REVIEW OF A MINISTERIAL DECISION TO TAKE ANTI-DUMPING ACTION AGAINST EXPORTS OF POLYVINYL CHLORIDE HOMOPOLYMER RESIN (PVC) FROM ISRAEL AND A DECISION NOT TO TAKE ANTI-DUMPING ACTION AGAINST EXPORTS OF PVC FROM INDONESIA

​ 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.
     

    The Review

  12. On 9 November 2001 Customs initiated an investigation into the alleged dumping of PVC exported to Australia from Indonesia, Israel, Norway, Sweden and Taiwan.  Australian Vinyls the sole Australian manufacturer of PVC claimed that the goods were dumped and causing material injury.
  13. On 3 May 2002 Australian Vinyls withdrew its application in relation to Norway, Sweden and Taiwan.
  14. Customs found that PVC was exported to Australia from Indonesia and Israel at dumped prices.  The level of dumping from Indonesia was found to be small and the incidence of dumping was not found throughout the entire period examined.  The overall level of dumping from Israel was found to be significant and occurred throughout the entire period examined.
  15. Customs also found that the Australian industry had suffered material injury in the form of lost sales, volumes and revenues, price undercutting, price suppression and reduced profits, profitability, return on investment and capacity utilisation. 
  16. Having considered that material injury to the Australian industry was caused by dumped imports from Israel, Customs however found that dumping from Indonesia did not cause material injury.
  17. Customs recommended to the Minister not to impose anti-dumping duties in respect of future exports of PVC from Indonesia to Australia; however it did recommend that the Minister impose anti-dumping duties in respect of future exports of PVC from Israel to Australia.
  18. The Minister declared that section 8 of the Customs Tariff (Anti-Dumping ) Act 1975 applies to like goods exported to Australia after 11 December 2002.  The Minister also declared that s8 of the Customs Tariff (Anti-Dumping ) Act 1975 does not apply to the goods or like goods exported to Australia from Indonesia.
  19. The Review Officer received two applications seeking a review of the Minister's decision in relation to PVC from Israel and Indonesia.  On 19 December 2002 Australian Vinyls Corporation Limited lodged an application seeking to have the decision by the Minister not to impose anti-dumping measures against Indonesia be reviewed.  In January 2003 a second applicant, Perex Pty Ltd an importer lodged an application seeking a review of the Minister's decision that s8 of the Customs Tariff (Anti-Dumping ) Act 1975 applies.
  20. The first applicant, Australian Vinyls Corporation Limited (Australian Vinyls), challenged the following Customs' findings: normal value determination for Indonesian exporter PT Asahimas Chemical Corporation (ACC); Indonesian price undercutting; import cumulation; material injury; and the calculation of an unsuppressed selling price.
  21. The second applicant, Perex Pty Ltd of Victoria, an importer of PVC from Israel challenged the following Customs' findings: material injury; causation; export price, normal values and dumping margins.
  22. The Review Officer accepted both applications and a public notice of the Review Officer's intention to conduct a review was published on 7 February 2002.  Interested parties had 30 days within which to lodge a submission with the office of the Trade Measures Review Officer. Submissions were received from Australian Vinyls and Roger Simpson & Associates Pty Ltd on behalf of an Indonesian exporter.
     

    Australian Vinyls

  23. The applicant's decisions and findings sought to be reviewed are:
     

    Decisions

    • The decision under s.269TAE(2C) that it was not appropriate to consider the cumulative effect of exportation from Indonesia and Israel.
    • The decision under s.269TAC(8) to make normal value adjustments for royalty and management fees, and inventory carrying cost.
    • The decision under s.269TL(1) not to declare PVC exported from Indonesia to Australia to be goods to which s.8(5) of the Customs Tariff (Anti-Dumping) Act 1975 applies.
       

      Findings

    • -  The normal value determination for Indonesian exporter, PT Asahimas Chemical Company ("ACC"), was afforded 'due allowance' adjustments to the normal value for royalty & management fees, and inventory carrying cost.
    • - Customs assessed that Indonesian price undercutting was insignificant in terms of volume and price.
    • - Customs considered that it was not appropriate to cumulate imports from Indonesia and Israel in the analysis of causation.
    • - Customs concluded that dumping from Indonesia had not caused material injury to Australian Vinyls.
    • - In the calculation of an unsuppressed selling price for Australian Vinyls, the inclusion of a rate of profit using information on chemical industry profitability obtained from the Australian Bureau of Statistics rather than historical profit levels achieved by Australian Vinyls.

      Succeeding sections of this appeal statement reference the above points in detail.   In doing so the following documents are referenced:
    • Trade Measures Report Number 54
    • Statement of Essential Facts Number 54
    • Normal Value / Exporter Visit Report 1997 : Asahimas Subentra Chemical (now ACC)
    • Exporter Visit Report, January 2002 : PT Asahimas Chemical Company ("ACC")
  24. Due Allowance Adjustments To The Normal Value

    Australian Vinyl's claims are:

    Royalty & Management Fee adjustment
    Background
    ACC has been the subject of two previous normal value inquiries in 1997 and 1999.  In the 1997 inquiry the investigation officers had rejected royalty and management fees as a valid adjustment claim.  The normal value report provided an insight into the rationale for the payment of these expenses and noted that the fees are paid:
     "......to Asahi Glass for original PVC technology owned by Chisso in Japan which is supported by Asahi Glass Japan.   .....management fees ....are  for assistance and advice associated with sales and marketing, obtaining government licence approval and permits, obtaining government protection's in the form of import duties, assisting with contacts with state owned corporations and with staff training."
     (Note:  ACC and Asahi Glass are related parties)
    In it's assessment of this issue the officers determined that the claimed adjustment should be disallowed for reasons that: 
     "....the benefit incurred from the use of patent production technology and management advice and assistance is equally beneficial to both domestic and export markets.  Both export and domestically sold PVC share the same production line and therefore benefit equally from the same technology and management assistance to which the payments relate.
    While this conclusion reflected a common sense approach, the officers' judgement was overturned and the adjustment subsequently allowed.
    Customs' Findings: Current Case
    The facts in the current case are that royalty and management fees were paid in respect PVC production technology, equally beneficial to both domestic and export markets for ACC. 
    Notwithstanding the basis of the royalty and management fees, it is understood that under an agreement with a related party, these fees are applicable to domestic sales only.  With these fees not payable in respect of export sales, Customs has allowed a negative due allowance adjustment to the normal value.
    Australian Vinyls' Appeal Claim
    •  Customs should have disallowed this adjustment on the following basis:
    •  It is clear that no technical service fee would benefit PVC manufacture for domestic sale without also benefiting PVC for export.
    •  Arms length considerations and the logic of the royalty and management fees agreement, where fees payable in respect of production technology are only paid on domestic sales, should have lead Customs to reasonably conclude such an arrangement was contrived. 
    •  It appears that Customs has accepted the due allowance adjustment without appropriate challenge to the basis and rationale of the fee arrangement.
       

      The Review Officer's Assessment

  25. Customs verified the details of the claim by ACC that an adjustment to the normal value for royalty and management fees be afforded.  Upon consideration and analysis of this information Customs recommended that an adjustment be allowed.  Customs' officers were provided with copies of the relevant documentation during their visit to the exporter's manufacturing plant.  The documentation and supporting evidence indicated that ACC's allocation method was reasonable and therefore an adjustment should be allowed.
  26. The Review Officer, in reviewing this finding is bound by the legislation that constrains him to only look at the evidence that Customs relied upon in reaching its determination.  The Review Officer can not postulate on whether the evidence Customs relied upon should have been challenged, nor does the legislation allow for the Review Officer to investigate the methodology used in conducting an exporter on site verification. 
  27. The applicant believes that Customs had accepted the allowance adjustment without appropriate challenge to the basis and rationale of the fee arrangement.  The Review Officer is obligated to rely upon the evidence collected by Customs as part of its investigation and based on this evidence either affirm or not affirm the finding being reviewed.  The Review Officer is not in a position to comment on whether Customs' officers should have challenged evidence as he is not privy to any other information other than the normal visit report and relevant information contained on file.  In this case, the Review Officer affirms Customs' determination to allow an adjustment for royalty and management fees.
  28. Inventory Carrying Cost adjustment

    Australian Vinyl's claims are:
    • Customs' Findings: Current case
    • In the current case (refer Normal Value Report) Customs established that:
    • - ACC's PVC plant capacity is around 285,000 tonnes per annum
    • - ACC's output is split 50:50 between domestic and export.
    • - Two rented warehouses are required for storage of domestic product and none for export.  
    • - Storage facilities at the plant were used for export stock.
    • - Customs allowed a negative due allowance adjustment for inventory carrying cost; the amount being the interest incurred on the production cost of stock held in the rented warehouses by the average holding period.
    • Australian Vinyls' Appeal Claims
    • - It is understood that ACC's stock is equally divided between domestic and export (at in excess of 100,000 tonnes for each market).  Export product requires an 'assembly' storage area and it is evident that similar warehouse capacity is required for both domestic and export markets, whether this be on-site or in rented warehousing.
    • - It is clear that the nature of the cost associated with holding stock for domestic sale would also be applicable to export storage.  Customs should have identified a cost for export storage as it had done for domestic warehousing.
    • - The normal value, adjusted only for domestic warehousing (negative adjustment), is not comparable to the export sale.  The normal value requires a positive adjustment equating to costs associated with export storage.
    • - In the absence of a verifiable export storage cost, an adjustment for domestic warehousing should not have been made in isolation.

      The Review Officer's Assessment
  29. Customs' assessment of ACC's warehousing arrangement was to make an adjustment for inventory-carrying costs associated with domestic sales.  A negative adjustment for the cost of warehousing for domestic stock was made.  The Review Officer affirms Customs' finding in relation to inventory-carrying costs.
  30. The applicant claims that a positive adjustment to the normal value should be made for the cost of holding stock at the factory.  The implication is, that there is a cost incurred for holding stock for export as well as a cost for holding stock for domestic consumption and that this carrying cost for export stock should be reflected in an adjustment to the normal value.  Customs, in determining an export price, have taken an ex-factory price and adjusted it for the cost of transportation to the wharf and fumigation to arrive at a FOB price.  The normal value was determined based on a constructed cost to make and sell under paragraph 269TAC(2)(c) of the Act. 
  31. The argument proffered by the applicant is, that there it is reasonable to assume that there must be a cost incurred in holding stock for export at the factory and that this cost should be reflected through a positive adjustment to the normal value.  The Review Officer does not dispute that this may be a reasonable assumption.  However, in order to make an adjustment under section 269TAC(9) of the Act, the cost must be identifiable and the cost must affect the price, and in this case based on the evidence presented it is not identifiable and it is not a cost that differentiates between the domestic produced stock and the export produced stock and does not affect price.
  32. The Review Officer affirms Customs' determination that the normal value be adjusted for inventory carrying cost for domestic sales, however he does not believe that an adjustment for export-storage holding costs should have been made.
     

    CUSTOMS' ASSESSMENT OF PRICE UNDERCUTTING - INDONESIA.

    • Australian Vinyl's claims are:
    • Customs' Findings
    • Trade Measures Report Number 54 ("The Report") at Section 7.2.2  states that:
    •  "Selling prices of imported goods from Indonesia have also undercut Australian Vinyls' prices however while the undercutting has been sustained in terms of occurrence it has not been significant in terms of volume and price."
    • The Statement of Essential Facts ("SEF"), at Section 7.2.2, in this case commented that:
    •  "....the weighted average level of undercutting from Indonesia was within the levels that could be usually expected in the normal ebb and flow of business."
    • The Report (Section 7.2.2) elaborates on this last point:
    •  "As prices for PVC are volatile, moving regularly and significantly, it could be expected that at any point in time, prices among different sellers would differ to some extent.  In the normal ebb and flow of business therefore, it could be expected that at any point in time prices of Australian Vinyls' competitors would be lower at times and higher at other times thus the incidence of undercutting of itself does not signal injury."
    • In terms of prices being compared in the price undercutting analysis, the SEF stated that comparisons "were made at the point in time at which prices were set". (Section 7.2.2)
    • Australian Vinyls' Appeal Claims
    • The Customs' assessment of price undercutting is fundamentally flawed for the following reasons:
    • Australian Vinyls operates in a South East Asian market of around 2M tonnes per annum.  All players in the market set monthly pricing which Australian Vinyls must match or risk losing business. In this environment, however, Customs found that Australian Vinyls had suffered material injury in terms of price suppression and reduced profits and profitability, and was satisfied that dumping from Israel was a significant contributing factor to this price related injury.  Accordingly, the level of undercutting from Indonesia did not occur in the "normal ebb and flow of business" but at a time when Australian Vinyls' selling prices were found to be suppressed and incurring heavy losses due to the presence of dumping.  (It should be remembered that Indonesian product was also found to be dumped, above de minimus levels in terms of volume and margin.)

    • The approach Customs has taken in the price undercutting analysis is misleading and understates the assessment of injury.  The methodology employed by Customs for this analysis was to make comparison of prices at the conclusion of price negotiations.  That is, "at the point in time at which prices were set".  This ignores the fact that Australian Vinyls' prices had been lowered, in the first instance, to match the import offers for dumped product.   Customs was in possession of historical monthly customer sales data for this analysis.

      In it's original anti-dumping application Australian Vinyls had included examples which instanced actual customer selling prices, the degree of undercutting from Indonesian import offers and the revised Australian Vinyls' price resulting in price depression.

    • Customs has dismissed price undercutting from Indonesia as being incidental, despite:

    • - a recognition that selling prices for Australian Vinyls were on a downward trend from the September quarter 2000;
    • - selling prices for Australian Vinyls were suppressed and these prices were used in comparison to Indonesia prices;
    • - profits and profitability levels for Australian Vinyls were significantly lower than those achieved prior to the commencement of injury;
    • - a finding that Indonesia had the highest export volume to Australia of any source (e.g. Section 6 of The Report, there were 106 shipments from Indonesia during the investigation period compared to 16 from Israel);  and
    • - product from Indonesia was dumped, above de minimus levels in terms of volume and margin.
    • Notwithstanding the above points, it remains a gross understatement for Customs to conclude that the level of price undercutting found to exist was insignificant.  Further, Customs should not have been dismissive of the small margin found for Indonesia.  In the weakened state any degree of price undercutting (and dumping) would have a material impact.  Put into context, the average selling price for Australian Vinyls in the period 2000 - 2001 was around $1,400/tonne.  With Australian Vinyls' sales volume for the 2 years at around 310,000 tonnes, price undercutting by just $20/tonne had the potential to impact profits by $6.2M.
    • - A more accurate and reasonable analysis should have compared selling prices for Indonesian product with an unsuppressed selling price for Australian Vinyls.  In this regard it may be useful for the Review Officer to consider the Customs' approach in the last inquiry involving PVC and imports from Hungary.  (Trade Measures Report Number 10 refers)  In the context of the above arguments a correlation may be drawn between the treatment of Hungary in that case and Indonesia in the present case.
    • Customs found thus in respect of imports from Hungary:
    • "Imports from Hungary have been sporadic and accounted for less than 5% of the total Australian import volume.  While the price of PVC from Hungary was generally higher than Australian Vinyls' price, PVC from Hungary was dumped.  Customs concludes that dumped PVC from Hungary may have contributed to the material injury suffered by Australian Vinyls.
    • (The underlined has been made for emphasis.)
    • In this case Customs correctly identified that while Hungarian PVC prices were above those for Australian Vinyls, the Australian Vinyls prices were at a depressed and suppressed level (due to dumping from another source, Korea).  Further, the Hungarian prices would have been below the unsuppressed selling price for Australian Vinyls.
       

      The Review Officer's Assessment

  33. Having considered all the evidence that Customs relied upon in its analysis of price undercutting the Review Officer affirms Customs' decision that the weighted average level of undercutting from Indonesia was within the levels that could usually be expected in the normal ebb and flow of business.  The Review Officer also affirms Customs' finding in relation to price undercutting that it has not been significant in terms of volume and price.
  34. Customs were meticulous in their analysis of the evidence in relation to material injury and causal link, this included looking at the various price effects, price depression, price undercutting, price suppression and profit and profitability. 
  35. Customs based its analysis on actual selling prices not, as was suggested by Australian Vinyls, that price offers made by importers should be considered in the analysis.  This would allow for too much latitude in the analysis and that would seem unreasonable given that an offer is exactly that and is not reliable enough to warrant being used as the basis for undertaking price undercutting analysis.  Customs used actual reliable sales data.  Having assessed the methodology that Customs applied in assessing price undercutting from Indonesia and the finding that these weighted average prices over the investigation period undercut the Australian Vinyls product by 1%, the Review Officer affirms Customs' conclusion that Australian Vinyls has not suffered injury in the form of substantial price undercutting from Indonesia.
  36. Customs concluded that in this current investigation products from Israel at dumped prices and other low priced product from other countries (prices which were lower than Indonesia's) caused injury.  The Review Officer does not believe that Customs' erred in its analysis of material injury and price undercutting from Indonesia. 
  37. The Review Officer does not believe that Customs' finding that PVC from Indonesian did not cause material injury, is flawed.  The Review Officer is of the opinion that the claim that this finding should have been taken in the context of the previous dumping investigation relating to Hungary is not reasonable as this previous case dealt with different circumstances surrounding the contribution of dumped product from Hungary to material injury suffered by an Australian industry.

    Customs Consideration On Cumulation Of Imports From Indonesia And Israel In The Analysis Of Causation.
  38. Australian Vinyl's claims are:
     
    The Customs finding that imports from Indonesia should not be cumulated with imports from Israel in the causation analysis has clearly been influenced by the assessment and finding of insignificant price undercutting.  
     
    The foregoing comments at 1.2.2 show that the Customs' assessment of price undercutting was deficient and lacked objective analysis.  Once this error is corrected, the issue of cumulation and causation will be seen in a different light.
     
    Customs' Findings (Section 8.3.2 of The Report
     
    Customs concluded that price injury occurred largely as a result of PVC originating from Israel and other countries not under investigation.
     
    Customs acknowledges some similarities between conditions of competition such as physical characteristics and volumes of dumped imports from Israel and Indonesia.
     
    In finding against cumulation Customs found 2 conditions where the countries differed, namely:
     
    - distribution channels for each country were not similar; and
    - there was a significant difference in the level and trend of pricing for both countries.
     
    Australian Vinyls' Appeal Claims
     
    As to whether dumped goods from a number of sources should be cumulated, s.269TAE(2C) of the Customs Act provides that Customs must have regard to the:
     
    -  conditions of competition between the exported goods; and
    -  conditions of competition between the exported goods and like goods that are domestically produced.
     
    The Report in this case does not include a detailed Customs' assessment of these conditions. 
     
    However, in assessing whether imports from Indonesia and Israel compete with each other and with the domestic product produced by Australian Vinyls the following factors may generally be considered:
     
    i)        The degree of fungibility among the subject imports from Indonesia and Israel, and between the imports and PVC produced and sold by Australian Vinyls.
    ii)      The presence of sales or offers to sell in the same geographical markets of imports from Indonesia and Israel, and Australian Vinyls' product.
    iii)    The existence of common or similar channels of distribution for the imports from Indonesia and Israel, and Australian Vinyls' product; 
    iv)    Whether the imports from Indonesia and Israel are simultaneously present in the market; and
    v)      The volume of product exported from a particular source and the timing of entry into the market.
     
    Each of the above factors is addressed in the analysis below:
    vi)    PVC is a fungible product.  That is, the locally produced PVC and PVC from various import sources can be readily interchangeable.  The fungibility of PVC can be demonstrated by the following:
     
    PVC is a commodity product traded globally in high volumes approaching around 10M tonnes per annum; the SE Asia sphere being a major participant with around 2M tonnes in inter country trade.
     
    The Australian market is supplied by Australian Vinyls and a large number of import sources.  Over recent years PVC has been exported to Australia from over 30 countries.  The Report in this case identifies 27 importers of PVC.
     
    There is a low level of import brand identification which might otherwise differentiate product
     
    The Report acknowledges claims by other interested parties that they wish to maintain a second source of supply "to keep Australian Vinyls' prices competitive".  Therefore, it is common practice for both distributors and end users to stock product from domestic and foreign supply.
     
    Provided there is acceptable quality, PVC sourced from imports (regardless of source) and Australian Vinyls is highly interchangeable.
    vii)  Imported product from both Indonesia and Israel, as with other import supply sources, and product from Australian Vinyls, is sold in the same geographical market - that is, throughout Australia.
    viii)  While Customs emphasises different distribution channels between Indonesia and Israel, the fungible nature of PVC means that product from both countries and Australian Vinyls is supplied throughout Australia to customers with common end use requirements.
     
    A customer in Australia either buys directly or through an agent.  Most customers use both mechanisms.  The customer will assess multiple import offers on a monthly basis (Customs identified around 27 importers during investigation period) and then apportion share predominantly based on price considerations.
    ix)    It is understood that product from Indonesia and Israel (and Australian Vinyls) was sold into the Australian market during the injury period.
    x)      The volume of product from Indonesia was significantly higher than the volume from Israel and any other import source.  Product from Indonesia has had an established presence in the Australian market for several years.  Conversely, product from Israel only emerged at the beginning of 2000 after an absence from the Australian market for around 2-3 years.  In order to re-establish a presence in the Australian market it is not surprising that average selling prices for Israeli product were found to be below prices of Indonesian product. 
     
    The cumulation test is not stringent and does not require that each of the above factors be determinative.  Only a reasonable overlap of competition should satisfy the conditions imposed by s.269TAE(2C).  However, based on the foregoing there is a high degree of overlap in competition between the imports from Indonesia and Israel, and the domestic like product from Australian Vinyls.
    In summary, it is reasonable to conclude in favour of cumulation in the analysis of causation on the following basis: 
    A balanced assessment of the above points on cumulation;
    An objective analysis of price undercutting in respect of Indonesian product (arguments presented at point 1.2.2 above); and
    Product from Indonesia was found to be dumped above de minimus levels in terms of volume and margin.
    It is clear that Customs has not undertaken the same degree of objective assessment on this issue.
     

    The Review Officer's Assessment

  39. Customs' assessment of whether to cumulate imports from Indonesia with those from Israel was based on a detailed analysis of the various price effects.  After consideration of the other possible causes of price injury, Customs concluded that price injury attributable to imported product was predominantly as a result of PVC imports from Israel and other countries not subject of a dumping investigation.
  40. Customs also found that not all the conditions of sales between the product from Indonesia and the product from Israel were the same.  Distribution channels differed and there was a significant difference in the level and trend of pricing from the two countries.  The Review Officer affirms Customs' recommendation that to cumulate imports in the analysis of causation would be inappropriate.  The Review Officer does not believe that, based on the evidence obtained by Customs that an error of law was made by not cumulating the imports from Israel and Indonesia in accordance with subsection 269TAE(2C) of the Act.

    Customs' Conclusion That Dumping From Indonesia Has Not Caused Material Injury
  41. Australian Vinyl's claims are:
     
    The foregoing addresses appeal claims in terms of injury assessment and cumulation in the causation analysis. 
    In particular:
    Indonesia was the largest volume import source during the injury period (106 shipments during the investigation period alone)
    Indonesian product has had an established presence in the Australian market.
    Indonesian product was found to be dumped, above de minimus levels in terms of volume and margin.  The level of dumping is actionable.
    Notwithstanding the deficiencies in Customs' price undercutting analysis Indonesian product was found to have undercut the selling prices of Australian Vinyls.
    Notwithstanding the Customs' finding that the level of price undercutting was insignificant, undercutting by just $20/t had the potential to impact profits by as much as $6.2M.
     

    The Review Officer's Assessment

  42. The Review Officer is of the opinion, having considered the claims by the applicant and in particular the issue of causation and material injury and after careful assessment of the evidence affirms Customs' finding that dumped imports from Indonesia did not cause material injury to the Australian industry.  There seems to be sufficient evidence collected by Customs to support the determination that there was no causal link between the Indonesian product and the material injury suffered by the Australian Industry.
  43. The Profit Rate Included In The Unsuppressed Selling Price ("Usp").
     

    Customs' Finding

    Customs has established a USP based on Australian Vinyls' most recent cost to make and sell plus a margin for profit derived from Australian Bureau of Statistics data on chemical industry profitability.
     
    In the 1997 and 1999 PVC inquiries Customs opted for a rate obtained from the Plastics and Chemicals Industries Association ("PACIA") on the profitability of the chemicals sector. 
     
    Australian Vinyls' Appeal Claims
    In representations to Customs in these inquiries and the current case Australian Vinyls has maintained an objection to this option and has cited profitability levels it had achieved in 1998, a period when the rate of return reached around 15% before being eroded by renewed dumping.  
    Despite the Australian market being affected by dumping at different times throughout the 1990's, the Anti-Dumping Authority and Customs have previously accepted this level of return in original inquiries in 1991 and 1992, and in a review of measures in 1996.
    Australian Vinyls cites Customs' acceptance to use the local industry's rate of return prior to the effects of dumping in the recent case involving Flexible Slabstock Polyols.  Trade Measures Report Number 43 refers.
    In that case Customs came to the following conclusion:
    " Customs examined several options to determine the level of profit to be applied.  These covered data from the Australian Bureau of Statistics; the Australian Taxation Office; the Australian Chemical industry performance site on the internet (www.chemlink); and the Business Review Weekly on industry sector surveys.  However, each source of data was found to be too broadly based for the purposes of this investigation. 
    Customs examined the performance of the Australian industry prior to 1997.  Given that 1996 was the most recent period when the Australian market for FSP was said to be unaffected by dumping, Customs has selected the average profit margin achieved by the Australian industry in 1996."
     (It should be noted that the local industry in this case had also claimed injury attributable to dumping in the early 1990's.)
    Australian Vinyls appeals the decision to use ABS profitability data.  Australian Vinyls sees no impediment to using a level of profit achieved by it in 1998, a period unaffected by injurious dumping.  Alternatively, Australian Vinyls seeks to understand why Customs has applied a different approach to like chemical industry members in this regard.
     

    The Review Officer's assessment

  44. Customs' determination to use an unsuppressed selling price based on Australian Vinyls' most recent data relating to its cost to make and sell, plus a margin for profit that was based on information obtained from the Australian Bureau of Statistics (ABS) was made in accordance with the Act and WTO agreement provisions.  Customs' approach to determining an USP is based on the merits of the particular case. 
  45. The Review Officer affirms Customs' determination to base its USP on Australian Vinyls' data relating to cost to make and sell plus a published profit rate from the ABS.
     

    Perex Pty Ltd (Perex)

  46. The applicant is seeking to have the following findings reviewed:
     
    Dumped imports from Israel have caused material injury to the Australian industry producing like goods;  and
    Material injury would continue to be caused to the Australian industry if the goods from Israel continue to be exported to Australia at dumped prices.
    In addition, [Perex] seeks a review of the finding that, prima facie, 'exports of the goods from ... Israel were at dumped prices': specifically we seek to establish that the goods were supplied at prices which represented normal values under the provisions of the Customs Act (para 6.1.2 of Trade Measures Report No.54 of 22 June 2002 refers).
     

    Material injury

  47. The applicant's claims are:
     
    Perex's request for a review of the finding that dumped imports from Israel have caused material injury to the Australian industry is based upon certain key factors which have been centrally relevant to the Australian industry, particularly since the reduction in Australian production capacity following closure in 2002 of one of Australia's two manufacturing facilities, and the subsequent arrangements which have been put in place to meet a substantial proportion of the Australian market's demand by supply of product from Taiwan.
     
    In lodging this request for review of Notice No.2002/060 of 11 December 2002, Perex strongly suggests that the significant changes to the overall structure of and arrangement of supply to the Australian market since the closure of the Australian Vinyls' plant at Altona in Victoria should be a key consideration for the Trade Measures Branch and for the Minister.
     
    Quite specifically, Perex notes that since the closure of the above-referenced manufacturing facility, significantly less than half of the total annual Australian market which is in the order of 220,000MT, has been met by supply from domestic manufacture; that is, a market requirement of significantly in excess of 100,000MT is to be met by imported goods.
     
    In these circumstances, Perex further notes that the application which Australian Vinyls has lodged in 2001 seeking imposition of dumping duties on PVC exported to Australia from Indonesia, Israel, Norway , Sweden and Taiwan, was subsequently varied when Australian Vinyls withdrew its application in relation to Norway, Sweden and Taiwan on 3 May 2002.  Significantly, Australian Vinyls has subsequently been revealed as having entered into an arrangement to import quantities of PVC from Taiwan to meet areas of demand in the Australian market left unmet by the closure of the Altona plant.
     
    In further support of our request for a review of the findings as referenced above, Perex points out that significant proportions of the goods imported from Israel have been supplied to meet demand which exists in markets in Western Australia and, to a somewhat lesser extent, in Queensland.  These markets - mostly particularly in Western Australia - have traditionally been made more accessible to importers because of their price competitiveness which imported goods can achieve in relation to goods supplied and transported from domestic manufacturing facilities located in Eastern Seaboard states (in this case, the state of Victoria).  It is Perex's contention that, following the closure of the Altona plant and the subsequent reduction of Australian Vinyl's capacity to supply goods into markets such a Western Australia, Australian Vinyls was faced with the prospect of losing totally its place in some sections of the market and accordingly entered into an arrangement to import PVC resin from Taiwan to sustain Australian Vinyl's position in the Australian market.  In these circumstances, Perex questions the validity and accuracy of the assertion by Australian Vinyls (see p.32 of the Trade Measures Branch Report No. 54 Polyvinyl Chloride Homopolymer Resin, Exported to Australia From Indonesia and Israel', 22 June 2002) that the prices of PVC exported from Israel to Western Australia will materially influence the prices for PVC resin in the total Australian market.
     

    The Review Officer's assessment

  48. In assessing material injury Customs is unable to segment the market.  In the case of PVC Customs, in assessing material injury is required to look at the total market, which in this case does include Western Australia.  The legislation does not allow Customs to segment the Australian market as it must be considered as a complete entity.  Customs may have regard to the effect of imports on the market but to be consistent with the WTO Anti-dumping agreement any conclusions drawn from any sectorial analysis must be related back to the industry as a whole.
  49. The material injury suffered by the Australian industry was caused by dumped prices from Israel and low prices from other exporting Countries (prices lower than Indonesia).  The dumped imports from Israel were at considerable dumped prices and were undercutting the prices of the Australian industry's product over the whole of the investigation period.   The Review Officer affirms Customs' finding that dumped goods from Israel caused material injury to the Australian Industry.

    The applicant's claims are:
  50. While Perex is not aware of the detail of the prices for PVC exported from Taiwan to Australia, we request in the context of this application for a review of Australian Customs Dumping Notice No.2002/060 (and in particular the "Material Injury" finding) that the Minister have meticulous regard for all details of the arrangements under which PVC resin is exported from Taiwan to Australia, including:
    • The arrangement which exists between Australian Vinyls and the major Taiwanese PVC producer Formosa Plastics;
    • Any differentiation between the arrangements which apply to the supply by Australian Vinyls of imported PVC into Australian markets other than those in Victoria and New South Wales:
    • Any arrangements which exist for Formosa Plastics to supply PVC resin for export to Australia from manufacturing plant or plants in the Peoples Republic of China, and the implications which any such arrangement may have for the assessment of normal values under the provisions of the Customs Act.
       
      In the event that the Trade Measures Office considers that the application by Perex for a review of the findings of the Minister as set out in Notice No. 2002/060 can be approved, Perex will be fully available and will welcome any opportunity to provide such further materials, information or detail as may be required by the Minister in the conduct of a review which he may order.
       
      Review Officer can have regard to in conducting his review.  The Review Officer is also bound by paragraph 269ZZK(1)(b) of the Act:...'recommending that the Minister direct the CEO to reinvestigate a finding or findings that formed the basis of the reviewable decision, being the finding or any other findings specified in the application.'
       

      The Review Officer's assessment

  51. Any arrangement that exists between Australian Vinyls and the major Taiwanese PVC producer, Formosa Plastics is not an issue that the Review Officer can have regard to in the context of the current review.  These issues relate to certain matters that were not part of the Customs' Report No.54.

    The applicant's claims are:
  52. Dumped Prices
     
    As outlined above and as discussed with the Trade Measures Officer, Perex also requests a review of the finding 'that PVC was exported from Israel at dumped prices': specifically, we seek to establish that the goods were supplied to [Perex] at prices which represented normal values under the provisions of the Customs Act (Para 6.2.2 of the Trade Measures Report No. 54 of 22 June 2002 refers).
     
    In requesting a review of the finding that goods from Israel were dumped, and in stating our intention to seek to establish that the goods were supplied at prices which represented normal values, I advance the following grounds on which the Review Officer might decide that a review is warranted:
     
    That the manufacturing/supplier from Israel (EIL), in failing to 'provide sufficient information to warrant a normal value verification visit' (Trade Measures Report No. 54 of 22 June 2002 6.1.2 refers), did so because it failed to comprehend clearly the purpose for which the information was required.  Thus Customs had insufficient information to determine export prices or to establish whether the goods were supplied at prices which represented normal values.
     
    That EIL's (see as above) shortcoming in failing to provide sufficient information to enable Customs to determine normal values was entirely inadvertent and due to a number of factors including particularly the absences at a number of material times during the transaction review period of key EIL personnel who called to meet statutory military service requirements.  These absences gave rise to occasions on which inexperienced personnel were less than comprehensive in their discharge of certain duties, including in relation to the provisions of information in response to request from Customs.
     
    That the Israeli Trade Commission Australia, having learned of the decision announced in Australian Customs Dumping Notice No. 2002/060, has agreed - subject to the judgement of the relevant Australian authorities as to the appropriateness of such a step - to make every possible effort to ensure that comprehensively detailed information be made available from EIL (and if necessary, verified by the appropriate agency or agencies of the Government of Israel) to enable Customs to make fully informed decisions and judgement in relation to the subject of normal values and the setting of prices for the goods.
     
    In advancing this statement on behalf of the Israeli Trade Commission in Australia as a further ground on which the Review Officer might decide that [Perex] request for a review is worth of support, [Perex] should make it clear that the Trade Commission's agreement to take such steps derives essentially from the importance which Israel attaches to the market in Australia for polyvinyl chloride homopolymer resin (and for related goods) and to the need to establish clearly the grounds on which and the circumstances in which Israeli manufacturers and suppliers such as EIL might properly access and seek to compete in that market into the future.
     

    The Review Officer's assessment

  53. The Review Officer is sympathetic to the exporter's claim that it was completely inadvertent that the key personnel were absent due to compulsory military service during the phase of Customs' investigation seeking important information in order to establish the best methodology of determining a normal value.  The Review Officer can only have regard to that information that Customs used in reaching its findings.  Based on their analysis and the subsequent review by the Review Officer it is not possible to accept as part of the review process any additional information.
  54. Any additional information that would clarify and may be even enhance the current information that Customs relied upon in reaching its findings is a matter for Customs and they would best be able to advise Perex of any process that would allow them to consider additional information.  The Review Officer is of the opinion that in this investigation all avenues to provide relevant information were afforded EIL and as such these avenues have now been exhausted as part of this investigation. 
  55. It is also not the role of the Review Officer to comment on Customs' investigation process; rather the Review Officer's role is to assess the application of the legislation and its provisions.  The Review Officer affirms Customs' findings that EIL dumped goods into Australia and that these dumped caused material injury to the Australian industry.  The Review Officer affirms the Minister's decision declaring s8 of the Customs Tariff (Anti-Dumping ) Act 1975 applies to like goods exported to Australia from Israel after 11 December 2002.
     

    Review Officer's Recommendations and Conclusions

  56. 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.
  57. The reviewable decisions by the Minister in this particular case are:
    i. a decision by the Minister that section 8 of the Customs Tariff (Anti-Dumping) Act 1975 does not apply to polyvinyl chloride homopolymer resin and like goods entered for home consumption from Indonesia after 11 December 2002,  and
    ii.  a decision by the Minister that section 8 of the Customs Tariff (Anti-Dumping) Act 1975 does apply to polyvinyl chloride homopolymer resin and like goods entered for home consumption from Israel after 11 December 2002.
  58. The foregoing analysis shows that, in the opinion of the Review Officer the Minister's decisions in respect of Indonesia and Israel be affirmed.

Richard Oliver
Trade Measures Review Officer

10 April 2003