3. Dumping Investigation
Section 3(1) of the Act states:
"Dumping", in relation to goods, means the situation where the export price of goods imported into New Zealand or intended to be imported into New Zealand is less than the normal value of the goods as determined in accordance with the provisions of this Act, and `dumped' has a corresponding meaning:
3.1 Export Prices
3.1.1. Export prices are determined in accordance with section 4 of the Act which states (inter alia) as follows:
| (1) Subject to this section, for the purposes of this Act, the export price of any goods imported or intended to be imported into New Zealand which have been purchased by the importer from the exporter shall be- |
| (a) | Where the purchase of the goods by the importer was an arm's length transaction, the price paid or payable for the goods by the importer other than any part of the price that represents- |
| (i) | Costs, charges, and expenses incurred in preparing the goods for shipment to New Zealand that are additional to those costs, charges, and expenses generally incurred on sales for home consumption; and |
| (ii) | Any other costs, charges, and expenses resulting from the exportation of the goods, or arising from their shipment from the country of export; |
Guangzhou Zhujiang Cement Company
3.1.2 Base Prices
3.1.2.1 Zhujiang exports to New Zealand through Guangzhou National which in turn sells to Century Cement, a Hong Kong based company which sells to the New Zealand importer. Zhujiang sold to Guangzhou National in order to utilize unused export quota held by that company. Century Cement is the cement export sales arm of the Yue Xiu Group (which holds a majority share in Zhujiang), but operates as an independent profit centre.
3.1.2.2 Invoices were supplied by Zhujiang relating to its sale to Guangzhou National. Invoices were also provided by Guangzhou National and Century Cement for the subsequent onward sales of the same shipment.
3.1.2.3 The sale by Zhujiang to Guangzhou National was made in Renminbi (Rmb) on ex-works basis, and this sale price was taken as the base price.
3.1.2.4 In response to the Essential Facts and Conclusions, the New Zealand industry submitted that, because of issues raised by it concerning the deduction of costs from factory to port, the investigating team should have taken the base price as the price from Century Cement to the New Zealand importer and then made the deductions required by section 4(1)(a) of the Act to ensure that there was sufficient margin available to Guangzhou National to cover the costs from factory to port.
3.1.2.5 Invoices have been provided for each of the sales from Zhujiang to Guangzhou National, from Guangzhou National to Century Cement and from Century Cement to the New Zealand importer. Using the actual transaction values from these invoices, the investigating team has calculated the margin available to Guangzhou National. This calculation shows that there was sufficient margin available to Guangzhou National to cover the costs from factory to port, to pay to Zhujiang the refundable input value added tax, and to provide a reasonable profit margin. (The costs from factory to port and value added tax are discussed in more detail below). The investigating team is therefore satisfied that base prices can be established on the basis set out in section 3.1.2 above.
3.1.3 Preparation for Export
Section 4(1)(a)(i) of the Act provides for deductions to be made as follows:
Costs, charges, and expenses incurred in preparing the goods for shipment to New Zealand that are additional to those costs, charges, and expenses generally incurred on sales for home consumption;
Commodity Inspection Fee
3.1.3.1 In the Essential Facts and Conclusions Report, it was stated that "A deduction has been made for the cost of a commodity inspection fee". Zhujiang has advised that the cost of the commodity inspection fee is actually met by Guangzhou National, as it is part of the unit cost of transport (factory to port) that is paid by Guangzhou National and has provided evidence to support this. Therefore, no deduction has been made.
Export Packing
3.1.3.2 There are additional export packing costs relating to the cement exported in 40kg bags. Export bagged cement is packed in 40kg bags, domestic bagged cement in 50 kilogram bags. The additional costs are the cost of the extra number of bags per tonne when the cement is exported. A deduction has been made for the additional cost.
3.1.3.3 In response to the Essential Facts and Conclusions, the industry submitted that the Ministry must also take into account the extra cost incurred by filling and stacking twenty five 40kg bags per tonne, as opposed to the twenty 50 kilogram bags per tonne sold domestically.
3.1.3.4 The investigating team considers that given that the smaller bags of cement would take less time to fill, there would only be a marginal difference in time, if any, required to fill and stack twenty-five 40kg bags as opposed to twenty 50kg bags. Zhujiang has also advised that there are no additional costs incurred in relation to the 40kg bags. The investigating team has therefore made no deduction for extra costs incurred by the filling and stacking of the five extra 40kg bags.
3.1.3.5 The industry also submitted in response to the Essential Facts and Conclusions that bulk cement exported to New Zealand is packaged in a concealed plastic bag or lining additional to the packaging used for bulk cement on the domestic market. However, the Ministry has been advised by Zhujiang that shrink-wrapping of jumbo bags is also used for sales on the domestic market.
3.1.3.6 Also in response to the Essential Facts and Conclusions, the industry submitted that the price of the export cement included the cost of container bags used for the loading of bagged cement, whereas container bags are not used in the domestic market. In response to this submission, Zhujiang advised that container bags are provided on the domestic market at the request of customers, and that container bags were requested by and supplied to the domestic customer whose purchases were used to establish the normal value. Therefore no deduction has been made for container bags.
3.1.3.7 In response to the Essential Facts and Conclusions, the industry also stated that spare jumbo and container bags were supplied to the New Zealand exporter free of charge, and that this does not occur in relation to domestic sales. The Ministry has been advised by Zhujiang that this service is available to domestic customers at their request, and that it was not requested by the domestic customer whose sales were used to establish the normal value. The investigating team considers that the cost of the spare bags allocated over the 8,000 tonnes of the shipment would be negligible and no deduction from the export price has been made.
3.1.4 Other Export Costs
Section 4(1)(a)(ii) of the Act provides for deductions to be made as follows:
Any other costs, charges, and expenses resulting from the exportation of the goods, or arising from their shipment from the country of export.
Credit
3.1.4.1 Zhujiang incurred a cost of credit on its export sale to New Zealand which differed from that incurred on its sales on the Chinese domestic market. A deduction has therefore been made for this cost.
Costs from Factory to Port
3.1.4.2 In response to the Essential Facts and Conclusions, the industry submitted that the cost of transporting the cement from the Zhujiang factory to Huang Pu Port is borne by Zhujiang, and a deduction should be made to the export price for this cost. This submission was based on the industry's interpretation of the contract for sale of cement between Zhujiang and Guangzhou National, and a subsequent transport contract between Zhujiang and Taili International Freight Transport Services Ltd, in which Zhujiang entrusts Guangzhou National to pay the cost of transport to the freight company. The industry submitted that the cost of transport is remitted to Guangzhou National by Zhujiang, or deducted from the invoiced price of the cement.The investigating team considers that the correct interpretation of the two contracts is that the contract of sale sets out the conditions of sale and imposes an obligation on Zhujiang to make arrangements for local freight. The conditions of transport are set out in the contract of transport, and is a mechanism for fulfilling the obligation created by the sale contract. It is clear that the cost of local freight is borne by Guangzhou National as per these two contracts. No deduction has therefore been made for local freight.
3.2 Normal Values
3.2.1 Normal values are determined in accordance with section 5 of the Act which states (inter alia) as follows:
Subject to this section, for the purposes of this Act, the normal value of any goods imported or intended to be imported into New Zealand shall be the price paid for like goods sold in the ordinary course of trade for home consumption in the country of export in sales that are arm's length transactions by the exporter or, if like goods are not so sold by the exporter, by other sellers of like goods.
Guangzhou Zhujiang Cement Company
3.2.2 Base Prices
3.2.2.1 The investigating team is satisfied that sales of Portland cement on the Chinese domestic market are not set or influenced by the Government (at any level), and that prices are established according to the market. The investigating team is also satisfied that sales are not made at a loss, and are made in sufficient quantities to be used to establish normal values.
3.2.2.2 Zhujiang has a basic price which applies to all sales made under contract, regardless of the level of trade (nearly all sales are made under contract), and from which various discounts apply.
3.2.2.3 Base prices were established from a sale made to a customer in August 1997 (under cover of four invoices) of a similar volume, and in similar proportions of bagged to bulk cement, as the sales made to New Zealand in August 1997. The contract under which these sales were made provided for annual sales of a similar volume to the projected annual sales to New Zealand. The investigating team is satisfied that the sales were at arm's length.The New Zealand industry has submitted that, based on its translation of an invoice, that the sale on which normal values were established may relate to a sale of concrete rather than cement. Based on a translation of the invoices obtained from the Translation Service of the Department of Internal Affairs, and on information provided by Zhujiang, the investigating team is satisfied that the sale does relate to cement of the same specification as that exported to New Zealand.
3.2.3 Adjustments
3.2.3.1 Section 5(3) of the Act provides:
| Where the normal value of goods imported or intended to be imported into New Zealand is the price paid for like goods, in order to effect a fair comparison the normal value and the export price shall be compared by the Secretary- |
| (a) | At the same level of trade; and |
| (b) | In respect of sales made at as nearly as possible the same time; and |
| (c) | With due allowances made as appropriate for any differences in terms and conditions of sales, levels of trade, taxation, quantities, and physical characteristics, and any other differences which affect price comparability. |
Terms and Conditions of Sale
Discounts
3.2.3.2 Discounts are given on the basis of the monthly sales to each customer, and relate to the volume of sales, sales made outside of Guangzhou, sales to key construction projects, and for payments made in due time. Invoices are issued at the end of the month in which the sales are made, and are issued net of any discounts for which the customer is eligible.
3.2.3.3 In response to the Essential Facts and Conclusions, the industry has submitted that these discounts should not be deducted from the normal value, because these discounts would not be available to Guangzhou National. The Ministry considers that sales to Guangzhou National cannot be directly equated with sales to a domestic customer for the purposes of establishing normal value. The sale used to establish base prices was therefore net of applicable discounts, as this was the actual price paid for like goods sold in the ordinary course of trade for home consumption in the country of export.
Credit
3.2.3.4 Zhujiang incurred a cost of credit on the domestic sale used to establish base prices which differed from that incurred on its export sale. A deduction has therefore been made for this cost.
Levels of Trade
3.2.3.5 No adjustment for differences in level of trade is required.
Taxation
3.2.3.6 There is a 17 percent value added tax (VAT) in China which applies to sales of most goods, including cement. When goods are exported, VAT cannot be added to the selling price and it is possible to claim back input VAT at the rate of only 9 percent. This effectively means that there is a higher cost of production associated with export sales by the amount of the non-claimable input VAT.
3.2.3.7 As the export sale by Zhujiang was made in the first instance to Guangzhou National, it was treated as a domestic sale, and base prices were established on the VAT exclusive amount of the sale. The base prices for normal values were also established on the VAT exclusive selling price. Guangzhou National has advised that it has claimed the allowable refund of input VAT on the export sale to New Zealand and will pay this to Zhujiang.
3.2.3.8 Zhujiang has argued that the allowable refund of input VAT effectively increases the revenue available to it from the export sale, and therefore an adjustment should be made to either increase the export price or reduce the normal value by the amount of the allowable refund of input VAT. The investigating team does not accept this argument as it fails to account for the cost of the input VAT which cannot be claimed back on exports.
3.2.3.9 The New Zealand industry has argued that as the input VAT which cannot be claimed back on exports is a cost "resulting from the exportation of the goods", it therefore should be deducted from the export price, or alternatively should be added to the normal value. The investigating team notes that deductions from the export price are normally made in order to arrive at the ex-factory price of the goods, and that the higher cost of inputs arising from the additional net tax on them is before the ex-factory level, and is therefore not considered to be a cost, charge or expense arising from the export of the goods.
3.2.3.10 The investigating team also notes that the non-refundable input VAT is not a difference in taxation that directly affects the selling price. The export price is negotiated for the best price that the exporter can achieve, which will depend on such factors as the market situation, the volumes involved, and the perception of the longer term sales prospects. The higher costs associated with the export sale will therefore not necessarily be reflected in the ex-factory export price. It is therefore considered that no adjustment is required to the normal value, or the export price, because of differences in taxation.
Quantities
3.2.3.11 No adjustment is required for differences in quantities.
Physical Characteristics
3.2.3.12 No differences in physical characteristics between the goods sold domestically and those sold to New Zealand are known to exist, therefore no adjustment is required.
3.2.3.13 The industry has queried the grade and standard of cement used to establish normal value. The investigating team is satisfied that the evidence available shows that the cement exported to New Zealand is of the same grade as the cement used to establish normal value, which is standard #525, grade II.
Other Differences Affecting Price Comparability
3.2.3.14 There are no other differences affecting price comparability.
3.3 Comparison of Export Price and Normal Value
3.3.1 Margins of Dumping
3.3.1.1 A comparison of export prices as established in section 3.1 of this report, and normal values as established in section 3.2, has been made.
3.3.1.2 Dumping margins have been calculated on a per tonne basis for cement packed in 40kg bags and in one tonne bags for the export shipment made to New Zealand during the period of investigation of 1 October 1996 to 30 September 1997.
3.3.1.3 Only the cement in 40kg bags was found to be dumped. The dumping margins for cement are as follows:
| Company: Zhujiang | Dumping Margin (% of Export Price) | Volume (tonnes) |
|---|
| 40kg bags | 5 | 3,000 |
| 1 tonne bags | 0 | 5,000 |
3.3.1.4 There has been one further importation of the goods since the period of investigation, in February 1998. Using the same deductions and adjustments as those applied to the export prices and normal values in the period of investigation, and using the actual export transaction values and a sale on the domestic market at about the same time as the export sale to establish normal values, margins of dumping have also been established for this shipment. In this shipment, only the 40kg bags were dumped, and the dumping margin as a percentage of export price for the 40kg bags is also 5 percent.
3.3.2 Volume of Dumped Goods
3.3.2.1 Section 11(1) of the Act provides that where the Minister is satisfied in respect of some or all of the goods under investigation, that there is insufficient evidence of dumping or injury to justify proceeding with the investigation then it shall be terminated. Section 11(2) of the Act provides that evidence of dumping shall be regarded as insufficient if the volume of imports of dumped goods, expressed as a percentage of total imports of like goods into New Zealand, is negligible, having regard to New Zealand's obligations as a party to the WTO Agreement. The WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 ("the Anti-Dumping Code"), deals with the negligibility of dumped imports under Article 5:8 as follows:
5.8 An application under paragraph 1 shall be rejected and an investigation shall be terminated promptly as soon as the authorities concerned are satisfied that there is not sufficient evidence of either dumping or of injury to justify proceeding with the case. There shall be immediate termination in cases where the authorities determine that the margin of dumping is de minimis, or that the volume of dumped imports, actual or potential, or the injury, is negligible. The margin of dumping shall be considered to be de minimis if this margin is less than 2 per cent, expressed as a percentage of the export price. The volume of dumped imports shall normally be regarded as negligible if the volume of dumped imports from a particular country is found to account for less than 3 per cent of imports of the like product in the importing Member, unless countries which individually account for less than 3 per cent of the imports of the like product in the importing Member collectively account for more than 7 per cent of imports of the like product in the importing Member.
3.3.2.2 The following table shows imports of dumped subject goods and total imports in the year ended September 1997.
Table 3.1: Share of Imports (kg)
| Dumped Imports | 3,000 | 35 % |
| Other | 5,635 | 65 % |
| Total Imports | 8,635 | |
On the basis of this information, imports of the dumped goods from China are not negligible.
3.3.2.3 The volume of dumped goods in the February 1998 importation was 1,000 tonnes out of a total of 8,000, or 12.5 percent of the total shipment.
3.4 Conclusions Relating to Dumping
3.4.1 The investigation has established that of the 8,000 tonnes of the subject goods imported from China during the dumping investigation period, 3,000 tonnes were dumped, with a dumping margin of 5 percent.
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