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Dumping and Countervailing Duties Act 1988

Contents

• 1. Proceedings
• 2. New Zealand Industry
• 3. Dumping Investigation
• 4. Injury Investigation
• 5. Conclusions
• 6. Recommendations

Table of Abbreviations

1.  Proceedings

1.1  Proceedings

On 24 July 2000, the Secretary of Commerce (now called the Chief Executive of the Ministry of Economic Development) accepted a properly documented application from Douglas Pharmaceuticals Limited (hereinafter referred to as Douglas), alleging that Tamoxifen Citrate of brand name Genox from the United Kingdom was being dumped and by reason thereof threatening to cause material injury to the New Zealand industry.

On 30 August 2000, the Secretary of Commerce formally initiated an investigation pursuant to section 10 of the Dumping and Countervailing Duties Act 1988 ("the Act"), on being satisfied that sufficient evidence had been provided that:

(a) the goods imported or intended to be imported into New Zealand were being dumped; and

(b) by reason thereof, material injury to an industry was being threatened.

The application was made in respect of one of the brands of tamoxifen imported from the United Kingdom, which won the tender round of New Zealand’s Pharmaceutical Management Agency (hereinafter referred to as PHARMAC), which was for sole supply of the market for a three year period. In accordance with section 10 of the Act, the Ministry’s investigation was to determine both the existence and effect of the alleged dumping of the Genox brand of tamoxifen from the United Kingdom.

The purpose of this Report is to provide a summary of the matters established by the investigating team as a basis for a determination to be made under section 13 of the Act as to whether or not the goods are being dumped and by reason thereof material injury to an industry has been or is being caused or is threatened. It should be noted that this Report provides a summary only of the information, analysis and conclusions relevant to this investigation, and should not be accorded any status beyond that.

Grounds for the Application

Pacific Pharmaceuticals Limited (hereinafter referred to as Pacific) won PHARMAC’s tender for sole subsidised supply of tamoxifen to the New Zealand market for three years. The brand Pacific is supplying is Genox. Douglas, and presumably other suppliers of tamoxifen were unsuccessful in the tender. The newly contracted tender price was in the market from 7 July 2000. Up until 30 November 2000, the unsuccessful tenderers were still able to supply their registered brands of tamoxifen to the New Zealand market, if they had lowered their prices to the new price level, and receive a subsidy. After that date they would not receive the subsidy. PHARMAC has stated that this transition period allows the unsuccessful tenderers time for an orderly exit from the market. Douglas has stated that ___________________________ at the new price level and as a result, sales of all other brands of tamoxifen will all but cease. From 1 December 2000, Genox supplied by Pacific is the only brand of tamoxifen subsidised under the Pharmaceutical Schedule.

Douglas claims that the price level at which the tender was won means that the goods are being dumped. Douglas claims that as a result of the alleged dumping, material injury is resulting from:

• a significant rate of increase in the volume of imports of the allegedly dumped goods, and the likelihood of substantially increased imports from the United Kingdom;
• price undercutting, and likely price depression and price suppression;

which will cause:

• decline in sales;
• decline in market share; and
• decline in profits.

The investigation was initiated by the Ministry based on the applicant’s claims of threat of injury arising from the contracted price reduction of the imported Genox brand of tamoxifen. That price reduction has now been in place for some months and the investigation has considered whether actual injury has been caused to the industry. Douglas has stated in its application that the material injury resulting from the importation of allegedly dumped tamoxifen commenced on 12 July 2000 since Pacific dropped the price to the market at that time. It was later established that Pacific dropped its prices on 7 July 2000.

In response to the Essential Facts and Conclusions report, Douglas noted that the tender results were announced on 30 May 2000 and stated that "injury commenced from at least that date". It was stated that this was when Douglas knew that it had lost its business of producing Tamoxifen Citrate for the New Zealand domestic market.

It should be noted that the Ministry approaches investigations on the basis that injury and threat of injury are alternatives, i.e. an industry is either injured or threatened with injury, but both cannot apply at the same time, although an investigation may be required to ascertain which is applicable.

1.2  Interested Parties

New Zealand Industry

The application was submitted by Douglas. The [Chief Executive of the Ministry of Economic Development] was satisfied that the application was made by or on behalf of the New Zealand industry producing like goods, and had the amount of support required by section 10(3) of the Act.

Importers and Exporters

From the information available to the Ministry, the importer and exporter of tamoxifen with brand name Genox, subject to the investigation for the year ended August 2000 were:

Importer

Pacific Pharmaceuticals Limited

Exporter

Generics (UK) Limited

1.3  Imported Goods

The goods which are the subject of the application, hereinafter referred to as tamoxifen, or "subject goods", are:

Tamoxifen Citrate (with brand name Genox) in any form or presentation.

The New Zealand Customs Department has stated that Tamoxifen Citrate enters under the following tariff classification:

Imports of the goods subject to this application have been free of duty since 1 July 1997.

Section 3(6) of the Act provides as follows:

For the purposes of this Act, where, during the exportation of goods to New Zealand, the goods pass in transit from a country through another country, that other country shall be disregarded in ascertaining the country of export of the goods.

and section 5(5) provides:

Where—

(a) The actual country of export of goods imported or intended to be imported into New Zealand is not the country of origin of the goods; and

(b) The [Chief Executive of the Ministry of Economic Development] is of the opinion that the normal value of the goods should be ascertained for the purposes of this Act as if the country of origin were the country of export,—

the [Chief Executive of the Ministry of Economic Development] may direct that the normal value of the goods shall be so ascertained.

In the current investigation, the subject goods were produced in and exported from the United Kingdom, direct to New Zealand therefore sections 3(6) and 5(5) of the Act are not relevant.

1.4  Investigation Details

In this Report, unless otherwise stated, years are March years and dollar values are New Zealand dollars. In tables, column totals may differ from individual figures because of rounding. The term VFD refers to value for duty for Customs purposes.

The period of investigation for dumping is 1 September 1999 to 31 August 2000 while the investigation of injury involves evaluation of data for the period 1 April 1997 to the latest available information.

In response to the Essential Facts and Conclusions, Blackburn Croft clarified that the date the result of the tender being announced was the date at which injury commenced.

1.5  Exchange Rates

Article 2.4.1 of the Agreement provides as follows:

When the comparison under paragraph 4 [of Article 2] requires a conversion of currencies, such conversion should be made using the rate of exchange on the date of sale8, provided that when a sale of foreign currency on forward markets is directly linked to the export sale involved, the rate of exchange in the forward sale shall be used. Fluctuations in exchange rates shall be ignored and in an investigation the authorities shall allow exporters at least 60 days to have adjusted their export prices to reflect sustained movements in exchange rates during the period of investigation.

8 Normally, the date of sale would be the date of contract, purchase order, order confirmation, or invoice, whichever establishes the material terms of sale.

Over the period of investigation Genox was exported from the United Kingdom direct to New Zealand. Generics (UK) invoiced its sales to Pacific in _______________________ were made.

In examining whether transactions were made at arm’s length the Ministry used exchange rate conversions made at the inter-bank rate taken for the OANDA Internet currency converter http:/www.oanda.com.

1.6  Disclosure of Information

The Ministry of Economic Development makes available all non-confidential information to any interested party through its Public File system.

Article 6.7 of the Agreement provides as follows:

In order to verify information provided or to obtain further details, the authorities may carry out investigations in the territory of other Members as required, provided they obtain the agreement of the firms concerned and notify the representatives of the government of the Member in question, and unless that Member objects to the investigation. The procedures described in Annex I shall apply to investigations carried out in the territory of other Members. Subject to the requirement to protect confidential information, the authorities shall make the results of any such investigations available, or shall provide disclosure thereof pursuant to paragraph 9, to the firms to which they pertain and may make such results available to the applicants.

A verification visit was made to the following exporter:

Generics (UK) Limited

A copy of the Verification Report was provided to the exporter visited, and a non-confidential copy was placed on the Public File.

Article 6.8 of the Agreement provides as follows:

In cases in which any interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available. The provisions of Annex II shall be observed in the application of this paragraph.

Information was requested, but not received to the extent required from Generics (UK) as explained below.

Information pertaining to domestic prices for the full period of investigation was requested from Generics (UK) to make the comparison between export prices and normal values on a transaction-to-transaction basis. Generics (UK) provided a list of monthly weighted average domestic prices (unadjusted) for the full period of investigation and domestic tax invoices from May 2000 to September 2000.

Generics (UK) argued at the verification visit that Douglas had not complained of the period prior to ______________) and __________________________________________ as they were considered to be irrelevant. Generics (UK) advised that the allegation of dumping related _______________ prices that coincided with Pacific’s successful tender with PHARMAC for sole subsidised supply of the New Zealand market and these transactions occurred from _______ onwards.

A comparison on a weighted average basis for the earlier part of the period of the investigation and on a transaction-to-transaction basis for the latter part of the period of investigation did not appear to the Ministry to be a consistent or appropriate approach. Generics (UK) indicated towards the end of the investigation that it would provide further information in respect of normal values in the earlier period of the investigation, but this had not been received when this report was finalised. The investigation team used normal values provided by the applicant for the period ____________, which allowed the Ministry to complete its comparison on a transaction-to-transaction basis for the full period of investigation.

Section 10a of the Act provides as follows:

(1) Subject to subsection (2) of this section, within 150 days after the initiation of an investigation under section 10 of this Act, the [Chief Executive of the Ministry of Economic Development] shall give to the parties to the investigation referred to in section 9(b) of this Act written advice of the essential facts and conclusions that will likely form the basis for any final determination to be made under section 13 of this Act.

(2) Nothing in subsection (1) of this section limits the Official Information Act 1982 or section 10(7) of this Act.

The Essential Facts and Conclusions were provided to interested parties on 19 January 2001. Comments were received from Douglas Pharmaceuticals (through Blackburn Croft), Generics (UK) and Pacific (through Bell Gully), and from PHARMAC.

2.  New Zealand Industry

Section 3a provides the definition of "industry":

3a. Meaning of "industry"—For the purposes of this Act, the term ‘industry’, in relation to any goods, means—

(a) The New Zealand producers of like goods; or

(b) Such New Zealand producers of like goods whose collective output constitutes a major proportion of the New Zealand production of like goods.

"Like goods" is defined in section 3 of the Act:

"Like goods", in relation to any goods, means—

(a) Other goods that are like those goods in all respects; or

(b) In the absence of goods referred to in paragraph (a) of this definition, goods which have characteristics closely resembling those goods:

2.1  Like Goods

In order to establish the existence and extent of the New Zealand industry for the purposes of an investigation into injury, and having identified the subject goods, it is necessary to determine whether there are New Zealand producers of goods which are like those goods in all respects, and if not, whether there are New Zealand producers of other goods which have characteristics closely resembling the subject goods.

The subject goods have been identified in section 1.3 of this Report as:

Tamoxifen Citrate (with brand name Genox) in any form or presentation.

Douglas produces Tamoxifen Citrate with the brand name Tamofen for the domestic market, and exports tamoxifen of brand name Tamoxen to the Australian market. Douglas has identified the allegedly dumped goods as being the prescription pharmaceutical Tamoxifen Citrate of the brand name Genox, which was being imported from the United Kingdom. Douglas states that this is a generic drug (not on patent) and that there were other brands of tamoxifen in the market.

Douglas claims that Tamofen is a like good to the Genox being imported.

Like Goods Considerations

In deciding like goods issues the Ministry takes into account the following considerations:

1. Physical characteristics, which cover appearance, size and dimensions, components, production methods and technology.
2. Function and usage. This covers consumer perceptions and expectations, end uses, and will lead to any conclusions on the issue of substitutability where relevant.
3. Pricing structures.
4. Marketing issues such as distribution channels and customer advertising.
5. Other. This can include tariff classification if applicable, and any other matters which could be applicable in the circumstances.

The following information has been provided by interested parties about the New Zealand and United Kingdom products.

Physical Characteristics

The tamoxifen is the active ingredient and the citrate is included only to stabilise the tamoxifen for the purpose of manufacture and shelf life. There are other differences in the composition of the tablets but these do not have any known therapeutic effect. Pacific, in its response to the importer's questionnaire, provided a table comparing the physical characteristics and composition between Genox, the imported product, and Tamofen, the domestic product. The Ministry has amended this table provided by Pacific with more specific information from interested parties as follows:

	Genox 10 Tablets Pacific)	Tamofen Tablets 10mg
	Tamoxifen (as Citrate)	Tamoxifen (as Citrate)
	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
Shape	CONFIDENTIAL	CONFIDENTIAL
Diameter	CONFIDENTIAL	CONFIDENTIAL
Weight	CONFIDENTIAL	CONFIDENTIAL
Debossing; Side 1	CONFIDENTIAL	CONFIDENTIAL
Side 2	CONFIDENTIAL	CONFIDENTIAL
Packaging	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
Pack	30 tablets	30 tablets

	Genox 20 Tablets (Pacific)	Tamofen Tablets 20 mg (Douglas)
	Tamoxifen (as Citrate)	Tamoxifen (as Citrate)
	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
Shape	CONFIDENTIAL	CONFIDENTIAL
Diameter	CONFIDENTIAL	CONFIDENTIAL
Weight	CONFIDENTIAL	CONFIDENTIAL
Debossing; Side 1	CONFIDENTIAL	CONFIDENTIAL
Side 2	CONFIDENTIAL	CONFIDENTIAL
Packaging	CONFIDENTIAL	CONFIDENTIAL
	CONFIDENTIAL	CONFIDENTIAL
Pack	30 tablets	30 tablets

The information in the table shows that there are differences in some of the ingredients used to make up the domestic and the imported tamoxifen. The information available indicates that these ingredients, other than the tamoxifen, have no known influence on the pharmaceutical’s effectiveness. The difference in ingredients between the two products reflects the different manufacturing processes used to make the subject goods and the domestically made product. The information provided indicates that the subject goods are manufactured _____________________________ and that Tamofen is made ___________________________________. All Tamoxifen Citrate must be manufactured in a toxic substances suite requiring a completely separate facility within the manufacturing plant. Specific procedures must be followed when dealing with cyto-toxic chemicals and significant downtime is required to clean equipment between each production run.

Function and Use

The Tamoxifen Citrate brands available in New Zealand are non-steroidal, anti-oestrogenic medicines. They block the actions of oestrogen in the body. Certain types of breast cancer require oestrogen to grow. Tamoxifen is used to treat and prevent some types of breast cancer. All the brands contain the same active ingredient, tamoxifen, which gives the same therapeutic effect. They are prescribed in oral doses of 20 to 40 mg once daily. There are a number of potential pharmaceutical substitutes currently being trialled (see details under Developments in Technology in Section 4.7 of this report) showing similar or potentially improved effects. From the information available these pharmaceuticals are not yet generally available.

Pricing

The pricing of Tamofen in the New Zealand market prior to the implementation of the new tender round price, was the same as that of the subject goods. The pricing between the brands has only changed since Pacific introduced the new lower price to the market.

Marketing

Prior to the new price, the information available indicates that all tamoxifen was marketed and distributed in similar ways in the New Zealand market. Both products were offered to pharmacies at the listed price _______________

Other

Tamoxifen Citrate from all manufacturers is classified under the same tariff item 3004.90.19 19G which includes a range of other medicaments and is not decisive in defining the product.

Conclusion

The Tamofen brand produced by the industry is not the same in all respects as the imported Genox. Both brands are similar in that they have the same function and use including the same active ingredient, which gives the same therapeutic effect, and are administered in the same dosages regardless of the brand. There are some common non-active ingredients, all are presented as tablets, they had the same subsidised pricing levels set by PHARMAC prior to the new tender price level, and have similar marketing and distribution systems. The main differences would seem to be some different non-active ingredients making up the tablets and the different processes by which they are made.

On the basis of the information available, the Ministry considers that the tamoxifen tablets produced by Douglas have characteristics closely resembling the subject goods, and are therefore like goods to the subject goods.

2.2  New Zealand Industry

The New Zealand producer of like goods is Douglas Pharmaceuticals Limited. The investigation was initiated on the basis that the application met the requirements of section 10(3) with regard to required levels of support, and that the applicant had standing to make an application. Douglas is the only known producer of Tamoxifen Citrate in New Zealand.

2.3  Imports of Tamoxifen

Tamoxifen is not separately identified in the Customs Tariff and all imports are not identifiable from the Customs data. The Ministry has therefore used data collected by IMS (NZ) Limited (IMS), a market survey company, to provide more accurate information on the volume of sales which can be used for a close approximation of the volume of imports. The following table shows import volumes into New Zealand on this basis from 1998. MAT (moving average total) October 2000 figures are for a full year to 31 October.

2.4   New Zealand Market

The following table shows the New Zealand market for tamoxifen and is based on the IMS data up to and including October 2000. The IMS data recording the New Zealand Industry’s sales is representative of the volume of production.

Tamoxifen Citrate is used mainly in the treatment of breast cancer and as such there are only minor changes in the total volume of tamoxifen sold in the New Zealand market over the period. The significant changes are the decline in the industry sales in the MAT October year and the significant increase in volume of imports of the subject goods over the same period.

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

Export prices are determined in accordance with section 4(1) 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 that 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 after their shipment from the country of export;or

Section 4(1)(b) of the Act provides as follows:

(b) Where the purchase of the goods by the importer was not an arm's length transaction, and the goods are subsequently sold by the importer in the condition in which they were imported to a person who is not related to the importer, the price at which the goods were sold by the importer to that person less the sum of the following amounts:

(i) The amount of any duties and taxes imposed under any Act; and

(ii) The amount of any costs, charges, or expenses arising in relation to the goods after exportation; and

(iii) The amount of the profit, if any, on the sale by the importer or, where the [Chief Executive of the Ministry of Economic Development] so directs, an amount calculated in accordance with such rate as the [Chief Executive of the Ministry of Economic Development] determines as the rate of profit on the sale by the importer having regard to the rate of profit that would normally be realised on sales of goods of the same category by the importer where such sales exist.

In relation to arm’s length transactions, section 3(2) and 3(3) of the Act provide as follows:

(2) For the purposes of this Act, a purchase or sale of goods shall not be treated as an arm's length transaction if -

(a) There is any consideration payable for or in respect of the goods other than their price; or

(b) The price is influenced by a relationship between the buyer, or a related person, and the seller, or a related person; or

(c) In the opinion of the [Chief Executive of the Ministry of Economic Development], the buyer, or a person related to the buyer, will, directly or indirectly, be reimbursed, be compensated, or otherwise receive a benefit for, or in respect of, the whole or any part of the price.

(3) Where goods are imported into New Zealand and are purchased by the importer from the exporter (whether before or after exportation) for a particular price and the [Chief Executive of the Ministry of Economic Development] is satisfied, after having regard to -

(a) The amount of the price paid or to be paid for the goods by the importer; and

(b) Such other amounts as the [Chief Executive of the Ministry of Economic Development] determines to be costs necessarily incurred in the importation and sale of the goods; and

(c) The likelihood that the amounts referred to in paragraph (a) and paragraph (b) of this subsection will be able to be recovered within a reasonable time; and

(d) Such other matters as the [Chief Executive of the Ministry of Economic Development] considers relevant,-

that the importer, whether directly or through a related person, sells those goods in New Zealand (whether in the condition in which they were imported or otherwise) at a loss, the [Chief Executive of the Ministry of Economic Development] may treat the sale of those goods as indicating that the importer or a related person will, directly or indirectly, be reimbursed, be compensated, or otherwise receive a benefit for, or in respect of, the whole or any part of the price for the purposes of subsection (2)(c) of this section.

Sections 3(4) and (5) of the Act refer to relationships as follows:

(4) For the purposes of this Act, a person shall be deemed to be related to another person if -

(a) One of them directly or indirectly controls the other (within the meaning of subsection (5) of this section); or

(b) Both of them are directly or indirectly controlled by a third person (within that meaning); or

(c) Together they directly or indirectly control a third person (within that meaning).

(5) For the purposes of subsection (4) of this section, a person controls another person if the first-mentioned person is in a position, whether legally or operationally, to exercise restraint or direction over the other person.

In relation to the use of best information available in ascertaining export price and normal value, section 6 of the Act provides as follows:

(1) Where the [Chief Executive of the Ministry of Economic Development] is satisfied that sufficient information has not been furnished or is not available to enable the export price of goods to be ascertained under section 4 of this Act, or the normal value of goods to be ascertained under section 5 of this Act, the normal value or export price, as the case may be, shall be such amount as is determined by the [Chief Executive of the Ministry of Economic Development] having regard to all available information.

(2) For the purposes of subsection (1) of this section, the [Chief Executive of the Ministry of Economic Development] may disregard any information that the [Chief Executive of the Ministry of Economic Development] considers to be unreliable.

Generics (UK) Limited

Generics (UK) is a pharmaceutical manufacturer producing tablets and capsules for the United Kingdom market as well as for export to New Zealand. Generics (UK) is a 100% subsidiary of Merck KgaA, a German pharmaceutical company. Merck KgaA owns 100% of Merck Generics Group BV which owns 100% of Pacific Pharmaceuticals Limited (Pacific). Brochures disclose that Merck Generics Group of companies is one of the worlds leading internationally based generic pharmaceutical groups specialising in development, production, marketing and distribution of generic drugs.

Base Prices

The sales from Generics (UK) to Pacific have been treated as arm’s length transactions. The companies are related but it is considered that the transactions have not been influenced by this relationship and that the export prices have not been artificially inflated. This is explained in more detail below:

• Generics (UK) and Pacific are sister companies within the Merck Generic Group of companies. Both companies _________________ and Merck KgaA is in a position legally to exercise restraint or direction over both Generics (UK) and Pacific. However, there is no evidence that Merck KgaA has any involvement in the day to day running of either company and does not have an influence on prices; and
• There is no evidence that Pacific, or a person or entity related to Pacific (including Merck KgaA and Merck Generics Group BV) will directly or indirectly, be reimbursed, be compensated, or otherwise receive a benefit for, or in respect of, the whole or any part of the price. The financial information showed that Pacific sold Genox in New Zealand at a profit therefore section 3(3) of the Act does not apply; and
• The Ministry in its investigations constructed an export price in accordance with section 4(1)(b) of the Act to test whether the prices had been affected by the relationship between companies. Deductions were made for all costs incurred between the point of resale in New Zealand back to the ex-factory level of sale in the United Kingdom. This analysis indicated that actual export prices had not been artificially inflated thereby hiding or decreasing any apparent margin of dumping.

Base prices are ___ prices charged to Pacific by Generics (UK).

Adjustments

Adjustments have been made to base prices for overseas insurance, airfreight, document-handling charge, delivery/pickup charge and fuel surcharge. Pacific and Generics (UK) sell to each other many pharmaceutical commodities and ______________________ and no cost of credit adjustment was needed.

Export Prices

Export prices were established for each consignment to New Zealand, relative to the two different strengths of tamoxifen, during the period of investigation by deducting the adjustments described above from the base prices.

3.2  Normal Values

Normal values are determined in accordance with section 5 of the Act.

(1) 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.

(2) Where the [Chief Executive of the Ministry of Economic Development] is satisfied that the normal value of goods imported or intended to be imported into New Zealand cannot be determined under subsection (1) of this section because-

(a) There is an absence of sales that would be relevant for the purpose of determining a price under that subsection; or

(b) The situation in the relevant market is such that sales in that market that would otherwise be relevant for the purpose of determining a price under subsection (1) of this section are not suitable for use in determining such a price; or

(c) Like goods are not 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 and it is not practicable to obtain within a reasonable time information in relation to sales by other sellers of like goods that would be relevant for the purpose of determining a price under subsection (1) of this section, -

the [Chief Executive of the Ministry of Economic Development] may determine that the normal value, for the purposes of this Act, shall be either-

(d) The sum of -

(i) Such amount as is determined by the [Chief Executive of the Ministry of Economic Development] to be the cost of production or manufacture of the goods in the country of export; and

(ii) On the assumption that the goods, instead of being exported, had been sold for home consumption in the ordinary course of trade in the country of export,-

(A) Such amounts as the [Chief Executive of the Ministry of Economic Development] determines would be reasonable amounts for administrative and selling costs, delivery charges, and other charges incurred in the sale; and

(B) An amount calculated in accordance with such rate as the [Chief Executive of the Ministry of Economic Development] determines would be the rate of profit on that sale having regard to the rate of profit normally realised on sales of goods (where such sales exist) of the same general category in the domestic market of the country of export of the goods; or

(e) The price that is representative of the price paid for similar quantities of like goods sold at arm's length in the ordinary course of trade in the country of export for export to a third country.

(3) 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 for the purposes of this Act, the normal value and the export price shall be compared by the [Chief Executive of the Ministry of Economic Development] -

(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 that affect price comparability.

(4) Where the normal value of goods exported to New Zealand is to be ascertained in accordance with subsection (2) of this section, the [Chief Executive of the Ministry of Economic Development] shall make such adjustments as are necessary to ensure that the normal value so ascertained is properly comparable with the export price of those goods.

(5) Where -

(a) The actual country of export of goods imported or intended to be imported into New Zealand is not the country of origin of the goods; and

(b) The [Chief Executive of the Ministry of Economic Development] is of the opinion that the normal value of the goods should be ascertained for the purposes of this Act as if the country of origin were the country of export, -

the [Chief Executive of the Ministry of Economic Development] may direct that the normal value of the goods shall be so ascertained.

(6) Where the [Chief Executive of the Ministry of Economic Development] is satisfied, in relation to goods imported or intended to be imported into New Zealand, that -

(a) The price paid for like goods -

(i) Sold for home consumption in the country of export in sales that are arm's length transactions; or

(ii) Sold in the country of export to a third country in sales that are arm's length transactions,-

is, and has been for an extended period of time and in respect of a substantial quantity of like goods, less than the sum of -

(iii) Such amount as the [Chief Executive of the Ministry of Economic Development] determines to be the cost of production or manufacture of the like goods in the country of export; and

(iv) Such amounts as the [Chief Executive of the Ministry of Economic Development] determines to be reasonable amounts for administrative and selling costs, delivery charges, and other charges necessarily incurred in the sale of the like goods by the seller of the goods; and

(b) It is likely that the seller of those like goods will not be able to fully recover the amounts referred to in subparagraphs (iii) and (iv) of paragraph (a) of this subsection within a reasonable period of time,-

the price so paid for those like goods shall be deemed not to have been paid in the ordinary course of trade.

Generics (UK) Limited

Base Prices

Generics (UK) sell generic medicines, including Tamoxifen Citrate, mainly to wholesalers (distributors) and a small proportion to hospitals under local contracts. Generics (UK) is not related to any of its domestic customers and transactions are considered to be at arm’s length.

The investigating team selected a group of ____________ wholesalers, the _____________ as an appropriate group of domestic customers for purposes of comparison of domestic with export sales. This group of customers was selected on the basis that the group was a similar customer to Pacific in terms of the functions it carried out, the way it is treated by Generics (UK), the level of trade and volume of sales.

The investigating team was satisfied that sales on the domestic market were not made at a loss and were produced in sufficient quantities to be used to establish normal values. Base prices were determined by the investigating team from the verified information obtained during the overseas industry verification visit.

In response to the Essential Facts and Conclusions report, Blackburn Croft again queried whether normal values are reliable for purposes of establishing normal values. Blackburn Croft notes that, while the Ministry found that Tamoxifen was sold by Generics (UK) at a profit, profit obtained on other products would assist in ascertaining whether domestic prices are reliable. Blackburn Croft observes that profit obtained on other products is not necessarily relevant and the Ministry agrees, as it would expect that profit levels would differ between different pharmaceutical products. EBIT on Generics’ domestic sales of Tamoxifen from May to July varied, between ___ and ____ of selling prices. Generics (UK)’s operating profit over all products for the year to 31 August 2000 of ____ of sales revenue falls within this range.

Blackburn Croft also queried whether there was evidence of the significant price changes that occurred in the United Kingdom market during the period of investigation. The Ministry refers to attachments to Generics (UK)’s response to the Manufacturers Questionnaire relating to the disruption in supply of generics in general in the United Kingdom market and notes that company information sighted at the verification visit was not inconsistent with those reports. In summary, the combination of the following events resulted, in 1999, in a shortage of supply of generic medicines in the United Kingdom and consequent price increases:

• A major UK supplier, Regent GM Laboratories, suspended production at the end of 1998;
• Two other large manufacturers, APS and Norton, moved their operations offshore; and
• An EEC directive that medicines be dispensed in a tamper proof patient pack caused disruption.

Generics (UK) states that the supply problems of 1999 have now been resolved and this resolution "together with the introduction of Lord Hunt’s maximum price scheme, which set ceiling wholesale prices, has meant that prices are now declining towards their 1998 levels".

For the period from _____________, base prices for assessing normal values are ___ prices invoiced to __________ customers for sales at as nearly as possible the same time as the export sales, being the invoice dates.

Generics (UK) considered that comparison of export prices with normal values ______________ and the time of the announcement of Pacific’s successful tender bid were irrelevant. Generics (UK) did not provide domestic prices on a transaction basis. In the absence of that information, for the period __________________, the Ministry used the normal values provided by Douglas in its application for the period _____________________

Bell Gully (acting for Pacific and Generics) submits that normal values provided by the applicant should not be used in a transaction-to-transaction comparison as such normal values do not represent transaction information but instead are derived from the pharmacist maximum prices listed in the United Kingdom Drug Tariff. In addition, Bell Gully advised that there is generally ___________________________________________ and it considers, therefore, that monthly weighted average figures _________________________________. The Ministry sought confirmation of this situation from Generics (UK)’s representatives.

In response to the Essential Facts and Conclusions report, Bell Gully notes that the Ministry’s use of the applicant’s normal values __________________________________ results in normal values that are "artificially high" and "at the wrong level of trade".

Generics (UK) was given the opportunity to provide normal values for that period at the time of the verification and declined to do so. As indicated above, at a later stage Generics (UK) indicated that it would provide information for this period, however, this further information had not been provided at the time this report was being finalised. The Ministry has used, therefore, the normal values provided by the applicant. The Ministry notes that the values it used were based on published information, but had been significantly reduced to be comparable with estimated export prices at the ex-factory level. The Ministry notes that export prices were ________ higher than assessed normal values in the period _________________, and that no dumping margins were found during that period, even though the Ministry used the applicant’s normal value information that was claimed to be artificially high.

Submissions from Interested Parties

Situation in the United Kingdom Market

PHARMAC considers that the situation in the United Kingdom market is such that sales in that market are not suitable for use in determining normal values in accordance with section 5(1) of the Act because of the situation in the UK market, namely "there is no buyer in the UK market offering sole supplier status for periods as long as in the PHARMAC contracts for similarly assured levels of sales". PHARMAC considers construction of normal values is not appropriate because allocation of overheads would be an arbitrary matter as fixed costs relating to manufacture and sale of a wide range of products of different values would need to be allocated to Tamoxifen Citrate.

PHARMAC considers that export prices should be compared with representative prices for sales to third countries. Factors that PHARMAC considers should be taken into account by the Ministry in order to ensure that the normal value is properly comparable with the export price involve identifying appropriate functional markets, which are as far as possible comparable with the PHARMAC tender market, identifying comparable prices and the relevant source market. PHARMAC suggests that "the closest relevant comparison would appear to be with similar term bulk supply contract prices throughout the European Union where quantities are predictable".

The Ministry considers that, if normal values could not be established using section 5(1) of the Act, it would be able to construct normal values from the costing information provided by Generics (UK). The problem of allocation of overhead costs to individual product lines is one that is common to many manufacturing enterprises producing more than one product line. In these circumstances, the Ministry assesses the reasonableness of methods used to allocate overhead costs to a particular product. The Ministry notes that it prefers not to use prices of sales to third countries, as the basis for normal values as it is possible that such sales may also be dumped.

Other parties to the investigation did not consider that a particular market situation existed that prevented the use of section 5(1) of the Act. Generics (UK) considered that sales to wholesalers in the United Kingdom were suitable for comparison with export prices to New Zealand. Generics (UK) did not argue that the situation in the United Kingdom market was such that domestic sales were not suitable for use in determining arm’s length prices in the ordinary course of trade. Blackburn Croft on behalf of Douglas argued that prices in the United Kingdom market were competitive.

The Ministry considers that a competitive market situation exists in the United Kingdom in respect of sales of generic medicines and there is no reason for sales to be regarded as unsuitable due to a particular market situation in the United Kingdom. The Ministry notes that while the exporter will have sole supply of the New Zealand market for two-and-a-half years it achieved this as a result of its customer’s successful tender in a competitive situation. The Ministry notes that the New Zealand market size is limited and that for comparison purposes it selected a group of customers in the United Kingdom to whom sales of a similar volume had been made.

Level of Trade

PHARMAC indicated early in the investigation that prices for sales to hospitals were appropriate for comparison with export prices and in its submission provided prices to hospitals under local contracts.

Blackburn Croft considers that "the fact that Pacific won the business through a tender does not impact on the level of trade for the purposes of establishing a normal value in the country of export". Blackburn Croft considered the appropriate comparable level of trade in the UK to be "Generics selling to a wholesaler/distributor". Generics (UK) also considered this to be the appropriate level of trade.

When considering the appropriate domestic customer the Ministry considers the functions, distribution flows and place in the distribution chain and volume of sales of the New Zealand customer to establish the correct level of trade. In terms of place in the distribution chain, domestic wholesalers were considered to be at an equivalent level to Pacific.

Wholesalers in the United Kingdom were either ________ wholesalers or _________ wholesalers. The ________ wholesalers tended to dominate the distribution of ________ whereas _______ wholesalers distributed most of the ________ medicines. In terms of function the most appropriate customer type at the same level of trade as Pacific appeared to be _________ wholesalers. In terms of a __________ wholesaler’s sales volume, the ________________________ was selected.

Hospitals source tamoxifen from manufacturers under local contracts or from wholesalers. The investigating team considered Pacific to be at a higher level of trade than hospitals as Pacific sells to hospitals, wholesalers and pharmacists and does not provide medicines direct to patients. In terms of volume of sales __________ were sold to __ hospitals in the United Kingdom, whereas sales to Pacific alone over the investigation period were several times higher at ____________.

Comparison of Unbranded Domestic Sales with Branded Export Sales

The base prices for normal values selected by the Ministry are for UK sales of an unbranded product. Generics (UK) sells tamoxifen on its domestic market as a generic product "Tamoxifen Tablets BP" with the company name and logo.

Export prices are based on sales to New Zealand of a branded product. Tamoxifen Citrate exported by Generics (UK) and sold by Pacific on the New Zealand market is labelled ‘Genox 20’ (20mg) or ‘Genox 10 ’ (10mg).

Submissions by Interested Parties

Submissions were received from representatives of the New Zealand industry arguing that export prices of a branded product should not be compared with domestic prices for an unbranded product, and from representatives of the exporter arguing that branding did not affect the comparison.

New Zealand Industry

Blackburn Croft suggested to the Ministry, that to effect a fair comparison, it should start with the price of a branded product sold in the United Kingdom properly adjusted so that it can be compared with the export price of a branded product. Blackburn Croft argues that the fact that Generics (UK) does not sell a branded form of Tamoxifen Citrate in the UK "is not an acceptable reason for the Ministry to use the lower unbranded price as the starting point to establish a normal value".

Blackburn Croft observes that Genox is not recorded on the Intellectual Property Office of New Zealand (IPONZ) database, but notes that "the long established use of the trade name, will, presumably allow Generics (and/or its customers) to ensure the name is not used by any other party". Blackburn Croft advises that it appears that Genox is a trade name and that Generics (UK) would not manufacture Tamoxifen Citrate for an unrelated third party wanting to use its trade name. Blackburn Croft considers the export sale of Tamoxifen Citrate under the name Genox to other markets, for example Australia, demonstrates that the exported Tamoxifen Citrate is a brand name and cannot be correctly compared with an unbranded sale in the United Kingdom.

Blackburn Croft refers to the value of a brand and notes that, because the brand Genox appears to have been available for sale in New Zealand since December 1985 (10mg) and February 1987 (20mg), it would have achieved some value after this length of time in the market.

Blackburn Croft suggests that the relationship between Generics (UK) and Pacific distinguishes Generics (UK)’s sales of Genox from examples of transactions where an independent manufacturer sells to a brand holder, for example ‘Reebok’, which subsequently realises a price premium due to the brand.

Blackburn Croft considers Genox is, or was, prior to the de-listing of other products, sold in New Zealand as a branded form of Tamoxifen Citrate. Blackburn Croft considers it is incorrect for the Ministry to look at the market subsequent to the effects of the dumping and say it is an unbranded market. Blackburn Croft considers it is clear that, prior to de-listing of branded products, New Zealand was a branded market for Tamoxifen Citrate. Blackburn Croft also notes that for Generics (UK) to make a sale of Tamoxifen Citrate to New Zealand [that is eligible for subsidy], it had to have a branded product. It is Blackburn Croft ’s opinion that it is only because of the dumping and the resultant material injury that the Ministry can say that New Zealand is no longer a branded market because of the sole supplier status.

Blackburn Croft considers that, by not comparing the prices of a branded export product with a branded domestic product, "the Ministry is making an interpretation which is outside of its usual practice and interpretation of the Act and the Agreement".

Blackburn Croft considers that "the Ministry is effectively allowing an adjustment for general advertising and different margins by using an unbranded price as the basis of establishing a fair comparison to the export sale of a branded product". Blackburn Croft observes that "the Ministry does not allow adjustments off the domestic price (in the country of export) for advertising that is not related to a particular sale".

Blackburn Croft also refers to a hypothetical example involving oil filters as follows. "Purolator is a branded oil filter exported to New Zealand. The promotion of the product in New Zealand is, for argument ’s sake, left to the importer. An export sale of the Purolator brand is, however, not compared with the sale of an unbranded filter in the USA because of the little, if any, brand support in New Zealand". Blackburn Croft extends the example so that ArvinMeritor Inc (Arvin), the exporter of branded oil filters, although having property rights in the brand name, has no interest in promotion of the brand and that the importer requested the name of Purolator. In Blackburn Croft’s example, Arvin argues that the proper comparison to establish a normal value is the sale of an unbranded filter in the United States. "Arvin goes on to claim that even though it sells the Purolator brand to other export markets this is purely coincidence as importers in those markets prefer the Purolator name".

Blackburn Croft considers this example illustrates the difficulty it has "accepting the argument put to the Ministry by Generics that Genox is merely a convenient term and which should be ignored as Genox is really no different from an unbranded form of Tamoxifen Citrate".

United Kingdom Exporter

Generics (UK) advise that the originator of a product secures branded prices. In the case of Tamoxifen, the originator brand was Nolvadex and that is still sold at the same price as when it was launched. Generics (UK) advises that it does not own the Genox brand and does not incur any costs in support of the Genox brand and the price at which it sells to Pacific is not affected by whether the product is branded.

Bell Gully advises that the right to use the name Genox "___________. It can in no way be compared with UK branded products."

Bell Gully, in its letter of 4 December 2000 advises that it has demonstrated that tamoxifen sold in the United Kingdom is identical and therefore a ‘like good’ to tamoxifen sold to Pacific. The fact that Pacific has instructed Generics (UK) to put the name ‘Genox’ on the packet does not disqualify the two products from being like goods in all respects.

Bell Gully notes that the intent of Blackburn Croft’s argument "seems to be to establish a normal value which is considerably higher than the price at which Generics (UK), the exporter, sells tamoxifen in the United Kingdom". Bell Gully considers that tamoxifen sold by Generics (UK) to Pacific is like in all respects to the tamoxifen it sells on the United Kingdom market. Bell Gully emphasises that:

The good allegedly dumped, and allegedly causing material injury, is Tamoxifen. It is not a carton with a name on it. That Pacific has chosen to instruct Generics UK to provide it with Tamoxifen in packaging which has the name "Genox" on it does not change in any way the characteristics of the good being Tamoxifen.

Generics (UK) states that "unlike New Zealand, an authorised pharmaceutical that is sold in the United Kingdom with a specific brand name has a different price arrangement than one that is sold with no such specific brand name".

The Ministry’s View

The Ministry notes that the Act requires that export prices and normal values be compared to establish whether imported goods are being dumped. Section 5(1) of the Act requires that normal values "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".

Only if normal values cannot be determined under section 5(1) because of reasons set out in section 5(2), relating to an absence of relevant sales, situation in the relevant market, or lack of information on relevant sales by other exporters, may the Ministry depart from section 5(1) and construct normal values or use representative prices for sales to a third country.

The Ministry established that the United Kingdom exporter, Generics (UK), made arm’s length sales of like goods in the ordinary course of trade for the United Kingdom market. The Ministry considers that, although Tamoxifen Citrate sold by Generics (UK) is not exactly the same in all respects as the exported Genox, it has characteristics closely resembling the subject goods and is therefore like goods to the subject goods.

Generics (UK)’s domestic sales were of unbranded product. Two other sellers (Pharmacia & Upjohn and Zeneca) sold like goods in the United Kingdom market in the form of branded product, but prices of these branded products could only be used by the Ministry if the exporter, Generics (UK), was not selling like goods in arm’s length transactions in the ordinary course of trade in the United Kingdom market. This was not the case since Generics (UK) was making such sales. The Ministry used Generics (UK)’s prices for domestic sales of like goods, in the form of unbranded tamoxifen, as the base prices for assessing normal values and then considered whether due allowance needed to be made to ensure a fair comparison between normal values and export prices.

The Ministry disagrees with Blackburn Croft’s comment that "the Ministry is effectively allowing an adjustment for general advertising and different margins by using an unbranded price". The Ministry has selected comparable domestic sales, that is, those that are the most appropriate for comparison with the export sales.

Blackburn Croft’s suggestions that the Ministry examine selling prices of either branded products by Generics (UK) or branded Tamoxifen Citrate by other sellers in the United Kingdom so that Generics (UK)’s unbranded prices could be adjusted "to reach an equivalent branded price for the Generics (UK)’s Tamoxifen Citrate sold in the United Kingdom" are not appropriate in view of the reasons outlined above.

The Ministry considers that branding identifies a product and differentiates it from other brands and unbranded products, but does not necessarily increase the value of a product over a period of time. The value of a brand, if any, is also dependent on conditions affecting competition and may vary from market to market.

The Ministry notes that Generics (UK) neither owns nor supports the Genox brand, _____________________________ ______________________________. Generics (UK) incurs no promotional or advertising costs in respect of sales of the Genox brand to New Zealand. Generics (UK) advised that its price to Pacific is not affected by whether the product is branded or unbranded. The Ministry considers that Generics (UK) does not receive any price premium related to brand value from the sale of the branded product to Pacific in New Zealand. The Ministry considers that it is reasonable in these circumstances to compare the branded export product with sales of the unbranded domestic product.

Pacific instructed Generics (UK) to put the name of Genox on the packet of Tamoxifen Citrate. The decision by Generics (UK) to sell Tamoxifen Citrate labelled Genox to Australia does not necessarily demonstrate that there is any value in the name Genox. Those sales are into a different market and have no effect on transactions with Pacific and therefore sales to Australia have no relevance to this investigation.

Blackburn Croft & Co, in response to the Essential Facts and Conclusions report, notes that its reference to oil filters was a hypothetical example to demonstrate a possible argument that could be put by an exporter to lower normal values. An argument could be put by an exporter supplying an oil filter with a brand owned by the exporter that, because it left the promotion of the product in New Zealand to the importer, its export sale should be compared with the normal value of an unbranded filter in the United States. Blackburn Croft explains that "if the export sale of a branded product is compared with the domestic sale of an unbranded product the Ministry is allowing adjustments to the domestic price that it would not normally allow".

Should the Ministry encounter this hypothetical example, it would need to consider it on its merits and on the basis of the facts available. It is important that export price and normal value are comparable and that a fair comparison is made. If an exporter makes a sale of a product for export which is labelled with a brand name, but does not price that product any differently than it would price a sale of an unbranded product, then it appears appropriate that the price of a branded product can be compared with the price of an unbranded product. Any advertising and marketing costs incurred by the importer to support the brand in New Zealand would not normally form part of the export price, but nor would similar costs be included in the normal value for the unbranded product. There would, therefore, be no argument in support on any adjustment for fair comparison.

In relation to the actual oil filter investigation (Automotive Oil Filters, USA December 2000), the Ministry notes the Purolator brand is managed and supported for both domestic and export sales by the United States exporter. Purolator is a brand of ArvinMeritor Light Vehicle Aftermarket. This is not the same situation as in the tamoxifen investigation where the exporter neither manages nor supports the Genox brand used by the New Zealand importer.

The invitation to tender administered by PHARMAC for the New Zealand market requests tenders to supply certain forms and strengths of chemical entities. A brand name is required where there is more than one form and strength of a particular chemical entity for each tender item.

PHARMAC manages the Pharmaceutical Schedule for the New Zealand market and publicises that its aim is to "provide the New Zealand public with the best healthcare value from the New Zealand Government’s expenditure on pharmaceuticals. PHARMAC’s decisions incorporate a balanced view of the needs of both prescribers and patients. In addition, PHARMAC seeks to balance the needs of patients for equitable access to healthcare with the needs of taxpayers for responsible management of the costs they ultimately bear". The decision by PHARMAC in accepting a tender is based on whether the supplier can meet the conditions of the tender, including the ex-manufacturer list price. There is no reference in the invitation to tender that trade names are considered when the PHARMAC board makes its decision on whether to accept a certain tender therefore the brand name appears to have no relevance other than differentiating the product. The Ministry notes that the system of sole subsidised supplier status of a product removes similar products from the marketplace and any price premium that might be associated with a brand or trademark no longer applies.

The Pharmaceutical Schedule’s operating policies and procedures state that on pricing schedules "all pharmaceuticals are listed under their approved name. However, brand names are also listed and then cross-referenced to their approved name. To be eligible for subsidy brands must be listed on the Pricing Schedules" (emphasis added). The Ministry also understands that, prior to sole subsidised supply of Tamoxifen Citrate being granted to Pacific, the market consisted of a number of products that had brand names, but there was no distinction between a branded and unbranded market as there is in the United Kingdom. In addition, all of the listed brands of Tamoxifen Citrate were being sold at the same ex-supplier prices.

PHARMAC aims to get the best healthcare value from the New Zealand Government’s expenditure on pharmaceuticals. Its insistence on brands appears to be for ease of identification in operating the Pharmaceutical Schedule, rather than to increase health expenditure by creating a branded market in which products are sold at a premium. In response to the Essential Facts and Conclusions report, PHARMAC concurs with the Ministry’s approach and notes that "the brand name is not an evaluation criterion in the tender and is required for identification purposes only".

Prices of generics and branded medicines in the United Kingdom are separately regulated – generics, including Generics (UK)’s Tamoxifen Citrate, under the Health Services (Control of Specific Generic Medicines) Regulations 2000, and branded product under the Health Services (Control of Prices of Branded Medicines) Regulations 2000 and the Pharmaceutical Price Regulation Scheme (PPRS). The Ministry considers that, while pharmaceuticals are sold on the New Zealand market under brand names, this does not make the market a branded market in the sense that there is a branded market in the UK where products are sold at a premium.

The Ministry considers that it is appropriate to compare Genox with sales of unbranded product in the United Kingdom, rather than with sales of branded product.

Sales at the Same Time

In response to the Essential Facts and Conclusions report, PHARMAC argues, on the basis that its contract with Pacific was for prices to be reduced on 12 July 2000, that all pricing comparisons before 12 July should be based on pre-tender prices. PHARMAC notes that dumping was found to occur in May and June 2000 when compared to export prices resulting from the successful tender, but that there would be no dumping in those months if normal values had been compared with pre-tender export prices.

Generics (UK) reduced its prices to Pacific effective from ____________. The Ministry is required to make a comparison of normal values and export prices in respect of sales made at as nearly as possible the same time. The Ministry, therefore, compared export sales made in May and June with domestic sales made in those months. The comparison was made between the exporter’s export sales to New Zealand and those on its domestic market. The Ministry considers that the date of any subsequent sales by the importer in New Zealand is not relevant.

Level of Normal Values

In response to the Essential Facts and Conclusions report, Blackburn Croft claimed that "the normal values established by the investigators appear to be extremely low". Blackburn Croft supplied a July 2000 invoice ____________________________________________ that showed prices for packs of 10mg and 20mg of £____ and £____ respectively. These prices were similar to published August 2000 prices of £____ and £____ shown in _____________ _______ did note, however, that ___________________________________________________ A __ percent reduction would lower these prices to £____ and £____ respectively. Generics (UK)’s prices to ______________ customers were _____ than these prices at £____ in May and £____ in July for 10mg tablets, and £____ in June for 20mg tablets. Blackburn Croft also referred to _______ showing retail prices for Tamoxifen in the United Kingdom, but these prices were for branded forms of Tamoxifen.

The Ministry notes that there are different types of wholesalers in the United Kingdom and that Generics (UK)’s prices differ between wholesalers. The Ministry’s verification team considered that the ___________, which is a group of __________ wholesalers, was an appropriate group of customers for comparison, after consideration of the functions, distribution flows, places in the distribution chain and volumes of sales of the New Zealand customer and UK customers.

Blackburn Croft also referred to a verification report comment that sales by Generics (UK) to another customer in the UK would be made at a loss. The prices to that customer were given as an indication that domestic prices were trending downwards and were lower than those to the group of customers selected for comparison purposes.

Adjustments

Terms and Conditions of Sale

Discounts

One of the companies within _______________________________ received discounted sales over the investigation period. An adjustment was made on transactions with that company.

Rebates

Generics (UK) is offering an annual rebate of _______________________________________________________ for the financial year ended 31 December 2000. Sales to the ______________ at the end of September had reached ___________, which indicated to the investigating team that Generics (UK) was on track ________________________. The investigating team has received evidence that a _______________ was granted to the ________________________ and an adjustment of this percentage has been made after any discounts.

Inland Freight

Sales to domestic customers were inclusive of delivery. An adjustment for delivery on the basis of _ percent of the net invoiced price was made.

Credit

Various credit terms were offered by Generics (UK) to companies in __________________. From each of the selected domestic invoices, the investigating team made an adjustment for credit on the basis of the mid-range of days that credit is extended, using an interest rate of ________. This adjustment for cost of credit was calculated as a percentage of the price net of discounts, but not net of _______.

Level of Trade

The investigating team compared the sales to New Zealand at the level of sales to wholesalers in the United Kingdom as Pacific is considered to be at the same level of trade as domestic wholesalers. No adjustment was required.

Sales At As Nearly As Possible The Same Time

The investigating team has carried out a transaction to transaction comparison for the entire period of investigation. For the period _____________ normal values for unbranded tamoxifen estimated by the applicant were used as base prices for assessment of normal values. From ___________________ invoices for domestic sales to _____________ where the transaction was as close as possible to the dates of the export invoices were selected. The difference in days varied by up to a maximum of _ days.

Taxation

All transactions were net of VAT therefore no adjustment was required.

Quantities

Prices on the domestic market to the ________________ were the same irrespective of the quantity ordered therefore no adjustment was made.

Physical Characteristics

There is no physical difference between the blister-packed tablets of tamoxifen exported to New Zealand and those sold on the domestic market. No adjustment was required.

Other Differences Affecting Price Comparability

Packaging

Domestic cartons of tamoxifen contain _________. However, __________________ in the export cartons. An adjustment was made. The cartons for the domestic market are ordered _________________ than export therefore domestic costs were higher. The investigating team did not consider this difference affected price comparability and therefore no adjustment was made.

Generics (UK) sell unbranded Tamoxifen Citrate in its domestic market. Genox is the brand of the product manufactured by Generics (UK) but sold by Pacific in the New Zealand market. Generics (UK) do not own the brand of Genox nor does it incur costs of brand support. As explained above, the Ministry made no adjustment on grounds that the comparison of a branded product for the New Zealand market with an unbranded product for the domestic market did not result in any difference affecting price comparability.

Compliance costs are incurred on domestic sales but not export sales. It was not clear to the investigating team whether some or all of these costs were not also incurred in respect of sales for exports. The quantum of any cost difference was not established. No adjustment was warranted.

Sales promotion costs for New Zealand are borne by Pacific in New Zealand. On the domestic market in the United Kingdom _______________________ in the Operations/Production division processes export orders. Generics (UK) did not demonstrate any differences in costs that affected price comparability. In response to the Ministry’s verification report Generics (UK) requested that a selling adjustment should be made to allow a fair comparison between normal value and export price. Due allowance is made by the Ministry for any differences that affect the comparability of domestic and export prices. Such an allowance is made on the basis of costs related to the price difference. Before an allowance is given it must be demonstrated to the Ministry that the costs are directly related to the sales under consideration, the buyer is aware of the matter for which costs are incurred, and the costs affect market value and price comparability. Generics (UK) stated that almost all of its sales and distribution costs relate to sales in the United Kingdom, however, before the Ministry could give further consideration to where any adjustments should be made, further information was sought. At the time that this report was being finalised representatives of Generics (UK) advised that they are in the process of reviewing the Ministry requirements and intend on discussing these with their client. As of the date of this report no further information has been received.

Normal values

Normal values have been calculated by deducting from the base prices the verified adjustments noted above.

3.3   Comparison of Export Price and Normal Value

Dumping margins have been calculated for each strength of Genox exported to New Zealand over the period of investigation from 1 September 1999 to 31 August 2000. Based on the information available to the investigating team the comparison has revealed that prior to May 2000 no dumping occurred. There has been dumping on the New Zealand market of Genox from 12 May 2000 to 29 June 2000 ranging from 22 to 33 percent of export price. However, from late July 2000 to late September 2000 there has been no dumping as normal values have significantly dropped since July 2000.

The following table represents the range over the period of the investigation of dumping margins for each strength of tamoxifen:

Volume of Dumped Goods

The volume of dumped goods has been calculated by applying the percentage of dumped goods during the investigation period to the volume of imports.

Over the period of investigation, _____ units of 10mg and ______ units of 20mg tamoxifen were dumped, representing 52 percent of 10mg imports and 40 percent of 20mg imports. Dumping occurred in the months of May and June 2000.

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 Agreement"), 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.

The following table shows the volume of imports of the dumped subject goods compiled from information provided by Generics (UK) for Genox and IMS data for other imported brands. Non-dumped Genox imports have been included in the figures for other imports. The calculations have been made for 20mg x 30 tablet pack equivalents, in relation to total imports in the year from 1 September 1999 to 31 August 2000 covering the period of investigation of dumping.

On the basis of this information, imports of the subject goods from individual countries are not negligible.

3.4  Conclusions Relating to Dumping

The investigation has established that of the _____ units of 10mg and ______ units of 20mg, of the subject goods, imported from the United Kingdom during the investigation period, _____ units of 10mg and ______ units of 20mg were dumped, with a dumped volume of 52 percent for 10mg and 40 percent for 20mg.

The investigation has established dumping margins of Nil to 33 percent for the 10 mg tablets and Nil to 31 percent for the 20 mg tablets.

4.  Injury Investigation

The basis for considering material injury is set out in section 8(1) of the Act:

8. Material injury to industry—(1) In determining for the purposes of this Act whether or not any material injury to an industry has been or is being caused or is threatened or whether or not the establishment of an industry has been or is being materially retarded by means of the dumping or subsidisation of goods imported or intended to be imported into New Zealand from another country, the [Chief Executive of the Ministry of Economic Development] shall examine—

(a) The volume of imports of the dumped or subsidised goods; and

(b) The effect of the dumped or subsidised goods on prices in New Zealand for like goods; and

(c) The consequent impact of the dumped or subsidised goods on the relevant New Zealand industry.

4.1  Material Injury Caused By Dumping

Section 13 of the Dumping and Countervailing Duties Act 1988 provides:

... the Minister shall make a final determination as to whether or not, in relation to the importation or intended importation of goods into New Zealand,—

(a) The goods are being dumped or subsidised; and

(b) By reason thereof material injury to an industry has been or is being caused or is threatened or the establishment of an industry has been or is being materially retarded.

This means that the material injury must be caused by reason of the dumping of goods.

Section 8 of the Dumping and Countervailing Duties Act 1988 sets out the injury factors which must be examined by the Chief Executive . These are:

• the volume of dumped goods;
• the effect of the dumped goods on prices in the New Zealand market for like goods; and
• the consequent impact of the dumped goods on the relevant New Zealand industry.

The Ministry interprets this to mean that injury is to be considered in the context of the impact on the industry arising from the volume of the dumped goods and their effect on prices. This is consistent with Article 3 of the WTO Anti-Dumping Agreement.

The Act goes on to set out a number of factors and indices which the Chief Executive shall have regard to, although noting that this is without limitation as to the matters the Chief Executive may consider. These factors and indices include:

• the extent to which there has been or is likely to be a significant increase in the volume of dumped goods, either in absolute terms or relative to production or consumption;
• the extent to which the prices of dumped goods represent significant price undercutting in relation to prices in New Zealand;
• the extent to which the effect of the dumped goods is or is likely significantly to depress prices for like goods of New Zealand producers or significantly to prevent price increases for those goods that otherwise would have occurred;
• the economic impact of the dumped goods on the industry, including actual or potential decline in output, sales, market share, profits, productivity, return on investments, and utilisation of production capacity; factors affecting domestic prices; and actual and potential effects on cash flow, inventories, employment, wages, growth, ability to raise capital, and investments;

In addition, the Chief Executive must have regard to factors other than dumping which may be injuring the industry, since in accordance with Article 3 of the WTO Anti-Dumping Agreement, it must be demonstrated that the dumped imports are, through the effects of dumping (as set out in paragraphs 4.1.2 and 4.1.3 above) causing material injury. The demonstration of a causal relationship between the dumped imports and the injury to the domestic industry must be based on an examination of all relevant evidence before the authorities, who