Review of a Ministerial Decision to Take Anti-Dumping Action against Exports of Dichlorophenoxy-Acetic Acid (2,4-D) from the People's Republic of China and the United Kingdom

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.

Background

12 On 2 April 2002 Customs initiated an investigation following an application from the Australian industry (Nufarm) for anti-dumping measures to be imposed on imports of 2,4-D from China, India and the UK.

13 Customs found that: exports of 2,4-D acid from China were dumped by margins of between five and ten percent, exports of 2,4-D acid and ester from the UK were dumped by margins of approximately thirty percent, dumping margins for 2,4-D acid from India were negligible, the Australian industry has suffered injury in the form of loss of market share, price undercutting, price depression, price suppression and loss of profits and profitability, there is a causal link between dumped imports and the injury to the Australian industry and the injury is material, and future exports from Chian and the UK are likely to be dumped and material injury to the Australian industry is likely to continue.

14 On 2 December 2002, Customs completed its investigation into this matter and recommended that, anti-dumping measures be imposed on 2,4-D exported from China and the UK. The Minister accepted Customs’ recommendations on 12 March 2003.

15 In April 2003, three applications were lodged with the Trade Measures Review Secretariat seeking a review of the Minister’s decision to impose anti­dumping measures in respect of China and the UK. Applications were received from Jiamusi Heilong Agricultural and Industrial Chemical Co. Ltd (Heilong), a Chinese company which exports 2,4-D to Australia, A. H. Marks and Company a UK exporter of the goods and the Grains Council of Australia, an interested party representing 60,000 grain growers Australia wide who use 2,4-D.

16 The Review Officer accepted all applications and on 16 May 2003 a public notice of the Review Officer’s intention to conduct a review was published. Interested parties were invited to lodge a submission with the officer of the Trade Measures Review Officer. Submissions were received from Heilong and Nufarm.

The Review

17 Heilong  

The applicant’s decisions and findings sought to be reviewed are:

The number of the applicable Customs Report is 58. The title of the applicable Customs Report is “Customs Act 1901 – Part XVB, Trade Measures Report No. 58, Dichlorophenoxy-acetic acid (2,4-D) from the People’s Republic of China, India and the United Kingdom” (“the Report”)On The finding or findings in that report that the Review Officer is being asked to review, (such as like goods, Australian industry, export prices, normal values, dumping, material injury, causal link, threat of material injury, non-injurious price).

There are two findings that the Review Officer is asked to review pursuant to this application, and potentially one other, depending on the decision of the Review Officer in relation to the first finding.

The exporter findings

The first finding that the Review Officer is asked to review is the finding that the “exporter” for the purposes of Section 269TAB of the Act in respect of 2,4­D acid produced by Heilong and exported to Australia was Heilong in the case of shipments numbered as 4, 5, 6, 7 and 8 in the Confidential Appendices to the Report referable to Heilong (“the exporter finding”).

The sub-section 269TAB(3) finding

If the Review Officer decides not to recommend that the Minister direct the CEO to reinvestigate the exporter finding in respect of any one or more of the shipments (“an unchanged shipment”), the Review Officer is asked to review the finding that the export price in the case of the unchanged shipment or unchanged shipments (as the case may be) be based on the price in the contract between Heilong and the company to which Heilong sold the 2,4-D acid, referred to in the Report as “the invoiced price between the exporter and China-based traders” (“the sub-section 269TAB(3) finding”).

The normal value finding

The second finding that the Review Officer is asked to review is the finding that that the normal value in respect of 2,4-D acid produced by Heilong and exported to Australia is to be determined pursuant to sub-section 269TAC(6) of the Customs Act “using a notional selling price for 2,4-D acid based upon a domestic selling price for like goods in India” (“the normal value finding”).

Heilong

18 The applicant’s claims are:

Grounds for review of the exporter finding

(a) We request that the Review Officer reinvestigate the exporter finding on the following grounds, which we submit are reasonable grounds for such a reinvestigation:

1. There are eight shipments referred to in the Confidential Appendices to the Report referable to Heilong.

2. In relation to the shipments numbered 1, 2 and 3, Heilong was the exporter. Heilong entered into export sale contracts with an Australian customer in respect of the first two, and with a different Australian customer in respect of the other. Full details and documents in respect of each of these export sales was provided to Customs in Heilong’s Export Questionnaire.

3. In relation to the other shipments, Heilong was the producer, but did not consider that it was the exporter. Heilong entered into sale contracts with China-based companies, who then entered into export sale contracts with customers in Australia. Relevant information in respect of each of these sales was provided to Customs in the first letter from Freehills to Customs dated 28 June 2001 and at the verification.

4. In relation to the shipments numbered 4 and 5, Heilong and the Chinese trader concerned used the expression “FOB” in their negotiations. However, the sale was to a Tianjin warehouse. Heilong did not arrange for the shipment to be placed on board a ship. This was made clear in the first letter from Freehills dated 28 June 2002, and in the statement of Heilong provided to Customs as an attachment to the letter from Freehills to Customs dated 12 November 2002. Such a warehouse location is no more the “point of exportation” than a warehouse in, say, Beijing.

5. In relation to the shipments numbered 6, 7 and 8, Heilong sold the goods to the China-based company on a CFR basis. Heilong was not aware of the identity of the Australian customer to whom the Chinese company eventually sold the goods.

6. In light of paragraphs 1(a)(4) and (5) above, Heilong maintains that it was not the exporter of the goods in each of the shipments numbered 4, 5, 6, 7, and 8. Heilong requests that the CEO should be directed to reinvestigate this matter. If Heilong did not export these shipments to Australia, and they are dumped, then the dumping is as a result of the sales by the China-based companies concerned and not Heilong.

7. In this regard we note that Customs makes an assumption, in paragraph 8.3.1.4 of the Report, that “a very similar dumping margin” would result “if Customs had found the traders to be the exporters”. This comment seems to be intended to subdue criticism of the decision.. Heilong does not agree with this assumption, as to which see paragraph 2(a)(4) in relation to the grounds for review of the sub-section 269TAB(3) finding. For the purposes of these grounds for review of the exporter finding, Heilong again points out that if another company is dumping, that practice should not be attributed to Heilong.

(b) These grounds are based on information to which the CEO had regard when making this finding (“relevant information”) including that recorded in:

1. the Report;

2. the Export Price, Normal Value and Dumping Margin Report (“the Dumping Report”);

3. letter from Freehills to Customs dated 12 November 2002;

4. two facsimiles from Freehills to Customs dated 15 October;

5. facsimile from Freehills to Customs dated 19 September 2002;

6. letter from Freehills to Customs dated 9 August 2002;

7. facsimile from Freehills to Customs dated 19 July 2002;

8. facsimile from Freehills to Customs dated 16 July 2002;

9. facsimile from Freehills to Customs dated 15 July 2002;

10. facsimile from Freehills to Customs dated 12 July 2002;

11. facsimile from Freehills to Customs dated 10 July 2002;

12. two letters from Freehills to Customs dated 28 June 2002; and

13. Exporter’s Questionnaire.

(c) We request that the Review Officer recommend that the Minister direct the CEO to reinvestigate the exporter finding.

 

Review Officer Assessment

19 The determination of an export price under the provisions of s269TAB of the Act is based on a hierarchical scale whereby ss269TAB(1) of the Act is used where there is clear evidence of a direct sale between the exporter and the importer. In the case of the shipments referred to above, there is no direct relationship between the exporter and the importer. The sale involves a third party in this case a Chinese based trader. In this case the situation is one of a multipartite sales arrangement which is covered by the broader scope of allowing a more flexible determination of the export price through the application of paragraph 269TAB(1)(c) and ss269TAB(3) of the Act. The crucial question is, ‘did the exporter bring the goods in relation to the shipments referred to above, to or past the point of exportation’? In these cases they were brought to or past the point of exportation therefore they were correctly identified as export sales and Customs’ correctly assessed exports prices using this information.

20 The Review Officer considers it appropriate that Customs’ identified Heilong as the exporter and that the involvement of the Chinese based trader is congruent to that of an agent not that of an exporter. The Review Officer affirms Customs’ assessment of export prices for shipments identified above under the provisions of ss269TAB(3) of the Act and the Review Officer does not believe that Customs’ erred in law nor fact, nor did it unreasonably try to justify its final recommendation rather it [Customs] made a statement concerning the application of the Act in relation to a scenario where Heilong was not considered the exporter. There is no indication that this statement (“a very similar dumping margin” would result “if Customs had found the traders to be the exporters”) in any way tried to justify its finding under ss269TAB(3) of the Act in relation to export prices. The statement merely clarifies the situation in which the resultant determination of export price under different conditions surrounding the export transaction would result in a similar dumping margin. The Review Officer does not believe that Customs’ intention was to justify its finding, this finding of export price was based on the facts relating to the export transaction.

21 The question that the Review Officer is concerned with here is, whether Customs established correctly that Heilong was the exporter of the goods in relation to shipments 4, 5, 6, 7 and 8 referred to in the Confidential Appendices to the Report.

22 Neither the Act nor the WTO Agreement defines the term ‘exporter’. The courts have however, gone to some way in identifying three types of export transactions. These are not definitive. In determining who is the exporter regard must be had to the terms and conditions of the export transactions. The difficulty arises where there is a sequence of parties involved in the transaction. A manufacturer may sell the goods through an agent where ownership of the goods passes to the agent and then onto the importer. It is not simply a matter of ascertaining the identity of the exporter by determining the identity of the vendor under a contract of purchase with the importer. It is necessary to identify the ‘exporter’ and then to examine whether that is the party from whom the importer has purchased – Celpav v Anti-dumping Authority [1996] FED 1048/96 [48].

23 Customs determined the export price under s269TAB(3) of the Act having regard to all relevant information. Customs assessed the circumstances surrounding the export transaction and determined the identity of the exporter and resulting export price. Under ss269TAB(3) of the Act the export price is determined having regard to all relevant information. Having reviewed the information used by Customs in its export price determination, the Review Officer affirms Customs’ determination in relation to all of the shipments above.

24 The determination of an export price under ss269TAB(3) of the Act provides a more flexible approach than when dealing with direct sales between the exporter and importer. Customs made its assessment based on the available evidence and in accordance with the provisions of the Act.

Heilong

25 The applicant’s claims are:

(a) We request that the Review Officer reinvestigate the sub-section 269TAB(3) finding on the following grounds, which we submit are reasonable grounds for such a reinvestigation:

1. These grounds of review apply to any of shipments 4, 5, 6, 7 and 8 in respect of which the Review Officer decides not to recommend that the Minister direct the CEO to reinvestigate the exporter finding.

2. In paragraph 8.3.1.3 of the Report, Customs found that the export price for the shipments concerned should be determined under sub-section 269TAB(3) using “all relevant information” and that the basis of such determination should be the invoiced price between the exporter (which Customs said was Heilong) “and China-based traders”.

3. Customs found that Heilong negotiated the price between the China and Australia-based parties. In relation to shipments 4 and 5, the shipments were in fact sold to the Australia-based traders at that price. Customs arrived at this finding, as well as findings which Customs interpreted as reducing the “Chinese traders” to the role of an “agent” of Heilong. Given these findings, in the context of the requirement to use “all relevant information”, this “information” (the price negotiated by Heilong for the export sale to Australia by the China based company) would be the most relevant information to use in comparing the price behaviour of Heilong between the export and the domestic markets

4. Customs found that Heilong negotiated the price between the China and Australia-based “traders”. Heilong contests this finding in relation to the exporter finding for shipments 6, 7 and 8, because Heilong did not know the identity of the Australian customer to whom the Chinese company eventually sold the goods. Nonetheless, if Heilong negotiated that price, then in the context of the requirement to use “all relevant information” this “information” (the price negotiated by Heilong for the export sale to Australia by the China based company) would be the most relevant information to use in comparing the price behaviour of Heilong between the export and the domestic markets.

5. Customs makes an assumption, in paragraph 8.3.1.4 of the Report, that “a very similar dumping margin” would result “if Customs had found the traders to be the exporters”. We submit that this does not follow, either automatically or necessarily, and if this view has been taken into account in an attempt to justify the recommendation made to the Minister, then it would be an entirely irrelevant consideration. If the trader does very little, which appears to be the basis of the rudimentary quantitative assessment used by Customs to work out who the exporter is, then the appropriate normal value comparison point may require little or no adjustment at all. In fact, if Heilong negotiated the price with the Australian customer, and the China-based company observed that price, then the China-based company’s “intermediary” position would be largely irrelevant to any export price analysis. The “trader” may as well be a branch of Heilong’s own company, like any export sales branch.

6. Our view here is assisted by the words of Section 269TAB(1), which indicate that the policy of the Act is to use “the price paid or payable by the importer, other than any part of that price that represents a charge in respect of the transport of the goods after exportation or in respect of any other matter arising after exportation” as the primary level of assessment of export price.

7. Our view is also assisted by the fact that Customs’ listing, in paragraph 8.3.1.2, as to Heilong’s activities in “shipments to formulators/distributors via Australian-based traders” is almost indistinguishable from those set out in paragraph 8.3.1.3, yet it seems that a different price point is selected by Customs for export price in the two cases.

(b) These grounds are based on information to which the CEO had regard when making this finding (“relevant information”) including that recorded in:

1. the Report;

2. the Export Price, Normal Value and Dumping Margin Report (“the Dumping Report”);

3. letter from Freehills to Customs dated 12 November 2002;

4. two facsimiles from Freehills to Customs dated 15 October;

5. facsimile from Freehills to Customs dated 19 September 2002;

6. letter from Freehills to Customs dated 9 August 2002;

7. facsimile from Freehills to Customs dated 19 July 2002;

8. facsimile from Freehills to Customs dated 16 July 2002;

9. facsimile from Freehills to Customs dated 15 July 2002;

10. facsimile from Freehills to Customs dated 12 July 2002;

11. facsimile from Freehills to Customs dated 10 July 2002;

12. two letters from Freehills to Customs dated 28 June 2002; and

13. Exporter’s Questionnaire.

(c) We request that the Review Officer recommend that the Minister direct the CEO to reinvestigate the sub-section 269TAB(3) finding.

Review Officer Assessment

26 Subsection 269TAB(3) of the Act provides flexibility in the determination of an export price. Customs made its assessment based on all relevant information, there is no indication that Customs erred in not considering all information nor was there any indication of not considering certain information. However, the Act does allow Customs to determine the export price using all relevant information and in this case Customs determined export price based on the circumstances of the export transaction.

27 The Review Officer affirms Customs’ determination of export price under the provisions of ss269TAB(3) of the Act.

Grounds for review of the normal value finding

28 The applicant’s claims are:

(a) We request that the Review Officer reinvestigate the normal value finding on the following grounds, which we submit are reasonable:

1. The normal value finding should be determined pursuant to sub-sub­section 269TAC(2)(c) of the Customs Act or, in the alternative, sub-section 269TAC(6) of the Customs Act, using the information furnished by Heilong, and available to Customs, in relation to the cost to make and to sell 2,4-D acid (“the 2,4-D acid CTMS information”),

2. Customs decided that the 2,4-D acid CTMS information submitted by Heilong was “unreliable”, in every respect, and should be disregarded pursuant to sub-section 269TAC(7) of the Customs Act. We submit that this decision was unjustified and wrong. In this regard we refer the Review Officer, in particular, to the summary of events set out in the attachments to our letter to Customs dated 12 November, and reiterate the things said therein for the purposes of this application. We wish to emphasise and add these matters:

a) the Customs officer concerned with the verification took issue with testimony about our client’s export information, and it was for this reason that he discontinued the verification: yet, ironically, the Report uses our client’s information as “relevant information” in relation to exports to Australia, but rejects all our client’s normal value information;

b) the Exporter’s Questionnaire and our client’s later submissions (see, for example, our letters to Customs and their attachments dated 28 June 2002, prior to the verification) provided 2,4-D acid CTMS information for all the types requested, and we requested in writing that Customs verify this information during the verification, but this request was either ignored or considered and rejected;

c) Customs refused to communicate with our client and us for a period of about three months after the verification visit, but notwithstanding that Heilong dutifully responded to all requests for follow up information.

3. Heilong is aggrieved by the use of information obtained from a different producer in a different country for its normal value assessment. Under the WTO Anti-Dumping Agreement, which underpins and serves to give background meaning to Australian anti-dumping law, resort may be had to “facts available” (or, in Australian terms, “relevant information”) in cases in which an interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation. Heilong did not refuse access to information, nor did it withhold necessary information, nor did it significantly impede the investigation. Even if Customs rightly formed the view that full disclosure in relation to the circumstances of some of Heilong’s exported 2,4-D acid was not as immediately forthcoming, in the form demanded by the Customs officer concerned, as it should have been, (which is not conceded) we submit that this should not entitle Customs to engage in a wholesale rejection of everything else that Heilong provided to Customs.

(c) These grounds are based on information to which the CEO had regard when making this finding (“relevant information”) including that recorded in:

1. the Report;

2. the Visit Report;

3. the Dumping Report;

4. letter from Freehills to Customs dated 12 November 2002;

5. two facsimiles from Freehills to Customs dated 15 October;

6. letter from Freehills to Customs dated 19 September 2002;

7. facsimile from Freehills to Customs dated 19 September 2002;

8. letter from Freehills to Customs dated 2 September 2002;

9. facsimile from Freehills to Customs dated 2 September 2002;

10. letter from Freehills to Customs dated 26 August 2002;

11. email from Freehills to Customs dated 22 August 2002;

12. letter from Freehills to Customs dated 21 August 2002;

13. facsimile from Freehills to Customs dated 20 August 2002;

14. facsimile from Freehills to Customs dated 19 August 2002;

15. facsimile from Freehills to Customs dated 12 August 2002;

16. letter from Freehills to Customs dated 24 July 2002;

17. facsimile from Freehills to Customs dated 19 July 2002;

18. facsimile from Freehills to Customs dated 16 July 2002;

19. facsimile from Freehills to Customs dated 15 July 2002;

20. facsimile from Freehills to Customs dated 12 July 2002;

21. facsimile from Freehills to Customs dated 10 July 2002;

22. two letter from Freehills to Customs dated 28 June 2002; and

23. Exporters’ Questionnaire.

(c) We request that the Review Officer recommend that the Minister direct the CEO to reinvestigate the normal value finding.

Review Officer’s Assessment

29 Under the WTO agreement and the corresponding Australian domestic legislation the Customs Act 1901, the determination of the normal value takes a hierarchical approach whereby s269TAC of the Act prescribes the provisions that apply given the information available and the methodology for determining a normal value. In the case of Heilong, Customs did not determine a normal value under the relevant provisions of ss269TAC(5D) through to ss269TAC(5J) of the Act dealing with an ‘economy in transition’ as Customs considered that there was no evidence of price control imposed by the Chinese government in respect of like goods sold by Heilong in the domestic market.

30 Customs considered domestic sales of like goods in order to ascertain normal values for Heilong. During its on site verification visit, Customs raised some concerns relating to the veracity of certain verbal explanations relating to the certain export transactions and requested documentation to substantiate these claims. These concerns were relayed to Heilong’s on site consultant as well as with Heilong’s own staff. There appeared to be an impasse which after considerable negotiation was not able to be resolved thus resulting in Customs terminating the on site visit. Relevant information concerning Customs’ decision to terminate its visit to Heilong has been thoroughly documented, including correspondence from Heilong senior management, Heilong’s legal advisers/consultants and Customs’ officials in Canberra and on-site. The Review Officer is of the opinion that, based on the evidence provided, it was reasonable for Customs to have terminated the on site visit given the circumstances surrounding the events that led to this decision being made.

31 The Review Officer is not in a position to re-investigate all aspects of this decision and is constrained to that information that is contained on the relevant files relating to this investigation.

32 Customs decided that the information provided by Heilong in relation to the determination of normal values pursuant to the relevant provisions of s269TAC of the Act was unreliable therefore ss269TAC(7) of the Act prescribes that any information that is considered unreliable may be disregarded.

33 Customs was not satisfied that sufficient information had been furnished to enable them to determine a normal value under the provisions of ss269TAC(1) or (2) of the Act. Customs ascertained a normal value under ss269TAC(6) of the Act using a notional selling price of 2,4-D acid based on domestic selling prices for like goods in India. The Review Officer is of the opinion that, given the circumstances surrounding the on-site visit and the apparent concerns of Customs’ officers regarding the information provided by Heilong, it is appropriate that normal values be ascertained under ss269TAC(6) of the Act. The Review Officer is not able to conduct a fresh investigation and is directed by the legislation to have regard to that evidence that was relied upon by Customs in reaching its conclusions and recommendations therefore, based on this evidence, the Review Officer affirms Customs’ decision in relation to ascertaining a normal value for China based on the domestic selling prices of like goods in India.

AH Marks Company Limited (AH Marks)

34 The applicant’s claims are:

Grounds for Review

ABS data included in Nufarm’s application identified average 2,4-D acid FOB price from China to be at the lowest level of nominated countries. Average FOB prices for 2,4-D acid from India and the UK were higher than FOB prices for China (allowing for the misclassification of product from India to statistical key 45). ABS data included in Nufarm’s application suggests that FOB export prices from the UK for 2,4-D acid were on average slightly higher than those from India. During 1999 and 2000, FOB export prices for 2,4-D acid from the UK were clearly at the highest levels of the three countries. It is not possible to draw any conclusions on FOB prices for 2,4-D ester as there were no exports by China and India of 2,4-D ester during the 2001 investigation period. A more detailed examination of export prices (including freight) into Australia ie CIF prices from China and India.

This factor is relevant in establishing causation between dumping material injury. The impact of the non-dumped imports on the Australian market has been dismissed by Customs as negligible. Customs has stated that the imports from India represent “..a relatively small volume, which are unlikely to have influenced the market..”. These comments do not reflect the true impact of Indian 2,4-D acid on the Australian market – with only 1200 tonnes of“tradeable acid’ available to non-Nufarm controlled formulators , India represents a significant proportion of acid volume (15 per cent) and a major reference point for alternate suppliers. The volume of imports from India at approximately 5 per cent market share cannot be dismissed as negligible or insignificant – this level of market share is significant enough to impact pricing decisions by formulators in the marketplace (refer Trade Measures Reports 8. and 28. for Linear Low Density Polyethylene and Ammonium Nitrate, respectively where lower market share volumes have influenced market prices).

A H Marks suggests that Customs’ conclusions on higher-prices imports taking market share form the non-dumped imports (and Nufarm) are incorrect – what this indicates is that there exist factors other than “price” which have influenced the purchasing decisions of formulators. Customs has discounted the assertion that Nufarm had been reluctant to supply 2,4-D to local formulators – however, it would seem that something other than price has been the influencing factor in the purchasing decision.

It has not been the dumping of 2,4-D acid which has been injurious to Nufarm; it is an aggregation of several factors including the impact of non-dumped imports, a general decline in world 2,4-D pricing, and Nufarm’s apparent reluctance to supply competitor with 2,4-D acid (requiring the remaining formulators not acquired by Nufarm to import their 2,4-D acid requirements) which have caused material injury to Nufarm.

Customs has failed to quantify the impact of each of these factors before arriving at a conclusion on causal link. With relatively insignificant 3 per cent decline in overall profit and a 10 per cent fall in profitability, the factors identified below would clearly represent a significant proportion of both indicators. It is A H Marks’ view that each of the following factors has caused material injury to Nufarm.

(i) non-dumped import prices All 2,4-D imports from the UK were at prices above non-dumped levels determined for Indian exports (ie 70 per cent of total imports- all imports from the UK and India – were at, or above, the non-dumped level). Further, imports from China were assessed as being dumped against Indian non-dumped normal values. This establishes a ‘benchmark’ for all Indian and Chinese exports of 2,4-D. Injury that may be attributed to dumped imports from China cannot exceed the difference between the weighted average export price from China contrasted with the Indian normal value. To assess injurious dumping applicable to imports from A H Marks above this benchmark level, attributes a far greater level of injury to UK imports than is otherwise the case.

(ii) general decline in world 2,4-D prices Customs has recognised that an independently study supports the claim that an oversupply in the world 2,4-D market due to an increase in worldwide production) has been a contributing factor to the declining selling prices in the market. Customs, however, failed to quantify the impact of this significant factor as a proportion of the total injury to Nufarm. It is inaccurate for Customs to conclude that low priced non-dumped imports may have occurred from global oversupply and that the injury attributable to them is not significant. Customs had available to it various export prices to third countries as well as domestic prices in four countries (including Australia). This information could have been used to assess the impact of declining world prices on the Australian market.

(iii) Nufarm’s decision not to supply the Australian Customs has stated (Section 10.2.5.3) that interested parties had claimed Nufarm was reluctant to supply 2,4-D to local formulators. Customs had stated that no detailed evidence or information had been provided throughout the inquiry to address the matter. However, it would appear that the apparent cessation of 2,4-D sales by Nufarm during 2001 (see P.69 of Report No. 58) would support this claim.

This is a significant market factor which should have required careful analysis.

This apparent absence of 2,4-D acid sales by Nufarm during 2001 (as evidenced on p.69 of the report) has significant implications for the business decisions of the 2,4-D formulator companies. How does a formulator source competitively priced 2,4-D acid for formulation, when its greatest competition in the marketplace comes from the incumbent 2,4-D acid producer who also formulates and sells into the finished goods market?

The impact of Nufarm’s apparent supply position is a contributing factor to the alleged injury sustained by Nufarm through imports of 2,4-D acid from China, India and the UK.

It would seem that Nufarm itself has been the catalyst for a significant proportion of the material injury it experienced during the injury period. Each of the above three factors has caused independently, and in aggregate, material injury to Nufarm throughout the injury period.

TMRO Recommendations - Hot Rolled Structural Steel Sections

The TMRO recently recommended to the Minister for Justice and Customs re­examine causal link in respect of hot rolled structural steel sections exported to Australia from Korea and Thailand. The basis for the recommendation was that the TRMO considered that a sufficient analysis of certain factors other than dumping had not been quantified by Customs in its assessment of causal link. It is A H Marks’ view that during the2,4-D investigation, as was apparent in the hot rolled structural steel sections inquiry, certain factors (other than dumping) have not been adequately examined or quantified in establishing the cause of injury to Nufarm during the injury period. A H Marks also considers that as its landed export prices for 2,4-D acid and ester are above the landed export prices form India and China, it can not be concluded that exports from the UK have caused material injury to Nufarm throughout the injury period.

Request

Failure by Customs to adequately examine the correct cause or causes of material injury to Nufarm in the recent 2,4-D inquiry has resulted in the Minister publishing a dumping duty notice against imports of 2,4-D to Australia from the UK. For the reasons stated above , the injury experienced by Nufarm may be attributed to several other factors. It is therefore requested that the TMRO review Customs’ analysis of causal link attributable to dumped imports from the United Kingdom.

Review Officer’s Assessment

35 In assessing the overall impact of whether an Australian industry has suffered material injury it is necessary to assess the impact of dumping, inter-relationship and consequence of each of the injury indicators as a whole. Customs considered each of the injury indicators in isolation. Customs was able to separate the impact of dumped and non-dumped goods on the Australian industry. Customs concluded that, while un dumped product may have some influence on the market price and therefore may possibly be injurious, it would appear that they do not have the same influence in the market as the dumped product. It is clear from the evidence that the dumped product has taken market share from both the Australian industry and un-dumped sources.

36 The Minister must be satisfied, in accordance with s269TG and s269TAE, that, material injury had been or is being caused to an Australian industry. Material injury must be by reason of or because of the dumped imports. The existence of injury to the Australian injury caused by factors other than the dumped imports does not preclude a finding that material injury has been or is being caused by dumped imports.

37 The conclusion that must be reached is not whether factors other than dumped goods have been attributed to the injury sustained by the Australian industry, but have dumped imports caused injury to the Australian industry. Under s269TAE(2A) Customs must consider whether detriment has been or is being caused by factors other than dumped imports and it must not attribute any part of that detriment to that caused by dumped imports. Where the Australian industry under consideration has suffered detriment from a number of causes, it will be necessary for the Minister to be satisfied that the industry has suffered detriment sufficient to meet the description ‘material injury within the meaning of the legislation in consequence of the dumping of the goods,… and to quantitatively separate that material injury form detriment caused by other factors– ICI Australia v Fraser [1992] 106 ALR 257at 265. Material injury determination involves a matter of judgement and degree and is a judgement of fact - ICI Australia v Fraser.

38 In the practical application of that notion material injury will in most though not necessarily in all cases be injury which is greater than that will likely to occur in the normal ebb and flow of business uninfluenced by dumping or other anti-competitive practices proscribed by the Customs Act - ICI Australia v Fraser. There can be no threshold figure or percentage that is capable of general application; what is material injury will depend on the circumstances of each case and it will differ from industry to industry and from time to time - ICI Australia v Fraser. Therefore the determination of material injury and the application of s269TAE(2C) of the Act is based on the merits of the individual case and in this case, Customs did not attribute other factors that may have caused material injury to dumped product.

39 Customs established that the goods from the UK were dumped and these imports contributed to the material injury suffered by the Australian industry. There is evidence that supports Customs’ finding of causal link between dumped imports and material injury. Customs identified that the impact of un-dumped product was not significant due to their low volume when compared to the volume from China and the UK. Customs did identify that there were other factors that may have caused injury to the Australian industry however, the Review Officer is of the opinion that any injury caused by other factors other than dumped product has not been attributed to the material injury sustained from dumped imports from the UK and China.

40 The Review Officer affirms Customs’ finding in relation to causal link and material injury suffered by the Australian industry due to dumped imports from the UK and China.

Grains council of Australia

41 The applicant’s claims are:

The Grains council of Australia (GCA) is the peak policy body of the Australian grains industry, representing some 60,000 grain growers Australia wide. The council is a major commodity member of the national Farmers Federation (representing over 120,000 Australian farmers) and is non­government, grower funded federation of farmer organisations from Australia’s five main growing states. The GCA’s fundamental objective is to protect the economic and social welfare of Australian grain growers. This includes the provision of input to government on issues affecting grain growers’ profitability and international competitiveness. 2,4-D is a low-toxicity selective herbicide able to be used on standing cereal crops and has become an essential component of modern ‘best practice’ in Australian grain production systems. In fact, after 50 years of continued availability, 2,4-d remains the single most widely used herbicide in the world today. Australian grain producers export the majority of their produce into a competitive, yet distorted, world market and in order to remain globally competitive it is imperative that Australian farmers retain access to essential inputs, such as 2,4-D, at world parity prices. ABARE reports that grain farmers using higher levels of crop and pasture chemicals usually also experience lower fuel costs due to expanded adoption of direct drilling and minimum tillage techniques. When applied in reverse, this suggests that if the cost of crop and pasture chemicals was to increase relative to fuel and oil, producers may move away from ‘best practice’ farming in favour of fuel intensive traditional weed control techniques. Thus, any increase in the retail price of 2,4-D will have major implications in terms of increasing total farm expenses (decreasing farm profitability0, raising fuel consumption (carbon pollution) and perhaps accelerating land degradation (environmental costs).

Ground for Appeal

The grounds upon which the GCA bases its appeal are briefly outlined below. A more detailed analysis of each of these points follows.

• Inherent inaccuracies in the methodology employed by Customs in calculating Jiamusi’s Normal Value Determination have led to an affirmative dumping conclusion in this case.

• Even if Customs’ finding of a 5-10% dumping margin with respect to Jiamusi was substantiated, Nufarm could not have experienced material damage from imports of this origin due to an existing 5% tariff and additional transport and selling costs when compared to domestically produced 2,4-D.

• Countervailing measures imposed appear not to reflect the fact that any material damage demonstrated by Nufarm has occurred from the presence of both dumped and non-dumped imports in the Australian market place.

1. Normal Value Determination The GCA appreciates the difficulties Customs faces when investigating complex international business arrangements in countries with ‘economies in transition’ such as China. However, it is clear that the assumptions employed by Customs (in the absence of data acceptable to Customs) in the calculation of the Chinese (Jiamusi) Normal Value have greatly influenced the final outcome of this investigation, resulting in a wholly indefensible dumping determination. The GCA understands that the Normal Value of goods is usually based upon the price paid for like goods sold in the domestic market of the country of export. These domestic sales must be at arms length and in the ordinary course of trade for the domestic price to be accepted as Normal Value. If information concerning suitable domestic sales is not available, Customs may use alternative (less accurate) methods to calculate the Normal Value such as:

• A representative price for like goods exported to an appropriate third country.

• The cost to make and sell the exported goods.

However, as Customs has elected to disregard important information provided by Jaimusi, none of the methods presented above were subsequently utilised. As a result of this decision, Customs has resorted to a ‘third tier’ approach in order to establish any sort of Chinese Normal Value. This process appears to have involved basing the undetermined Chinese Normal Value on the Normal Value of like goods sold in a surrogate country (India) in the ordinary course of trade and at arms length. The Grains Council contends that this ‘educated guess work’ is inherently inaccurate and thus incorporates significant potential for the true Chinese Normal Value to be misrepresented. In support of the utilisation of this method, Customs has asserted that the economies of India and China are directly comparable. However, the GCA disputes any comparison between the ‘transitional Chinese 2,4-D market and the Indian 2,4-D market in the absence of documentary evidence upon which to base this assumption. Even the proponent (Nufarm), in their initial application for dumping duties to be imposed, has provided prima facie evidence to Customs (Table 1) indicating that there is likely to be quite a large difference between the true Indian Normal Value and the true Chinese Normal Value.

 

Indian ​$A/kg

China $A/kg

% Difference

Ester

$13.70

$4.99

64

Acid

$13.64

$6.13

 

55

 

Table 1 Prima Facie normal values presented by Nufarm.

The Grains Council must therefore conclude that Customs’ findings with regard to the Chinese Normal Value, and the dependent dumping margin of 5­10% (Jiamusi), are inherently inaccurate and highly questionable, particularly in light of the very low relative dumping margins actually determined. The GCA considers that all this methodology had been successful in establishing is the dumping margin that would be applicable to India if this country was to sell 2,4-D into Australia at the same price as China. Sadly, Customs then seek to apply this unsubstantiated margin to exports from China. In summary, the GCA believes that the broad unsubstantiated assumptions utilised by Customs in the calculation of the Chinese Normal Values are likely to have led to an affirmative dumping conclusion in the case of China (Jamusi). Imports of Chinese 2,4-D may well be totally legitimate and in the ordinary course of trade. While the GCA considers Customs’ findings with regard to China to constitute little more than a highly questionable guess, if Customs will remain intent on applying this margin, it is reasonable that the lower limit of the 5-10% Chinese dumping margin only be applied.

The Review Officer’s assessment

42 Customs determination of a normal value for China was made after careful consideration of the all relevant information and based upon its assessment Customs decided that it was unable to rely upon the information provided by Jamusi. The Review Office is of the opinion that every opportunity was provided by Customs for Jamusi to provide sufficient information to enable Customs’ officers to establish a normal value using domestic sales of like goods or constructing a normal value using cost to make and sell data. Customs ascertained a normal value under s269TAC (6) of the Act using all relevant information. In this case using a notional selling price for 2,4-D acid based on upon a domestic selling price for like goods in India.

43 The Review Officer, having reviewed all the information relating to the investigation of normal value, export price and the issues surrounding the on-site visit by Customs’ officers that was subsequently terminated, is of the opinion that it was reasonable to determine a normal value under s269TAC(6) of the Act. The Review Officer is only able to review that information that was used by Customs in making its findings upon which final recommendations were made to the Minister. The Review Officer is not in a position to be able to re-investigate aspects of Customs investigation and can only recommend that certain finding or findings be reinvestigated if he believes that Customs erred in its application of the legislation or in its application of the facts. In the case of Jamusi, the Review Officer affirms Customs decision to ascertain a normal value for China based on a notional selling price of like goods in India. The Review Officer relied upon the evidence that Customs used in reaching its conclusion in relation to the normal value finding.

 

The applicant’s claims are:

2. Non-injurious price determination

The GCA is aware that the Dumping Margin is calculated as a function of both the Export Price and Normal Value:

Dumping Margin = Normal Value – Export Price

The calculated margin is then expressed as a percentage of the normal value for easy application to all future exports as a dumping duty.

However, the GCA also understands that a provision exists for the final duty rate to be less than the dumping margin if that amount is sufficient to remove

any injury suffered by the Australian industry. This process involves the calculation of a Non-injurious Price (NIP).

For imported goods, the NIP is based upon the Unsuppressed Selling Price (USP- the price with which the domestic manufacturers would be forced to

compete in the absence of dumped imports), minus:

    • All expense incurred in Australia;
    • Customs duty and goods and service tax;
    • Expenses incurred in importing the goods into Australia;
    • Selling expenses;
    • An amount of profit in Australia.

The GCA understands that the role of undumped imports is obviously an important consideration in the determination of the extent to which the Australian industry has suffered material injury and also in the calculation of the unsuppressed selling price (USP and non-injurious price (NIP). In section

12.5.1 of the SEF, Customs have dismissed low priced undumped imports as a cause of material injury to the Australian Industry on the grounds that they are low in volume in both absolute and relative terms. The Grains Council would like to remind the TMRO that Customs has often asserted that price depression and suppression of domestic products due to low priced imports is not dependent upon the volume of these imports in either relative or absolute terms. Nufarm’s original application for an anti-dumping investigation contends that imports have, in Nufarm’s opinion, caused material damage to the Australian industry in the form of loss of profit and profitability. Further, discussions between the NFF and the Indian importer (Atul Ltd) have indicated that Atul Ltd are in a position to expand production to meet increased demand from the relatively small Australian domestic market.

Thus, the GCA contents that the lowest priced legitimate imports in Australian are those from India and that the price Of Indian 2,4-D in Australia should be the basis for the calculation of the USP.

Due to the large range of factors potentially impacting upon Nufarm's continued profitability, the GCA believes that Customs' proposal to base the non-injurious price (NIP) on Nufarm's most recent 'cost to make and sell' figures (+profit) is totally inappropriate and would reward Nufarm for any damage brought about through legitimate commercial factors, including Nufarm's decision not to supply 2,4-D acid to Australian formulators (thus forcing them to seek a lower priced import in order to compete with Nufarm's branded product). This methodology also inherently assumes that the Nufarm selling price in Australia is not undercut by any legitimate imports in the Australian market place despite the fact that Customs' own investigation has identified several sources of lower priced, undumped imports.

Customs' proposal to base the Chinese NV on the Indian NV, while at the same time basing the Chinese USP on an Australian cost to make and sell, is inconsistent. For instance, it is interesting that Customs argue that the Chinese and Indian economies are comparable and have considered the data provided by Indian manufacturers to be sufficient to base an estimate of the Chinese NV - yet customs appear to have dismissed the Indian data as being sufficient for use in the calculation of the LISP! If the data provided by Indian manufacturers is deemed acceptable and the Indian and Chinese economies are actually comparable (as asserted by Customs), one must ask: "Why then is the Indian cost to make and sell 2,4-D not used as the basis for the USP7'

The Grains Council therefore contends that the NIP for Jaimusi should be based upon the Indian price in Australia, minus the applicable 5% import tariff and all associated transport and selling costs as previously outlined.

The GCA believes that once this method has been applied, it will follow that the difference between the Indian NV and NIP will be identical to the difference between the Chinese NV and NIP as both of these will be based upon Indian data. As Customs has already determined that Nufarm does not suffer significant material damage from Indian imports, Customs should reach a similar conclusion with regard to imports from China and impose a zero tariff level.

As far as the GCA can ascertain, the primary reason that dumping duties have been considered for Chinese 2,4-D and not Indian 2,4-D is that the factors that reduce injury to Australian manufacturers (such as tariffs etc) are not considered until after dumping margins are calculated.

The Review Officer’s assessment

44 Customs considered the views expressed by interested parties concerning the setting of NIP based on the lowest domestic price for undumped imports taking into consideration additional costs, Australian profit and existing tariffs relating to 2,4-D imports. It was also expressed by interested parties that, as there were no exports of ester from undumped sources during the investigation period, the NIP for ester be based on the undumped acid price adjusted for the specification differences.

45 Customs concluded that while undumped products may have some influence on the market price they did not have the same level of influence as the dumped product. Customs did not use the undumped price as the market had been influenced by dumped product. Customs calculated an USP based on Nufarm’s cost to make and sell plus a rate for profit it could necessarily be expected to achieve in the absence of dumped imports.

46 The calculation of the NIP was done in accordance with the provisions of the Act and the methodology to calculate the NIP is a matter for Customs after consideration of all the relevant information required to remove injury to the Australian industry. The Review Officer affirms Customs’ calculation of the NIP.

47 The applicant’s claims are:

3. CAUSAL LINKAGE

Although it appears that Nufarm have suffered some form of material damage during the investigation period, the Grains Council of Australia is not convinced that this injury has in any way been caused by dumping activities. The GCA believes that there are many other primary factors involved in the causation of material injury to Nufarm, not the least of which is the presence of undumped import options in the Australian domestic marketplace.

Nufarm's original application for an anti-dumping investigation contends that imports from both Atul and Imtrade have caused material damage to the Australian industry in the form of loss of profit and profitability. However, as Customs' investigation of Atul and Imtrade has confirmed, imports of these origins have not been dumped yet they legitimately undercut Nufarm's normal price.

As mentioned in the previous section, the GCA understands that the role of undumped imports is obviously an important consideration in the determination of the extent to which the Australian industry has suffered material injury. In section 12.5.1 of the SEF, Customs have dismissed low priced undumped imports as a cause of material injury to the Australian industry on the grounds that they are low in volume in both absolute and relative terms. The Grains Council would again like to remind the TMRO that Customs has often asserted that price depression and suppression of domestic products due to low priced imports is not dependant upon the volume of these imports in either relative or absolute terms. The GCA thus concludes that these legitimate imports are the primary cause of price suppression and depression in the Australian 2,4-D marketplace and that even with the removal of all dumped imports, domestic 2,4-D prices would not rise above the level of the lowest priced non-dumped import.

As such, the GCA considers that the application of any level of duty to Chinese imports beyond that required to bring the Chinese price in line with the Indian price to be excessive. As outlined in the section above, utilisation of legitimate Indian data in the calculations of the Chinese NIR should result in a zero duty level.

Further, the Grains Council fully expects that the domestic 2,4-D market would intrinsically level all 2,4-D imports at a similar price due to the strong competition between importers. In fact, it may well be the case that any apparent dumping margins observed in the Australian marketplace are a direct consequence of this strong competition.

The Review Officer’s assessment

48 The issue of causal link is discussed above. The Review Officer is of the opinion, having reviewed the information in relation to injury, that dumped imports caused material injury to the Australian industry. The Review Officer affirms Customs’ assessment of causal link between the dumped imports and material injury suffered by the Australian industry.

Review Officer’s Recommendations and Conclusions

49 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.

50 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 apply to dichlorophenoxy-acetic acid (2,4-D) and like goods from China (except from Imtrade) and the UK and entered for home consumption on or after 28 October 2002,

ii. a decision by the Minister that section 8 of the Customs Tariff (Anti-Dumping) Act 1975 does apply to dichlorophenoxy-acetic acid (2,4-D) and like goods from China (except from Imtrade) and the UK and entered for home consumption on or after 24 March 2003.

51 The foregoing analysis shows that, in the opinion of the Review Officer the Minister’s decisions in respect of China and the UK be affirmed.

Richard Oliver
Trade Measures Review Officer

18 August 2003