Anti-dumping and Countervailing Program

OTTAWA, June 16, 2006

4214-11
AD/1353

DECISION

On June 1, 2006, pursuant to subsection 38(1) of the Special Import Measures Act, the President of the Canada Border Services Agency made a preliminary determination of dumping respecting single or multilayer cross-linked polyethylene tubing in nominal tubing sizes up to and including 1 inch or the metric equivalent, excluding cross-linked polyethylene tubing with an oxygen barrier layer, originating in or exported from the United States of America.

TABLE OF CONTENTS

Summary of Events
Period of Investigation
Interested Parties

Product Definition
Additional Products Information

Canadian Industry
Imports into Canada
Dumping Investigation

Decision
Provisional Duty to be Imposed
Future Action
Retroactive Duty on Massive Importations
Undertakings
Publication
Information
Appendix

STATEMENT OF REASONS

Summary of Events

1. On March 3, 2006, the President of the Canada Border Services Agency (CBSA) initiated an investigation into the alleged injurious dumping of certain cross-linked polyethylene tubing (PEX tubing) originating in or exported from the United States of America (United States).
   
   
2. The investigation was initiated in response to a complaint filed by Vanguard Piping Systems (Canada) Inc. (Vanguard) of Mississauga, Ontario, on February 7, 2006.  On February 13, 2006, the CBSA informed Vanguard that the complaint was properly documented and notified the government of the United States that a properly documented complaint had been filed.  The complainant provided evidence that certain PEX tubing had been dumped, and that the dumping had caused injury to Canadian producers of these goods.
   
   
3. Upon receiving notice of the initiation of the investigation, the Canadian International Trade Tribunal (Tribunal) started its preliminary injury inquiry.  On May 2, 2006, the Tribunal made a preliminary determination that the evidence disclosed a reasonable indication that the dumping of certain PEX tubing has caused injury to the Canadian industry.
   
   
4. On June 1, 2006, as a result of the CBSA’s preliminary investigation and pursuant to subsection 38(1) of the Special Imports Measures Act (SIMA),the President made a preliminary determination of dumping respecting certain cross-linked polyethylene tubing originating in or exported from the United States.
   
   

Period of Investigation

5. The investigation covered all subject goods released into Canada during the period of investigation (POI), that is, from January 1, 2005 to December 31, 2005.

INTERESTED PARTIES

Complainant

6. The complainant, Vanguard, is one of the largest Canadian producers of certain PEX tubing.  The complainant’s headquarters is located at 1205 Matheson Blvd. East in Mississauga, Ontario, while its production facility is located in Burnaby, British Columbia.

Exporters

7. At the time of the initiation of the investigation, the CBSA had identified 9 known or possible exporters of the subject goods.  A Request for Information (RFI) was sent to all of those 9 companies.  During the investigation, the CBSA conducted further analysis of customs documentation and other available information, with the refined data indicating that there are 8 identified exporters or possible exporters of the subject goods.  No responses to the RFI were received from exporters, while one exporter submitted a statement that it had not exported the subject goods to Canada during the period of investigation.

Importers

8. When the investigation was initiated, the CBSA identified 19 known or possible importers of the subject goods.  Further analysis after initiation indicated that in total there were 18 identified importers or possible importers of the subject goods during the POI.  Similarly as for the exporters, an RFI was sent to all identified importers or possible importers.  Substantially complete submissions were received from 2 importers, both of whom are related to exporters.  An additional 6 importer replies were received stating that the respondent had not imported subject goods during the POI.

Product Definition

9. For the purpose of this investigation, the subject goods are defined as:

   Single or multilayer cross-linked polyethylene tubing in nominal tubing sizes up to and including 1 inch or the metric equivalent, excluding cross-linked polyethylene tubing with an oxygen barrier layer, originating in or exported from the United States of America.

Additional Product Information

Technical Information

10. The subject goods are commonly referred to as “PEX tubing” in the industry, PEX being an acronym for cross-linked polyethylene.  Cross-linking involves the formation of links between individual polyethylene macromolecules to create a single large molecule of polyethylene.  The resulting large molecule is resistant to temperature extremes, chemical attack and creep deformation.  As a result of these properties, PEX tubing is used in hot and cold potable water distribution systems; potable water being defined as water that meets applicable water quality standards and is safe to be consumed.  PEX tubing is primarily designed and marketed to replace the traditional copper systems commonly used in residential and commercial dwellings.  PEX tubing is marketed in the same dimensions as copper tubing and is sold in either straight lengths or coils.
    
    
11. For further clarity, for purposes of the investigation the terms “tubing” and “pipe” can be used interchangeably when referring to PEX tubing.
    
    
12. Multilayer PEX tubing, a recent development, provides the same benefits as single layer PEX tubing, with the extra feature of added ultraviolet protection.  Single layer PEX tubing degrades quickly if exposed to ultraviolet light (i.e. sunlight).  Through the addition of multiple layers, the multilayer variation of PEX tubing meets the relevant standards for chlorinated, potable water systems after extended UV exposure.
    
    
13. The subject goods exclude PEX tubing with an oxygen barrier layer that resists the passage of oxygen through the wall of the tubing.  The oxygen barrier, ethylene vinyl alcohol (EVOH), is applied to the PEX tubing during the extrusion process.  Typically used in hydronic radiant heating piping systems, the additional oxygen barrier layer is added to limit the amount of oxygen that can permeate into the system through the tubing, thus preventing rust from forming on any ferrous metal parts.  PEX tubing with an oxygen barrier tends to command a significant premium in terms of price, although the relative size of this premium appears to vary depending on the individual manufacturer.  It is possible for PEX tubing with an oxygen barrier to be used in potable water applications but, due to the additional cost premium, this is rarely done.  It is generally marketed using a very bright red/orange colouring, as opposed to the red, white or blue colouring normally used to market the PEX tubing without an oxygen barrier.  In addition, the markings on the excluded tubing are usually distinct from that used on PEX tubing without an oxygen barrier.
    
    
14. PEX tubing is marketed as complying with the American Society for Testing and Materials (ASTM) standards F 876 and F 877, certifying that a given manufacturer’s goods have met and/or exceeded performance and toxicological standards, and/or the equivalent NSF, CSA, IAPMO, SBCCI, BOCA, ICBO, IPC, and NSPC standards.  Generally, manufacturers market their products in Canada as complying with both the CSA and ASTM standards, as well as having been certified by NSF International.

Production Process

15. PEX tubing is made via one of three processes:  the silane method, the irradiation method, or the peroxide procedure method.  The finished properties of cross-linked material from all of these production methods are similar and all yield products that are compliant with the appropriate standards.  The complainant uses the silane process in manufacturing the goods.
    
    
16. The silane manufacturing process begins with a medium to high-density polyethylene resin. Additives such as colorant and catalysts are mixed with the base resin in exact ratios in a “Hopper”.  The pre-mixed material is then fed into an extruder, which operates at temperatures of approximately 400 degrees Fahrenheit.  Printers are used immediately following extrusion to print all the necessary information on the tubing (such as the trade name and size, date of manufacture, and certifications).  Hot extruded pipe is then pulled through a vacuum and cooling tank which brings the tubing to room temperature and finalizes the dimensions of the tubing.  A “Haul-Off” is used to ‘pull’ the tubing through the tanks.  Depending on the required final product, a cutter will cut the tubing into straight lengths (20 foot lengths are the most common in the industry) or a coiler will be used to create coils (ranging in length from 100 feet to 1,000 feet).  Bundles of lengths are subsequently bagged on a bundle table; coils are taped or strapped in place.  Coils or straight length bundles are then ready for the cross-linking process, which involves exposing the tubing to heat and moisture (i.e. steam).  In summary, the silane method of cross-linking as utilized by the complainant involves the combination of the substrate material, the polyethylene resin, with additives that react when the extruded tubing is exposed to heat and moisture.  The resulting chemical reaction ceases when the cross-linking reaches 70-80%. 
    
    
17. Apart from the silane method, the irradiation method of cross-linking uses high-energy irradiation directed at the extruded pipe to form the molecular links.  The third method of cross-linking, known as the peroxide procedure or, alternatively, as the Engel method, uses heat-activated chemicals that generate free radicals for cross-linking.
    
    
18. Based on the CBSA’s own research it appears that PEX tubing manufactured using the peroxide/Engel method has been certified to be used in commercial buildings such as office towers and condominiums, where fire barriers are utilized.  PEX tubing manufactured using other production techniques does not appear, as of yet, to have been similarly certified.

Classification of Imports

19. The subject goods are commonly classified under the following Harmonized System (HS) classification numbers:

3917.21.00.10	3917.21.00.30	3917.31.90.10
3917.21.00.20	3917.21.00.90	3917.31.90.90

Canadian Industry

20. Vanguard is one of the major Canadian producers of certain PEX tubing.  The goods are produced at its manufacturing facilities in Burnaby, British Columbia.  Vanguard has its corporate headquarters in Mississauga, Ontario, and sales offices in Quebec and British Columbia.
    
    
21. Prior to initiation, the CBSA confirmed that the standing requirements of subsection 31(2) of SIMA had been met. There has been no change in the structure of the Canadian industry since the initiation of the investigation.

Imports into Canada

22. During the preliminary phase of the investigation, the CBSA further refined its estimates of the volume of imports from all sources.  For this purpose, the CBSA utilized its internal information system, reviewed customs accounting documents and examined information received during the investigation from importers and exporters. 
    
    
23. The CBSA’s revised estimates of importations of subject goods, based on information gathered during the preliminary phase of the investigation, are presented in the following table:

Apparent Canadian Imports (2005)

Imports into Canada	Volume (kilograms)	Market Share (%)
United States of America	109,121	11%
All Other Countries	902,751	89%
Total Imports	1,011,872	100%

Investigation Process

24. At the time of the initiation of the investigation, RFIs respecting dumping were sent to 9 exporters in the United States.  All RFIs included instructions indicating that exporters who were not also manufacturers were to forward the RFIs to the manufacturers of the goods.
    
    
25. No responses to the RFI were received from either exporters or from non-exporting producers. 
    
    
26. Substantially complete submissions were received from 2 importers, both of whom are related to exporters.  An additional 6 importer replies were received stating that the respondent had not imported subject goods during the period of investigation.

Investigation

27. In conducting its investigation, the CBSA requested that exporters provide sales and cost information necessary to estimate the normal values and export prices of the subject goods.
    
    
28. Normal values are generally based on the domestic selling prices of the goods in the country of export or on the total cost of the goods (cost of production, administrative, selling and all other costs) plus an amount for profit.
    
    
29. The export price of goods shipped to Canada is generally the lesser of the exporter's selling price or the importer's purchase price.  When the export price is less than the normal value, the difference is the margin of dumping.
    
    
30. Normal values are usually estimated using information that exporters provide and the CBSA then verifies. However, as the exporters did not provide information to allow the normal values to be estimated in this manner, an alternative method had to be used. The CBSA used the best information available to estimate the normal values of the subject goods.  As a result, the normal values were estimated based on the information provided by the complainant when the properly documented complaint was submitted.
    
    
31. Due to the lack of cooperation from exporters, the CBSA could not determine the exporter's selling price of the subject goods.  Therefore, for purposes of the preliminary determination, export prices were estimated based on the facts available by using the purchase price paid by importers adjusted for freight charges and all other costs resulting from the exportation of the goods to Canada.
    
    
32. Not having received information from the exporters, the CBSA estimated the margin of dumping based on the highest estimated margin of dumping found using information from importers who had provided responses to the questionnaire during the investigation.  Thus, an estimated margin of dumping of 213% has been established and applied to the subject goods originating in or exported from the United States. 

Summary of Results (Dumping)

Country	Estimated Dumped Goods as Percentage of Country Imports	Estimated Weighted Average Margin of Dumping *	Country Imports as a Percentage of Total Imports	Estimated Dumped Goods as a Percentage of Total Imports
United States	100%	213%	11%	11%

* as a percentage of export price

33. Under subsection 35(1) of SIMA, the President is required to terminate an investigation prior to the preliminary determination if he is satisfied that the margin of dumping of the goods of a country is insignificant or that the volume of dumped goods of a country is negligible.  Pursuant to subsection 2(1) of SIMA, a margin of dumping of less than 2% is defined as insignificant, whereas a volume of dumped goods from a country forming less than 3% of total imports is considered negligible.
    
    
34. As shown in the table above, the estimated weighted average margin of dumping of subject goods from the United States is above 2% and is, therefore, not insignificant.  As well, the volume of dumped goods from the United States is above 3%, and is, therefore, not negligible.

Decision

35. On June 1, 2006, pursuant to subsection 38(1) of SIMA, the President of the CBSA made a preliminary determination of dumping respecting certain cross-linked polyethylene tubing originating in or exported from the United States. 

Provisional Duty to be Imposed

36. In light of the preliminary determination of injury made by the Tribunal and to prevent further injury from dumped imports, provisional duty will be imposed on all subject goods imported into Canada, on and after June 1, 2006, pursuant to subsection 8(1) of SIMA.
    
    
37. The provisional anti-dumping duty is based on the estimated margin of dumping, expressed as a percentage of the export price of the goods.  The Appendix shows the estimated margin of dumping and the rate of provisional duty, payable on subject goods released from Customs on and after June 1, 2006.
    
    
38. Provisional duty is payable by the importer and applies until the day the Tribunal makes its finding on injury.  However, if the investigation is terminated by the CBSA or there is an undertaking arrangement, provisional duty will cease.
    
    
39. Importers are required to pay provisional duty in cash or by certified cheque.  Alternatively, they may post security equal to the amount payable.  Importers should contact their regional customs office if they require further information on the payment of provisional duty or the posting of security.  If the importers of such goods do not indicate the required SIMA code or do not correctly describe the goods in the customs documents, an administrative monetary penalty could be imposed. The imported goods are subject to the Customs Act.  As a result, failure to pay duties within the specified time will result in the application of the provisions of the Act regarding interest.

Future Action

The Canada Border Services Agency

40. The CBSA will continue its investigation of the dumping and will make a final decision by August 30, 2006. 

The Canadian International Trade Tribunal

41. The Tribunal has begun its full inquiry into the question of injury to the Canadian industry.  The Tribunal is expected to issue its final decision by September 29, 2006. 
    
    
42. If the Tribunal finds that the dumping has not caused injury or is not threatening to cause injury, the proceedings will be terminated and all provisional duty collected will be refunded.  If the Tribunal makes a decision of injury, anti-dumping duty will be imposed on imports of subject goods.

Retroactive Duty on Massive Importations

43. Under certain circumstances, anti-dumping duty can be imposed retroactively on subject goods imported into Canada.  When the Tribunal conducts its inquiry on material injury to the Canadian industry, it may consider if dumped goods that were imported close to or after the initiation of the investigation constitute massive importations over a relatively short period of time and have caused injury to the Canadian industry.  Should the Tribunal issue a finding that there were recent massive importations of dumped goods that caused injury, imports of subject goods released by the CBSA in the 90 days preceding the day of the preliminary determination could be subject to anti-dumping duty. 

Undertakings

44. After a preliminary determination of dumping, exporters may give a written undertaking to revise selling prices to Canada so that the margin of dumping or the injury caused by the dumping is eliminated. 
    
    
45. Acceptable undertakings must account for all or substantially all of the exports to Canada of the dumped goods.  In the event that an undertaking is accepted, the required payment of provisional duty on the goods would be suspended. 
    
    
46. In view of the time needed for consideration of undertakings, written undertaking proposals should be made as early as possible, and no later than 60 days after the preliminary determination of dumping.
    
    
47. The legislation allows all interested parties to make representations concerning any undertaking proposals.  The CBSA will maintain a list of interested parties and will notify them should an undertaking proposal be received.  Persons wishing to be notified must provide their name, address, telephone, fax, or email address, to one of the officers listed below.  Interested parties may also consult the CBSA Internet Web site noted below for information on undertakings offered in this investigation.  A notice will be posted on the CBSA Web site when an undertaking proposal is received.  Interested parties have nine days from the date the undertaking offer is received to make representations.

Publication

48. A notice of this preliminary determination of dumping will be published in the Canada Gazette pursuant to paragraph 38(3)(a).

Information

49. This Statement of Reasons has been provided to persons directly interested in these proceedings.  It is also posted on the CBSA Web site at the address below.  For further information, please contact Alex Lawton, Matthew Lerette, or Jean-Louis Lapratte as follows:
    
    

Mail	Canada Border Services Agency Anti-Dumping and Countervailing Directorate 100 Metcalfe Street, 10th Floor Ottawa, Ontario K1A 0L8 Canada
Telephone	Alex Lawton                           (613) 954-7410 Matthew Lerette                      (613) 954-7398 Jean-Louis Lapratte                 (613) 954-7375
Fax	(613) 948‑4844
Email	Alexander.Lawton@cbsa-asfc.gc.ca Matthew.Lerette@cbsa-asfc.gc.ca Jean-Louis.Lapratte@cbsa-asfc.gc.ca
Web site	http://www.cbsa-asfc.gc.ca/sima

Attachment

Appendix

CERTAIN CROSS-LINKED POLYETHYLENE TUBING
ESTIMATED MARGINS OF DUMPING BY EXPORTER/COUNTRY

Country of Origin	Volume of Goods Dumped (Percentage)	Range of Estimated Margins of Dumping for Dumped Imports1	Weighted Average Margin of Dumping1	Provisional Duty Payable1
United States of America
All Exporters2	100%	-	213%	213%
Total/Average	100%	-	213%	213%

1 As a percentage of export price
2 Margin of dumping based on highest margin of dumping estimated for the Preliminary Determination