Review of publication decision - Canned pineapples from the Philippines -

​21 February 2007

06/20687

Review of publication decision - Canned pineapples from the Philippines

By notice dated 7 November 2006, published in Commonwealth of Australia Gazette (Gazette) on 13 November 2006, the Minister for Justice and Customs made a declaration that section 8 of the Customs Tariff Anti Dumping Act 1975 (the Dumping Duty Act) applied in relation to food service and industrial (FSI) pineapple imported to Australia from the Philippines after 11 August 2006. Earlier, on 28 September 2006, the Minister by notice declared section 8 of the Dumping Duty Act applicable to both FSI and consumer pineapple imported from the Philippines after 11 August 2006. This notice was published in Gazette S185 of 10 October 2006. In the 7 November notice, the Minister specified that his earlier declaration in relation to FSI pineapple was of no effect, although the declaration remained on foot with respect to consumer pineapple.

I received five applications for review of the Minister’s decision, two from SPC Ardmona Operations Ltd (SPCA) dated 8 November and 12 December 2006, two from Del Monte Philippines Inc (Del Monte) and GTL Limited (GTL) and the other from H J Heinz Company Australia Ltd (Heinz). Del Monte, GTL and SPCA were represented by Corrs Chambers Westgarth Solicitors and Heinz by Rodda Coburn and Co, Trade Consultants of Sydney. SPCA, Del Monte, GTL and Heinz are all interested parties entitled to make an application as they are all persons who are likely to be concerned with the importation or exportation to Australia of goods or like goods the subject of the decision to impose dumping duties, in terms of the definition in section 269ZX of the Customs Act 1901 (the Act).

On 22 December 2006, pursuant to section 269ZZI of the Act, I published a notice in the Australian Financial Review indicating that I would be conducting a review of the decision. I subsequently received a submission from Golden Circle Ltd (GCL), as the Australian industry participant.

Claim by Heinz

Heinz is an importer of consumer pineapple from the Philippines into Australia. It purchases its pineapple from GTL. The pineapple is sold to Grocery Holdings Pty Ltd who sells at retail level through Coles and BiLo stores. Imports began in July 2005, following Heinz’s decision to begin selling a range of canned fruit products including peaches, pears, apricots and fruit salad.

Heinz seeks review of the finding by Customs in relation to ascertained export prices for Heinz branded consumer pineapple. The application notes that the ascertained export price determined by Customs in relation to consumer pineapple imported from the Philippines by Del Monte (0.70 USD/kg) is lower than the export price paid by Heinz for consumer pineapple from the Philippines (total weighted average price FOB 0.93 USD/kg). If this were true, the consumer pineapple being exported from the Philippines by Del Monte and purchased by Heinz was not being imported at dumped prices.

Heinz’ submission is straightforward: the export price ascertained by Customs in relation to consumer pineapple imported from the Philippines is simply not reflective of the export price paid by paid under Heinz’s pricing arrangements with Del Monte.

In section 6.3 of Trade Measures Report No 112 (TMR112), Customs notes that export prices in relation to pineapple exported from the Philippines could not, except in relation to one exporter, Dole Philippines Inc (Dole), be determined from the information provided by the exporters (notably Del Monte and GTL). Accordingly, export price was ascertained by reference to subsection 269TAB(3) of the Act. That section provides that:

Where the Minister is satisfied that sufficient information has not been furnished, or is not available, to enable the export price of goods to be ascertained under the preceding subsections, the export price of those goods shall be such amount as is determined by the Minister having regard to all relevant information.

In accordance with this subsection, Customs proceeded to determine export prices for all exporters based on the verified information provided by Dole and Castle and Cooke Worldwide Ltd (CCWW), an affiliated company of Dole. In fact, the ascertained export prices for pineapples exported by Del Monte mirrored that for Dole and that of GTL mirrored CCWW.

In order to determine whether this was a reasonable approach for Customs to take, it is necessary to review the information provided by the other exporters and importers in relation to pineapple exported from the Philippines.

Heinz provided a significant amount of information to Customs before publication of the Statement of Essential Facts (SEF). An Importer Visit Report was completed by Customs in relation to Heinz and Customs was furnished with detailed evidence of prices paid by Heinz on exported pineapple. The information provided by Heinz included two relevant confidential attachments which provided full details of export prices paid by Heinz during the investigation period. Those confidential attachments show export price by shipment in 2005 as well as the weighted average export price paid by Heinz.[1] Those documents reveal the weighted average export price to be well above both the ascertained export price and the non-injurious price determined by Customs in relation to consumer pineapple exported from the Philippines.[2]

There is nothing in the SEF to suggest that the information provided by Heinz was considered by Customs to be either insufficient or unreliable. However, the SEF does state that “Customs does not have sufficient information to satisfactorily establish the roles and responsibilities of all parties involved in the manufacture and sale of consumer and FSI pineapple to Australia [from the Philippines].”[3]

Heinz did not make any submission to Customs in response to the SEF. However, other interested parties (GTL and RD2 International) responded to the SEF arguing that export prices in relation to Del Monte and GTL should not be determined in accordance with subsection 269TAB(3). Those submissions suggested that the ascertained export prices were not an accurate reflection of those paid to Del Monte and GTL. Both further submissions invited Customs to verify further information. It is very clear that Customs was alerted to the fact, at that stage, that the export prices ascertained in relation to Del Monte and GTL under subsection 269TAB(3) were not considered accurate by either the exporters or the importers.

Notwithstanding these submissions in response to the SEF, Customs continued to maintain in the publication of TMR112 that the information provided by Heinz and others was considered not to contain “sufficient information or evidence in order to establish export prices” under subsection 269TAB(1). However, I cannot see that it follows that the information should therefore be excluded from consideration under subsection 269TAB(3), which requires Customs to consider all “relevant information” for the purposes of ascertaining export prices. It is clear from the divergence between the information provided by Heinz and the export price ascertained by Customs that Customs disregarded that information for the purposes of determining export prices.

From Customs’ statements it appears that the reason for discounting the information provided rests in Customs’ inability to identify the precise relationship between Del Monte and GTL. I agree that it is not clear on the face of the information provided what that relationship is, although it is clear that GTL is a wholly owned subsidiary of Del Monte. However, the fact that Customs had been alerted to the inaccuracy of the ascertained export price should have given Customs pause to consider attempting to verify the information with which they had been provided. This may have required specifically requesting information from either GTL or Del Monte on the relationship between those companies. Indeed, it is likely that Heinz could have provided that information.

Moreover, subsection 269TAB(4) enables the Minister to disregard information that he or she considers to be unreliable. Customs considered that because more than one party was involved in the supply chain before the goods entered Australia, and the relationship of these parties could not be verified, the information about export prices was unreliable [4] and for that reason considered that the Dole information should be used as it had been verified. However, Customs did have verified information that showed certain Australian customers, such as Heinz, were paying much higher prices for the pineapple product than the ascertained normal values.

Part XVB of the Act is intended to give effect to Australia’s obligations under the Agreement on the Implementation of Article VI of the General Agreement on Tariffs and Trade, known as the Anti Dumping Agreement. Article 6.2 of the Agreement requires that during an anti dumping investigation all interested parties shall have a full opportunity for the defence of their interests. I consider that a better opportunity should have been accorded to Heinz in this case to defend its interests. It is clear that Del Monte and GTL laboured under certain misconceptions about the anti dumping process in Australia and the rigour with which investigations are carried out. One of the over arching reasons for having the anti dumping agreement is to ensure that arbitrary decisions are not made about dumping matters and that imposition of duties occurs only where there is a clear linkage between imports that are actually at dumped prices and material injury to domestic injury. It is ironic that in this matter dumping duties have been recommended when there are reasonable grounds for doubting whether the products in question were sold at dumped prices into the Australian market by Del Monte or GTL.

In my opinion, Customs should be directed to reconsider ascertained export prices for Heinz-branded consumer pineapple, taking into account the “relevant information” provided by Heinz and others in the course of the review.

Claims by Del Monte and GTL

Del Monte exports both consumer pineapple and FSI pineapple to Australia via GTL, a wholly owned subsidiary.

Del Monte and GTL sought reviews of the ascertained export price and the finding that this price was less than the normal value of the goods. They also dispute that there was insufficient information to determine that Del Monte was an exporter of canned pineapple, that the Australian industry incurred material injury, that Del Monte exports had caused material injury, and the correctness of the ascertained non-injurious price.

Export price

Del Monte and GTL say that export prices were determined using information provided by Dole. Similar to the claim made by Heinz, they say that Customs has detailed information on the price which SPCA, Heinz and RD2 International paid for pineapple product from the Philippines, and that they verified this information. The files show that the prices paid by these companies were higher than the normal values ascertained by Customs, and that Customs has not had regard to all relevant information in making its recommendations to the Minister under subsection 269TAB(3) of the Act.

As with the similar submission made by Heinz, I think this submission must also be accepted. Customs indicated that although Del Monte made a submission, it did not provide all the information required by the exporter questionnaire, or supporting data such as to justify verification. However, as I stated above, Customs did have verified information that showed Australian customers of Del Monte were paying much higher prices for the pineapple product than the ascertained normal values.

In my view, there was enough material in the file and the submissions that should at least have raised a doubt for Customs as to whether it was appropriate to apply the ascertained values for Dole in relation to Del Monte.

In my opinion, Customs should be directed to reconsider ascertained export prices for Del Monte and GTL, taking into account the “relevant information” provided by the interested parties in the course of the review.

Injury suffered by the Australian industry

Del Monte and GTL make a number of submissions in relation to the injury suffered by the Australian industry, including whether such injury was material and whether a causal link can be established between the injury and the alleged dumping.

Given my findings in relation to the earlier ground of review in relation to the existence of dumping, it is unnecessary for me to consider these grounds.

Determination of non-injurious price

Del Monte and GTL also submit that Customs erred in using the cost incurred by GCL in its purchases of fresh pineapple from its shareholder growers to determine the non-injurious price for the Australian domestic industry.

In determining a non-injurious price, Customs used an unsuppressed selling price based on GCL’s cost to make and sell plus a rate of profit achieved in the same general category of goods. Del Monte and GTL argued that, by virtue of the relationship between GCL and its shareholder growers, the price paid by GCL was not suitable for this use. They submit that Customs should have used the price paid by GCL on imported pineapple from Indonesia, or, alternatively, that Customs should have substituted fresh pineapple prices from Thailand or the Philippines in the calculation of unsuppressed selling price.

In Trade Measures Policy Advice 2004/1, Customs set out a clear hierarchy to be applied in attempting to ascertain an unsuppressed selling price. That hierarchy was as follows:

    1. Industry selling prices at a time unaffected by dumping
    2. Constructed industry prices — industry cost to make and sell plus profit
    3. Selling prices of undumped imports.

That Policy Advice also set out the rationale Customs would follow in moving through the hierarchy. It is not suggested by any party in this matter that the industry selling price at a time unaffected by dumping should have been used to base an unsuppressed selling price. Customs made clear in TMR112 why that method should not be utilised. Customs resorted to a construction method, utilising GCL’s cost to make and sell plus profit. However, Trade Measures Policy Advice 2004/1 also states that where “the industry CTMS data was unsuitable for a construction approach”, resort should be had to the third option of the hierarchy (undumped import data).

In my opinion, Customs has not given any consideration to the suitability of GCL’s cost to make and sell data in this case. There are reasons why that data may not be suitable for determining an unsuppressed selling price. Those reasons are set out in Del Monte’s application and relate to the unique position of GCL as a cooperative growers scheme. In this business model, GCL purchases raw materials from shareholders. There are reasons why such a price paid would not reflect the market price; most importantly, GCL may elect to pay higher prices for raw materials to offset profit and dividend liabilities. Such a practice would be a reasonable commercial decision for GCL and is a possible explanation for GCL’s failure to reduce the price paid for raw materials after the drought had passed.[5]

Accordingly, I consider that Customs should be directed to reconsider their findings in relation to the unsuppressed selling price in this matter, having regard to the suitability of utilising GCL’s costs to make and sell data.

Claims by SPC Ardmona

SPCA purchases FSI pineapple from RD2 International, a Philippino exporter. In addition to a number of the claims made by GTL and Del Monte in their application, SPCA made certain claims specific to their situation.

Consumer and FSI pineapple as separate goods

The first ground of review submitted by SPCA is that Customs erred in finding that consumer pineapple and FSI pineapple are “separate goods”.[6] The applicants claim that by dividing the investigation into two parts, an artificial result was achieved.

The finding that FSI and consumer pineapple are “separate goods” in TMR112 was based on an earlier finding by Customs in Trade Measures Report 41 (TMR41) that:

fruit FSI and fruit consumer are sold into distinct segments of the market and therefore are not directly competitive and only marginally substitutable.[7]

This finding was based on submissions by the Thai Food Processors’ Association (TFPA) that the two types of pineapple were supplied into different markets. A large part of TFPA’s submission was the difference in container size between the two types of pineapple products. I am not convinced that this argument is still valid. There is clearly now available in supermarkets, intended for the consumer market, pineapple in containers exceeding one litre.

It is noteworthy that the Australian industry participants, Coles Myer and GCL, at that time rejected the suggestion that consumer pineapple and FSI pineapple were separate goods.[8]

In any event, it is not clear to me why, given the terms of GCL’s application for the imposition of dumping duties, it was necessary for Customs to divide the investigation into two parts. GCL’s application did not divide the Australian industry, as Customs proceeded to do. It was not contended that the two types of products are not “like goods” for the purposes of the investigation. Customs simply stated that they were “separate goods” and, accordingly, proceeded to divide the investigation.

As SPCA state in their application, Customs was required by the Act to investigate whether there was a domestic industry producing like goods to the goods under consideration. It was not required to determine whether the goods under consideration in fact spanned two market segments.

Accordingly, in my view, Customs should be directed to reconsider their investigation considering FSI pineapple and consumer pineapple as parts of the same market, regardless of whether they are “separate goods” or not.

I note that all dumping decisions since 2001 in respect of FSI and consumer pineapple have proceeded on the basis that there are two markets segments and two “separate goods”. I also recognise the existence of two tariff classifications relevant to this question. However, I consider that the issue deserves re-examination.

Close processed agricultural products

SPCA’s next ground for review is that Customs erred in its finding that consumer and FSI pineapple produced by GCL are not ‘close processed agricultural goods’ within the meaning of that term in subsection 269T(4B) of the Act.

Subsection 269T(4A) and (4B) of the Act provide that:

(4A) Where, in relation to goods of a particular kind first referred to in subsection (4), the like goods referred to in that subsection are close processed agricultural goods, then, despite subsection (4), the industry in respect of those close processed agricultural goods consists not only of the person or persons producing the processed goods but also of the person or persons producing the raw agricultural goods from which the processed goods are derived.

(4B) For the purposes of subsection (4A), processed agricultural goods derived from raw agricultural goods are not to be taken to be close processed agricultural goods unless the Minister is satisfied that:

(a) the raw agricultural goods are devoted substantially or completely to the processed agricultural goods; and

(b) the processed agricultural goods are derived substantially or completely from the raw agricultural goods; and

(c) either:

(i) there is a close relationship between the price of the processed agricultural goods and the price of the raw agricultural goods; or

(ii) a significant part of the production cost of the processed agricultural goods, whether or not there is a market in Australia for those goods, is, or would be, constituted by the cost to the producer of those goods of the raw agricultural goods.

Customs stated in TMR112 that the basis for their finding that the products are not ‘close processed agricultural goods’ was a consideration of the “use of fresh pineapple fruit”.[9] However, this does not correlate to the examination which Customs is bound to undertake under the terms of the subsection 269T(4B). Under that provision, it is necessary to show that the raw agricultural product (fresh pineapple fruit) is not devoted substantially or completely to the processed goods (FSI and consumer pineapple). It is not at all clear from the face of TMR112, nor is there any material which I have found on the Customs files to suggest, that Customs undertook this examination.

As SPCA submits, the analysis required to be undertaken is “how many pineapples, of the number of pineapples produced each year in Australia, are used by Golden Circle to produce its processed agricultural goods each year.” Customs did not undertake this analysis. Customs should be directed to undertake such an examination for the purposes of determining whether the FSI and consumer pineapple are close processed agricultural products.

SPC Ardmona forming part of the domestic industry

The final ground of review raised by SPCA is that Customs erred in failing to include SPCA as part of the ‘Australian industry producing like goods’. SPCA submit that if Customs had correctly identified them as part of the Australian industry, a different result would have been reached in relation to injury to the Australian industry.

In TMR112, Customs determined that GCL was the sole manufacturer and processor of pineapple fruit in Australia and, accordingly, was the Australian industry.[10] The repackaging operations undertaken by SPCA were determined by Customs to be insignificant for the purposes of determining the extent of the domestic industry. Customs stated:

…a small percentage of SPCA’s imports are repackaged into plastic containers for the consumer market. Customs considers the repackaging process carried out by SPCA does not constitute a substantial process of manufacture of the goods in Australia.[11]

SPCA submitted that the description of their processes as “repackaging” was misleading. They argued that the process involving the pineapple fruit is not a mere repackaging. They contend that the goods produced are commercially distinct from the raw material. This is undoubtedly so. However, it is not simply a matter of the distinction between inputs and outputs. The question as to whether a party is involved in the domestic industry is to be determined by the resources that party invests in the relevant production. Subsection 269T(2) of the Act provides that:

For the purposes of this Part, goods, other than unmanufactured raw products, are not to be taken to have been produced in Australia unless the goods were wholly or partly manufactured in Australia.

Subsection 269T(3) clarifies this further:

For the purposes of subsection (2), goods shall not be taken to have been partly manufactured in Australia unless at least one substantial process in the manufacture of the goods was carried out in Australia.

The question then becomes: is the process in which SPCA engages with respect to the pineapple fruit a “substantial process in the manufacture of the goods”?

In my opinion, Customs’ Report does not reveal sufficient examination of this matter to support a finding that SPCA is not part of the Australian industry. Various matters have been raised by SPCA, both to Customs and before me, which warrant a closer analysis of this question.

Accordingly, in my view, Customs should be directed to reconsider their finding that SPCA does not form part of the Australian industry producing like goods.

Conclusion

It follows from the above analysis that I consider that Customs should be directed to reconsider its findings in relation to the following matters:

(a) the export price determined for GTL and Del Monte;

(b) the conclusion that FSI and consumer pineapple are “separate goods” for the purposes of an analysis of the domestic market;

(c) the characterisation of FSI and consumer pineapple as close processed agricultural products;

(d) the determination of an unsuppressed selling price based on GCL’s cost to make and sell in circumstances where that data may not be suitable; and

(e) SPCA does not form part of the Australian industry producing like goods.

Mark A Zanker
Trade Measures Review Officer

Telephone: 62506647
Facsimile: 62505931

E-mail: mark.zanker@ag.gov.au

 

Relevantly, ascertained exported prices in respect of pineapple exported from the Philippines were determined by Customs using the weighted average export price, rather than a line-by-line study.

Heinz does not import any FSI pineapple.

SEF, page 15.

see generally confidential attachment 4 to Trade Measures Report 112 (TMR112) in file C0613948

It is noteworthy that the unreliability of these prices is accepted by Customs in TMR112 in its consideration of material injury at p41.

TMR112 at p5.

TMR41 at p 20.

TMR41 at p 18.

TMR112 at p8.

10  TMR112 at p6 and p8.

11  TMR112 at p6.

RELATED DOWNLOADS

Review of publication decision - Canned pineapples from the Philippines - 21 February 2007 - 63KB