Canada border agency says tariffs should apply to LNG modules

11/26/2018

VANCOUVER (Reuters) - The Canada Border Services Agency (CBSA) said on Friday that the modules to be used in a liquefied natural gas export terminal near Vancouver should be subject to hefty import tariffs on certain steel elements, in a blow to the proposed C$1.6 billion ($1.2 billion) project.

In its decision, the CBSA said the fabricated industry steel components (FISC) of an LNG module are not transformed when non-FISC elements are connected, and therefore the 45.8 percent anti-dumping tariffs on the FISC portion should apply.

Woodfibre LNG has estimated that FISC makes up roughly 40 percent by weight of the modules it plans to use to build its LNG export plant.

“We’re reviewing the ruling and evaluating our options,” said Jennifer Siddon, a spokeswoman for the company, without providing further details on Woodfibre’s next steps.

Woodfibre applied for the CBSA scope proceeding in June, in hopes the border agency would determine its modules were not covered in a 2017 ruling by a Canadian trade court that found certain FISC from China, South Korea and Spain were being dumped into the Canadian market, harming local producers.

Woodfibre argued that its modules should not be subject to the tariffs as they are not basic steel structures, but rather manufactured goods that include “a myriad of complex and specialized machinery.” It said applying the tariffs to its FISC modules would be like applying sugar tariffs to the import of bottled soda.

Woodfibre is backed by Indonesian billionaire Sukanto Tanoto’s RGE Group.

Woodfibre and the companies behind other Canadian projects have further argued that LNG modules are complex units that have never been built domestically, with the vast majority of global production concentrated in specialized steel yards in Asia.

The CBSA said Woodfibre could appeal its decision to the Canadian International Trade Tribunal (CITT), which made the original ruling.

The original CITT ruling is currently being considered in Canada’s Federal Court of Appeal, with a decision expected sometime this year.

Construction is expected to start on Woodfibre LNG early next year, with first shipments in 2023. The plant, located some 60 kilometers (37 miles) north of Vancouver, will liquefy and export some 2.1 million tonnes of supercooled gas each year.

($1 = 1.3191 Canadian dollars)

Reporting by Julie Gordon in Vancouver; Editing by Leslie Adler