Linear Low Density Polyethylene (LLDPE)

Review of a Ministerial decision to take anti-dumping action against imports of LINEAR LOW DENSITY POLYETHYLENE (LLDPE) Exported from INDONESIA; but not against imports of LLDPE from Korea, Malaysia and Saudi Arabia

 

BACKGROUND

  1. As a member of the World Trade Organisation (WTO), Australia is bound by the World Trade Organisation Uruguay Round Anti-Dumping Agreement and Agreement on Subsidies and Countervailing Measures (the WTO Agreement).  Article 2.1 of the WTO Agreement provides that a product is considered dumped, ieintroduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.  (The export price is the price paid before any costs in respect of the export are included.  Normal value is usually defined as the price at which a good would be sold in its home market.)

  2. Before any action may be taken against dumped goods the Australian industry concerned must demonstrate not only that there is dumping occurring, but that the industry has suffered injury as a result.  This is done through an application to the Australian Customs Service (Customs) for an investigation into the facts of the case.  If Customs determines that dumping has occurred, it must then establish whether the Australian industry’s performance has deteriorated, whether any injury suffered would be considered material and whether the dumping has caused the material injury to the industry.  Any injury that has resulted from other, clearly identifiable sources must not be attributed to the dumping.  Even if it is found that dumping has not caused material injury, it must be determined whether future dumping threatens to cause material injury to the Australian industry.  This includes an assessment of whether any changes in circumstances would make that material injury both foreseeable and imminent unless anti-dumping measures were imposed.

  3. Under the provisions of the Customs Act 1901 (the Act) Customs has 155 days from the date of initiation of an investigation within which to make a recommendation to the Minister responsible for Customs (the Minister) concerning the imposition of interim anti‑dumping duty.  On the basis of Customs’ recommendations the Minister will then make a decision whether to impose definitive measures.  Once details of the Minister’s decision have been published as required by the legislation, interested parties have up to 30 days to apply to the Trade Measures Review Officer (the Review Officer/TMRO) for a review.  Certain decisions by the CEO of Customs are also subject to TMRO review.  Applicants need to establish to the satisfaction of the Review Officer that, on the basis of the particulars contained in the application, there are reasonable grounds to warrant the reinvestigation of Customs’ finding(s) that formed the basis of the decision.

Reviews by the Trade Measures Review Officer

  1. Subdivision C of Division 9 of the Act provides for reviews by the TMRO of certain decisions of the Minister, including decisions to take anti-dumping action under subsections 269TG(1) and 269TG(2) of the Act.  Subdivision C also describes the procedures to be followed in the conduct of a review.

  2. An applicant must establish to the satisfaction of the Review Officer that there are reasonable grounds to warrant the reinvestigation of the finding or findings specified in the application.  Section 269ZZG of the Act provides that the Review Officer must reject an application if satisfied that the applicant has failed to provide sufficient particulars in relation to the application, including particulars concerning the finding or findings to which the application relates, within the 30 day statutory period.  Unless an application is so unreasonable that it may be rejected in the first instance, the Review Officer will accept it at face value and undertake an investigation.  If an application is made by a party to the original decision, it will be assumed that the applicant has a right to request a review.

  3. The Review Officer must reject an application if the applicant claims that information included in it is confidential, or is information the publication of which would adversely affect a person’s business or commercial interests, and the applicant fails to give a summary of that information to the Review Officer.  The summary must contain sufficient detail to allow a reasonable understanding of the substance of the information without breaching the confidentiality or adversely affect the interests concerned.

  4. Before conducting a review, the Review Officer must publish in a national newspaper a notice indicating that the Review Officer proposes to conduct that review.  Interested parties in relation to a reviewable decision may make submissions to the Review Officer within 30 days after the publication of the public notice.

  5. If an application is not rejected, the Review Officer must make a report to the Minister on the finding(s) specified in the application, by recommending either that the Minister affirm the reviewable decision or that the Minister direct the CEO to reinvestigate the finding(s) which formed the basis of the reviewable decision.  The Review Officer must take account only of information relating to the reviewable decision that was before the CEO when making the findings and recommendations set out in Customs’ report to the Minister.

  6. If an application is not rejected, the Review Officer must make a report to the Minister on the finding(s) specified in the application, by recommending either that the Minister affirm the reviewable decision or that the Minister direct the CEO to reinvestigate the finding(s) which formed the basis of the reviewable decision.  The Review Officer must take account only of information relating to the reviewable decision that was before the CEO when making the findings and recommendations set out in Customs’ report to the Minister.

  7. The Review Officer’s report must be made at least 30 days after the public notification of the review, but not more than 60 days after that notification - or such longer period allowed by the Minister in writing because of special circumstances.

Ministerial Decision

  1. Under s269ZZL of the Act the Minister must, by public notice, affirm the reviewable decision if:

  • the Minister accepts a recommendation from the Review Officer to affirm a reviewable decision; or

  • the Minister does not accept a recommendation by the Review officer to require the CEO to reinvestigate the finding(s) which formed the basis of the reviewable decision.

  1. If the Minister accepts a recommendation by the Review Officer to require the CEO to reinvestigate a finding or findings, s269ZZL prescribes that the Minister must, in writing, require the CEO to make further investigation of the finding(s) and report the result of that further investigation to the Minister within a specified period.  In addition, the Minister must, by public notice, indicate acceptance of the Review Officer’s recommendation, including particulars of the requirements made of the CEO.

  2. After receiving a report by the CEO in respect of a reinvestigation, the Minister must either affirm the reviewable decision or revoke that decision and substitute a new decision.  The Minister must give public notice of that decision.

TMRO Review

  1. By public notice in the Australian Financial Review (AFR) on 27July2000, Customs notified that the Minister had accepted its recommendations that anti-dumping action be taken against imports of linear low density polyethylene (LLDPE) exported to Australia from Indonesia, but not against imports of LLDPE exported to Australia from the Republic of Korea (Korea), Malaysia and Saudi Arabia.

  2. The report of Customs’ investigation leading to these recommendations, the Australian Customs Service, Trade Measures Branch, Report No. 8 Linear Low Density Polyethylene from Indonesia, Korea, Malaysia and Saudi Arabia (February2000) is at Attachment A.

  3. While LLDPE exported to Australia from all four countries covered by the investigation was assessed as dumped, the dumped goods from Korea, Malaysia and Saudi Arabia were assessed as being in negligible volumes, and as not causing material injury, or the threat of material injury, to the Australian industry producing like goods.  Customs considered that dumped LLDPE exported from Indonesia to Australia contributed to material injury suffered by the Australian industry producing like goods.  Accordingly, Customs recommended that the Minister take anti-dumping action against exporters of LLDPE from Indonesia to Australia, but not against exporters of LLDPE from Korea, Malaysia and Saudi Arabia.

Applications for Review

  1. On 23August2000, Qenos Pty Ltd (Qenos) the sole Australian producer of LLDPE, sought a review of certain findings of Customs which led the Minister not to take anti‑dumping action against exporters of LLDPE from Korea, Malaysia and Saudi Arabia.

  2. Qenos’ application challenges Customs’ calculations of normal values for all exporters from Korea and Saudi Arabia which led to its finding that dumped imports from these sources have been made in negligible volumes; and claims that exports from Malaysia (via Singapore) were for “off-grade” products.

  3. On 24August2000 Roger D Simpson on behalf of PTChandra Asri, an Indonesian producer and exporter of LLDPE, sought a review of certain findings of Customs which led the Minister to take anti‑dumping action against imports of LLDPE from Indonesia.

  4. PTChandra Asri challenges Customs’ findings in relation to the causation and threat of material injury by Indonesian imports, claiming that it was not possible for Customs to isolate any price depression that may have been caused by dumping, and that Customs could not demonstrate that material injury has been caused through the effects of dumping.

  5. The non-confidential versions of Qenos Pty Ltd’s application and PTChandra Asri’s application are at Attachment B and Attachment C respectively.  In accordance with the requirements of the legislation, each applicant has provided a non‑confidential version of their application for the public record.

  6. Both applicants’ claims are examined in this report, and reasons given for the TMRO’s assessment in respect of the claims.  Unless otherwise specified, references in this report to Customs’ investigation are to the investigation leading to the Australian Customs Service, Trade Measures Branch, Report No. 8 Linear Low Density Polyethylene from Indonesia, Korea, Malaysia and Saudi Arabia (February2000).

  7. Eight submissions to the TMRO were received and considered in the course of this review.  The submissions, on behalf of Samsung General Chemicals Co Ltd of Korea, Hyundai Petrochemical Corporation of Korea, SK Corporation of Korea, PPI Corporation Pty Ltd, Australian Plastic Supplies, Polyethylene Malaysia SDN BHD of Malaysia, PTChandra Asri of Indonesia and Qenos Pty Ltd at AttachmentD.

  8. KPMG on behalf of Samsung General Chemicals Co Ltd (Samsung) of Korea in their submission of 30 September 2000 raised objections over the statutory authority of the Review Officer to review a decision by the Minister not to publish a dumping notice under section 269ZZA of the Act.  Legal advice was sought and obtained by the Review Officer in relation to this objection.  The objection was not upheld.

  9. Samsung further challenged the authority of the Review Officer to have accepted an application submitted by Qenos that included a front page having a wrong box ticked.  Again on advice from the AGS the Review Officer does have the authority to conduct a review even though the subject decision by the Minister was mis-described in the application form (a tick was placed in the wrong box such that the Minister’s decision was mis-described as a decision to publish a dumping notice, whereas the Minister’s decision was, in reality, a decision not to publish a dumping notice).  The application itself contained sufficient information to enable the Review Officer to ascertain the grounds on which the applicant was seeking a review.  The application was accepted on this basis.  The applicant provided the Review Officer with a corrected prescribed application form.

QENOS PTY LTD

  1. Qenos Pty Ltd, the sole producer of polyethylene (including LLDPE) in Australia, is a joint venture company formed between Orica Australia Pty Ltd (Orica) and Kemcor Australia Pty Ltd on 1July1999.  Orica was formerly the sole producer of LLDPE in Australia, and in January1999 was the applicant requesting measures against the alleged dumping of LLDPE into Australia from Indonesia, Korea, Malaysia and Saudi Arabia.

Basis of Submission

  1. Qenos claims that:

  • Customs’ investigation process involving certain exporters in Korea, Malaysia (and Singapore) and Saudi Arabia failed to follow prescribed guidelines for normal value determination, and consequently resulted in errors being made in assessing the existence of dumping margins;

  • a number of errors were made in assessing normal values for the exporters identified in Korea and Saudi Arabia; and

  • Customs discounted exports from Malaysia (via Singapore) to Australia as “off grade’ with little or no verification undertaken to confirm this claim (by the exporter)

Normal Values

Qenos’ Submission Daelim Industrial Co Ltd (DIC)

28.       Qenos claims that:

  • DIC manufactures the goods and Daelim Corporation(DC) exports them to Australia.  DC does not sell on the domestic market, however, DIC does.  DIC sells LLDPE to distributors and to end-users on the Korean market.  DC exported to five distributors and one end-user in Australia.

  • DIC ‘provided a complete list of its domestic sales for quarters in which there were export sales’ to Customs.  It is noted that ‘Customs considered that all of DIC’s domestic sales were relevant for determining normal values as no pattern of price differences existed among customers’, page 30 of Custom’s Report.

  • Customs’ finding of DIC’s domestic sales reflecting ‘no pattern of price differences existed among customers’ is intriguing to say the least.

  • There are five producers of LLDPE in Korea.  DIC was the first producer of LLDPE on the Korean Market, and has the largest production facility in Korea.  In a market where five producers exist, it is considered probable that price competition would be intense.

  • For Korea, Customs made no comment whether a comparison was made of pricing between the five Korean domestic sellers of LLDPE, but appears to have determined dumping margins only for Daelim Industrial Co Ltd (DIC).  It is not unrealistic to expect such a comparison to have been made, in the light of findings at DIC and the economic impact of the currency crisis at the time of the normal value inquiries.  Customs determined 15% dumping margins for DIC, but found no margins for the other Korean exporters, amongst whom it is probable that price competition would be intense.

Review Officer’s Assessment

30.       While it is not unrealistic to expect such a comparison to be made the Review Officer accepts Customs’ findings in relation to DIC and does not accept that it erred in its normal value assessment and subsequent recommendations to the Minister in relation to DIC. 

31.       The Review Officer does not accept that Customs’ failed to follow prescribed guidelines and in fact Customs’ investigations into Korean normal values assessment and the application of Customs Regulation 180 has been conducted in accordance with the Act and Regulations.

Qenos’ Submission Samsung General Chemicals Co Ltd

33.       The applicant claims that:

  • Customs erred in its normal value assessment by permitting  Samsung General Chemical Co Ltd. (SGC) a volume discount adjustment under subsection 269TAC(8) of the Act when the selected customer’s sales ‘ were comparable to quantities exported to Australia’. 

  • In the event a discount is appropriate for the selected customer, why did Customs not reject the customer selected by SGC and choose an alternate customer (with similar volumes to those exported to Australia) for normal value determination. 

  • Customs commented that SGC provided a ‘complete list of domestic sales’ during the investigation at SCG’s premises, therefore an inference could be made that Customs was not granted access to SGC’s actual sales records but only a summary of alleged domestic sales over the investigation period. 

  • Customs states that SGC’s sales to Australia were to end-users and that the selected customer on the domestic market was also an end-user, therefore Customs should not have allowed a subsection 269TAC(8) adjustment for level of trade.  The sales by SGC on the domestic market were at the same level of trade as the export sales to Australia.

  • the two adjustments for volume and level of trade could represent significant values (resulting in the finding of negative margins for SGC)

  • questions arise as to why SGC requested adjustments be made for domestic warehousing, domestic packing, technical service support, bad debts, bank charges, export packing, export credit terms, volume discounts and level of trade, when Daelim did not.

Review Officer’s Assessment

34.       The Review Officer accepts Customs’ findings allowing an adjustment for both level of trade and volume discount under subsection 269TAC(8) of the Act.  Customs verified the level of trade adjustment being sought by SGC and was satisfied that an adjustment should be allowed.  The Review Officer is satisfied that Customs did not err in its treatment of a volume discount in allowing a negative adjustment to the normal value. 

35.       Customs documented that it was given complete cooperation by SGC during company visits and Customs report that SGC had invested considerable effort in preparing its submission and preparation for the verification visit.  The Review Officer does not believe, based on the documentation that an inference can be drawn that Customs was not provided with access to all of SGC’s actual domestic sales information.

36.       The Review Officer accepts that Customs normal value assessment of SGC was made in accordance with the prescribed guidelines and the Act.  The Review Officer does not accept that any issues arise in Customs treatment of adjustments for SGC based on an assertion by the Australian Industry that if adjustments are sought by one exporter and not by another that this should be grounds for concern. 

Any adjustment to the normal value ascertained by Customs is based upon the individual assessment of that exporter’s case and any differences between the ascertained normal value, for comparability purposes, and the export price are made in accordance with the appropriate provisions as set out in subsection 269TAC(8) of the Act.

 

Qenos’ Submission Hyundai Petrochemical Co Ltd

37.       The applicant claims that:

  • Hyundai Petrochemical Co Ltd(HPC) sells through its agent, Hyundai Corporation (HC) all exports to Australia.  HC sold goods to five distributors and two end users in Australia.  One of the importers Hyundai Australia(HA) is a wholly owned subsidiary of HC, and received a commission from HC in certain types of sales

  • Customs was provided details of domestic sales to all customers by HPC.  Customs selected domestic customers at the same level of trade as the Australian importer.  Some of HPC’s sales were not in the ordinary course of trade.  No details were provided by Customs to state what proportion of sales were not in the ordinary course of trade.

  • Customs’ original normal value report for HPC identified certain grades of LLDPE as being not in the  ordinary course of trade.  The investigating officers were satisfied that it was unlikely that the losses for these grades would be recoverable in the near future.  From the extracts shown in the public file normal value report for HPC it would appear that the majority of grades of LLDPE sales by HPC were not in the ordinary course of trade.  As HPC did not provide costs for the first quarter of 1999 (for any grade of LLDPE), it is difficult to understand how Customs ultimately arrived at a conclusion to base normal values for HPC on domestic selling prices under subsection 269TAC(1) of the Act.

  • Customs’ normal value report on HPC would suggest that a significant proportion of HPC’s sales were at a loss throughout 1998.  Customs’ view was that these losses could not be recovered.  In the absence of 1999 cost data (not provided by HPC for the first quarter, 1999) it would seem most appropriate to have based normal values for HPC on costs for the 1998 year.

Review Officer’s Assessment

38.       Based upon the information on file, including the normal value report and subsequent re-investigation normal value report, the Review Officer is satisfied that Customs did not err in its assessment of HPC’s normal values.  There is sufficient information to indicate that Customs did not base its assessment on data that would be inconsistent with both the prescribed guidelines and the Act. 

39.       Customs’ assessment of normal values was consistent with the method adopted for the other exporters from Korea and is based on sales that were made in the ordinary course of trade and sales that did not satisfy the requirements of section 269TAAD were disregarded for the purposes of assessing them under section 268TAC(1) of the Act.  The Review Officer therefore rejects the applicant’s claim that it would seem more appropriate for Customs to have based normal values for HPC on costs for the 1998 year. 

40.       The Review Officer accepts Customs’ findings in relation to the normal value assessment for HPC and accepts Customs’ interpretation of section 269TAAD of the Act regarding sales not in the ordinary course of trade for the purpose of normal value calculations under section 269TAC(1).

 

Qenos’ Submission: Hanwah Corporation (Hanwah)

41.       The applicant claims that:

  • Hanwah the exporter does not sell LLDPE in the domestic market.  Hanwah Chemical Corporation (HCC) does sell on the domestic market to wholesalers and distributors only.  HCC provided a summary of its domestic sales of like goods to all customers.  Customs selected a domestic customer as suitable for comparison purposes with quantities exported to Australia,  At the same level of trade.

  • Whilst Customs did not state that HCC’s sales in Korea were in the ordinary course of trade Report No. 8 indicates that Customs ‘found sufficient sales’ in the ordinary course of trade.  No comments were made by Customs whether it appeared likely that HCC would have a growing volume of sales in the ordinary course of trade.  It does not seem unreasonable for Customs to have established this position for HCC ( and other producers found to have some sales not in the ordinary course of trade).

  • Customs original investigation at HCC evidenced sales Grade 3120 were in the ordinary course of trade throughout 1998.  For the first quarter of 1999, Customs determined normal value for this grade based on costs (plus profit) because the information supplied by HCC was considered insufficient.

  • Customs also stated in its normal value report that it became aware of foreign exchange currency losses, which were omitted from the 1998 accounts and were expected to be included in the 1999 accounts (due to a change in the accounting of such losses).  Customs was unable to resolve clarification of this issue prior to departure from HCC.

  • As HCC (and all other Korean producers) imported the raw materials naphtha and hexene for ethylene and LLDPE manufacture respectively, it is expected that there would have been significant foreign exchange losses over the investigation period.  If these amounts were not included in the full cost to make and sell (CTMS) calculation (as indicated in Customs’ HCC report on page 26), then the normal value assessment in respect of HCC is deficient.

  • If Customs considered the costing data to be deficient, it should not have been accepted as reliable.  An alternate source of information, which was considered to be more reliable, could have been used.

Review Officer’s Assessment

42.       Having considered all the information that Customs relied on in making their assessment in relation to normal value calculations, the Review Officer accepts that Customs did not err in calculating its normal values for HCC.  From the documentation it would appear that Customs was thorough in ensuring that the normal values for the various grades were assessed based on prescribed guidelines and the appropriate sections of the Act. 

43.       The Review Officer also accepts Customs treatment of the relevant costing data and does not accept the claims by the applicant that Customs erred in its consideration of the data.  According to the information relied upon by Customs in concluding its normal value assessment, there was no evidence that did not support its conclusion that the records of HCC reasonably reflect the costs associated with the production of ethylene; and the production and selling cost of LLDPE.

 

Qenos’ Submission: S K Global Co Ltd (SKC)

44.       The applicant claims that:

  • SKC manufactures LLDPE in Korea and exports to Australia through S K Global Co Ltd (SKG).  Sales to Australia were to two end-users and a distributor. 

  • Customs determined there existed sufficient sales by SKC that were made in the ordinary course of trade(as per comments regarding Hanwah above).  Customs selected three domestic customers (from data supplied by SKC on domestic sales of like goods in Korea) suitable for comparison with exports to Australia.

  • Adjustments were made by Customs based on evidence verified with SKC.  From the information supplied in the report, it is difficult to comment on the appropriateness of the sales selected by Customs and the allowances made.  There is insufficient information and detail to allow constructive comment.

Review Officer’s Assessment

45.       Having reviewed both the original normal value assessment and subsequent investigation arising from the provision of legal advice concerning the interpretation of Customs’ Regulation 180, the Review Officer accepts Customs’ findings. 

46.       The Review Officer is also  satisfied that Customs did not err in its selection of appropriate end users for normal value purposes and also accepts Customs adoption of subsection 269TAC(1) and paragraph 269TAC(2)(c) for ascertaining normal values. 

Qenos’ Submission: Polyethylene Malaysia Sdn bhd (PEMSB)

47.       The applicant claims that:

  • In contrast to the preceding commentary on the selection of sales in Korea either by the seller or the exporter by Customs, there is no indication as to whether the sales proffered by PEMSB (and accepted by Customs) were comparable to export sales to end-users in Australia. (ie were they for similar quantities).

Review Officer’s Assessment

48.       Based on the evidence contained on file the Review Officer accepts Customs’ assessment of normal values determined under subsection 269TAC(1).  The Review Officer also accepts Customs’ determination in its selection of sales proffered by PEMSB as appropriate.

“Off-Grade” Exports

Qenos’ Submission: TCR Singapore

49.       The applicant claims that:

  • Customs notes (page 35) that two shipments of Malaysian LLDPE were exported to Australia by TCR (Singapore), a distributor/trader.  PEMSB manufactured the LLDPE exported by TCR.  It is alleged by PEMSB that these two shipments were ‘off-grade’ or ‘substandard grade’ LLDPE.

  • Customs appears to have accepted the explanation offered by PEMSB without verifying its authenticity.  Customs can readily ‘test’ claims of alleged ‘off-grade’ material via an examination of the local industry’s sales to the end-user in question.It would seem that no verification of PEMSB’s claim was followed up by Customs in Australia.

Review Officer’s Assessment

50.       The Review  Officer rejects the applicant’s claim that Customs appeared to have accepted the explanation offered by PEMSB without verifying its authenticity.  Customs based its verification on PEMSB’s  Internal Manufacturing Specification Document (IMS) and accepted this documentation as verification. 

51.       The Review Officer does not accept that Customs erred in its assessment of “off-grade’ LLDPE based on available information.  Customs accepted as reasonable the IMS provided by the exporter and based its assessment on it, and based on this information the Review Officer accepts Customs’ determination in relation to normal value assessment.

Qenos’ Submission: Saudi Arabia

52.       The applicant claims that:

  • Customs determined that the exporters of LLDPE to Australia were agents based in Hong Kong and Tokyo.  They were not the producers of the goods in Saudi Arabia.

  • Saudi Basic Industries Corporation (SABIC) produces and markets (through a joint venture companies SHARQ and KEMYA) LLDPE in Saudi Arabia.  Customs had ‘lengthy negotiations’ with SABIC to organise a verification visit, however was unable to do so in the required timeframe.

  • SABIC supplied certain supporting information to Customs in respect  of domestic sales and information on cost to make and sell LLDPE by KEMYA and SHARQ plants.  This information could be verified by Customs.

  • In accepting the information supplied by SABIC under sub-section 269TAC (6) as the ‘best’ available information, Customs has made due allowances for certain adjustments requested by SABIC.

  • In the absence of a verification visit, it is difficult to understand how SABIC’s claims for allowances can be ‘fully established’ and supported by documentary evidence, which can reflect an impact in SABIC’s prices on the Saudi home market.

  • Customs has allowed the adjustments on the basis of unverified data.  The Customs manual provides guidance to investigating officers.  Section 6, paragraph 264 suggests:

‘Customs is required to make due allowance where appropriate.  That said, Customs anticipates that exporter’s evidence and supplied in timely and reliable manner.  Customs cannot make adjustments if costs (and cost differences) have not affected price.’

  • It is difficult to understand how Customs can ‘fully evidence’ the allowance afforded SABIC when it is unable to verify (through physical visit) whether the adjustments actually affected prices.  Customs could not have ‘evidenced’ the adjustments made by virtue of a desk audit.  The adjustments made, therefore, to normal values determined for SABIC must be disallowed.

 

Review Officer’s Assessment

53.       The role of the Review Officer to assess whether Customs’ process did follow prescribed guidelines and its findings and conclusions were made in accordance with the Act.  Based on information relied upon by Customs, the Review Officer accepts Customs’ findings and assessment of normal values under subsection 269TAC(6) and also accepts Customs’ treatment of adjustments as requested by SABIC to its normal values. 

54.       The Review Officer is satisfied that Customs’ assessment based on the information gathered and detailed in its normal value report to be reliable and reasonable upon which to determine normal values. 

Qenos’ Submission: Comparable Volumes

55.       The applicant claims that:

  • Customs has stated that it determined normal values based on domestic sales for customers who have purchased similar volumes to those exported to Australia.

  • Australian industry has maintained a level of disagreement with Customs on this issue.  Each export sale of LLDPE to Australia by an exporter must be regarded as its last sale - this is because sales of this nature often are not based on guaranteed volumes over a specified period (as is the case with most domestic contract customers).

  • A comparable domestic customer for normal value determination is one, which has an annual (or contracted) volume similar to the volume exported to Australia by the exporter at any one time (and not the annual volume of the Australian importer.

Review Officer’s Assessment

56.       It is not the role of the Review Officer to assess issues of a policy nature.  

Conclusion and Recommendations

57.       The Review Officer has considered the claims by the applicant, Qenos Pty Ltd, and, in accordance with Subdivision C of Division 9 of the Customs Act 1901, has conducted a review of the decision of the Minister for Justice and Customs not to publish dumping duty notices in respect of imports of linear low density polyethylene (LLDPE) exported to Australia from Korea, Malaysia and Saudi Arabia.

58.       Based on the above assessment the Review Officer does not accept Qenos’ claims that Customs erred in its assessment of normal values in relation to exporters from Korea and Saudi Arabia. The Review Officer further reject Qenos’ claims that Customs’ erred in its assessment of ‘off-grade’ exports from Malaysia. 

59.       The Review Officer also accepts Customs findings in relation to all of its further investigations of normal value assessments based on a broader interpretation of Custom’s regulation 180. 

60.       The Review Officer is satisfied that there has been a thorough investigation into the alleged dumping of LLDPE from Indonesia, Korea, Saudi Arabia and Malaysia.  The Review Officer therefore recommends that the Minister affirm the reviewable decision in respect of LLDPE from Korea, Saudi Arabia and Malaysia.  The Review Officer recommends that no further action be required of Customs in this matter.

PT CHANDRA ASRI

61.       PT Chandra Asri is directly concerned with the production and exportation to Australia of LLDPE from Indonesia.

Basis of Submission

62.       PT Chandra Asri claims that the anti-dumping notice should not have been published as the Minister could not be satisfied that goods exported from Indonesia at dumped prices were causing material injury to the Australian industry producing like goods.

Material Injury

PT Chandra Asri’s Submission

63.       The applicant claims that:

  • In its application Orica stated that the injury period commenced in the first quarter of 1998.  Orica claimed injury in the form of:

    • lost sales and effect on market share;

    • price undercutting and depression; and

    • reduced profits and effect on profitability.

  • In its examination of the economic condition of the Australian industry (Orica), Customs found as follows:

            Re Volume

    • during 1998, sales of goods concerned by Orica increased by a greater proportion than the market growth (para 6.4.2 of the Report refers.)

    • in 1998 Orica’s market share increased (para 6.4.4)

    • Orica’s loss of market share in the first quarter of 1999 (over Q4, 1998) was accompanied by an increase in its selling prices (para 6.4.4).

            Re price

    • selling prices of some imports undercut selling prices in a small proportion of Orica’s total transaction  (para 6.5.1).

    • Orica’s selling prices decreased in 1998 but increased slightly in the first quarter of 1999 (para 6.5.2).

    • Orica’s did not claim price suppression (para 6.5.3).

            Re profit and profitability (para 6.6)

    • both profits and profitability showed improving trends in 1998

    • from December 1997 to March 1999 Orica’s profit margins as a percentage of sales generally increased

    • Orica’s net loss in 1998 was lower than that in 1997 and therefore its performance improved.

    • Notwithstanding the above findings of improved performance during the injury period, Customs concluded that Orica had suffered injury because it made a loss during this period (para 6.7).

Review Officer’s Assessment

64.       Customs’ reported that Orica did show a decrease in its losses in 1998 on domestic LLDPE operations and its profitabilty on domestic sales improved, however Orica was still suffering a loss.  The Review Officer agrees with Customs’ consideration that profits are the key indicator of performance and while Orica may not have been recording a profit, there is still sufficient evidence that indicates that any loss incurred by Orica was contributed to by dumped imports from Indonesia. 

65.       The Review Officer accepts Custom’s finding that Orica suffered a loss during the inquiry period and as a result has suffered material injury contributed to by dumped imports from Indonesia.  The Review Officer agrees with Customs’ assessment having considered the issues involved that the conditions of subsection 269TAE(2B), 

........because of the exportation  of goods into the Australian market the Minister must take account only of such changes in circumstances, including changes of a kind determined by the Minister, as would make injury foreseeable and imminent unless dumping or countervailing measures were imposed.

have been satisfied.  The Review Officer accepts Customs’ finding that exports from  Indonesia have caused material injury to the Australian industry and therefore recommended that anti-dumping measures be imposed.

Causal Link

PT Chandra Asri’s Submission

66.       The applicant claims that:

  • In its examination of the cause of the said injury Customs found that:

Re price effects

  • during 1998, LLDPE prices around the world were in trough of the commodity business cycle.  Low LLDPE prices and profits were not only experienced by Orica but LLDPE manufacturers around the world.(para 7.2.2)

  • generally, Orica’s quarterly average selling prices have been following ethylene prices and SE Asian LLDPE prices.  There is causal relationship between ethylene prices and Orica’s LLDPE prices. (para7.3.1)

  • Orica has long term contracts with its major customers to supply LLDPE.  Selling prices in most of these contracts are tied to SE Asian prices.  Therefore, Orica’s prices would be influenced by SE Asian prices. (para 7.3.1)

  • Reduction in ethylene prices and a reduction in international prices for LLDPE contributed to the price depression suffered by Orica.(para 7.3.5)

  • It was not possible for Customs to isolate any price depression that may have been caused by dumping.

Re volume effects (para 7.3.2)

  • Orica’s sales volume in 1998 was higher that the sales volume achieved in the previous year.

  • Orica’s market share also increased in 1998.

Re profits (para 7.3.3)

  • In the year in which Orica claimed injurious dumping (1998), Customs found that, although Orica’s losses increased marginally in 1998, this increase was due to a very significant increase in losses incurred in exports.  There was a significant improvement in its domestic operations.

  • losses on Orica’s domestic LLDPE operations decreased in 1998, ie its profit performance improved in 1998.

  • gross profit on domestic sales of LLDPE increased significantly - gross profit in 1998 was several times the gross profit for 1997.

  • while profit in the first quarter of 1999 was slightly lower than the average quarterly profits for 1998 it was still am improvement on the average quarterly profits for 1997.

Re profits (para 7.3.4)

    • Orica has not made profits on LLDPE since it commenced production of it in 1992

    • Orica’s (actual) sales increased in 19998

    • Orica’s ‘loss’ by reduced prices was offset by ‘gains’ due to increases sales volume with resultant improved profits and profitability.

    • Orica’s price reduction followed reduced material costs and resulted in improved performance.

  • Notwithstanding the above findings of improved performance by Orica during the period in which it claims injurious dumping (1998), Customs has quite remarkably concluded in para 7.5 of the report that it satisfied that dumping form Indonesia has caused material injury to the Australian industry.  This is despite the Ministerial Direction to Customs referred in para 7.5 of the Report that - only in rare exceptions, would the government expect material injury (or threat) to be proven unless the Australian industry has suffered (or was threatened with (either -

    • a ‘material’ diminution of profits; or

    • a ‘material’ loss of market share

and Customs’ ,finding that Orica’s domestic profit improved and market share increased during 1998 (para 7.5).

  • It can only be assumed that Customs’ conclusion is due to its finding that:-

    a) dumped imports from Indonesia accounted for 2 percent of the Australian LLDPE market;

    b) dumping margins were large and some imports undercut Orica’s prices;   and

    c) Orica’s LLDPE operations are still run at a loss and its financial position weak.

  • The findings of fact by Customs per (a), (b) and (c) above concerning the market share of Indonesian imports, the size of dumping margins, price undercutting by some imports from Indonesia, Orica’s LLDPE operations continue to run at a loss and a weak financial position do not demonstrate that material injury has been caused through the effects of dumping.

  • It can not be reasonably concluded from the findings of Customs per the Report which formed the basis of the decision by the Minister to cause dumping notices to be published vide ss269TG(1) and (2) of the Customs Act, that material injury has been caused to the relevant Australian industry by exports of LLDPE from Indonesia at dumping prices.  In fact the said findings of Customs must reasonably lead to a contrary conclusion.

Review Officer’s Assessment

67.       The Review Officer, based on the informaiton, accepts Customs’ findings in relation to causal link and subsequent recommendation that the Minister publish dumping notices under subsection 269TG(1) and (2) of the Act in respect of PT Chandra Asri of Indonesia (see comments in paragraph 62 above).

Conclusion and RecommendationS

68.       The Review Officer has considered the claims by the applicant PT Chandra Asri, and, in accordance with Subdivision C of Division 9 of the Customs Act 1901, has conducted a review of the decision of the Minister for Justice and Customs to publish dumping duty notices in respect of imports of linear low density polyethylene (LLDPE) exported to Australia from Indonesia.

69.       Based on the above assessment the Review Officer does not accept PT Chandra Asri’s claims that Customs erred in its assessment of material injury and causal link in relation to dumped imports from Indonesia.  The Review Officer therefore recommends that the Minister affirm the reviewable decision in relation to PT Chandra Asri.