Review Of A Ministerial Decision To Publish Dumping Duty Notices Under Subsections 269tg(1) And 269tg(2) Of The Customs Act 1901 In Relation To Imports Of Pineapple Juice Concentrate And Pineapple Fruit From Thailand

​ 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, ie introduced 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 goods after exportation 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 material 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. Regardless of whether it is found that dumping has caused material injury, it must also 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 threat of 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 anti-dumping measures.

4. The Trade Measures Review Officer (the Review Officer) is appointed by the Minister for Justice and Customs to review certain decisions in relation to dumping matters. The Review Officer is an independent administrative appeal mechanism with no investigative function. The Review Officer may review a prescribed range of decisions made by the Minister or by the Chief Executive Officer of Customs (CEO). Reviews are conducted only on application from relevant interested parties as defined in the Act under section 269ZX.

5. Subdivision B of Division 9 of the Act provides for reviews by the Review Officer of certain decisions of the Minister, including decisions to take, or not to take, anti-dumping action under subsections 269TG(1) and 269TG(2) of the Act. Subdivision B also describes the procedures to be followed in the conduct of a review.

6. 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 the right to request a review.

7. 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 by the Minister may make submissions to the Review Officer within 30 days after the publication of the public notice.

8. 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 only have regard to information that Customs relied upon to make its decision and any relevant information provided in submissions by interested parties.

9. 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. In this particular case, an extension of 30 days was granted by the Minister in light of the complex and voluminous nature of the evidence and submissions to be reviewed.

10. 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.

11. 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.

PINEAPPLE JUICE CONCENTRATE AND PINEAPPLE FRUIT FROM THAILAND

12. On 8 January 2001 Golden Circle Limited (GCL) lodged an application under subsection 269TB(1) of the Act requesting that the Minister publish a dumping duty notice in respect of:

  • - pineapple juice typically concentrated to 60 - 65% brix usually aseptically packed in 200 litre containers so that it can be shipped without refrigeration. The goods are classified within subheading 2009.40.00, statistical code 20;
  • - prepared or preserved pineapple in syrup or juice in containers not exceeding one litre. The goods are classified within subheading 2008.20.00 statistical code 26; and
  • - prepared or preserved pineapple in containers exceeding 1 litre fruit food service and industrial (FSI).
  • -The goods are classified within subheading 2008.20.00, statistical code 27.

13. The application alleged that the nominated imports were dumped and had caused and threatened to cause material injury to GCL in the form of:

  • - price undercutting;
  • - loss of sales volume
  • - loss of market share; and
  • - loss of profit and reduced profitability.

14. After consideration of GCL's claims, Customs initiated the investigation on 29 January 2001. Shortly after initiation, Customs concluded that the volume of pineapple juice concentrate exported form Indonesia during the investigation period was negligible and terminated that part of the investigation.

15. Customs examined imports of pineapple products over the investigation period of 1 January 2000 to 31 December 2000. Customs placed the Statement of Essential Facts (SEF) on the public record on 20 August 2001 following the granting of an extension of time. Interested parties were given until close of business on 9 September 2001 to make submissions in response to the SEF. Customs continued to receive submissions up to 28 September 2001 and all of these were considered as part of the investigation. Customs' final report was completed on 1 October 2001.

16. For pineapple juice concentrate, typically concentrated to 60% - 65% brix, exported from Thailand, Customs concluded that:

  • - exports have been made at dumped prices;
  • - GCL has suffered material injury in the form of price undercutting, loss of sales volume, loss of market share and reduced profits;
  • - there was a causal link between the dumping and the material injury; and
  • - failure to put in place a prospective dumping duty notice in respect of pineapple juice concentrate from Thailand would result in further exports from Thailand, most likely at dumped prices.

17. For pineapple fruit in containers greater than 1 litre fruit FSI exported from Thailand, Customs concluded that:

  • - exports have been made at dumped prices;
  • - GCL has suffered material injury in the form of price undercutting, loss of sales volume, loss of market share;
  • - there is a causal link between the dumping and the material injury; and
  • - failure to put in place a prospective dumping duty notice in respect of fruit FSI from Thailand would result in further exports from Thailand, most likely at dumped prices.

18. For pineapple fruit in containers less than 1 litre (fruit consumer) exported from Thailand, Customs concluded that:

  • - exports have been made at dumped prices;
  • - GCL has suffered material injury in the form of price undercutting, price depression, loss of sales volume, loss of market share;
  • - there os a causal link between the dumping and the material injury; and
  • - failure to put in place a prospective dumping duty notice in respect of fruit consumer from Thailand would result in further exports from Thailand, most likely at dumped prices.

19. On 4 October 2001 the Minister accepted Customs recommendation to impose anti-dumping duties on certain exports of the following goods from Thailand:

  • - pineapple juice concentrate, typically concentrated to 60%-65% brix:
  • - pineapple fruit prepared or preserved in containers greater than 1 litre; and
  • - pineapple fruit prepared or preserved in containers less than 1 litre.

APPLICATION FOR REVIEW

20. On 9 November 2001, the Review Officer received applications for a review of a Ministerial decision to take anti-dumping action against imports of pineapple juice concentrate and pineapple fruit from Thailand.

21. Applications for review and submissions to the Review Officer were received from KPMG Legal on behalf of SPC Operations Limited (SPC), an importer; Coles Myer Ltd, an importer; and Bell Gully Barristers and Solicitors of New Zealand on behalf of the Pineapple Packers Group of the Thai Food Processors' Association of Thailand, a trade association, the majority of whose members are directly concerned with the production and export of the goods to Australia. The Review Officer also received submissions from the Thai Government.

22. On 17 November 2001 a notice was published in the Australian Financial Review notifying the intention of the Review Officer to conduct a review into pineapple juice concentrate and pineapple fruit from Thailand under section 269ZZK of the Act. The Review Officer invited interested parties to lodge submissions by 17 December 2001 in relation to this matter.

23. A further submission was received from Bell Gully on behalf of the Thai exporters and a further submission was received from the Department of Foreign Trade of Thailand. The Siam Agro Industry Pineapple and other Public Company Limited, (SAICO) provided a submission on 17 December 2001. The Review Officer considered all submissions as part of the process of conducting a review in accordance with section 269ZZk of the Act.

24. The applicants challenged Customs' findings in relation to the following issues:

  • - scope of the dumping application;
  • - statement of essential facts;
  • - like goods;
  • - identity of the exporter;
  • - export price;
  • - normal value;
  • - material injury;
  • - causal link: and
  • - Non-Injurious Price (NIP).

25. The applicants proffered as grounds for the review that the Minister could not be satisfied that:

  • - a decision to publish a dumping duty notice in respect of exports of pineapple fruit in plastic cups was in accordance with the Act as there had been no application for the imposition of dumping duties on such goods;
  • - the recommendations proposed to him by the Chief Executive Officer of Customs were based on an adequate statement of facts;
  • - canned pineapple fruit produced in Australia and 20oz. canned pineapple fruit sold in Thailand were 'like goods' to the pineapple fruit in plastic cups exported from Thailand to Australia;
  • - SPC is the exporter of the goods;
  • - the price paid by SPC to Siam Food Products Public Co. Ltd. of Thailand was at a loss and therefore s269TAA of the Act should apply;
  • - the use of s269TAC(6) of the Act was appropriate in calculating a normal in relation to Thai Pineapple Canning Industry Corp Ltd of Thailand
  • the methodology adopted by Customs in the allocation of costs used in calculating normal values, was correct;
  • - the Australian Industry suffered material injury given that, it had neither experienced price depression nor price suppression;
  • - dumped pineapple caused material injury to the Australia Industry; and
  • - the calculation of NIP was correct.

Bell Gully Barristers and Solicitors

Like goods

Bell Gully's claims are

  • - That B grade concentrate produced in Australia is a "like good' to A grade pineapple juice concentrate exported from Thailand to Australia.
  • - That canned pineapple fruit produced in Australia and 20oz. canned pineapple fruit sold in Thailand are - like goods to pineapple fruit in plastic cups exported to Australia.

26. Customs erred in finding that B grade concentrate produced in Australia is a 'like good' to A grade pineapple juice concentrate exported from Thailand to Australia. The key difference in the characteristics were set out in our letter dated 10 September, but Customs failed to appreciate the extent of these differences in its report. For example, Customs overlooked:

  • - that only A grade concentrate may be classified as 'juice' according to international standards, not B grade concentrate:
  • - the production differences between A grade concentrate (made only from the flesh of the fruit using mechanical scrapers) and B grade concentrate (made from pressing the flesh and skins of the fruit together.

27. Customs erred in finding that canned pineapple fruit produced in Australia and 20oz canned pineapple fruit sold in Thailand are 'like goods' to pineapple fruit in plastic cups exported from Thailand to Australia. The clear physical and end-use differences were summarised in our letter of 25 September. Customs failed to appreciate these differences and failed to deal with them in its report. Its reasoning was limited to a reference to an earlier submission on the issue of whether FSI and consumer in cans and fruit consumer in plastic cups were like goods. That conclusion was wrong. For example, the physical differences included production differences, and differences in the pineapple and syrup contents, differences in size, and different end uses and target markets.

The Review Officer's Assessment

28. In its final finding report on this matter, Customs concluded that locally produced pineapple juice concentrate is a like good to both A grade and B grade imported pineapple concentrate and that pineapple fruit consumer in cans and fruit consumer in plastic cups are like goods.

29. The Review Officer affirms both of these conclusions. There can be no doubt that pineapple juice concentrate and pineapple in containers (in whatever packaging medium) respectively possess characteristics closely resembling the imported goods under consideration. Both goods compete in their own market and are (respectively) directly substitutable in terms of end-use. Admittedly the goods are not necessarily identical in all respects but this does not negate the manner in which the interpretation of section 269T(1) of the Act applies nor does it negate legal precedent in this regard.

Export Price

Bell Gully's claims are

30. Customs erred in finding that SPC was the exporter of plastic cup products to Australia rather than the Thai producer SFP. We refer to the application for review lodged on behalf of SPC.

31. Even treating SPC as the exporter of plastic cup products, Customs erred in calculating the export price. Although Customs correctly stated that the export price in these circumstances should be calculated by deducting costs from the first arm's length selling price in Australia, it is clear from Customs' own spreadsheet that the export price calculation does not in fact take this approach. Customs' calculations commence with the SFP/SPC invoice price and add costs to obtain the export price. This approach is clearly erroneous and not a deductive calculation from the first sale in Australian at all.

32. We note also that Customs' export price and normal value calculations for SFP/SPC were not disclosed to us by Customs at all. They were only calculated from SPC's consultant in the final days of the investigation.

The Review Officer's Assessment

33. Custom's final finding report indicated that the relationship between SFP and SPC, the co-pack agreement was a commercial arrangement that facilitated production of fruit in consumer cups by one party for another. Customs concluded that: 'neither beneficial ownership of the goods at the time that they are exported, nor being the party responsible for the physical movement of the goods, are of themselves enough to define who is the exporter in any given case'.

34. Customs further concluded that: 'SPC is the exporter because it is the owner of the goods prior to exportation pays, for the shipping of the goods and exercises extensive control over the movement of the goods and determines their destination and the sale price of the goods'.

35. The Review Officer affirms Customs' assessment that SPC is the exporter. However the Review Officer does not affirm Customs' determination of a deductive export price. Customs determined that SPC was both the exporter and importer and that the export price would be determined pursuant to subsection 269TAB(1)(c) of the Act.

36. In section 5.2.2.2 of their final finding report Customs state: 'having established all the circumstances of the exportation, Customs has determined export price by starting with the first arms length sale of the goods by SPC in Australia and deducting all relevant cost and an amount of profit to arrive at a deductive FOB export price'.

37. However Customs' determination of the export price is inconsistent with its own final finding report as it did not use the first arm's length sale by SPC to determine a deductive export price: rather it used the sale price by SFP to SPC to determine a free on board (FOB) export price contrary to what is stated in its report.

38. The Review Officer does not affirm Customs determination and in this regard recommends that Customs determine an FOB export price consistent with its statement in its final finding report.

Normal value

Bell Gully's claims are

39. Customs erred in finding that the costs of the sample companies were unreasonable.

40. Customs is required to calculate the costs using the information set out in the company's own records if they are in accordance with the generally accepted accounting principles in the country of export and reasonably reflect the cost associated with the production, or manufacture, and sale of like goods. See regulation 180 and Article 2.2.1.1 of the WTO Agreement.

41. Customs failed to apply this test properly:

  • - Customs' own normal value reports for Malee and SFP concluded that the company's cost allocation was reasonable. These reports were prepared following lengthy normal value visits in which the verification teams received explanation from companies as to cost allocation.
  • - Customs accept that the companies' records were in accordance with GAAP in the country of export. Note that the relevant accounting principle stated that 'when the cost of conversion of each product are not separately identifiable, they are allocated between products on a rational and consistent basis'.
  • - Customs subsequently disregarded the conclusions of the investigating teams by relying on a review carried out by Deloittes which Customs has refused to disclose.
  • - In concluding that the cost allocations were unreasonable Customs mis-applied the legal test by effectively concluding that the purpose of company accounts is not for use in an anti-dumping investigation.
  • - Further more in the case of SFP, Customs accepted that all of SFP's cost items, other than the fruit costs, were reasonable and yet nevertheless erroneously ignored these actual costs in calculating SFP's cost of production.

42. We understand Customs then used a NRV method of cost allocation which allocates costs on the basis of the product's final sales value, less any joint costs of production necessary to process the products to their final basis of completion and an allowance for selling and distribution cost (paragraph 5.1.2.2 of Report):

  • - the NRV method is less reasonable given the different product styles. Although purportedly rejecting each company's methodology in favour of a more accurate method, Customs own NRV method ignores individual product styles and allocates the raw fruit costs based on PJC and canned fruit and then allocated costs to individual product styles on the basis of drained weight (TPC's actual method of cost allocation).
  • - in disregarding the conclusion of the SFP investigating team, the report failed to consider the inconsistent results achieved over successive years 1999 and 2000 using the NRV method (refer to SFP cost Allocation Methodology document dated 1 June 2001).
  • - refer to our letters of 13 and 25 September in relation to additional flaws in Customs' cost allocation method. Customs either failed to consider those points, or in the case of level of trade, wrongly rejected it.

43. Customs erred in finding that normal values for the Thai exporters should be determined pursuant to subsection 269TAC(6) using other seller's costs.

44. Customs only found itself using the last resort provision s269TAC(6) because of its erroneous approach to cost allocation referred to above. (This has created a consequential difficulty for Customs in relation to setting of an interim duty rate for residual exporters and led Customs to take the extraordinary step of imposing provisional measures as if the investigation were continuing.)

45. Having concluded that the sample company's costs were unreasonable, Customs said that it could not rework the costs sample companies to reflect a reasonable allocation of raw material costs to both fruit and juice on the basis of NRV 'for reasons of insufficient information and time constraints' Therefore, Customs:

  • - Calculated the normal value for fruit consumer as:
    • SFP's domestic selling price of 20oz cans, expressed as TCP's cost of production +
    • : SFP's domestic SG&A expense for 20 oz cans +
    • a profit margin for fruit consumer (calculated as the difference between SFPs, domestic selling price, less TCP's cost of production and SFP's domestic SG&A expense for 20oz cans);
    • SFP's domestic SG&A expense for 20oz cans and the hybrid profit margin were then also applied to plastic cups;
  • - Calculated the normal value for fruit FSI using the same approach.

46. The flaws with this approach were summarised in our letters of 13 and 25 September. Contrary to Custom's assertion, if Customs was justified in rejecting the sample companies' actual cost allocation, Customs had sufficient information and time to rework the costs of the sample companies.

47. All the necessary information was provided during the lengthy verification visits that occurred in May. Furthermore not only was there adequate time to carry out this reworking between the SEF and the Final Report but it was also evident from an early stage even before the verification visits took place that Mr Clark was contemplating using this cost allocation method.

48.We note the inconsistency between this approach taken with the normal value for Indonesia where third country sales were used.

49. We note also that Customs took a different approach in relation to the Australian complainant's costs allocation for injury purposes, asserting time constraints. It is unfortunate that the result of claimed lack of time in relation to reworking cost allocations has been used to move away from the Thai exporter's costs on the one hand and to accept the Australian industry's costs (without reworking) on the other hand, both to the disadvantage of the Thai industry.

The Review Officer's Assessment

50. Customs' decision not to accept SFP's cost as reasonable was made after receiving independent accounting advice from Deloitte Touche Tohmatsu (Deloittes). Deloittes reviewed all relevant information gathered by Customs' Officers during their normal visit reports as well as the information provided by the exporters to Customs as part of their exporter submissions. Deloittes found that the method for allocating joint fresh pineapple cost was allocated on a recovery yield basis. This method did not consider the differing quality of the different parts of the pineapple used to produce either canned fruit or juice products. The allocation was not reworked on a comparative net realisable value ratio basis as the appropriate information required to perform the rework was not available at the time of review by Deloittes.

51. The Review Officer affirms Customs' determination not to accept SFP's cost of production (COP) as reasonable and affirms Customs decision to determine normal values under subsection 269TAC(6).

52. However the Review Officer does not affirm Customs' decision to use another seller's selling, general and administrative costs (SG&A) on the basis that Customs does not have available information to establish the SG&A for domestic sales based upon SFP's data. In its normal value visit report, Customs' Officers were able to establish SG&A using SFP's verified data. Therefore it would seem reasonable to use the best available information to assess a level of SG&A in calculating a normal value.

53. Based on the verified information contained in Customs' normal value visit reports and the information used by Deloittes in their report there would appear to be sufficient available information for Customs to establish an amount for SG&A using SPC's data.

54. By Customs own admission in its final findings report on page 45 it would appear to be normal to have a higher unit selling cost for domestic sales; however this is not the case on the Thai domestic market for the pineapple products examined. Therefore it would seem inconsistent and unreasonable to use SG&A and profit for 20oz cans when Customs by its own admission in its normal visit report ascertained SG&A and finance expenses as a % of net sales for plastic cups.

55. The Review Officer therefore recommends that Customs reassess SFP's normal values using the verified SG&A as per Customs' normal value visit report and the recommendations on page 39 of Deloittes' Report.

Material Injury

Bell Gully's claims are

56. As a consequence of Customs' errors in relation to 'like goods' referred to above, Customs erred in its assessment of material injury.

57. Customs erred in finding that there was material injury to Golden Circle. We refer to the application for review lodged on behalf of SPC.

58. Furthermore, Customs erred by including in its assessment of material injury in respect of fruit FSI from Thailand the impact of all exports including those by Malee which Customs had concluded were not dumped.

59. Customs was wrong to take into account information from outside the period of investigation (see report page 80) without advising interested parties that it was extending the period of investigation or otherwise providing an opportunity to respond.

The Review Officer's Assessment

60. As already mentioned, the Review Officer affirms Customs' conclusion in respect of like goods.

61. However the Review Officer has reservations in relation to Customs' assessment of material injury in respect of fruit FSI and fruit consumer.

62. The Review Officer agrees that the Australian industry (GCL) has suffered material injury in the Australian market for pineapple juice concentrate based on the evidence available.

63. However Customs' conclusions in relation to material injury in respect of fruit FSI and fruit consumer are not supported by the evidence available and presented in its report, and objective analysis of the available data does not support the conclusion that GCL has suffered material injury in the Australian market for fruit FSI and fruit consumer.

64. There appears to be some inconsistencies in Customs' report in this regard.

65. In the summary to its final finding report (page 2), Customs indicates that the Australian industry producing fruit FSI and fruit consumer has suffered material injury in the form of price undercutting (price depression in the case of fruit consumer), loss of sales volume and loss of market share. There is no reference to loss of profit for both products.

66. Further, in Customs' analysis of the economic condition of the industry (Chapter 6, pages 82 to 89 of the final finding report), 'Customs concludes that GCL has not suffered injury in the form of lost profits on sales of fruit FSI'; and 'GCL has not suffered injury in the form of lost profits on sales of fruit consumer'.

67. These conclusions are in accord with the available evidence and are supported by Customs' analysis as well as the Review Officer's scrutiny of that analysis. The evidence available indicates that, in respect of fruit FSI, GCL converted losses in 1998 and 1999 to a situation of profit in 2000 and that, in respect of fruit consumer, GCL, despite recording a loss in 1998, was profitable in 1999 and substantially improved that profit in 2000. Over the injury period claimed and examined, the Australian industry improved its profit situation in respect of both fruit FSI and fruit consumer.

68. These outcomes are not consistent with a finding of material injury in respect of these particular goods.

69. Customs' final finding report (Section 7.5 - pages 108 to 109) goes on to conclude that:

  • - imports of Thai fruit FSI are dumped, have undercut industry prices and have taken market share from GCL with a consequent loss of profits; and
  • - imports of Thai fruit consumer are dumped, and have significantly undercut industry prices, in both canned and plastic cup segments of the fruit consumer market; Customs is also satisfied that GCL has lost market share - to the imported goods and a consequent loss of profits.

70. These conclusions appear to be inconsistent with Customs' own analysis of profits in respect of these goods and the Review Officer's examination of the evidence available.

71. In September 1990, the (then) Minister responsible for dumping matters issued a Ministerial Directive concerning material injury. In December 2000, that Ministerial Directive was affirmed by the (then) Minister for Justice and Customs.

72. The Ministerial Directive, which remains in force, states that:

'The Government expects that material injury, or the threat thereof, will only rarely be taken as proven when the Australian industry producing like goods has not suffered, or is not threatened with, a 'material' diminution of profits....'

73. The Review Officer accepts that the Australian industry has suffered material injury in respect of pineapple juice concentrate.

74. However, on the basis of all evidence available, including Customs' own analysis of GCL's profit situation in relation to fruit FSI and fruit consumer, the Review Officer does not accept the proposition that the Australian industry has suffered material injury in respect of these particular goods.

75. Accordingly, the Review Officer will recommend that the Minister direct the CEO to reinvestigate its findings in relation to material injury to the Australian industry in respect of fruit FSI and fruit consumer.

Will dumping continue?

Bell Gully's claims are

76. As a consequence of the export price and normal value errors referred to above, Customs erred in its consideration of whether dumping would continue. In addition, Customs was wrong to discount the future effect of market changes in Thailand.

The Review Officer's Assessment

77. The Review Officer is satisfied that dumping is likely to continue but material injury has not been established for fruit FSI and fruit consumer.

78. The Review Officer affirms Customs' finding that dumping of pineapple juice concentrate will continue to cause material injury.

Non-Injurious Price (NIP)

The Bell Gully's claims are

79. As indicated above, Customs calculated Golden Circle's NIP using its actual costs despite its adoption of an NRV method for the Thai exporters.

The Review Officer's Assessment

80. The calculation of a NIP is based on the non-injurious price being defined as the minimum price necessary to remove any injury caused by dumping. Given that, the NIP has been calculated in accordance with Customs' guidelines, the Review Officer affirms Customs' calculations.

Date of Imposition of Interim Duties

The Bell Gully's claims are:

81. The Minister's decision published on 11 October 2001 that interim duties on pineapple fruit apply retrospectively from 4 October 2001 was unlawful given that no provisional measures were in place, or were capable of being in place.

82. Although Customs' report contained a Proposed Preliminary Affirmative Determination (PAD) in respect of fruit, Customs did not implement that decision and instead implemented the decision by the Minister to impose duties on those exports (refer notice 2001/62). Accordingly, under s269TG(2) the Minister may only declare that s8 of the Dumping Duty Act applies to goods that are exported to Australia after the date of publication of the Minister's Notice on 11 October against residual exporters is unlawful in that no notice was published, no PAD was issued or published and the investigation had already been completed.

The Review Officer's Assessment

83. The Review Officer affirms Customs' decision to make a PAD in respect of pineapple fruit at the time it made its final findings and recommendations to the Minister. The Review Officer affirms Customs' decision to implement the Minister's decision to impose duties on those exports.

Coles Myers Limited (CML)

CML's claims are:

84. For the following reasons, CML respectfully requests that the TMRO review the Minister's decision to publish the dumping duty notice:

  • - The ACS erred in finding that subsection 269TAC(2)(c) cannot be used to determine TPC's NV because TPC did not have domestic sales of like goods;
  • - Subsection 269TAC(2) clearly provides that TPC's NV should be calculated on the basis of it own SG&A cost and profit data in instances where there are no domestic sales of like goods.
  • - Because the ACS has not established that the condition precedent to subsection 269TAC(6) has been satisfied in the instant case, the ACS erred in finding that subsection 269TAC(6) could be used to determine TPC's NV.
  • - The ACS hybrid approach used under subsection 269TAC(6) to determine TPC's NV is not authorised by the relevant legislation or regulations, and has lead to skewed fictional results, consequently resulting in the imposition of unreasonably high dumping margins on TPC's exports of fruit consumer products.
  • - The hybrid approach used by the ACS to calculate TPC's NV under subsection 269TAC(6) is inappropriate because the ACS erred in finding that it may substitute another seller's cost and profit data in place of the data set out in the exporter's own records.
  • - The alleged injury suffered by GCL (i.e., the Australian industry) is not caused by the exportation of fruit consumer products by TPC. Instead, there is a series of unrelated events, including GCL's reluctance to adjust prices to reflect normal market conditions, that clearly have a direct causal link to GCL's alleged injuries.

85. The TMRO is asked to review the ACS's findings regarding the- normal value ("NV") of fruit consumer products exported by Thai Pineapple Canning Industry Corp Ltd ("TPC") to Australia during the investigation period. TPC is the supplier to CML of pineapple fruit.

86. In the Report, the ACS found that NV should be determined pursuant to subsection 269TAC(6) of the Act. NV was calculated using the reworked costs of production of TPC, plus the weighted average of selling, general and administrative costs incurred by another seller in its domestic sales of fruit consumer products, plus profit also based on the others seller's domestic sales of fruit consumer products. See section 5.3.2.3 of the Report. CML submits that the ACS's use of this hybrid approach to calculate TPC's NV under 269TAC(6) is fundamentally flawed for the following reasons.

NV should be determined pursuant to subsection 269TAC(2)(c) of the Act.

87. CML submits that the ACS erred in rejecting subsection 269TAC(2)(c) to determine TPC's NV. In the absence of domestic sales of like goods by the exporter, 269TAC(2)(c) directs the Minister to determine NV on the basis of the sum of:

(i) such amount as the Minister determined to be the cost of production or manufacture of the goods in the country of export; and

(ii) on the assumption that the goods, instead of being exported, had been sold for home consumption in the ordinary course of trade in the country of export - such amounts as the Minister determined would be the administrative, selling and general costs associated with the sale and, subject to subsection 13 [of the section 269TAC], the profit on that sale; (emphasis added)

88. In the instant case, TPC does not sell fruit consumer products on the domestic market in Thailand. Thus, CML believes that NV should have been determined in accordance with 269TAC(2)(c) on the basis of TPC's actual and historical cost data.

89. However, the ACS rejected 269TAC(2)(c) as the basis for determining the NV for TPC for the following reason:

However, TPC does not sell like goods on the domestic market, therefore Customs does not have available information to establish the selling, general and administrative costs for the domestic sales based upon TPC's data ...Customs concludes that it is unable to determine normal values for TPC pursuant to subsection 269TAC(2)(c). See lines 31-37 on page 54 of the Report.

90. CML submits that the fact the TPC does not sell like goods on the domestic market is not a finding that justifies the rejection of 269TAC(2)(c). The very language of 269TAC(2) itself specifies that it is to be applied where NV cannot be ascertained "because of the absence, or low volume, of sales of like goods in the market of the country of export..."

91. Furthermore, 269TAC(2)(c) on its face contemplates that, as a natural consequence of the absence of domestic sales by the exporter, the information used to establish the selling, general and administrative costs ("SG&A costs") and profit fox the exporter's domestic sales would not be readily apparent based upon exporter's data. This is evidenced by the fact that 269TAC(2)(c)(ii) directs the Minister to determine what the SG&A costs and profit would be, based "on the assumption that the goods, instead of being exported, had been sold for home consumption in the ordinary course of trade in the country of a Report." This assumption clearly directs the Minister to determine what the exporter's SG&A costs and profit for domestic sales would have been by reworking the exporter's own data for exported goods (i.e., to reflect a hypothetical scenario in which those exported goods are instead sold for domestic consumption). Therefore, TPC's NV should have been calculated on the basis of its own actual SG&A costs and profit data, and not on the basis of another seller's data.

92. This position is affirmed by the U.S. Department of Commerce decision, in conducting its own dumping investigation of pineapple products from Thailand, to accept as reasonable the accounting and financial data of the majority of the Thai pineapple exporters in order to calculate the anti-dumping rate for each respective company. This highlights that the ACS applied the wrong approach in concluding that the substitution of another seller's SG&A cost and profit data would provide a more reasonable assessment of 'TPC's NV.

93. Although domestic sales figures by the third party sellers may be used to compare the reasonableness of the ACS's methodology for allocating TPC's own costs between exports and hypothetical domestic sales, nothing in 269TAC(2), the Customs Act or related regulations suggests that the SG&A cost and profit data of another seller should be substituted in place of the exporter's own historical cost and profit data.

94. In this instance, the ACS conducted an exhaustive verification of TPC's costs during this dumping investigation, and TPC has complied with the investigation by providing all relevant cost and profit data. Notably, however, there is nothing in the Report which suggests that the ACS considered, or did in fact, rework TPC's historical SG&A cost or profit data in order to arrive at what the SG&A costs and profit would have been for hypothetical domestic sales by TPC, as required by 269TAC(2)(c).

95. Therefore, CML respectfully requests that the TMRO review the Minister's decision to publish the dumping duty notice in. reliance on the ACS's incorrect finding that 269TAC(2)(c) must be rejected as the basis for TPC's NV. More specifically, the TMRO is requested to review the findings by the ACS that, because the TPC does not sell like goods on the domestic market, and therefore Customs does not have available information to establish the selling, general and administrative costs for the domestic sales based upon TPC's data, NV could not be determined under 269TAC(2)(c). CML submits that these are plainly not legitimate grounds to reject the application of'269TAC(2)(c), as the provision clearly envisions that it should be applied precisely in such. Circumstances.

The Review Officer's Assessment

96. Customs' decision not to accept Thai Pineapple Canning Industry Corp Ltd's (TPC) cost as reasonable was made after receiving independent accounting advice from Deloitte Touche Tohmatsu (Deloittes). Deloittes reviewed all relevant information gathered by Customs Officer's during their normal visit reports as well as the information provided by the exporters to Customs as part of their exporter submissions. Deloittes found that the method for allocating joint fresh pineapple cost was weight based. This method did not consider the differing quality of the different parts of the pineapple used to produce either canned fruit or juice products. The allocation was reworked on a comparative net realisable value ratio basis.

97. The Review Officer affirms Customs' determination not to accept TPC's COP as reasonable and affirms Customs' decision to determine normal values under subsection 269TAC(6).

98. However the Review Officer does not affirm Customs' decision to use another seller's SG&A on the basis that Customs did not have available information to establish the SG&A for domestic sales based upon TPC's data.

99. Customs also reallocated TPC's selling, general and administration costs on the basis of relative sales revenue, TPC having allocated these costs on the basis of production costs which was also considered to be unreasonable (see Customs' final finding report on page 52). Based on the verified information contained in Customs' normal value visit reports and the information used by Deloittes in their report there would seem to be sufficient available information for Customs to establish an amount for SG&A using TPC's data.

100. The Review Officer therefore recommends that Customs reassess TPC's normal values using TPC's data to establish SG&A costs and profit.

The condition precedent to subsection 269TAC(6) of the Act has not been established by Customs

CML's claims are:

101. The ACS found that TPC's NV should be determined pursuant to subsection 269TAC(6). This provision provides:

Where the Minister is satisfied that sufficient information has not been furnished or is not available to enable the normal value of goods to be ascertained under the preceding subsections (other than subsection (5D)), the normal value of those goods is such amount as is determined by the Minister having regard to all relevant information.

102. As a general matter, 269TAC(6) is a default provision to be used as a matter of last resort when all other provisions have been exhausted and determined inapplicable. Because of the nature of default provisions in legislative schemes, all reasonable efforts should be made to make use of the primary sections of the legislation before resorting to the default provision (ie., 269TAC(2) should be used before 269TAC(6)). More specifically, 269TAC(6) is to be applied only upon satisfaction of the following condition: when sufficient information has not been furnished or is not available to enable the normal value of goods to be ascertained under the preceding subsections.

103. In this instance, the ACS recommended that NV be determined pursuant to subsection 269TAC(6) because it is "satisfied that sufficient information is not available to enable it to ascertain normal values under the preceding subsections." See line 2 of page 55 of the Report. It is CML's understanding, however, that TPC has furnished all of its relevant cost and profit data to the ACS. The Report does not refute this understanding. Thus, it is submitted that the ACS has failed to establish, beyond making superficial conclusions, the relevant findings to support that the condition provided in 269TAC(6) has been satisfied (ie., that the information was not available or not furnished).

104. As discussed earlier, the ACS conducted an exhaustive verification of TPC's costs and profit during this dumping investigation, and TPC has complied with the investigation by providing all relevant cost and profit data. Based on the ACS findings in this investigation, the apparent point of contention with TPC's cost information is their method of allocation, and not the availability of the actual data, nor any identifiable reluctance on TPC's part to furnish information. Accordingly, the ACS's reliance on 269TAC(6) to determine NV for TPC is erroneous.

105. Moreover, having established earlier that 269TAC(2)(c) is intended to be used in the absence of domestic sales of like goods by the exporter, the application of 269TAC(2)(c) precludes the application of the default section 269TAC(6).

106. Therefore, CML respectfully requests that the TMRO review the Minister's decision to publish the dumping duty notice based on a finding of TPC's NV under 269TAC(6). The ACS's NV determination under 269TAC(6) should be rejected in favour of the approach required by 269TAC(2)(c) (i.e., NV should be recalculated using TPC's actual and historical SG&A cost and profit data).

The Review Officer's Assessment

107. Based on the circumstances surrounding the available information used by Customs in assessing normal values, the Review Officer affirms Customs' decision to determine normal values under subsection 269TAC(6) of the Act.

108. However as discussed earlier in relation to the use of TPC's actual and historical SG&A cost and profit data the Review Officer is of the opinion that Customs should reassess TPC's normal values.

The hybrid approach used under subsection 269TAC(6), to determine TPC's NV is not authorised by the relevant legislation, and leads to skewed fictional results.

CML's claims are:

109. Alternatively, assuming that the ACS's finding that 269TAC(6) may be used to determine the NV is acceptable, 269TAC(6) does not authorise the Minister 1o use any method, including the hybrid approach, to allocate cost. The provision simply authorises the Minister to use "all relevant information."

110. Because TPC did not have any domestic sales of like goods, the ACS used a hybrid approach to determine TPC's NV by reworking the costs of production of TPC, plus the weighted average of SG&A costs incurred by another seller in its domestic sales of fruit consumer products, plus profit also based on the other seller's domestic sales of fruit consumer products. However, this hybrid approach does not have a justifiable basis in either the law or in sound economic or accounting policy.

111. Regulation 181 of the Customs Regulations 1926 specifies the methods of calculation that may used by the Minister to determine the costs and profits under subsection 269TAC(6) of the Act. There is no authority in Regulation 181 for the ACS's finding that the SG&A costs and profit of another seller may be substituted for the exporter's own cost and profit. Regulation 181(5) does suggest that if 269TAC(6) of the Act is used to calculate the exporter's profit, then a comparison to the amount of profit normally realised by other exporters or producers in domestic; sales of like goods may be had. However, Regulation 181(5) does not authorise the ACS to substitute another seller's SG&A costs (or profit for that matter) in place of the exporter's historical cost and profit. Notably, Regulation 181(5) deals only with profit, not SG&A costs. Regulation 181(5) also only permits a comparison with a sample of exporters or producers (plural in order to derive an accurate profit figure that is reflective of the industry. In this instance, the Report indicates that the ACS erred twice by conducting TPC's profit analysis using only one seller, and then by using the seller's information for substitution purposes rather than comparison purposes.

112. By substituting the costs and profits of a third party seller for TPC's own cost and profit, the ACS has not calculated amounts that reflect reality, but rather fictional amounts which do not take into account actual cost structures, differences in volumes of sale, or other factors such as the unique financing costs of a particular company. For example, in the context of a dumping investigation, this hybrid approach could lead to a result in which a highly capitalised and efficient company with minimal debt and high volumes of export sales, and consequently lower costs and per-unit profits, is prejudiced by the substitution of inflated costs and profits of a smaller, debt burdened company with smaller volumes of domestic sales but higher per-unit profits.

113. Moreover, calculating NV under the ACS's hybrid approach may yield higher than normal profit margins for TPC as the comparison to domestic sales (made by another seller) is generally distorted by the fact that domestic sales do not comprise a significant portion of TPC's business. For these reasons, the ACS's hybrid approach is to be flatly rejected as a matter of sound and equitable economic policy in that it has lead the ACS to impose unreasonably high dumping margins on TPC's exports of fruit consumer products (32.31 margins on fruit consumer products).

114. Notably, the U.S. Department of Commerce, in conducting its own dumping investigation of pineapple product from Thailand, accepted as reasonable the majority of the Thai pineapple exporter's own cost allocation methods. Accordingly, CML respectfully requests that the TMRO review the Minister's decision to publish the dumping duty notice in reliance on the ACS's erroneous finding of a fictional NV for TPC under the economically flawed and unlawful hybrid approach.

The Review Officer's Assessment

115. See the Review Officer's assessment in paragraphs 96-99 regarding Customs' approach in determining NV using data from third parties. The Review Officer recommends that Customs reassess TPC's normal values using the reworked SG&A data as per the recommendations on pages 36-37 of the report by Deloittes.

TPC's NV must be calculated on the basis of its own records, cost and profit data in accordance with Regulation 180 of the Customs Regulations 1926.

CML's claims are:

116. Moreover, the undeniable fact that companies are entitled to use their own information in calculating NV is recognised in Regulation 180 the Customs Regulations 1926. Regulation 180 provides:

(a) If the exporter or other seller of like goods keeps records relating to like goods;

and

(b) The records:

(i) are in accordance with generally accepted accounting principles in the country of export; and

(ii) reasonably reflect the costs associated with this production, or manufacture, and sales of like goods;

The Minister must calculate -the costs using the information set out in the records.(emphasis added)

117. In this instance, it is CML's understanding that TPC keeps its records in accordance with the generally accepted accounting principles ("GAAP) of Thailand, and that those records reasonably reflect the costs associated with the production and sales of like goods. The Report does not refute this understanding or indicate otherwise. To the contrary, the Report finds that "Thai exporters' accounts were-, prepared in accordance with Thai GAAP, but the allocation methods used were quite varied." See line 1 on page 38 of the Report.

118. The ACS's major point of contention against using TPC's own SG&A cost and profit data is neither that the "records" were not in accordance with Thai GAAP, nor that the "records" did not reasonably reflect costs, but merely that the "method of cost allocations" were not reasonable. However, as long as TPC's records reflect actual costs, those records reasonably reflect the costs associated with the production, or manufacture;, and sales of like goods. Thus, in accordance with Regulation 180, the Minister must calculate the costs using the information set out in those records. The fact that the ACS may disagree with the method of cost allocation by TPC does not give the ACS the authority to substitute the overheads and profit data of another seller in order to calculate TPC's NV. Arguably, the remedy in such a situation is to rework TPC's own data in accordance with an acceptable method.

119. For these reasons, CML submits that the findings made by the ACS do not justify or authorise departing from the mandate of Regulation 180. Accordingly, CML respectfully requests that the TMRO review the Minister's decision to publish the dumping duty notice in reliance on the ACS incorrect finding of a fictional NV based on another seller's records, overheads and profit data.

The Review Officer's Assessment

120. The Review Officer affirms Customs decision not to accept TPC's COP as reasonable (see paragraph 97).

Material Injury and Causation

CML's claims are:

121. The TMRO is also asked to review the ACS's findings concerning the alleged injury caused by dumped imports of fruit consumer products. In summary, with regard to fruit consumer products, the ACS found that the primary injury suffered by GCL consists of price undercutting (i.e., where the imported product sells below the price of the Australian manufactured product), loss of sales volume, and loss of market share. See Conclusions (section 6.4) at page 97 of the Report.

122. CML submits that the alleged injury suffered by Golden Circle Limited ("GCL") pineapple fruit consumer operations is not caused by the exportation of fruit consumer products by TPC. Instead, there appear to be a series of unrelated events that clearly have a direct causal link to GCL's alleged injuries.

123. As you are aware, GCL has not historically operated in a highly competitive environment in so far that it handles more than 80% of the pineapple produced in Australia (according to the Report, GCL is the sole Australian producer of like goods). This is further evidenced by the fact that GCL has managed to hold prices "at substantially unchanged levels" during the period in question. See page 66 of the Report.

124. Furthermore, the ACS itself found that its analysis did not show that GCL experienced any price depression (i.e., the reduction in selling prices of the Australian product in the domestic market), or price suppression (i.e., the margin between costs and selling prices is reduced) over the period 1998 to 2000. See pages 71 and 75 of the Report. To the contrary, the ACS found that GCL's margin between price and the costs to make, and sell widened in each subsequent year over 1998.

125. In addition, it is likely that the following factors have contributed to GCL's injury and accordingly have caused injury to GCL's pineapple fruit consumer operations. These factors either have not been evaluated fully or have not been considered at all by the ACS under its analysis of other possible causes of injury, as is required by 269TAE(2A) of the Act. See section 7.4 of the Report.

 

The Review Officer's Assessment

126. The analysis of material injury is contained at paragraphs 60 to 74 above.

127. The Review Officer has concluded that the Australian industry has suffered material injury caused by dumped imports of pineapple juice concentrate from Thailand but has reservations in relation to material injury allegedly caused by dumped imports of fruit FSI and fruit consumer from Thailand.

128. As the Review Officer has reservations in relation to the issue of material injury in respect of these particular goods and the matter of causation is a secondary issue to the finding concerning material injury, the Review Officer is unable to assess the issue of causation.

Economies of Scale

CML's claims are:

129. GCL is a diverse food and beverage company with 400 different product lines on offer. Unlike many of its Thai counterparts, GCL does not concentrate its business around just pineapple consumer products. In addition, unlike Thai producers, it is apparent that GCL also deals in a niche market segment consisting of much smaller plastic cups of pineapple. The start-up and overhead costs to maintain this niche market segment tend to be high, and are usually spread across all product lines. These are costs that Thai producers/exporters that deal primarily with lower grade pineapple consumer products do not ordinarily incur.

130. GCL is also a highly integrated firm with high investment and operation costs at all stages of production from the raw material stage through processing, storage and packing. Because of the seasonal nature of pineapple anal other fruits, GCL has had to develop large warehousing facilities, including cold storage anal sophisticated systems to keep track of raw materials and finished good inventory. The floor-manufacturing floor-space rovers approximately 8.3 hectares. Included at GCL's Northgate site is:

- a hi-tech can-supply system commissioned in 1997;

- a sugar refinery to refine raw sugar to a quality suitable for use in GCL products;

- plant for the treatment of effluent before being discharged into the sewage system;

- a cold store complex, consisting of ripening rooms, thawing rooms and a frozen storage facility;

- a food hall processing plant: to produce niche products in glass, plastic and cans; and

- an on-site warehousing facility (an offsite warehouse is also used by GCL).

131. Accordingly in looking at any claims of material injury, an objective appraisal would suggest that the high costs associated with economies of scale of GCL's nature (e.g. wide product range, and high vertical integration) offers a more realistic explanation why GCL is experiencing competitive difficulty. These high costs will unavoidably affect GCL's price scales for fruit consumer products. The Thai pineapples industry, on the other hand, is not as integrated, does not deal in niche market products, and is more or less export orientated. Therefore, Thai producers may not experience the same cost base as GCL.

132. CML submits that the Report does not indicate that the ACS adequately made a fair comparison of the two industries to assess the extent that scale was a factor in contributing to GCL's injury.

 

The Review Officer's Assessment

133. The analysis of material injury is contained at paragraphs 60 to 74 above.

Upgrade Capital Costs

CML's claims are:

134. There has been a recent substantial investment in the upgrade of the processing and packaging area by GCL as well as the renovating of its old can-making facilities. In total, an investment of $17 million was committed to refurbishing old can-making plant, and installing machinery to automate the mixing, filling and packaging processes for a range of products. capital investments of about $13.5 million directly attributable to the goods, relate to automation of the pineapple processing line. The first stage of the project was; completed in September 1997; the final stage was completed in January 1999. See page 92 of the Report. These costs need to be amortised over its product range and will affect return in the short term (i.e., during the investigation period).

135. GCL's claim regarding the commencement of injury suggests that there is clear correlation:

"Injury commenced some time ago, but in the past [GCL] has been able to absorb this injury. Due to the more competitive markets in which it now operates and the increased volumes and reduced prices of dumped imports observed recently, GCL has been forced to seek relief." (See page 63 of the Report).

136. An alternative assessment suggests that GCL's recent inability to absorb "this injury" (or what is properly known as the natural consequence of competition) is more likely a result of its desire to recoup its high investment costs incurred between 1997 and 1999. In these circumstances it is therefore not surprising to find that the alleged injury coincided with the undertaking of GCL's costly upgrade project. Accordingly, the "relief" sought in this instance may not be due to any injury caused by dumped imports, but is the result of GCL's desire to accelerate the return on its capital investment.

137. The ACS, in evaluating other possible causes of injury, does not address this factor as a possible cause of GCL's injury

 

The Review Officer's Assessment

138. The analysis of material injury is contained at paragraphs 60 to 74 above.

Integrated Industry Structure

CML's claims are:

139. GCL handles more than 80% of the pineapple produced in Australia. From one perspective it holds an obvious competitive edge on the Australian market for pineapple consumer products.

140. A percentage of GCL's shareholding includes, but is not limited to, pineapple growers. Growers of other fruits and vegetables also hold equity in the company. Five of the seven directors on GCL's board of directors were fruit growers that held shares in GCL during the year.

141. The Report recognises that GCL is to a large extent bound to accept production of pineapples by its growers (and shareholders) based upon their eligible shareholdings. Under its contractual obligations, GCL is often required to take fruit even when the market situation does not warrant it. See pages 105-107 of the Report.

142. Although the ACS, in evaluating other possible causes of injury, does recognise that the pineapple fruit intake mechanism has contributed to the injury suffered by GCL, it does not fully address this.

 

The Review Officer's Assessment

143. The analysis of material injury is contained at paragraphs 60 to 74 above.

Shift in Consumer Consumption/Preference

CML's claims are:

144. Because imports of pineapple consumer products from Thailand tend to be of a lower quality than GCL's Grade 'A' brand products, the lower grade Thai products do not directly compete with GCL's premium brand - the bulk of GCL's canned pineapple output. Thus, the dumping of these lower quality goods could not have caused the alleged loss of sales volume or loss of market share suffered by GCL. Instead, changes in the consumption patterns of processed fruit in Australia have had a more significant impact causing the alleged injury suffered by GCL.

145. There have been substantial changes in consumer conscription of processed fruits in Australia. The Australian Bureau of Statistics issued a report on 25 October 2000, entitled "Apparent Consumption of Foodstuffs (4306.0)." The report clearly indicates that the average per capita consumption of processed fruit has declined steadily since 1978-79. At the same time, the increase in the per capita consumption of fresh fruit has been exponential. An obvious explanation for this shift in preference is the "health kick" experienced throughout the world in the 1980s to the present.

146. This general shift in preferences from processed canned fruit to fresh fruit tends to impact primarily producers of Grade 'A' premium canned fruit products. As the highest grade of canned fruit, Grade 'A' products are the most expensive, and more directly compete with fresh fruit for consumer demand. Because GCL handles primarily Grade 'A' premium brand products that sell purely on quality, the general decline in consumer demand for processed fruit is exasperated for GCL as consumers previously inclined to purchase only the highest grade of canned fruit are now more likely to purchase fresh Emit. Consumers of lower level generic brands may also shift to fresh fruit, but not to the same extent because of price differentials.

147. Accordingly, since GCL does not deal generally with lower quality generic brands of canned fruit, the injury (ie., loss of sales volume or loss of market share) resulting from the decline in consumer preference is greater for GCL than other suppliers who deal in larger volumes of various grades of canned fruit (for example, CML's strategy is to stock in three levels products, Grade A, B and C, to ensure that it caters for all customers)

148. The changes in per capita consumption are not restricted to the Australian market. Studies by the United States Department of Agriculture Economic Research Service reflect similar trends away from processed to fresh fruit,

149. The ACS, in evaluating other possible causes of injury, does not evaluate this factor as a possible cause of GCL's injury.

 

The Review Officer's Assessment

150. The analysis of material injury is contained at paragraphs 60 to 74 above.

Non-Injurious Price

CML's claims are:

151. That the above series of unrelated events clearly have a direct causal link to GCL's alleged injuries is supported by the ACS's finding in regard to the non-injurious price ("NIP").

152. The ACS has compared the available NIP to their respective NVs and in each relevant case established that the NIP is higher than the comparable NV. See page 114 of the Report. In so far that the NIP generally represents the price at which the Australian market industry (i.e), GCL, with 80% of the market) might reasonably expect to sell its goods in the Australian market if local prices in that market were not affected by the dumped imports, the higher NIP demonstrates that there are unique factors specific to GCL's operation that constrain its ability or willingness to sell pineapple consumer products at competitive prices.

 

The Review Officer's Assessment

153. The calculation of a NIP is based on the non-injurious price being defined as the minimum price necessary to remove any injury caused by dumping. Given that, the NIP has been calculated in accordance with Customs' guidelines, the Review Officer affirms Customs' calculations.

KPMG's claims are:

154. The grounds for the application are, in summary, as follows:

  • - The Minister's decision to publish a dumping duty notice in respect of exports of pineapple fruit in plastic cups was unlawful as there had been no application for the imposition of dumping duties on such goods:
  • - The Minister's decision to publish a dumping duty notice in respect of exports of pineapple juice concentrate from Thailand was unlawful as it was based on recommendations made by the Australian Customs Service (Customs) that, in turn, were based on facts contained in the Statement of Essential Facts, and, consequently, were precluded from being made to the Minister:
  • - Customs and the Minister erroneously concluded that pineapple fruit in plastic cups was a 'like good' to pineapple fruit in cans;
  • - Customs and the Minister erroneously concluded that SPC was the exporter of pineapple fruit in plastic cups and, consequently, erroneously calculated the export price for such goods:
  • - Customs and the Minister erroneously calculated the normal value for pineapple fruit in cans greater than one litre and pineapple fruit in plastic cups;
  • - Customs and the Minister erroneously concluded that the Australian industry producing like goods had suffered material injury and that this had been caused and is likely to continue to be caused by the goods under investigation.

155. The basis for each of these grounds for a review of the Minister's decision to publish a dumping duty notice are set out in detail below.

Background

156. Customs completed its investigation into the alleged dumping of

  • - pineapple juice concentrate from Thailand;
  • - pineapple fruit prepared or preserved in containers greater than one litre ('fruit FSI"); and
  • - pineapple fruit prepared or preserved in containers less than one litre ("fruit consumer"),
  • - exported to Australia from Thailand on 1 October 2001.

157. In its Final Finding Report No. 41 dated 1 October 2001 ("the Report"), Customs concluded in respect of pineapple juice concentrate, fruit FSI and fruit consumer that:

  • - exports of the goods under investigation from Thailand had been at dumped prices;
  • - the Australian industry has suffered injury;
  • - dumped imports from Thailand caused material injury to the Australian industry producing like goods; and
  • - material injury would continue to be caused to the Australian industry producing like goods if the goods under investigation continue to be exported at dumped prices.

158. Customs, therefore, recommended to the Minister that anti-dumping action be taken against pineapple juice concentrate, fruit FSI and fruit consumer exported from Thailand.

159. The Minister accepted Customs' recommendations and declared that Section 8 of the Customs Tariff (Anti-Dumping) Act 1975 applies to pineapple juice concentrate, fruit FS1 and fruit consumer exported to Australia from Thailand after 4 October 2001

Grounds for review

Scope of Dumping Application

KPMG's claims are:

160. At Sections B1.1 and B1.2 of the application lodged with Customs by Golden Circle Limited ("GCL"), GCL was required to fully describe the imported goods against which action was sought and to identify the tariff classification of those goods.

GCL described the goods as follows:

"Pineapple Juice (concentrate):

The imported product is pineapple juice typically concentrated to 60 - 65% brix (...) and is usually aseptically packed in 200 litre containers so that it can be shipped without refrigeration. Preservatives may be added.

Prepared pineapples (fruit):

The imported product is prepared or preserved pineapples in syrup or juice and falls into two sub-categories by end-customer and container size:

  • - container sizes more than 1 litre (...) are sold to the food service
  • - and industrial market; and container sizes not exceeding 1 litre (...).

The two sub-categories are represented by separate tariff sub-classifications. "

The tariff classifications identified by GCL consisted of the following:

"Pineapple Juice (concentrate):

2009.4000.20 pineapple concentrate

Pineapples (fruit):

2008.2000 pineapples

2008.2000.26 pineapples in containers not exceeding one litre... (consumer)

2008.2000.27 pineapples in containers exceeding one litre ... (food service/industrial)."

162. The Notice of Initiation of an Investigation subsequently published by Customs in a Commonwealth of Australia Gazette and the Australian Financial Review on 29 January 2001 stated that:

"The goods covered by this notice are:

  • - pineapple juice concentrated to 60 - 65% brix usually aseptically packed in 200 litre containers... The goods are classified within subheading 2009.40.00, statistical code 20;
  • - prepared or preserved pineapple in syrup or juice in containers not exceeding one litre. The goods are classified within subheading 2008.20.00, statistical code 26; and
  • - prepared or preserved pineapple in containers exceeding 1 litre. The goods are classified within subheading 2008.20.00, statistical code 27."

163. Customs' Initiation Report contains a similar description of the goods the subject of the investigation, as does Australian Customs Dumping Notice No. 2001/09.

164. In this context, we note that the relevant subheadings in Schedule 3 to the Customs Tariff referred to by both GCL and Customs in respect of pineapple fruit are in fact the following:

  • - 2008.20.00/26 Pineapples, canned, in containers not exceeding 1 L (litre)
  • - 2008.20.00/27 Pineapples, canned, in containers not exceeding 1 L (litre)

(emphasis added)

165. It is therefore clear that the application by GCL and the dumping investigation initiated by Customs were limited in scope to "canned" pineapples and did not extend to pineapples in other kinds of containers, such as in plastic cups. Had GCL wished to include pineapple in plastic cups in its application it was required by the approved application form to have made reference to them in the description of the goods and to subheading 2008.20.00/28, being the subheading to which pineapple in plastic cups is classified. As it did not, it is clear that pineapple in any containers other than cans did not form part of its application and this was accepted by Customs when it initiated the investigation.

166. Customs then went outside the scope of the application and broadened its investigation. Customs stated at Section 3.2, lines 14 to 20 on page 10 of the Report that:

"Therefore, it was determined for the purpose of this investigation that the word "containers" when used by the applicants to describe the goods against which action was sought in relation to fruit was intended to mean any containers and not just fruit in metal cans.

Customs considers that certain pineapple products, in particular pineapple in plastic cups, classified to sub-heading 2008.20.00, statistical code 28, are the goods. "

167. Customs erred by taking into account irrelevant considerations to broaden the scope of the Australian industry's application to include pineapple classified to sub-heading 2008.20.00, statistical code 28 when these goods had not been included in the application or the investigation as initiated by Customs. It is not for Customs to determine the intent of the applicant

168. We, therefore, submit that there was no lawful basis for Customs to include pineapple in plastic cups in its investigation, or for the Minister to publish a dumping duty notice in respect of pineapple in plastic cups.

169. Without prejudice to our position that there was no legal basis for the inclusion of pineapple in plastic cups in the investigation, had they been included there are other grounds for review of the Minister's decision to publish a dumping duty notice. These are set out below.

The Review Officer's Assessment

170. Based on Customs' assessment that pineapple in plastic cups is a like good to pineapple in cans, the Review Officer affirms Customs' decision to include pineapple in plastic cups as part of its investigation.

171. The Review Officer does not accept the claim that Customs erred by taking into account irrelevant considerations to broaden the scope of the Australian industry's application and rejects the claim that Customs determined the intent of the applicant.

Statement of Essential Facts

KPMG's claims are:

172. Section 269TDAA(1) of the Customs Act 1901 requires the Chief Executive Officer of Customs ("CEO") to place on the public record, within 110 days of initiation of an investigation arising from an application under section 269TB or such longer period the Minister allows, a statement of the facts on which the CEO proposes to base a recommendation to the Minister.

173. A Statement of Essential Facts, dated 17 August 2001, was placed on the public record on 20 August 2001, a copy of which is attached.

174. In regards to fruit consumer we note that at Section 5.2.2.2 of the Statement of Essential Facts the following statement was made by Customs:

"Having established all the circumstances of the exportation, Customs intends to determine export prices by starting with the first arms length sale of the goods by SPC in Australia and deducting all relevant costs and profit to an FOB export price, pursuant to subsection 269TAB(1)(c)." (emphasis added)

175. Further at Section 5.3.2.2 Customs stated:

"That information may be used as the basis for the determination of normal values for pineapple in plastic cups." (emphasis added)

176. As at the date of the Statement of Essential Facts, Customs had not calculated an export price or a normal value relating to exports of fruit consumer product in plastic cups to Australia by Siam Food Products Public Co Ltd ("SFP"). Customs, therefore, was not able to determine if pineapple in plastic cups had been, was being or was likely to be dumped. As these "facts" (i.e. the export price, normal value and dumping margin of fruit consumer in plastic cups) were not included in the Statement of Essential Facts, the CEO is statute-barred from making any recommendation to the Minister on these "facts", namely the export price, normal value and dumping margin of fruit consumer product in plastic cups exported to Australia during the period of investigation. To do otherwise is clearly a breach of the statutory obligation in Section 269TDAA of the Customs Act 1901 and also constitutes a breach of natural justice.

177. Further, we note that these are not the only "facts" omitted from the Statement of Essential Facts in relation to SFP and SPC: see also paragraph 5.4.2.2.

178. Accordingly, any report to the Minister cannot lawfully make any recommendation based on a "fact" which was not included in the Statement of Essential Facts. If Customs' report to the Minister had omitted the facts that had not been included in the Statement of Essential Facts together with any recommendations based on those facts, then the Minister would not have been in a position to have been satisfied of those matters that the Minister is required to be satisfied of in order to publish a dumping duty notice. In short, the Minister would not have been able to publish a dumping duty notice in respect of exports of fruit consumer in plastic cups. Similarly, as regards fruit consumer in cans and fruit FSI.

 

The Review Officer's Assessment

179. The Review Officer is of the opinion that Custom's placement of the SEF on the public record on 20 August 2001, three days after it was required in accordance with the extension granted by the Minister, did not disadvantage any interested party nor deprive them of the opportunity to provide submissions.

180. The Review Officer notes that Customs accepted and had regard to submissions up and until 28 September 2001.

181. The Review Officer does not accept that the CEO is precluded from making any recommendation to the Minister on facts that were not contained in the SEF.

Like goods - fruit consumer in cans and in plastic cups

KPMG's claims are:

182. Customs concluded at Section 4.1.3 of the Report that fruit consumer in cans is a "like good" to fruit consumer in plastic cups.

183. No reasons were provided for this conclusion.

184. Customs did, however, state at Section 4.1 of the Report that, in considering whether certain goods are like goods to the goods under investigation, "Customs recognises that no one factor is itself sufficient reason for a conclusion" and, consequently, Customs had regard to:

  • - physical characteristics;
  • - end-use; and
  • - directly competitive or substitutive products, in its assessment of "like goods".

185. In applying these tests, we submit Customs failed to take into account a relevant consideration and took into account irrelevant considerations and, had this not occurred, the outcome would have been different.

186. Based on an application of these tests, Customs concluded there were three categories of goods, namely:

  • - juice concentrate;
  • - fruit FSI;
  • - fruit consumer; and

there existed an Australian industry producing "like goods" in respect of each such category.

187. We submit that the application of the tests mentioned by Customs resulted in an incorrect categorisation of the goods under investigation.

188. The end-use of a good and whether it is directly competitive or substitutable may be indicative that certain goods have characteristics closely resembling those being imported, but it is not determinative. That is, the end-use to which a good may be put, the competitiveness and substitutability are, in themselves, not characteristics of the good. Rather, they are applications that flow from a characteristic of the good and it is the latter that must be identified and compared. The term "like goods", as defined in the Customs Act 1901, and the equivalent term in the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 is, in substance, a subset of directly competitive or substitutable products in the sense that all "like goods" are, by definition, directly competitive or substitutable products. However, it does not follow that directly competitive or substitutable products are "like goods". This has been recognised by the Disputes Resolution Panel of the World Trade Organisation: see paragraphs 6.20 to 6.22 of the Appellate Body's report on "Japan-Taxes on Alcoholic Beverages" of 4 October 1996: In that report the Dispute Resolution Panel stated that:

"In the view of the Panel, like products should be viewed as a subset of directly competitive or substitutable products. The wording ("like products" as opposed to "directly competitive or substitutable products") confirmed this point, in the sense that all like products are, by definition, directly competitive or substitutable products, whereas all directly competitive or substitutable products are not necessarily like products....

....

The wording of the term "like products" however suggests that commonality of end-uses is a necessary but not sufficient criterion to define likeness. In the view of the Panel, the term "like products" suggests that for two products to fall under this category they must share "essentially the same characteristics. "

189. In that report the Panel was considering paragraph 2 of Article III of the General Agreement on Tariffs and Trade 1994, which prohibits the products of a contracting party imported into the territory of another contracting party from being subject to taxes in excess of those applied to "like domestic products". When read with paragraph 2 of Ad Article III of Annex I of the General Agreement on Tariffs and Trade 1994, that paragraph extends to prohibiting the products of a contracting party from being subject to a tax in excess of those applied to "a directly competitive or substitutable product". Such an extension of the prohibition would not be necessary if "like goods" included "competitive or substitutable" goods.

190. Similarly, Article XIX of the General Agreement on Tariffs and Trade 1994 refers to "like or directly competitive products" and the reference there to "directly competitive products" would not be needed if "like product" included "directly competitive products".

191. In Article VI of the General Agreement on Tariffs and Trade 1994, the term "like goods" has not been extended to include "competitive or substitutable products". Rather, it refers only to identical goods or, in the absence of identical goods, goods having essentially the same characteristics as the goods under investigation.

192. Accordingly, pursuant to the definition of "like goods" in Australia's anti-dumping legislation and consistently with Article VI of the General Agreement on Tariffs and Trade 1994, the proper approach, where the goods in question are not identical, is to identify the characteristics of the goods under consideration, to identify the characteristics of the other goods in question and then assess whether the characteristics of the latter goods so identified "closely resemble" the characteristics of the goods under consideration. This is a relatively straightforward objective test that, regrettably, appears not to have been undertaken by Customs and should be undertaken.

193. Had such a test been adopted the outcome would have been different. A comparison of the characteristics of fruit consumer in cans and with fruit consumer in plastic reveals that there is only one common characteristic, namely the contents of the cans and plastic containers (i.e. the pineapple fruit). All other characteristics are different, from the materials used to the technology employed to the longevity of the product. In other words, the characteristics of fruit consumer in plastic do not closely resemble those of fruit consumer in cans. From any objective observation they are different.

194. Accordingly, fruit consumer in cans and fruit consumer in plastic cups should not have been treated as "like goods" by Customs. Rather, to the extent that it was lawful to include pineapples in plastic cups in the investigation, pineapples in plastic cups and pineapples in cans should have been dealt with separately and, for the reasons discussed later below, such an analysis, if it had been undertaken, would not have resulted in a dumping duty notice being published in respect of fruit consumer in plastic cups.

 

The Review Officer's Assessment

195. In its report, Customs concluded that locally produced pineapple juice concentrate is a like good to both A grade and B grade imported pineapple concentrate and that pineapple fruit consumer in cans and fruit consumer in plastic cups are like goods.

196. The Review Officer affirms both of these conclusions. Pineapple juice concentrate and pineapple in containers (in whatever packaging medium) respectively possess characteristics closely resembling the imported goods under consideration. Both goods compete in their own market and are (respectively) directly substitutable in terms of end-use.

SPC as the exporter of fruit consumer

KPMG's claims are:

197. At Section 5.2.2.2 of the Report Customs concluded that SPC "exported" fruit consumer in plastic cups from Thailand to Australia.

198. The basis for such conclusion is not apparent from the Report. That is, Customs has stated in the Report that, in coming to such conclusion, it had regard to a number of factors including the fact that SPC initiates discussions and determines the timing of shipments, production volumes, it owns the packing line, it owns certain inputs to the production process, it owns the finished product at the time they are packaged and warehoused, there is a permanent SPC representative at SFP, there is no individual transaction involving the value of the goods at the time of exportation, and so on. The relevance of these factors to the exportation of the goods under consideration is not clear and nor does Customs explain their relevance to exportation.

199. Moreover, it appears that Customs has linked the two issues of who is the exporter and what is the export price of fruit consumer in plastic cups exported from Thailand. This has served to confuse and cloud Customs judgement on the issue of who is the exporter. These are separate issues and should be dealt with separately.

200. In relation to who is the exporter, it clearly is not SPC. [ ], SPC does not arrange for the shipment and does not cause any particular finished product to be shipped to any particular country. Rather, it is SFP that appropriates warehoused finished product to a particular overseas shipment by packing the finished product in a container and then arranging for the shipment of the packed finished product in a container to the appropriate country with the relevant shipping line. In short, it is SFP that causes particular finished product to be exported to a particular country.

201. SFP is the manufacturer of pineapple in plastic cups. It is common practice for a manufacturer not to own all or part of the plant and equipment used in a production process. It may lease or use all or part of a production/packing line owned by another party. In this instance SPC owns the packing line that SFP uses to pack pineapple into plastic cups. [ ], lids and sleeves for the product it is purchasing from SFP. These factors are not relevant in determining who is the exporter of a product.

202. SPC's role is similar to any other purchaser of product from an overseas manufacturer in the sense that all purchasers place orders and purchase product from the manufacturer and it is such orders and purchases that result in particular goods being shipped to the country nominated by the purchaser, but it is the manufacturer that actually appropriates particular product to the transaction and, apart from ex-warehouse transactions and FOB transactions, arranges for their shipment (ie. export) overseas. To maintain that SPC is the exporter would mean that every purchaser that places an order on an overseas manufacturer is the "exporter" because it is that order that causes, in a contractual sense, the exportation of the goods appropriated by the manufacturer to satisfy that order.

203. In this regard, we note that the [ ] agreement between SPC and SFP provides for a payment by SPC to SFP in respect of SFP's obligation to export the goods in question overseas. That payment is comprised of the cost of the shipping labour, trucking and exportation plus a profit margin on these costs. This is paid for by SPC in its 'second' payment to SFP.

204. This is not a reimbursement of costs but a payment for a commercial undertaking by SFP, namely exporting the goods overseas, that covers SFP's costs in so doing plus a profit. This was verified by Customs when reviewing [ ] at each of the importer verification visits and, presumably, the exporter verification visit in Thailand.

205. We note that at line 213 of the second Importer Visit Report in respect of SPC, Customs concluded that SPC was the exporter on the following grounds:

- SPC controls production volume of the goods;

- SPC is the owner of the goods at the end of the month;

- SPC decides where the goods are exported to and when; and

- SPC causes exportation of the goods, notwithstanding that SFP arranges for the shipping, freight, documentation, loading and export clearance of the goods.

206. It is difficult to understand the relevance of the first two factors to "exportation". The third factor is factually incorrect as it is SFP that selects and packs particular warehoused goods in containers for shipment to a particular country, not SPC. Rather SPC merely decides the quantity of goods it requires to be shipped to a particular country. SFP, on the other hand, decides which warehoused goods will satisfy that requirement. The final factor is simply a statement of the conclusion already reached and it is also factually incorrect because it is SFP that actually causes particular goods to be exported, not SPC.

207. On the other hand, in the Exporter Report for SFP, Customs stated as follows:

"... that the contract provides [] to have title to the goods at the time of packing is not, in our view, decisive as to who is the exporter. (...) [] orders the goods. SFP produces and packs the goods, places the packed goods in containers, delivers those containers to port after having made all the exportation arrangements. These exportation arrangements may be made to Australia or to several different destinations in the world. These are typical activities of an exporter and we have concluded that SFP is the exporter. The bill of lading described SFP as the exporter in Thailand".

208. It was self-evident to the Customs verification team, when verifying information provided to it by SFP, that SFP was the exporter of the goods under consideration. No sustainable reasons, nor any evidence, have been put forward by Customs for any departure from this conclusion.

209. Interestingly, in the footnote on page 14 of the Exporter Visit Report, Customs noted that the visit report to the importer, SPC, recommended that SPC is the exporter on the grounds that "SPC causes exportation" but observed, correctly, that every order placed upon an exporter causes a sale to take place.

210. Further, we draw your attention to the determination of 'exporter' by the Australian Tax Office ("ATO") for the purposes of Section 38-185 of A New Tax System (Goods and Services Tax) Act 1999, details of which were made available to Customs. In the ATO's draft Goods and Services Tax Ruling GSTR 2001/D6, the ATO expressed the view as to when the requirement that a supplier is the entity that exports the goods is satisfied. It is satisfied where:

(a) the supplier is responsible for delivering the goods on board a ship or to an aircraft operator; and

(b) that ship or aircraft has been engaged, either by the seller or the buyer (or by another party acting on behalf of the seller or buyer), to carry those goods to an overseas destination.

211.There is no reason in our view for different approaches being taken of the same concept in different Commonwealth statutes by different Commonwealth agencies. Indeed, it is important that a consistent approach between the Customs Act 1901 and A New Tax System (Goods and Services Tax) Act 1999 and between Customs and the ATO be maintained because of the close relationship and their interdependence.

212. On the ATO's view, SPC could not be regarded as the entity exporting the goods in question, as it is not the party responsible for delivering the goods on board the ship, nor of engaging the shipper to ship the goods to an overseas destination. That is, it is the responsibility of SFP to export the goods in question and, further, it is SFP that actually delivers the goods to the ship and engages the shipper to carry the goods to the relevant overseas destination. The evidence of the actual transactions that occur between SPC and SFP and associated documentation, as verified by Customs, unequivocally demonstrates that SFP is the exporter of the subject goods to Australia, not SPC. We, therefore, submit that SFP, not SPC, is the exporter of the fruit consumer in plastic cups.

213. As SFP is the exporter of the goods under investigation, this requires a re-evaluation of the export price based on the price paid by SPC to SFP for the fruit consumer in plastic cups consistently with the findings in the Exporter Visit Report for SFP.

 

The Review Officer's Assessment

214. The Review Officer's analysis of this issue is contained at paragraphs 33 to 38 above.

Export price

KPMG's claims are:

215. In relation to what is the export price, it is simply the price paid by SPC to SFP for the purchase of the fruit consumer in plastic cups in the arms length transaction between SFP and SPC: see Section 269TAB(1) of the Customs Act 1901. In this regard, we draw attention to the fact that the price payable by SPC to SFP under the agreement between the parties is a price that was negotiated by two unrelated parties at arms length in commercial negotiations over time. There is no evidence that the transaction between the parties is other than arms length.

216. In relation to the suggestion that there is no export price between SPC and SFP representing the full value of the goods, the relevance of this to an export price is not clear to us. Clearly, the sale by SFP to SPC is not at a loss and, therefore, Section 269TAA of the Customs Act 1901 does not apply and, more importantly, there is no provision in Part XVB of the Customs Act 1901 requiring export prices to reflect the full value of the goods, nor is there any reason for there to be such a provision. All that is necessary and provided for in Part XVB of the Customs Act 1901 is that there be a price payable by the importer to the exporter and that price not be at a loss, which is the case here.

217. In this regard we note that in the Exporter Visit Report for SFP, Customs reached a similar conclusion:

... the contract between SPC and SFP is the result of an arrangement between two independent parties, the purpose simply stated as meeting SPC's desire that [SFP] process product for SPC on terms and conditions set out in the agreement. The terms of Section 269TAA should not be interpreted so broadly that many usual commercial relationships would be treated as non-arms length. For example, the provision at 269TAA(1)(b) that a sale is not arms length if the price is influenced by a commercial or other relationship between the buyer and the seller, if interpreted broadly, would have this effect. Usually a test of any such influence is to compare prices between different parties in order to see if there is any influence but we are unable to do so in this case. That the contact sets out [ ] in the pricing arrangement does not in our view mean that it causes the sales to become non-arms length - the [ ] nature of the contract places a defined role on each of the parties the price may fluctuate according for example to the changes in pineapple prices in Thailand. SFP was prepared to produce under the contract [ ] arrangement that ensures it a [ ] the period of the contract.

We considered whether the [ ] under the contract which excludes certain components (such as plastic cups and lids and machinery expenses as these are being borne by SPC) has any bearing on the relevancy of Section 269TAB(1)(a). We found no requirement under that section that the amount invoiced by an exporter must be inclusive of a "fully absorbed" cost of production.

We considered the requirement in 269TAB(1)(a) that the export price... is the price payable...

We have concluded that ... Section 269TAB(1)(a) is relevant to the circumstances described. "

218. Accordingly, for the reasons given above, the exporter of fruit consumer in plastic cups is SFP and, pursuant to Section 269TAB(1)(a) of the Customs Act 1901, the export price is the price payable by SPC to SFP for fruit consumer in plastic cups.

 

The Review Officer's Assessment

219. The Review Officer's analysis of this issue is contained at paragraphs 33 to 38 above.

Normal Value

KPMG's claims are:

220. The methodology adopted by Customs to calculate a normal value for pineapple fruit FSI and pineapple fruit in plastic cups is fundamentally flawed and incorrect. This results in erroneous dumping margins. There are numerous reasons for this and they are set out below.

Cost allocations

221. We note that, in Customs' view, the less valuable parts of a pineapple used to produce pineapple juice, that is the waste product from the production of fruit consumer, should be reflected in the cost of production of pineapple juice.

222. This view is based on regulation 180(2)(b) of the Customs Regulations, which provides a two-step test. As noted in the Statement of Essential Facts, step one requires an assessment as to whether the exporter's records are in accordance with generally accepted accounting principles, while step two requires an assessment of whether the records reasonably reflect the costs associated with the production of the goods.

223. Further, Customs noted at section 5.1.2 of the Report that:

"Thai producers have presented costs of production that reflect varying methods of allocating the cost of pineapple raw material to juice and fruit products. " (emphasis added)

224. Customs has rejected the Thai producers cost allocation methodologies and applied a single methodology across all producers. The legislation does not require the application of a particular methodology, only that the methodology used reasonably reflects the cost associated with the production of the goods. In the case of SFP, its cost allocations were found by the Customs officers conducting the exporter verification to be both reasonable and accurate.

225. SFP have developed a sophisticated methodology to accurately allocate the yield and cost of pineapple on an ongoing basis. The methodology complies with Thailand's generally accepted accounting principles (GAAP). SFP's Quality Control team continually perform random sampling to ensure an accurate yield and cost measurement is maintained. SFP's cost allocation methodology is more accurate than the Net Realisable Value ("NRV") methodology applied by Customs as it reflects the true cost and yield of pineapple to be accurately allocated to pineapple fruit and juice produced by it.

226. SFP's cost allocation methodology was fully explained to Customs officers during the seven (7) day on-site verification visit to SFP. It is evident from the Exporter Visit Report for SFP, that the Customs officers accepted that SFP's method of allocation of costs between pineapple fruit and juice was both on a rational and consistent basis and further that the costing method used by SFP was "a reasonable measure of the costs incurred".

227. At issue here is whether the Thai manufacturer's records do reasonably reflect the costs associated with the production of each of the three categories of goods under consideration. In other words, is it "reasonable" for a manufacturer to allocate costs between products according to a standard weight or other similar ratio?

228. As noted in the Report, the key guidance provided by the generally accepted accounting principles ("GAAP") on this issue is:

"When the costs of conversion of each product are not separately identifiable, they are allocated between products on a rational and consistent basis."

229. However, at Section 5.1.2.2 of the Report, the following statement is made:

"Customs is of the view that consistency with Thai GAAP does not ensure the degree of accuracy required when allocating joint costs for the purpose of a dumping investigation."

230. This misstates the issue. The issue is not one of accuracy of allocation for the purposes of a dumping investigation. Rather, the issue is the method of allocation and whether that method of allocation is "reasonable". That is, whether the allocation reasonably reflects the costs associated with the production of the goods in question. In the Exporters Visit Report Customs confirmed that it did and no cogent reason has been put forward to depart from that conclusion.

231. We do note that at Section 5.1.2.2 of the Report, Customs stated that:

"Given the complexity of the cost allocation methods involved, the case management team is of the view that it was not feasible for the teams to fully assess the reasonableness of the exporter's allocation methods during the course of the on site visits, although some reports contain comments to that effect. "

232. It is not clear why such an assessment was not feasible. Essentially the issue was whether the Thai GAAP permitted an allocation of costs in according to the methodology adopted by SFP, which the Thai GAAP do permit, and whether such an allocation reasonably reflect the costs associated with the production of the goods in question, which Customs in the Exporter Visit Report confirmed was the case.

233. At Section 5.1.2.2 of the Report, Customs noted that it had engaged an international accounting firm to review, in consultation, each exporter's costs, with the results of that review being summarised for each exporter in Section 5.3 of the Report. In relation to SFP, the review apparently concluded that SFP's costs were unreasonable, with the key area of concern being the method used to allocate joint fresh pineapple costs. Precisely why the method of allocation employed by SFP was "unreasonable" was not set out.

234. However, at Section 5.1.2.2 of the Report, Customs advised that the method of cost allocation recommended to it by the "international accounting firm" as being appropriate is the NRV method, which allocates costs on the basis of the products final sales value less any separate costs of production to further process the joint products to their final stage of completion and an allowance for selling and distribution costs. Why this method was to be preferred and whether it was reasonable was not explained. Moreover, it provides no better or more reasonable reflection of the costs associated with the production of pineapple fruit and pineapple juice. In the case of SFP the NRV method provides a less accurate allocation of costs than SFP's historically developed allocation of actual cost to fruit and juice.

235. Because Customs has adopted a cost allocation method at variance with the actual method used by Thai exporters, being a method permitted by Thai GAAP and one which is internationally recognised as a reasonable methodology, it is clear that Customs has departed from regulation 180(2)(k) of the Customs Regulations and, in so doing in the circumstances, acted unreasonably.

236. We, therefore, submit that normal values for pineapple fruit and juice should be calculated using the cost allocation methodology used by SFP, being a methodology that is permitted by Thai GAAP and which reasonably and accurately reflects SFP's costs in producing pineapple fruit and juice, as Customs confirmed during its verification visit to SFP. Accordingly, SFP's normal values need to be re-calculated using this methodology.

 

The Review Officer's Assessment

237. The Review Officer's analysis of this issue is contained at paragraphs 50 to 55 above.

Selling, General and Administration Calculations

KPMG's claims are:

238. Customs has used a selling, general and administration cost ("SG&A") and profit calculation based on sales of SFP's 20oz cans of pineapple in heavy syrup to the retail trade. Customs has not made any adjustments to make a fair comparison to the export price of pineapple in plastic cups to SPC.

239. There are several factors that make this calculation incorrect, namely:

  • - sales to SPC are at the wholesale level, not the retail level as used by Customs. The sales to SPC do not bare any of the marketing and support costs that retail sales require;
  • - the contents of the 20oz cans sold domestically in Thailand are mostly pineapple slices in heavy syrup. The pineapple in plastic cups exported to SPC is mostly pineapple chunks and titbits in light syrup. There is a significant cost difference as the heavy syrup is significantly more expensive than light syrup; and
  • - the pineapple in plastic cups exported to SPC are in sizes 130gm, 220gm and 410gm, which are significantly smaller than the 20oz cans sold on the Thai market;

240. The [ ] agreement between SPC and SFP is a normal commercial arrangement between non-related and equal parties. The [ ] agreement was negotiated at arms length over an extended period of time between equal parties with either party being able to discontinue the negotiations at any time if they had not been satisfied with the arrangements. The price of pineapple in plastic cups negotiated in the [ ] agreement is derived from normal market negotiations. The price negotiated reflects the risks of each of the contracting parties. Although the [ ] agreement describes the payment by SPC to SFP as a fee, it is the price payable by SPC to SFP, not unlike any price for goods, that is, it covers the fully-absorbed costs to make and sell of the vendor (i.e. SFP) plus a margin, which is essentially what a price should reflect. That it is a "price" paid for the purchase of goods is clearly reflected in the co-packing agreement by virtue of the fact title to the goods passes to SPC on production of the goods (ie. there are present all the characteristics of a sale-consideration and passing of title).

241. The price paid by SPC to SFP already includes an amount to fully recover the SG&A incurred by SFP and a % profit margin. If the [ ] including a % profit obtained by SFP, are added to the price paid by SPC to SFP under the Agreement, it produces a fully absorbed cost to make and sell, including a realistic profit, for pineapple in plastic cups sold at a wholesale level. Not only has Customs erred in using the SG&A and profit based on the sale of SFP's 20oz cans of pineapple to the retail sector but it has double counted the SG&A and profit already included in the price charged to SPC.

242. At 5.3.2, lines 33 to 41, of the Report Customs states:

"...Thai exporters do not appear to be geared for normal domestic sales activities. This is reflected in selling, general and administration expenses whereby unit domestic sales expenses are significantly lower than those for export. Usually the domestic sales situation..., resulting in a higher unit selling cost than those for export. That is not the case on the Thai domestic market for the pineapple products examined."

243. Having determined that the SG&A for domestic sales of canned pineapple on the Thai domestic market are significantly lower than those for export, Customs applied a normal value methodology that resulted in the application of a commercially unrealistic and unsupportable % SG&A and profit to the determined cost to make ("CTM") for pineapple in plastic cups exported to SPC. This bears no resemblance to the facts. Using this calculation Customs, not surprisingly, determined a dumping margin of 74% for fruit consumer in plastic cups exported to SPC.

244. In a submission to Customs on 27 September 2001 a normal value calculation was provided that reflected the factual situation (copy attached). In this calculation the actual and verified SG&A of SFP ( %) and for fair comparison, the actual profit margin as per the co-pack agreement( %) was used. This calculation resulted in dumping margins of negative % for pineapple in 130gm plastic cups, negative % for 220gm plastic cups and positive % for 410gm plastic cups.

245. This level of dumping also reflects the findings of the United States Department of Commerce, International Trade Administration ("USITA ") in its review of anti-dumping measures on canned pineapple fruit from Thailand, of which Customs was no doubt aware. The USITA found a dumping margin of positive 0.18% against SFP. In fact, Customs' findings are the complete reverse of the USITA findings. The USITA found that SFP had the lowest dumping margin (0.18%) and Malee Sampran Public Co. ("Malee ") the highest margin at 10.45%. Customs found that SFP had the highest dumping margin at 74% for fruit consumer in plastic cups and Malee, while only exporting fruit FSI, was found not to be dumping.

246. It is a concern that two administrations, applying legislation based on the same international agreement to similar products from the same companies and presumably applying the same or similar methodologies, can arrive at two widely differing results.

 

The Review Officer's Assessment

247. The Review Officer's analysis of this issue is contained at paragraphs 50 to 55 above.

Material Injury

KPMG's claims are:

248. At Section 6.4 of the Report, Customs concluded that GCL had, in relation to fruit consumer, suffered injury in the form of price undercutting, sales volume and loss of market share, but not in respect of price depression, price suppression, loss of profits and loss of profitability. Further Customs noted at Section 6.2.3.2 of the Report that despite import competition, GCL had increased its average sales revenue for fruit consumer during the period under investigation.

249. In other words, notwithstanding price undercutting by imports and loss of sales volume and market share, GCL experienced neither price depression nor price suppression and nor did it experience any loss of profits or profitability but was able to increase its average sales revenue for fruit consumer during the period under investigation.

250. At Section 7.3.5 of the Report Customs noted that while there was evidence of price undercutting in respect of fruit consumer, neither price suppression nor price depression was experienced by GCL but, rather, it was able to increase "its average unit sales revenue throughout the injury period." Further, Customs noted that while losing sales volume and market share, this did not translate into GCL losing its profits or profitability. Rather, GCL recorded improved profits and profitability throughout the injury period, turning from a loss situation in 1998 to a profitable one in 1999 and 2000.

251. Despite the improved profits and profitability throughout the injury period, Customs concluded GCL had suffered material injury in the form of loss of market share and sales volume.

252. We submit such a conclusion is not sustainable. If the loss of sales volumes and/or market share had no discernible effect on the profits or profitability of GCL, it cannot be sustained that GCL has suffered material injury. A similar conclusion can be reached in respect of pineapple juice and fruit FSI.

 

The Review Officer's Assessment

253. The analysis of material injury is contained at paragraphs 60 to 74 above.

Causation

KPMG's claims are:

254. Given that notwithstanding price undercutting, loss of sales volumes and market share, GCL has not suffered price suppression, price depression, loss of profits or loss of profitability, as it claimed, it is evident that, whatever else imports of the allegedly dumped pineapple juice from Thailand and pineapple fruit from Thailand and Indonesia may have done, they have not caused material injury to GCL.

255. Further, if, as we submit should be the case, fruit consumer in plastic is not "like good" to fruit consumer in cans and, therefore, must be separately assessed, it is apparent that it could not have caused nor threatened to cause material injury to the Australian industry given the relatively small share of the fruit consumer market held by fruit consumer in plastic: see Section 7.5.3 of the Statement of Essential Facts.

256. Moreover, given that SPC has ceased to import fruit consumer in plastic as major retailers have declined to stock that product, as Customs was advised, there can be no threat of material injury from that product.

 

The Review Officer's Assessment

257. The analysis of material injury is contained at paragraphs 60 to 74 above.

Review Officer's Recommendations and Conclusions

258. In conducting this review, the Review Officer has taken account of all the evidence available to Customs during the course of its inquiry as well as the arguments contained in applications and submissions presented to the Review Officer.

259. The reviewable decisions by the Minister in this particular case are:

  • - a decision by the Minister to publish a notice under subsection 269TG(1) of the Act which provides that the Minister take action against dumped goods that have already been exported to Australia; and
  • - a decision by the Minister to publish a notice under subsection 269TG(2) of the Act which provides that the Minister take action against like goods that may be exported to Australia in the future at dumped prices.

260. The foregoing analysis shows that, in the opinion of the Review Officer, Customs' findings in respect of:

  • - material injury in relation to fruit FSI and fruit consumer;
  • - the determination of export price for SPC; and
  • - the determination of NV for TPC and SFP;

need to be reinvestigated.

261. Accordingly, the Review Officer recommends that the Minister's original decisions in this matter be set aside (with the exception of pineapple juice concentrate) pending a reinvestigation by Customs of the matters referred to in the preceding paragraph.

Geoff Hine
Trade Measures Review Officer

15 February 2002