 409 Ibid. 410 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 411 Tianjin Pipe Group Corporation, Company Profile, Public Exhibit 7-A-98.

137 NON-CONFIDENTIAL company's products recognized as "Famous Chinese Product" and "Renowned Chinese Export

Commodity," and the brand "TPCO" was recognized as a "well-known Chinese trade mark."412

xxxii. Local and Provincial Government Reimbursement Grants on Export Credit Insurance Fees

395. According to the USDOC's finding in Steel Wheels.fi·om China, "Hangzhou and Fuyang

City Governments and the Government of Zhejiang Province reimbursed {the respondent companies in that case} during the POI for export credit insurance fees the companies paid in2008 and 2009. {The respondent companies} report that {they} did not submit an application to receive the funds. Instead, the companies reported the fees it paid for export credit insurance to local authorities."413 The USDOC found this program to be countervailable in Steel Wheels.fi·om China, as well as in Pre-stressed Concrete Steel Wire Strand.fi"om China.414

396. Chinese API 5L line pipe certificate holders, such as CNOOC Kingland Pipeline Co., Ltd. and Ningbo Jun Cheng Corp, are located in Zhejiang province.415 Such Chinese line pipe producers would be eligible for this grant.

xxxiii. Special Fund for Fostering Stable Growth of Foreign Trade

397. According to the Agency's Finding in Stainless Steel Sinks .fi·om China, " {t} his program was established in 2009 and was valid for one year to help exporters survive the financial and economic crisis in the world market. This program provided benefits in the form of marketing assistance. The granting authorities responsible for this program are the Department of Finance and the Department of Foreign Trade and Economic Cooperation of Guangdong Province. This

412 Ibid. 413 The United States Department of Commerce, Issues and Decision Memorandum for the Final Dctennination: Certain Steel Wheels from the People's Republic of China, C-570-974, Public Exhibit 7-A-23. 414 Ibid. 415 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33.

138 NON-CONFIDENTIAL program is implemented by the Municipal Bureau of Foreign Trade and Economic Cooperation and the Bureau of Finance."416

398. Chinese line pipe producers, such as Guangzhou Steel Pipe Mill Co., Ltd., Panyu Chukong

Steel Pipe Co., Ltd., Tai Feng Qiao Metal Products Co., Ltd., Zhongshan Walchamp Steel Pipe, and Guangzhou Juyi Steel Pipes Co., Ltd are located in Guangdong province.417 Such Chinese line pipe producers would be eligible for this grant.

xxxiv. Liaoning High-Tech Products & Equipment Export Interest Assistance

399. According to the Agency's Finding in OCTG.fi"om China, "this program was established by govemments at the local level to provide financial support to enterprises of high-tech products or the equipment manufacturing industry in Liaoning province. The !,>ranting authority responsible for this program is the Liaoning Economic Commission."418 The Agency found this program to be countervailable and that a Chinese OCTG producer received benefits under this program in OCTG

.fi"om China.

400. Liaoning province is home of some of the most prominent Chinese line pipe producers and exporters. For example, Huludao City Steel Pipe companies are located in Huludai city of Liaoning province. Angang Steel Company, whose 67.25% of ownership is controlled by Anshan ]ron and

Steel Group,419 who is in turn 67.2% controlled the SASAC,420 is also located in Anshan city of

Liaoning province.421 These line pipe producers, along with 12 other known producers of line pipe

416 Final Determination Statement of Reasons in Stainles,\· Steel Sinks (May 9, 2012). 417 American Petroleum Institute. API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 418 Final Determination Statement of Reasons fOr Certain Oil Count!}' Tuhu!ar Goods (March 9, 2010). 4 9 t Angang Steel Company Limited, Summary of Core Business, Public Exhibit 7-A-85. 420 Ansteel, Ansteel: Shareholders, Public Exhibit 7-A-116. 421 Angang Steel Company Limited, 2013 Annual Report, Public Exhibit 7-A-117.

139 NON-CONFIDENTIAL producers located in Liaoning province, would all be eligible to receive benefits under this program.

C. Environmental Grants

40 I. The GOC also provides numerous grants ostensibly tor environmental purposes. These grants are financial contribution in the fonn of direct transfer of funds within the meaning of the

SIMAs. 1.6(a), conferring benefits in the amount of the h'fant pursuant to s. 27 of the S!MR. The manner by which these grants are targeted to the Chinese line pipe producers vary from program- by-program, as described in more detail below.

xxxv. Emission Reduction and Energy-saving Award

402. According to the Agency's finding in OCTG .fi"om China, the Emission Reduction and

Energy-saving Award is "administered by the Jiangsu Environmental Protection Department. The source of funding is the Finance Department of J iangsu Province. This program is intended to support the emission-reduction work of major pollutants and the program came into force in

September 2008". 422 As such, this program is de jure specific within the meaning of the SIMA s.

2(7 .2)(a), in that the program is limited explicitly to the "major pollutants." The Agency found this program to be countervailable and that a Chinese OCTG exporter received benefits under this

403. Jiangsu province is home to numerous known and potential Chinese producers or exporters of API 5L line pipe. 423 The API's list of API 5L certificate holder also shows a large number of certificate holders located in Jiangsu province.424 In particular, given that an OCTG producer was found to have received benefits under this program, the Complainant believes that the line pipe

422 Final Determination Statement of Reasonsfhr Certain Oil CountJT Tubular Goods (March 9, 2010). 423 List of Known Exporters, Confidential Exhibit 2-1. 424 American Petroleum Institute, API Standard API-SL Certified Companies Located in the People's Republic of China. Public Exhibit 7-A-33. 140 NON-CONFIDENTIAL producers in Jiangsu province would therefore be eligible to receive benefits under this program as well.

xxxvi. 2009 Energy-saving Fund in Jiangsu Province

404. The Agency found in OCTG fi'om China that " {t} his program was established by governments at the local level to promote energy savings. The granting authority responsible for this program is the Department of Foreign Trade & Economic Cooperation of Jiangsu."425 The

Agency held that this program was countervailable in the OCTG.fi'om China case because one of the exporters was found to have received benefits under this program.426

405. Jiangsu province is home to numerous known and potential Chinese producers or exporters of API 5L line pipe.427 The API's list of API 5L certificate holder also shows a large number of

certificate holders located in Jiangsu province.428 In particular given that an OCTG producer was

found to have received benefits under this program, the Complainant believes that the line pipe

producers in Jiangsu province would therefore be eligible to receive benefits under this progTam

as well.

xxxvii. Environment Protection Award in Jiangsu Province

406. This award "was established to provide financial assistance to enterprises for

environmental protection. The administrative authority responsible for this program is the

Environmental Protection Bureau of Jiangsu Province. The granting authority is the Jiangdu

4 ~ 5 Final Determination Statement ofReasonsfbr Certain Oil Country Tubular Goods (March 9, 2010). 426 Ibid. 427 List of Known Exporters, Confidential Exhibit 2-1. 408 American Petroleum Institute, API Standard API-5L Certilied Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 14! NON-CONFIDENTIAL

Finance Bureau."429 The agency in OCTG .fi"om China found this program to be countervailable and that a Chinese OCTO exporter received benefits under this program.430

407. Jiangsu province is home to numerous known and potential Chinese producers or exporters of API 5L line pipe.431 The API's list of API 5L certificate holders also shows a large number of certificate holders located in Jiangsu province.432 In particular, given that an OCTO producer was found to have received benefits under this pro~o;ram, the Complainant believes that the line pipe producers in Jiangsu province would therefore be eligible to receive benefits under this program as well.

xxxviii. 2007 and 2008 Energy-saving Grant in Changzhou City

408. "{T} his pro!,'fam was established by govemments at the local level to promote energy savings. The granting authority responsible for this program is the Changzhou Economic & Trade

Commission.''"33 The agency in OCTG fi"om China found this program to be countervail able and that a Chinese OCTO exporter received benefits under this program.434

409. Changzhou city is home to numerous known and potential Chinese producers or exporters of API 5L line pipe. 435 The API's list of API 5L certificate holder also shows a large number of certificate holders located in the Changzhou city. 436 In particular, given that an OCTO producer was found to have received benefits under this program, the Complainant believes that the line

42'> Final Determination Statement t~{Reasonsfbr Certain Oil Country Tubular Goods (March 9, 2010). 430 Ibid. 4 " List of Known Exporters, Confidential Exhibit 2-1. 432 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 433 Final Determination Statement ofReasons for Certoin Oil Country Tubular Goods (March 9, 2010). 414 Ibid. 435 List of Known Exporters, Confidenti:tl Exhibit 2-1. 4 "' American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33.

142 NON-CONFIDENTIAL pipe producers in Jiangsu province would therefore be eligible to receive benefits under this program as well.

xxxix. Water Saving Enterprise

410. According to the Agency, "this program was established by governments at the local1evel to encourage the development of water-saving technologies. The granting authority responsible for this program is Changzhou Water Conservancy Bureau.''437 The agency in OCTG.fi·om China found this program to be countervailable and that a Chinese OCTO exporter received benefits under this program.438

411. Changzhou city is home to numerous known and potential Chinese producers or exporters of API 5L line pipe.439 The API's list of API 5L certificate holder also shows a large number of certificate holders located in the Changzhou city. 440 In particular, given that an OCTO producer was found to have received benefits under this program, the Complainant believes that the line pipe producers in Jiangsu province would therefore be eligible to receive benefits under this program as well.

D. Other Grants

xl. Innovative SME Grants

412. According to the Agency's Finding in Unitized Wall Modules .fi'om China, a Chinese

44 respondent reported of having received benefits under this program. t In addition, the Agency found that "the granting authority responsible for this prO,b'Tam is the Ouangdong Department of

Finance and the program is administered by the Ouangdong Small and Medium-sized Enterprise

437 Final Determination Statement(~( Reasonsfhr Certain Oil Coun!IJ Tubular Goods (March 9, 20 l 0). 438 Ibid. 419 List of Known Exporters, Confidential Exhibit 2-1. ""American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. "' Final Determination Statement of'Reasonsfbr Uniti=ed Wall Modules (October 25, 20 13).

143 NON-CONFIDENTIAL

Bureau. This program was established to encourage small and medium-sized enterprises to perfonn technical innovations and product innovations and to increase employment." The Agency found this program to be countervailable."442

413. The US DOC also found and countervailed what appears to be the same grant program for

"innovative" SMEs in another region of China in Steel Gratings ji-om China.443 Specifically, the

USDOC found that the Ningbo Zhenhai Development and Refom1 Bureau of the Ningbo city,

Zhejiang province awarded "Innovative Small- and Medium-sized Enterprise Grant 2008."444

414. Based on this infom1ation, the Complainant believes that grants for innovative SMEs may be a national level program, implemented through local authorities. In any case, the Complainant identified potential Chinese line pipe producers located in two places where this program was found to have been conferred, namely Guangdong province and Zhenhai district ofNingbo city: there are five known potential line pipe producers in Guangdong;445 and Ningbo Jun Cheng Metal

Pipe Co., Ltd., a holder of API 5L certificate,446 which is also a known producer and exporter of the subject goods, 447 is located in Zhenhai district of Ningbo city. 448 As such, based on the infonnation reasonably available, the Complainant believes that the Chinese line pipe producers would be eligible to receive benefits under this pro1,>ram.

415. Government grant is a financial contribution in the tonn of direct transfer of funds pursuant to the SIMAs. 2(1.6)(a). The benefit is in the amount of the grant pursuant to the SIMR s. 27. On

442 /bid. 443 The United States Department of Commerce, Issues and Decision Memorandum for the Final Determination: Certain Steel Grating from the People's Republic of China, C-570-948, May 28,2010, Public Exhibit 7-A-22. 444 Ibid. 445 List of Known Exporters, Confidential Exhibit 2-1. 446 American Petroleum Institute, API Standard API-5L Certified Companies Located in the People's Republic of China, Public Exhibit 7-A-33. 447 Ningbo Jun Cheng Metal Pipe Co., Ltd., Products: API 5L Pipe, Public Exhibit 7-A-118. 448 Ningbo Jun Cheng Metal Pipe Co., Ltd., Group Prolile, Public Exhibit 7-A-119.

144 NON-CONFIDENTIAL its face, this program appears to be de jure specific under the SIMAs. 2(7.2)(a) in that the grants are provided only to certain SMEs designated to be "innovative."

xli. Allowance to Pay Loan Interest in Support of Small and Medium Sized Businesses

416. The Agency found in Stainless Steel Sinks.fi·om China that a Chinese respondent "received an allowance from the local government in support of small and medium sized businesses. This program came into effect in 2010 and the funds were provided to help reduce interest payments on commercial bank loans. The program was provided and administered by the Economic and Trade

Office of the Huangpu govemment in Zhongshan city, Guangdong Province. The granting authority is the Zhongshan Municipal government."449 The Agency found this program to be countervailable, and that a Chinese exporter received benefits under this program.

417. Govemment payment of companies' loan interest is a financial contribution in the form of direct transfer of funds or liabilities, and confers benefits in the amount of the interest paid. On its face, this program appears to be provided to the enterprises located in Huangpu district, given that the grant is disbursed by the Huan1,rpu govemment. Since the granting authority is the Zhongshan city govemment, and only the particular enterprises located in a limited geographic area within the city, namely Huangpu district, appear to qualify under this pro.!,'Tam, this program is believed to be de jure specific within the meaning of the SIMAs. 2(7.2)(a).

xlii. Enterprise Innovation Award of Qishuyan District

418. According to the Agency's Finding in OCGT.fi·om China, "this program was established by govemments at the local level to encourage and support enterprises to develop high-tech products. The granting authority responsible for this program is the Qishuyan District Government

4 9 -1 Final Determination Statement ofReasons in Stainless Steel Sinks (May 9, 20 12).

145 NON-CONFIDENTIAL ofChangzhou."450 The Agency found this program to be countervailable and that a Chinese OCTO

producer received benefits under this program in OCTG.fi'om China.

419. This grant is a financial contribution in the fonn of direct transfer of funds, and confers

benefits in the amount of the grant. On its face, this grant appears to be de jure specific within the

meaning of the SIMAs. 2(7.2)(a), since the program is limited to the certain enterprises developing

"high-tech products."

420. The Complainant identified Changzhou Yuanyang Steel Tube Co., Ltd. to be a line pipe

producer,451 located in east Qishuyan,452 and advertising that Canada is its "{t)arget market."453

The Complainant believes that Changzhou Yuan yang Steel Tube and other line pipe producers or

exporters located within Qishuyan district would be eligible to receive benefits under this program.

xliii. Jiangdu City Industrial Economy Performance Award

421. According to the Agency's Finding in OCTG.fi'om China, " {t} his program was established

to encourage industrial enterprises to speed up technological transfonnation, product development

and brand building. The administrative authority responsible for this program is the Jiangdu

Economic and Development Commission. The granting authority is the Jiangdu Finance

Bureau."454 In OCTO trom China, the Agency found this program to be countervail able and that a

Chinese OCTO producer received benefits under this pro1,rram in OCTG.fi'om China.

422. This grant is a financial contribution in the fonn of direct transfer of funds, and confers

benefits in the amount of the grant. This grant appears to be de jure specific within the meaning of

the SIMA s. 2(7.2)(a), since the program appears to be limited to certain "industrial enterprises."

45° Final Determination Statement t~( Reasonsfor Certain Oil Count!)' Tubular Goods (March 9, 201 0). 451 Changzhou Yuanyang Steel Tube, Product Introduction: Brieflntroduction, Pnblic Exhibit 7-A-120. 452 Changzhou Yuanyang Steel Tube, Contact Us, Public Exhibit 7-A-121. 453 Changzhou Yuanyang Steel Tube, Sales Network, Public Exhibit 7-A-122. 454 Final Determination Statement of Reasons for Certain Oil Country Tubular Goods (March 9, 201 0).

146 NON-CONFIDENTIAL

In addition, this program also appears to be de facto specific within the SIMAs. 2(7.3)(d), in that only the enterprises selected by the granting authority, by exercise of its discretion, would be eligible to receive benefits.

423. The Complainant identified a Chinese subject goods producer in Jiangdu city, namely

Yangzhou Lontrin Steel Tube.455 Such line pipe producers and exporters in Jiangdu city would be eligible to receive benefits under this program.

xliv. Gaocun Government Grant

424. According to the Agency's Finding in OCTG.fi·om China, this program "was established in the Notice abolll Allocation of Government Reward, Gao Zheng Fa (2008), No. 7, which was issued on June 20, 2008. This program was established to increase employment and promote the local economy. The granting authority responsible for this program is the Gaocun Town People's

Government. "456 The Agency found this program to be countervailable and that a Chinese OCTO exporter received benefits under this program in OCTG .fi'om China.

425. This grant is a financial contribution in the form of direct transfer of funds, and confers benefits in the amount of the grant. This grant appears to be de facto specific within the meaning of the SIMAs. 2(7.3)(d), in that only the enterprises selected by the granting authority by exercise of its discretion would be eligible to receive benefits.

xlv. Wendeng Government Grant

426. According to the Agency's Finding in OCTGfi·om China, "this program was established by governments at the local level to provide a one-time grant. The granting authority responsible for this program is the local Wendeng government."457 The Agency found this program to be

455 The Simdex Steel Tube Manufacturers Worldwide Guide, Yangzhou Lontrin Steel Tube, Public Exhibit 7-A- 123. 456 Final Determination Stateme111 ofReasonsfor Certain Oil Count1y Tubular Goods (March 9, 2010). 457 Ibid. 147 NON-CONFIDENTIAL countervailable and that a Chinese OCTG exporter received benefits under this program in OCTG

_fi-om China.

427. This grant is a financial contribution in the fonn of direct transfer of funds, and confers benefits in the amount of the grant. This grant appears to be de facto specific within the meaning of the SIMAs. 2(7.3)(d), in that only the enterprises selected by the granting authority by exercise of its discretion would be eligible to receive benefits.

xlvi. Grant for key enterprises in equipment manufacturing industry of Zhongshan

428. According to the Agency's Finding in Welded Pipes from China, this program "was established in the Notice of Issuing Method for Detennination of Key Enterprises in Equipment

Manufacturing Industry ofZhongshan, Zhong Fu (2005) No. 127. The objective of the program is

'promoting the strategy of industrial strong city and enterprise string city, promoting the transition of the stmcture of industrial enterprises towards higher level and moderate orientation to heavy industry, and elevating the industrial competitiveness and development level." The granting authority responsible tor this program is the Municipal Economic and Trade Bureau of Zhongshan.

429. The benefit provided under this program is in the fonn of grants and is limited to enterprises in the equipment manufacturing industry located in Zhongshan City."458 The Agency found this program to be countervailable and that a Chinese welded pipe producer received benefits under this program in Welded Pipes.fi·om China.

430. This grant is a financial contribution in the fonn of direct transfer of funds, and confers benefits in the amount of the grant. This f,'TUnt appears to be de jure specific within the meaning of

458 Final Determination Statement ofReasonsfor Carbon Steel Welded Pipe (August 5, 2008). 148 NON-CONFIDENTIAL the SIMA s. 2(7.2)(a), in that the authorizing document explicitly limits the program to the

"equipment manufacturing industry."

43 I. The Complainant identified at least one line pipe producer located in Zhongshan city, namely Zhongshan Walchamp Steel Pipe,459 and believes that this company, along with other line pipe producers and exporters in Zhongshan city, would be eligible to receive benefits under this program.

xlvii. Superstar or Famous Enterprise Grant

432. In Certain Aluminum Extrusions.fi"om China, the Agency found that "under this pro1,rram, enterprises located in certain cities and selected as 'Superstar Enterprises' may receive grants from the local government. In order to qualify for a 'Superstar Enterprise' total annual sales of the superstar enterprise have to reach a certain threshold. The granting authority responsible for this program appears to be the local municipal govemment."460 The Agency found this program to be countervailable and that a Chinese exporter received benefits under this program.

433. This grant is a financial contribution in the fonn of direct transfer of funds, and confers benefits in the amount of the grant. This grant appears to be de jure and de .facto specific within

the meaning of the SIMA ss. 2(7.2)(a) and 2(7.3)(d) respectively, in that the authorizing document

explicitly limits the program to cettain enterprises designated to be "superstar" enterprises.

xi viii. Awards to Enterprises Whose Products Qualify for "Well-Known Trademarks of China" or "Famous Brands of China"

434. According to the Agency's Finding in Aluminum Extrusions.fi·om China, "{t}his program

appears to be established by the State level government and administered by both the provincial

459 Zhongshan Walchamp Steel Pipe Company Ltd., Contact Us, Public Exhibit 7-A-124; Zhongshan Walchamp Steel Pipe Company Ltd., Survey of the Company and Products, Public Exhibit 7-A-125. 46°Final Determination Statement f~{ Reasonsjhr Cerrain .. Huminum Extrusions (March 3, 2009). 149 NON-CONFIDENTIAL and local authorities. According to a document obtained through CBSA research, entitled Notions

Concerning Accelerating The Growth q/the Non-State-Owed Economy ("NSOEs ..), published by the Yunnan provincial government, the provincial government shall grant a one-time award to

NSOEs whose products are qualified as 'Well-known Trademarks of China' or 'Famous Brands of China,' or are listed among the most famous export commodities identified by the state trading authority. In addition, should an enterpiise qualify as a well-known trademark or famous brand of the province, a one-time award will be granted by local authorities." The Agency further explained that {t}his program does not appear to be limited to the province of Yunnan as ... one of the cooperative exporters located in a different province received awards under this program."461

435. Confinning the Agency's Finding, a Chinese line pipe producer Shengli Oilfield Freet

Petroleum Co., Ltd. reports in its website that it was "awarded the title of Shandong Famous

Brand,"462 likely from the provincial govemment of Shandong. In the USDOC's finding in Steel

Gratings .fi"om China, a "famous brand" grant was countervailed and found to have been provided in Zhenhai district of Ningbo city in Zhejiang province.463 In Pre-stressed Concrete Steel Wire

Strand .fi"om China, the USDOC found this same famous brand grant in Xinyu city, Jiangxi province.464 The Australian Antidumping Commission in Toilet Paper.fi"om China found that this program was indeed established at the state level by the MOFCOM. 465

461 Ibid. 2 "' Shengli Oilfield Freet Petroleum Co., Ltd., Company Profile, Public Exhibit 7-A-52. 463 The United States Department of Commerce, Issues and Decision Memorandum for the Final Detennination: Certain Steel Grating from the People's Republic of China, C-570-948, May 28,2010, Public Exhibit 7-A-22. 464 The United States Department of Commerce, Issues and Decision Memorandum for the Final Determination: Pre-stressed Concrete Steel Wire Strand from the People's Republic of China, C-570-946, May 14,2010, Public Exhibit 7-A-40. 465 Australian Anti-dumping Commission, Im·estigation into the Alleged Stthsidisation a_{ Certain Toilet Paper Exportedfi·om the People's Republic a_{ China: Preliminwy Report on Existence o_f Countcrvailahle Subsidies, September 2008, Public Exhibit 7-A-126 at 102.

150 NON-CONFIDENTIAL

436. This grant is a financial contribution in the fi:mn of direct transfer of funds, and confers benefits in the amount of the grant. This grant appears to be de jure specific within the meaning of the SIMA s. 2(7.2)(a), in that the authorizing document explicitly limits the program to the

"equipment manufacturing industry."

xlix. Repaying Foreign Currency Loan by Returned VAT

437. According to the Agency's Finding in Seamless Casing from China, "{t}his program was established in the Notice of the Ministry of Finance and the State Administration of Taxation on

Continuing the Policy of Repaying Foreign Currency Loans (Incurred prior to December 3I, 1994) by Retumed VAT During the 'Tenth Five-Year' Period, Cai Qi (2002), No. 268, which was published on September 10, 2002. The 'Tenth Five-Year' period covers the five years from 2001 to 2005. The authorit{ies} ... responsible for administering this program are the Ministry of

Finance and the State Administration ofTaxation."466

438. Under this program, industrial enterprises are eligible to receive VAT refund if the enterprise had outstanding foreign currency loans as of December 31, 1994, and the refund can be used to repay the outstanding foreign currency loans. The amount of the VAT refund shall not exceed 12% of the total amount of the principal and interests payment for the foreign currency loan in any given year." The Agency in Seamless Casing from China found this prOl,'Tam to be countervailable and that a Chinese seamless casing exporter received benefits under this program.

439. Although the program was officially discontinued in 2005, it is submitted that the VAT refund under this program is a non-recuning grant to pay for financing expenses incurred by the recipients, not for operating expenses related to the line pipe. As such, to the extent that any line pipe producers received the VAT refund, benefit should be allocated to the POI, provided that the

466 Final Determination Statement of Reasons for Seamless Casing (August 5, 2008) at page 57. 151 NON-CONFIDENTIAL

POI is within the appropriate allocation period (AUL not exceeding ten years as prescribed by the

SIMR ss. 27(c) and 27.1 (2)). In addition, the Agency in Seamless Casing from China found this program to be de jure specific within the SIMA s. 2(7.2)(a), and that this prO!,>ram to be countervailable.

I. Special Fund for Fostering Stable Growth of Foreign Trade in 2009

440. The Agency found that this program is "administered by the Beijing Commerce

Commission. This pro!,>ram was established to support export sales."467 As this is a one-time !,>rant received in 2009, without any apparent restrictions as to the use (i.e., the recipient need not use the grant for operating expenses or acquiring fixed assets), the grant is to be amortized based on the useful life of the assets up to maximum often years pursuant to the SIMR s. 27(c).

441. In the Certain Unitized Wall Modules case, the Agency found this program to constitute a financial contribution under SIMAs. 2(1.6)(a) through a direct transfer offunds. The Agency also found that the benefit equal to the amount of the grant provided. Given that the purpose of this program is "to support export sales," it appears that the program is specific as a prohibited subsidy under the SIMAs. 2(7.2)(b). The Agency in Unitized Wall Modulesfi'om China found this program to be countervailable and that a Chinese exporter received benefits under this program.

li. Award of Taxpayers in Yanghang Industrial Park

442. According to the Agency's Finding in Metal Bar Gratingfi·om China,468 "{t}his pro!,'Tam appears to be established by governments at the local level and was established to provide grants to taxpayers located in Yanghang Industrial Park. The administrative authority responsible for this program is identified as Yanghang Entetprise Development Co." Grants constitute financial

467 Final Determination Statement qfReasonsfor Uniti::ed Wall Alodu/es (October 25, 2013). 46 H Final Determination Statement <~{Reasons in Steel Grating (May 7, 2011). !52 NON-CONFIDENTIAL contribution in the fonn of direct transfer of funds under the SIMA s. 2( 1.6)(a). Benefit is the amount of the grant under the SIMR s. 27. The Agency found this program to be countervailable and that a Chinese exporter receive benefits under this program.469

443. Huaye International Investment Co., Ltd. is a Chinese line pipe producer or exporter,470 reportedly located inside Yanghang Industrial Park. 471 Such Chinese companies would therefore be eligible to receive grants under this program.

10. Various Additional Subsidies

444. The Agency have also considered and found a number of these additonal subsidies countervailable in previous cases. In the Complainant's opinion, these subsidies cannot tit into the broad categories of programs, discussed above. As such, the manner of how these prOk,'Tams meet the financial contribution, benefits, and specifies requirements within the SIMA, varies from program-by-program. These requirements will be discussed within each program below.

A. Various Subsidies Provided in Liaoning Province Under the Five Points and One Line Development Strategy

445. The "Five Points and One Line" development strategy is a program established in Several

Opinions of the People's Government of Liaoning Province on Encouraging the Extended

Opening-up of the Coastal Development.472 This development strategy is expected to boost the economy ofNortheast China's Liaoning Province.473 The "five-points" refer to the following tive economic zones that are all located along the coastal line of Liaoning Province: (I) Dailan

Chanxing Island Lin Gang Industrial Zone; (2) Liaoning (Yingkou) Coastal Industrial Base

469 Ibid. 470 Huaye International Investments Co., Ltd., Steel Product: Pipe, Public Exhibit 7-A-130. 471 Too Too Trade, Company Product Marketing \Vebpage ofHuaye Shanghai Steel processing Center, Public Exhibit 7-A-131. 472 Final Determination Statement ofReasonsjhr Certain Oil Country Tubular Goods (March 9, 201 0). 473 China Daily, 'Five Points, One Line' Strategy Guiding Light for Liaoning, March 9, 2007, Public Exhibit 7-A-127.

!53 NON-CONFIDENTIAL

(including Panjin Marine Building and Repairing Industrial Park); (3) Liaoxi Jinzhou Bay Coastal

Economic Zone (including the Jinzhou Xi Hai Industrial Park and Huludao Bei Gang Industrial

Park); and (4) Liaonin Dandong Industrial Park; (5) Dailan Hua Yuan Kou Industrial Park. 474 The

"One Line" refers to a coastal road that connects the "five-points," which symbolizes economic integration along the Liaoning coastal line. 475 Industries targeted in these developments receive specific subsidies in the following forms;

• refund of value added taxes, business taxes, enterprise income taxes, personal income taxes, and house taxes paid in 2005 within the five selected areas; • reduction of income tax from 25% to 15% for the enterprises established in the five selected areas that also qualify as a high and new technology enterprises; • exemption of income taxes for two years from the initial profit-making year for the domestically funded high and new enterprises newly established in the five selected areas; • provision of preferential guarantees; • provincial level financing at discounted interest on preferential loans for certain projects; • special financial aid for certain marketing expenses to the "foreign trade export" enterprises; • establishment of"Foreign Trade Development Fund for the Northeast Old Industrial Base" to be spent for acquiring intellectual property rights, improving exported products, conducting R&D, among others; • exemption from all administrative and institutional enterprise charges at the Provincial level; • potential preferential loans from the State and/or private financial institutions made under the Provincial guideline for the banks to "energetically push the development of key projects in the five major areas; and • heightened refund rates for the enterprises located inside designated "flying lands," to be set up within Liaoxi Jinzhou Bay Coastal Economic Zone.

446. In the past, the Agency found this program to be countervailable and that a Chinese OCTG exporter received benefits under the "Five Points and One Line" program.476 This appears to be

474 Ministry of Commerce of PRC, Speech by the Governor of Liaoning Province, April 24, 2007, Public Exhibit 7-A-128. 475 China Daily, 'Five Points, One Line' Strategy Guiding Light for Liaoning, March 9, 2007, Public Exhibit 7-A-127. 476 Final Determination Stateme1ll ofReasons }Or Certain Oil Cottnl!}' Tubular Goods (March 9, 201 0). 154 NON-CONFIDENTIAL also true for the Chinese line pipe producers and exporters. For example, Huludao City Steel Pipe

Industrial Co. Ltd ("HLD") produces line pipe and the company is located in Beigang Industrial

Zone,477 which is known to be a part of Liaoxi Jinzhou Bay Coastal Economic Zone, one of the

"five-points."m Therefore, HLD and other line pipe producers operating in the designated area would be eligible to receive various fonns of subsidies under the "Five Points and One Line" program.

447. The provincial government of Liaoning provides financial contribution through the Five

Points, One Line program. Preferential refunds, loans and special funding schemes constitute direct transfer of funds under the SIMA s. 1.6(a). Exemptions and reductions of income taxes, other taxes, and charges/fees constitute government revenue foregone under s. 1.6(b ). Preferential guarantees constitute contingent transfer of liabilities under s. 1.6(a).

448. In the cases of refunds, and exemptions and reductions of amount otherwise owed to the government, the benefits conferred equal to the amount of the grant, and the amounts exempted or reduced under the SIMR ss. 27 and 27 .I. Loans and financial schemes provided at discounted rates confer benefits in the amount equal to the difference between the interest rate actually charged and interest rate that would have been charged on a comparable commercial non-guaranteed loan pursuant to the SIMR s. 29(1). Preferential loan guarantees, similarly, confer benefits in the amount equal to the difference between the interest rate actually charged in respect of the guaranteed loan and interest rate that would have been charged on a non-guaranteed loan under the SIMR s. 31.1 (I). In addition, the Five Points and One Line prot,>Tam is specific in law within

477 Huludao City Steel Pipe Industrial Co., Ltd., About Us, Public Exhibit 7-A-109. 47H The Government of Liaoning Province, Se,·eral Policy Suggestions oft he People~'i Government of Liaoning Province on Encouraging Coastal Jvfcu·or Development Regions to Expand Opening-up to the Owside World, January 23, 2006, Public Exhibit 7-A-129. !55 NON-CONFIDENTIAL the meaning of the SIMA s. 2(7.2)(a), gtven that these subsidies are limited to a particular enterprise located in designated geographic areas.

B. The "Torch Project"

449. According to Provision (I) of the 2010 official document on the Torch Project "The

Ministry of Science and Technology's National Torch Plan on Key High-tech Enterprises'

Management Approach", the main goal of the Torch Project is to support the development of the

State's new high-tech industry. 479

450. The eligibility of this program is contained in the High-tech Enterprise Management

Approach, which provides, inter alia, that the enterprise must be recognized as a "high and new- tech enterprise" within the "high and new-tech fields getting key supports from the State" (Article

I 0(2)). 480 Once qualified, the companies would receive the following preferential measures:481

• preferential tax: o income tax rate is reduced to 15% for the qualified companies located in a SEZ; o income tax rate is reduced to I 0% for the qualified companies located in a SEZ and whose export sales exceed 70%, of its sales; o income tax is exempted for the first two years beginning from the new establishment in a SEZ; • financial support: o special loan for scientific and technological development; o priority financial support from the New Product Program; o financial support from the Chinese Torch Foundation and the Chinese Scientific and Technological Development Foundation; and o special construction loan in the new- and high-tech development zones.

451. As discussed above, for example, WSP Holdings Ltd - the parent company of Wuxi

Seamless, a main Chinese steel producer - reported in its Fonn 20-F submission to the US

""Ministry of Science and Technology of the People's Republic of China, Administration of Key High-tech Enterprises under the National Torch Project, April 25, 2011, Public Exhibit 7-A-136. 480 Ministry of Science and Technology of the People's Republic of China, Notice on the Issuance of the Administrative Measures for Determining New High-tech Enterprises, April28, 2008, Public Exhibit 7-A-137. 481 Wenzhou Municipal Sci- Tech Bureau, National Torch Program of China, Public Exhibit 7-A-138. !56 NON-CONFIDENTIAL

Securities and Exchange Commission in 2012 that the enterprise is a HNTE and as such benefit from a preferential tax rate of 15%.

452. The financial support programs under the "Torch Project" is a financial contribution within the meaning of the SIMAs. 2( 1.6)(a) through a direct transfer of funds. Preferential tax schemes are government revenue forgone under the SIMAs. 2( 1.6)(b ). For both types of subsidies, benefits are measured in pursuant to the SIMR s. 27, i.e., the amount of the financial support and the amount forgone by the GOC. The "Torch Project" is defacto specific to particular enterprises designated as HNTEs.

453. The Agency found a grant titled "Scientific and Technological Projects Which Passed

Appraisal and Certification in Zhuji City" countervailable in Copper Tube fi'om China. The

Complainant notes that the Agency found this grant has been funded through the "Project of

National Torch Program," and respectfully requests that the Agency fully investigate the full scope of the subsidies provided under the 'Torch Project."

C. There arc Numerous Other Chinese Subsidies Programs the Agency found Countcrvailabic in Previous Cases:

454. In addition to the programs identified above, numerous other Chinese export contingent grants were previously investigated and countervailed in Canada, as well as in other jurisdictions.

In the vast majority of these investigations, the GOC and the exporters simply decided not to cooperate, and made it impossible for the investigating authority to detern1ine the countervailability of such programs. In light of this history of lack of cooperation by the GOC and the Chinese respondents, the Complainant respectfully request that the Agency initiate investigations of the following programs as line pipe producers and exporters are eligible to receive these subsidies, based on the information available. The Complainant asks that the amount of

157 NON-CONFIDENTIAL subsidy be calculated under ministerial specification pursuant to s. 30.4(2) of the SIMA in the event that the GOC and the Chinese respondents fail to cooperate again:

Programs Case where found Program Description Countervailable 2007 Technology OCTG ji'om China482 Based on the information available, this program Innovation Award was established by local Chinese governments to promote technology innovation and energy savings. The granting authority responsible for this program is the Changzhou Economic & Trade Commission 2008 Water-saving OCTG ji'om Chinam Based on the information available, this program Technique Assistance was established by governments at the local level to encourage the development of water-saving technologies. The granting authority responsible for this program is Changzhou Water Conservancy Bureau. Science and OCTG fi'om China484 This program was established to provide benefits Technology Award to enterprises for dedication to technology development. The granting authorities responsible for this program are the Jiangdu Finance Bureau and the Jiangdu Science and Technology Bureau. Wengeng Government OCTG ji'om China485 Based on the information available, this program was established by governments at the local level to provide a one-time grant. The granting authority responsible for this program is the local W endeng_government. Changzhou OCTG ji'om China486 Based on the information available, this program Technology Plan was established by governments at the local level to encourage enterprises in developing new technologies. The granting authority responsible for this program is Changzhou Science and TechnologyBureau. Financial Subsidy OCTG ji'Ofn China487 One of the cooperative exporters in OCTG from China reported receiving a financial subsidy from the provincial government, but stated that it has no knowledge or details of this program. The granting authority is identified as the Finance Department of Jiangsu Province.

482 Final Detem1ination Statement of Reasons for Certain Oil Country Tuhular Goods (March 9, 20 10). '"'Ibid. 484 Ibid. 485 Ibid. 486 Ibid. 487 Ibid.

158 NON-CONFIDENTIAL

488 1 Grant for Market I OCTG .fi·om Clzina I Based on the infonnation available, this prob>ram I Promotion and Trade Iwas established by governments at the local level I development I I to encourage the development and expansion of \ trade and markets for local industries. The I 1 granting authority responsible for this program is ~-..,-\1-t=.h:.::e _l)ongying District Finance Bureau. 489 I Grant Provided for 1 Fastenersfi"om China I The GOC provtdes b'fants to enterpnses satlsfymg

1 Export Performance 1 1 specified export criteria, or to assist in expanding . and Employing I I export sales. I I~C~o_m~m~o_n~VV~o_r_k_e_rs-:--+-~~~--~~--~-----+~~------~-----~--~~~--~---___jl I Training Program for j Aluminum Extrusions 1 This program appears to be administered by I Rural Surplus Labour Ifi"om China490 I municipal authorities. According to information , Force Transfer I I submitted by one of the cooperative exporters, the 1 Employment program is provided in the lmplemental Scheme

\, of Training Program for Rural Surplus Labor 1 1 , 1 Force Transfer Employment of Taishan City from 2005 to 2009, and is administered by the Labour

1 and Social Security Bureau of Taishan City. 1 Qualified enterprises are entitled to receive funds from the local government for providing training 1 to the rural sur Ius labor force. Innovative Welded Pipefi"om This prob>ram was established to promote the Experimental I China491 technology development of Zhejiang province. ' Enterprise Grant I' I The granting authority responsible for this I 1 . I I program is the Science and Technology I I 1 Department of Zhejiang Province. State Key Technology I Seamless Casingfi"om \ Enterprises appears to be selected based on their 492 Renovation Projects China I perfon~ance. . . Supportive fund I Seamless Casingfi·om 1 Enterpnses recetve grants from Xuy1 government fprovided by the ' Clzina493 I if all criteria are met: (1) they are located in the government of Xuyi 1 Industrial Zone ofXiyu county; (2) they have over county, Jiangsu ·, RMB 3 million investment on fixed assets; and

Province 1 (3) the project is non-polluting and non- 1 combustible. The enterprise of grant is based on I j tax paid by the company.

Tax preference I Stainless Steel Sinks fi·om 1 This program was established in the Law of the 494 available to companies ' China 'j' PRC Income Tax (2007) and came into effect on . January I, 2008. The program objectives are to

4RS !Ind. ~ 89 Final Determination Statement

!59 NON-CONFIDENTIAL

r:--~-~--'7.' ,---·-----,--;--~ ~--~----c-,----:c---, that operate at a small I reduce the burden on enterprises making small 1I profit I profits and to maintain job opportunities. The I I granting authority responsible for this program is \ I the Ministry of Finance and the State ' i Administration of Taxation. It is administered by I local tax authorities. International market Stainle'{~ Steel Sinksfi'om 1 This program was established in a document titled China4 h fund for small and I 1 "Measure Cai Qi (2010) No 87" in .ord~r to. medium sized export · provide support for export compames Identified as companies SMEs. The funds are provided for developing international markets including overseas exhibitions, certification of enterprise management system, various product certifications, foreign patent applications, promotional activities in international markets, electronic business, foreign advertisement and trademark registration, international investigation, bid (negotiations) abroad, enterprise training, foreign technology, and brand acquisition, etc. Benefits granted to an enterprise under this program shall not exceed 50% of the total

1 expenditure paid by the enterprise. This program is administered jointly by the Ministry of Finance and Ministry of Commerce. I

Export Subsidy and 1 Thermoelectric Coolers 1 This appears to be an export contingent grant ~ Product Innovation I and Warmers from program. I 496 1 Subsidy China

· Exemption of Special 1 Welded Pipefi·om I This program appears to be an exemption or Land Tax and Land I China497 · reductiOn of specwl and tax use fees lnmted to Use Fees in SEZs and particular enterprises located in designated areas. Other Designated I I. Areas

D. The Agency found additional programs potentially actionable in the Preliminary Determination of Certain Carbon ami Alloy Steel Line Pipe fi·om China

455. Finally, in the Preliminary Determination of the Certain Carbon and Alloy Steel Line Pipe

Originating in or Exportedfi·om the People's Republic ofChina case ("SD Line Pipe"), the Agency

495 Ibid. 4 % Final Detennination Statement of Reasonsjbr Thermoelectric Coolers and Warmers. 4n Final Determination Statement ofReasons for Carbon Steel Welded Pipe (August 5, 2008).

160 NON-CONFIDENTIAL found additional programs potentially countervailable. Specifically, the Agency stated that there is "sufficient reason to believe that these programs may constitute actionable subsidies provided by the GOC and that the exporters and producers of the subject goods benefit from these programs". 498 Evraz also respectfully requests that the Agency initiate investigations of the following programs:499

Program Type of Program I 1 I Corporate Income TaX.~emption and/or l SpecialEC()nop.Uc Zcine(§~Z) arid I I 1 Reduction in SEZs andotlier Designated Areas I Other Designated Area£ Incentives ' l 2 I Preferential Costs of Services and/or Goods 1 Special Economic Zone (SEZ) and

Provided by Government or State-owned I Other Designated Areas Incentives , Enterprises (SOEs) in SEZs and Other Designated

IAreas i ~~~~~~~~~~~=-~~~~~~-+~~~~~~~~~~~~ 3 I LminFrm11LoChlFiriarice, Bureau · I Special Economic Zone (SEZ}and ·.. 1 Other :Designated Areas Incentives

4 I' Loans and Interest Subsidies provided under the ! Special Economic Zone (SEZ) and Northeast Revitalization Program [ Other Designated Areas Incentives I

. 5 I Advanced Science/Technology Enterprise Grant I Grants and GrantEgujvalerits j I . . . . I ! /6 . Allowance to Pay Loan Interest (Zhongshan City, ' Grants and Grant Equivalents i Guangdong) 1 L~-~Ass}stance for Technologylnnovation -R&D ·-1 Grants-and Gran:tEquivalentS [ 1 Project ! · ; . . I i . . --···--··---r -~-·~-.. ~~--~-~

I : I:::~:::::~:,:::~::::,::,m j ::::::::::::::: I

: 10 : ::::,'" Qi,lmy~ Diitciot Eo,imomo•"' ; Gmot>Ood Gc

161 NON-CONFIDENTIAL

Energy~sayingTechnology Renovation Fund -I Grants and Grant Equivalents jn l -1 -_ -_ ------~ i Enterprise Technology Centers 1 Grants and Grant Equivalents I I I lt3 I Ftind. for UrbariPublic Utilities -· j Grants and Grant Equivalents ~ r:::-~------· ~-~~~~-__j h4 [Government ofShijiazhuang City Export Award ( Grants and Grant Equivalents i 15 ··l Granf-'-CbangzhouCityKeySupportinglndtistry I Grants and GrmitEqtiivalents ~ I Upgradihg SpeCiaJFurid · I ; ------= ~-~~-~---~-_:._~~ - - ~-~-_:-~ 16 1 Grant- Changzhou Five Major Industries i Grants and Grant Equivalents '[ ' Development Special Fund i r

17 i G.i"3nt=- Cleaningcproductioil Qiuilified Enterprise ; Grants and Grant EquivalentS I r Reward · 1 -~

18 ( Grant- Financial Subsidies from- Wei Hai City tGrants and GrantEquivalents , Gao Cun Town Government i 19 lGn1nt- Jiangsu Pt'oyince Finance Supporting 1 Grants rmd GrarifEquivalents ' :Fund ' 1 . . ~-~-~ ------~----·-1 rwrorant- Large Taxpayer Award . . !Grants and Grant Equivalents I I I I ! ! 21 I Grant~PatentApplieationA:ssistance rarants andGrap.tEquiyalerits

22 I Grant- Provincial Foreign Economy and Trade ~-Grants and Grant Equivalents

• 1 Development Special Fund

\23 ) Gt"irnt.2-Provisional Industry Promotion Special Grants and Grant Equivalents . I Furid ...... i

~24 IGrant- Resources Conservati;n and Environment ~ Grants and Grant Equivalents I 1 _jProtection Grant L ··-···-···j\ 125. ! Grarit~StateServiceindustr)'Deve!o]JilientFund i Grants and GrantEquivalerits.-

1.~~ lg~:R~ ~~~:~dJo~~~o:~~~:~v~1~~Lfi;~nd for · : g;:~: :~ g;:~~ ~~~:~:;::~·~s---11 i I. TlrihuLake I . .. f 28 I Grants for Encouraging the Establishment of i Grants and Grant Equi,;alents ~ b.t~:~;E~~;ln:e:~:::ea~~qu_a:e:~-w-it~--~:1 Grants and Grant Equivalents· •- --d

162 NON-CONFIDENTIAL

30 ' Grants for International Certification Grants and Grant Equivalents

· i Grantsuhder the InformationTechnology Program 1 31 Grants and Grant Equivalents jofFeicheng · l . ' 32 Guangdong- Hong Kong Technology Grants and Grant Equivalents Cooperation Funding Scheme ' i . - ~ ' - ' Guaranteed Growth Fund Grants and Grant l \ i Equ!Val;-en~t~s~~ l..,.___! 34 l Interim Measures of Fund Management of [ Grants and Grant Eq-uivalents I ' Allowance for Zhongshan Enterprises to Attend , Domestic and Overseas Fair (Zhongshan) if 35 _: _Iritematio11al.Market 'Fund for Export Companies I Grants' and Grant Equivalents r (JiangmenCity) · : ; \ - ' 1 ~~-·- i ·.. ~~.c._~~~~~~-....:....-~+,.-.. -~-~-- ~~~--~ 1 36 !Modem Service Grant i Grants and Grant Equivalents . ! i • 37 1 MunicipalGovemi11ent'- Exhihition Grant I· Grants and Grant Equ1valen!S :

f 39 j Municipal Goveiruhent- InsuranceFee-.Grarit i Grants and Grant Equivalents --~l

40 1· Provincial Government- Equipment Grant ! Grants and Grant Equivalents . I ~---+ ·...... : 41 1Reduction in LandU~eFees, Land Rental Rates, I Grilrits and GrarifEquivalents i· aridl.and Purchase Prices j-

' .; flc-_4_2_, Refund from Government for Participating in ----ro;;Jtls~an~d~G~r~aJtl_E_qtJ'j\;-;_]e~n~ts ------1 . Trade Fair (Foshan)

I 43 R.eimbutsenierit of Anti-dumping and/or Grants and Grant EquivalentS ·countetVailihg Legal Expenses by the Local I Gcnrel11ments · · · · L-.~-

163 ------

NON-CONFIDENTIAL

.----~-- --,--- ~ -----~ ---~-- ~------·' ------~------~" --··------··"-·-·- --~-~~~------····- ---- .------·------~------1 44 1 Reimbursement of Foreign Affairs Services . Grants and Grant Equivalents · Expenses (Foshan) I Subsidy foi the Technology Development 145 : nt< ~d Ck'"t f4W

I I 1 I : I

I47·-t Technical Rc:movation LoanJtitereSt Discaurit' - --_. ·· •.•. l. Gnmts and Grant Equivalents . -~1,1 I I Fund · ·· . . . I . I I

'! 48 \ Water Fund Refund/Exemption 2008 l Grants and Grant Equivalents ~ I I i-----+==-~~~---~,..-,-=o,---o:------:-c=-----=c-~ i .49 , D@TaxJ3XeiilptiorisFotLandTransfe1Ted ! Piefefentil!l Tax Progranis ! through Merger orRestiucfuring . i ...... ,I 'I Exemption from City Maintenance and ! Preferential Tax Programs I Construction Taxes and Education Fee Surcharges )_ 1 I for FIEs 1 I

i -· 51 : Muili\;ipa1 G()vi:J:nritent -Preferential Tax ! Pre---=f~er-:-e.,.-n'ti'""al:-:T~:~:a~xcc·P:cr~o-,-grc-a""m-s·~-~~~~1 ; Program ; I

r 52 I' Stamp Tax Exemption on Share Transf~s under - i Preferentiai Tax Programs ~ Non-tradable Share Reform 1 I \

153 .I Two Free, Three Half Tax Exemptions for-ti};;··- .... ', Pref~tml T~ '""=' "" -"1 · I Productive FIBs 1 1

!54 1 Relief from Duties and Taxes on Imported ·--~Relief from Duties and Taxes on I Material and Other Manufacturing Inputs I Inputs, Materials and Machinery I

55 Utilities Provided byGoyenlinent at Less thari Fair IRelieffromDuii(:g and Taxes on - l , Market Value _ · ji11puts, MaterialsahdMachinery 1 ; - - _- \ - 1 1--:::--::----i~ . ------~----~---~---~------~--r---~---· - ----~~~ , 56 I Exemptions for SOEs from Distributing Dividends [ Equity Programs . \ l to the State l I L___ L ______~---···--~------~ ____ .l______j

164