Letter Sent To Prime Minister Harper About The Unfair Treatment In Canada Of Chinese Steel Products (and backgrounder)



    OTTAWA, March 2 /CNW Telbec/ -

    February 28, 2008

    The Right Honourable Stephen Harper, P.C., M.P.
    Prime Minister of Canada
    Langevin Block
    Ottawa, ON  K1A 0A2

    Dear Prime Minister,

    I am writing you on behalf of CANTAK Corporation, an Alberta distributor
of oil and gas exploration equipment. CANTAK has been in business in Canada
for more than 50 years. I have been president of the company since 1988.
    I am deeply concerned about the devastating effect on our Alberta-based
business, due to the Canada Border Services Agency's (CBSA) final
determination of dumping and subsidization of oil and gas well casings from
China. These decisions are arbitrary and punitive and designed to force
Chinese product out of the market.
    Subsequent to a major expansion of drilling in 2004 and 2005, the oil and
gas drilling market collapsed in mid-2006, due to a combination of adverse
influences, including:

    
    - low Canadian Natural Gas Prices
    - dramatic strengthening of the Canadian Dollar against the US Dollar
    - significant escalation in the cost of doing business in Alberta;
    - changes relating to the taxation of income trusts affecting the oil
      industry
    - uncertainty relating to proposed Alberta royalty changes
    

    This confluence of adverse influences, shifted the drilling activity from
very high levels to significantly lower levels. Market demand dried up and
inventories of goods on the ground or on order grew. So TenarisAlgomaTubes
(TAT) filed an anti-dumping and countervailing duty complaint against imports
from China, to get relief from this downturn in activity.
    Tenaris, an Argentinean multinational producer, with production bases in
at least 10 countries, obtained abandoned mill assets, from the former Algoma
Steel Corporation, in a fire sale in 2000. Tenaris clearly told the Canadian
International Trade Tribunal (CITT) that production decisions, on where orders
(destined for Canada) are to be produced, are made through a Buenos
Aires-based committee, within its global group. They decide this with the
profits of the Global Tenaris group uppermost in mind.
    TAT cannot produce everything the Canadian market needs. TAT has been
importing semi-fabricated steel for processing in the Sault, from Argentina.
TAT imports finished products for sale from its plants in Argentina, Mexico
and Romania.
    CBSA admitted that there were as many imports from Tenaris' foreign
operations, as there were from China. When Canadian customers purchase from
Tenaris, they may think they are buying Canadian goods, but may often get
imports.
    From our perspective in Alberta and the oil patch, this does not make any
sense. Why should Canadian businesses - which needed Chinese supply when the
drilling market was stronger - be cut off from alternative suppliers, to help
foreign producers in Mexico or Argentina supply the market in Canada?
    Our supplier, TPCO, has been assessed an arbitrary subsidy margin of 7% -
not high you may think, but 90% of this amount, is due to CBSA's arbitrary
decision to value the company in a restructuring at nil. Canadian laws are not
designed to protect steel pipe producers in Argentina, Mexico, Japan, Italy
and/or Romania, that operate within the Tenaris Group.
    This complaint by Tenaris, ostensibly to protect a cast off division of
Algoma (itself bailed out many times) is really to protect the Canadian market
for the Global Tenaris in Buenos Aires, Argentina.
    I know you are busy, but I felt that I should draw this potential
travesty to your attention. I have been very supportive of your efforts to
make the public service responsible and to establish oversight of the
activities of these unelected officials. We certainly need oversight to deal
with this type of decision.
    It is fine for the CBSA to say - go to court if you do not agree. Should
the CITT find injury, we will have to wait 18-24 months to get justice through
the Judicial review system or through Chinese Government challenges at the
WTO.
    I do hope you can bring some sense into these trade remedy rules - which
may destroy Canadian businesses; leave Canadian oil exploration companies at
the mercy of foreign producers (whose Canadian business is incidental); not to
mention irritating our trading partners. Decisions by the CBSA, merely mimics
the same behavior that Canada objects to, when applied to its Western Canadian
beef, pork and lumber exports to the USA.
    I am copying this letter to Premier Ed Stelmach, and the Ministers of
Finance, International Trade and Foreign Affairs, as well as my M.P.

    Yours truly,

    Allan Cheng
    President and CEO
    CANTAK Corporation



    BACKGROUNDER:

    MARCH 2, 2008

    CANTAK/IMEX BACKGROUNDER:

    On Feb. 7th, 2008, the Canada Board Services Agency (CBSA) made a Final
Determination of dumping and subsidizing on the imports from China of seamless
oil and gas well casing.
    The CBSA, determined dumping and subsidizing into from five Chinese
exporters to Canada of between 37% and 61% and a weighted subsidy of between
2% and 7%. For other companies which did not respond to CBSA's requests for
information the margin of dumping is 91%, and weighted average of margin of
subsidy is 38%.
    It is the view of Cantak Corp. and IMEX Canada Inc., both of which
imports the casings from China, that CBSA did not thoroughly investigate the
issue, made unsound judgments and an inexplicable determination.
    The CBSA relied on circumstantial evidence of government macro-economic
policies that were primarily directed to the steel industry to justify its
claim that prices in the oil and gas well casing industry in China were not
market based.
    By making this finding, CBSA did not have consider the price and cost
data provided by Chinese exporters that showed that they did not dump their
products onto the Canadian market, and could instead rely on an alternative
method to assess Chinese costs and prices. CBSA used prices reported in Metal
Bulletin Report.
    This price data was incomplete and imprecise and did not indicate even
whether the reported price reflected the ex-factory price or included mark ups
for importer, distributor or freight charges.
    The China Iron and Steel Association has been highly critical of these
determinations and has urger the Government of China to seek Judicial review
in Canada as well to pursue China's rights through the World Trade
Organization's Dispute Settlement Mechanism. This would be the first time the
CBSA would be challenged at the WTO and the first time China brought a case
against Canada since it was admitted into the WTO.




For further information:

For further information: Peter Morton, (202) 842-1190, pgmorton@att.net

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CANTAK CORPORATION

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