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• Trade Remedies

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• Dumping Investigations

• Washing Machines: Korea

Dumping and Countervailing Duties Act 1988

April 2001

This document is also available in Adobe Acrobat format: Washing Machines from Korea: Provisional Measures Report (160 KB)

Table of Contents

• 1. Proceedings
• 2. New Zealand Industry
• 3. Dumping
• 4. Material Injury
• 5. Conclusions
• 6. Provisional Measures
• 7. Recommendations

Table of Abbreviations

1.   Proceedings

1.1   Proceedings

On 12 December 2000, the Chief Executive of the Ministry of Economic Development (hereinafter referred to as the Chief Executive), acting pursuant to section 10 of the Dumping and Countervailing Duties Act 1988 (hereinafter also referred to as "the Act") formally initiated an investigation into the dumping of household fully automatic washing machines on being satisfied that sufficient evidence had been provided that:

1. The goods imported or intended to be imported into New Zealand were being dumped; and
2. 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.

In accordance with section 10 of the Act the purpose of the Ministry’s investigation is to determine both the existence and effect of the alleged dumping of the subject goods.

In its application for the initiation of an investigation, Fisher and Paykel Limited (F&P), representing the New Zealand industry requested that provisional duties be imposed as early as the Act allowed.

Section 16(1) of the Act provides as follows:

16. PROVISIONAL MEASURES – (1) If, at any time after 60 days from the date on which an investigation has been initiated by the [Chief Executive] under section 10 of this Act (not being an investigation that has been terminated under section 11 of this Act) -

(a) The Minister has reasonable cause to believe, in relation to the importation or intended importation of goods into New Zealand, that -

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

(ii)  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; and

(b) The Minister is satisfied that action under this section is necessary to prevent material injury being caused during the period of investigation, -

the Minister may, by notice, give a provisional direction that payment of duty in respect of the goods shall be secured in accordance with sections 156 and 157 of the Customs and Excise Act 1996, except that the rate or amount of duty to be secured shall not exceed the difference between the export price of the goods and their normal value, or the amount of the subsidy, as the case may be.

The purpose of this Report is to provide a basis for a determination to be made under s.16 of the Act as to whether or not provisional measures should be imposed. In particular, the report addresses the issues of whether there is reasonable cause to believe that the subject goods are being dumped and by reason thereof material injury to an industry has been or is being caused or is threatened; and whether provisional measures are necessary to prevent material injury being caused during the remaining period of investigation.

Basis for Request for Provisional Measures

In its application, F&P claimed that as a result of the alleged dumping, material injury was arising from:

• increased volume of the allegedly dumped imports;
• price undercutting, price depression, and price suppression,

resulting in:

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

leading to:

• declines in output and sales;
• decline in return on investments; and
• possible adverse effect on employment.

Based on the information available to date, the investigating team has provisionally assessed these claims and where they have been found to be justified has examined the extent to which provisional measures are necessary to prevent material injury being caused during the investigation period.

1.2. Interested Parties

New Zealand Industry

The application was lodged by F&P, the only producer of household automatic washing machines in New Zealand. F&P is a wholly owned subsidiary of the listed company Fisher & Paykel Industries Ltd.

Exporters

Due to the number of companies identified from New Zealand Customs Service (NZCS) information as exporting the subject goods over the period of investigation (the year ending 31 October 2000), and in accordance with Article 6.10 of the WTO Agreement on the Implementation of Article VI of the GATT 1994 (the Agreement) the investigation has been limited to those exporters representing the top 99 percent of imports by volume over the period of investigation. These exporters are:

Samsung Electronics Co Limited (Samsung),
LG Electronics Inc (LG), and
Daewoo Electronics Co Limited (Daewoo)

All other exporters of the subject goods from Korea during the period of investigation have the opportunity to provide submissions but these have not been directly solicited.

None of the exporters identified above has provided the investigating team with a response to its questionnaire. A joint submission was received from Davenports West (Davenports) an Auckland based firm of solicitors acting on behalf of all three exporters, in which various matters of interpretation and process are addressed.

The submission made by Davenports is also on behalf of the Electronic Industries Association of Korea (EIAK). No further information regarding this organisation has been provided.

The tenor of the submission by Davenports is that, due to the factors they have identified, the investigation itself is invalid and should be immediately terminated. Where relevant, these matters are discussed in this report.

Importers

The companies identified from the NZCS information as importing the subject goods from the above 3 exporters over the period of investigation are:

LM Rankine Trading Co Ltd (LMR)
Email Appliances (NZ) Ltd (Email)
Radiola Corporation Ltd (Radiola)
Eurolife Ltd (Eurolife)

Submissions have been received from each of these importers and their content is, as appropriate, reflected in this report.

L M Rankine Trading Co Ltd

LMR is a 100 percent New Zealand-owned importer and wholesaler of whiteware. The company is located in Wellington and sales are made by a [Text deleted due to confidentiality]. LMR sources its Korean produced washing machines from LG.

LMR’s major customer is the  and it also supplies [Text deleted due to confidentiality] and [Text deleted due to confidentiality]. [Text deleted due to confidentiality].

LMR provided a full submission in response to the importers questionnaire and is represented in this investigation by Chen Palmer and Partners (Chen Palmer) a Wellington based firm of barristers and solicitors.

In addition to the questionnaire response, the LMR submission raises a number of queries regarding aspects of the initiation of this investigation and of the information contained in the F&P application. Where they are germane, these matters are addressed in this report.

Email Appliances (NZ) Ltd

Email is a subsidiary of Email Limited (Major Appliances) of New South Wales Australia. At an early stage of the investigation the parent company Email Limited (Major Appliances) was purchased by Electrolux Home Products Pty Limited and Email is now known as Electrolux Home Products (NZ) Limited (Electrolux).

Electrolux is a manufacturer and distributor of major household appliances in New Zealand. The company is headquartered in Auckland and its production facility is located in Christchurch. Electrolux does not produce washing machines in New Zealand.

Whiteware is [Text deleted due to confidentiality] and is sold through retail electrical appliance stores and outlets, nation-wide. The company’s Korean sourced washing machines are purchased from LG and sold in New Zealand under the Westinghouse brand.

Outlets available to [Text deleted due to confidentiality] are the same as those serviced by [Text deleted due to confidentiality].

Electrolux provided a full submission in response to the importers questionnaire and has provided additional information and clarification as required.

Radiola Corporation Ltd

Radiola is headquartered in Porirua where its Consumer Appliances division acts as an importer and wholesale distributor of Samsung branded whiteware. Its customers are retail chains and independent retailers throughout New Zealand. Imports by Radiola [Text deleted due to confidentiality] during the period under investigation.

Radiola’s major customer for whiteware is the PRG, the only retail chain in New Zealand which remains outside the F&P EDA arrangement (see discussion below on the EDA in section 4.4).

Radiola provided a full submission in response to the importers questionnaire and has provided additional information and clarification to the investigating team as required.

A submission was also made on behalf of Radiola by Chapman Tripp, a Wellington based firm of barristers and solicitors. This submission deals with various aspects of the initiation of this investigation and with information contained within the F&P application. Where they are pertinent, the points raised by Chapman Tripp are addressed in this report.

Eurolife New Zealand Limited

Eurolife [Text deleted due to confidentiality] importers identified and sells only to The Warehouse chain of retail outlets. Eurolife is a privately owned New Zealand company and over the period of investigation has imported only one model of washing machine from Daewoo in Korea.

Eurolife provided a response to the importers questionnaire and has indicated that as the model it has previously imported has been [Text deleted due to confidentiality], [Text deleted due to confidentiality] . The company is however [Text deleted due to confidentiality] of washing machines meeting the required specifications.

1.3   Imported Goods

The goods which are subject to investigation, hereinafter referred to as , washers or "subject goods", are:

Household fully automatic washing machines with a dry linen capacity not exceeding 10kg, the capacity determined by standard AS/NZS2040

The allegedly dumped goods consist of both top loading and front loading models. F&P refers to capacity measures for washing machines in terms of standard AS/NZ2040, which requires machines to meet a number of wash performance and energy consumption standards at the claimed capacity.

Information provided in several of the importers submissions indicates that the imported subject goods are, for the most part manufactured to the AS/NZ2040 standard.

The NZCS has advised that enter under the following tariff classification and statistical keys:

Applicable duty rates are:

Normal	7%
Australia	Free
Canada	3%
LDC	5.5%
LLDC	Free
Pac	Free

In this report, unless otherwise stated, years are years and dollars values are NZ$. Year to date (YTD) figures refer to the period April to December 2000. In tables, column totals may differ from individual figures because of rounding.

The period for considering claims of dumping is from 1 November 1999 to 31 October 2000. This was the period for which NZCS data as close as practicable to the date of initiation was available.

In its application F&P claimed that injury had occurred in the April to July 2000 period and that ongoing injury was likely. The period over which evidence of injury has been considered is 1 April 1997 to 31 December 2000. For the purposes of this report and the consideration of the necessity for the imposition of provisional measures, import forecasts have been obtained from each of the importers concerned. F&P has provided some financial forecasts and has quantified certain of its injury claims over the remaining period of investigation.

It should be noted that this report deals with material injury only insofar as a prerequisite of the imposition of provisional measures under section 16(1) of the Act is that the Minister has reasonable cause to believe that material injury due to dumped imports of the subject goods has been or is being caused or is threatened. The report also deals with whether and the extent to which the imposition of provisional measures would prevent injury being caused during the remainder of the investigation period.

1.4   Exchange Rates

Article 2.4.1 of the WTO 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.

In this report Normal Values are expressed in Korean Won, export transactions take place in US and Australian dollars, and any injurious effect is reflected in New Zealand dollars. The investigating team used the invoice date to establish the date of sale and export transactions have been converted into Korean won as at the date of sale. The exchange rates used are the interbank rates listed by the OANDA currency conversion site on the Internet (http://www.oanda.com/converter/classic).

1.5   Dislosure of Information

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

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

Section 6, subsections (1) and (2) of the Act reflect this and state in relation to export prices and normal values:

(1) Where the [Chief Executive] 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 [Secretary] having regard to all available information.

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

As noted in paragraph 1.2.3 above, information was requested, but not received or not received to the extent required, from Samsung, LG, and Daewoo. In view of the failure to provide all of the necessary information, decisions regarding these companies have been made having regard to all available information, that is, on the basis of the best information available, in accordance with section 6 of the Act. Details of the information used and the conclusions drawn are shown in sections 3 and 4 of this report.

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:

Household fully automatic washing machines with a dry linen capacity not exceeding 10kg, the capacity determined by standard AS/NZS2040.

New Zealand Production

F&P produces the following washing machines in New Zealand:

• GW509 Smart drive 5.5kg, top loader with stainless steel bowl and delay start time
• GW709 Smart drive 7.5kg, top loader with stainless steel bowl and delay start time.
• MW059 "Pride" 5.5kg, top loader with stainless steel bowl.
• Intuitive 7.5kg, top loader with stainless steel bowl, delay start time and fabric sensing.
• Intuitive 5.5kg, top loader with stainless steel bowl, delay start time, fabric sensing.

Like Goods Considerations

In reaching its decision at the time of initiation that the washing machines produced by F&P were like goods to those imported from Korea the Ministry applied its normal framework of taking account of the following considerations:

1. Physical characteristics, including appearance, size and dimensions, components, production methods and technology.
2. Function/usage, including consumer perceptions/expectations, end uses, and substitutability where relevant.
3. Pricing structures.
4. Marketing issues such as distribution channels and customers advertising.
5. Other, including the stated capacity of the respective washing machines and the tariff classification into which washing machines fall.

Davenports, on behalf of the Korean exporters, does not accept that the top loading washing machines produced by F&P are like goods to the front loading washing machines imported from Korea. Similar concerns have been raised in submissions made by or on behalf of each of the importers.

The question of whether or not the goods produced by F&P are like goods to the subject goods is central to the question of whether or not a New Zealand industry exists to be injured by reason of the dumping of washing machines from Korea. The points that have been raised by Davenports and others are therefore briefly discussed below.

Comments by Davenports

Referring to the terms of section 3 of the Act, Davenports states "In applying these principles to the facts of this case, MED is not dealing with like goods, when comparing the products manufactured by F&P with those by Samsung and LG. F&P’s approach to the issue of "like goods" is patently wrong, for the reasons that follow." Davenports then go on to argue on the general premise that as F&P does not produce front-loading washing machines their inclusion "is unreasonable and unjustified".

Specific comments are made regarding technology, heating and water characteristics, environmental considerations and tariff classification. Both "technology" and "heating and water characteristics", relate to physical characteristics, while "environmental considerations" and "tariff classification" are aspects which fall within part (e), [Other] of the list given above.

In respect of technology, Davenports has opined that F&P lacks the necessary knowledge of the ‘complex and sophisticated technology’ required to produce front-loading machines, citing in particular the speed at which horizontal drums rotate.

Davenports outlines the temperature sensor and water-heating technology found in front-loading machines, comparing this to the limited, spillover prevention sensor function of top-loading models.

In commenting on environmental considerations, Davenports notes the popularity of front-loading machines in the European market and attributes this to lower water consumption than top-loading machines.

Davenports has noted that the two types of washing machines are separated in the Tariff of New Zealand at the statistical key level, citing also the statistical level split found in the US and EU tariff documents.

Also noted by Davenports is the fact that F&P itself, whilst claiming the substitutability of one for the other, import front-loading machines from Italy. Davenports consider that this detracts from F&Ps like goods claim.

Drawing together the above points, Davenports questions the appropriateness of the pricing comparisons made by F&P between front-loading and top-loading machines, concluding that the differing characteristics render this comparison "fallacious" and result in "serious distortion". These distortions are held to be unfairly prejudicial.

Comments by Radiola

In its substantive submission, Radiola has identified a number of differences between the Samsung washing machines it imports and the F&P range. Radiola considers that these differences have a material effect on the basis of any comparison made between the product ranges. Radiola also identifies one specific model (the 6.5kg top loading machine) for which it contends there is no New Zealand manufactured equivalent and therefore against which no claim of material injury can be made.

Radiola specifically lists features and physical characteristics found on the F&P range, comparing these to ‘equivalent’ Samsung models and notes that the additional features of the F&P models do not come without a cost. Radiola also notes that its Samsung products are perceived in the market place as being lower featured than F&P products and that the consumer expects a correspondingly lesser price.

Radiola notes the low (by international standards) production volumes achieved by F&P and notes that this provides a narrow base over which to recover the ‘high tech’ R & D costs incurred by F&P. Radiola goes on to note the relative production volumes maintained by Samsung and the "low tech" developments and refinements made by Samsung in the models sold to New Zealand.

Radiola notes that, as a ‘newcomer’ there is a necessity for it to price at a level appropriate to a market where the F&P brand is well established and strongly promoted. Comment is also made regarding the restrictive effect of the F&P EDA on the range of outlets available to Radiola for its products and the effect that this has on the marketing and distribution of Samsung branded washing machines.

Comment by Electrolux

Whilst not commenting further, Electrolux draws attention to the fact that front loading washers are not produced in New Zealand.

Comments by Chen Palmer and Partners

Chen Palmer, on behalf of LMR have highlighted the physical differences between the LG washers imported from Korea by LMR and those produced in New Zealand by F&P. In particular they contrast the "Turbo Drum Wash" technology found in LG top loading machines with the agitator technology found in F&P machines, and note the ‘fuzzy logic’ systems said to have been introduced by LG in 1990 and only now added to the F&P range.

Chen Palmer also notes differences in energy and water conservation ratings, some differences in appearance and infer some direct effects of relative production volumes of F&P compared to those of the Korean producers.

Consideration by the Ministry

Physical Characteristics

The Initiation Report discussed physical characteristics in respect of the differences which were noted by F&P in their application, noting that;

• apart from some styling differences, New Zealand and Korean top loading washing machines present the same basic appearance,
• front loading machines differ significantly in appearance from New Zealand top loading machines in terms of placement of access door and controls,
• the external dimensions of the locally produced and imported washing machines differed slightly but that machines from both sources are offered in a range of capacities.

It was also noted in the Initiation Report that production methods used for top loading and front loading machines "are similar as the machines use similar components (motors, tubs (a drum on its side) and cabinets.

The Report went on to note that New Zealand washing machines contain a central agitator and that F&P had stated that "most top loading machines do have some type of central agitator" or in its absence a pump [or punch] to force water up from the bottom of the bowl. F&P was noted as having stated that some Korean models do not have a central agitator and that in some models with central agitators, the agitator is not full size. F&P was also noted as having commented that "some top loading machines have a rotating device at the bottom of the bowl to provide the means to move the water to aid the cleaning of articles".

In the Initiation Report F&P was noted to have stated that front loading machines do not have a central agitator. Controls on New Zealand and Korean washing machines allow wash cycle selections and some models of both top loading and front loading machines have an option for a fast wash.

The comments made by interested parties other than F&P and summarised above relate for the most part to differences in components and options between the subject goods and washing machines in the F&P range. The Ministry acknowledges that these differences exist but considers that they do not alter the basic physical characteristics of the products concerned beyond the extent already discussed at initiation. Some of the elements identified by interested parties may however impact on the pricing related comparisons necessary to assess material injury. Further comment on this aspect is made in section 4.2 of this report.

Function and Usage

In this respect the Initiation Report noted that;

• F&P’s top loading machines have the same end-use, namely washing of clothes for households, as the imported top loading and front loading machines and that
• F&P considered that front loading machines are substitutable with top loading machines, and
• that F&P was preparing to release a top loading machine which replicates the features of front loading machines. It was noted that F&P considers this development "is a strong indication of the substitutability of these machines".

The Initiation Report noted that F&P had identified no differences between consumer perceptions of New Zealand and Korean washing machines, stating that "consumer preferences indicate that top loading machines are more flexible [than front loading machines] because items can be added to the machine once the washing cycle has commenced. Top loading machines have a shorter washing cycle than front loading machines. F&P was also noted as considering that front loading machines may use less water, depending on user behaviour, and less laundry powder than top loading machines.

The Initiation Report discussed washing action of the two types of washing machines and pointed to F&P’s consideration, supported by Consumers Institute testing reports submitted with the application that top loading machines have wash programmes that are as gentle as front loading machines.

The information and comments in this area by other interested parties since initiation, which are summarised above do not provide a basis on which it would be necessary for the Ministry to reconsider its position on the relative function and usage of the products concerned.

Pricing Structures

The Initiation Report noted F&P’s comment that there is a perception that front loading machines are more expensive than top loading machines and that this perception may be due to European machines being distributed through specialist outlets for many years prior to The Warehouse securing distribution of the AEG brand.

By way of recording F&P’s rebuttal of these perceptions, the Initiation Report commented on the retail price comparisons submitted by F&P for a number of machines including LG which are sold in both front loading and top loading versions. These comparisons showed that LG’s 6.5kg and 8kg top loading machines were sold at the same prices respectively as LG’s lower and higher-priced 7kg models and noted F&P’s observation that the retail pricing of imported Korean front loading machines was similar to retail prices of F&P top loading machines. This evidence was held to demonstrate that price is not a barrier to substitutability.

None of the submissions summarised above have specifically commented on this aspect but comments by Radiola regarding customer perceptions and pricing expectations and those relating to its pricing policies vis-à-vis market access are noted by the investigating team.

Marketing Issues

The Initiation Report noted F&P’s observations that top loading machines and front loading washing machines were sold through the same retail outlets and are often placed together on the retail floor. The Report also noted Consumers Institute tests, submitted by F&P in which both front loading and top loading machines feature.

The Initiation Report noted F&P’s own imports of front loading machines from Italy and their distribution through the same retail outlets as its top loading models, noting F&Ps comment that "promotional material from retailers includes both types of machines which is a strong indication that the retailer views a potential buyer of a washing machine making a choice between a top loading machine and a front loading machine".

The report recorded F&P’s reference to the growth in imports of front loading washing machines as being indicative of the substitutability of the machines.

Except in general terms, viz. features comparisons and the like, interested parties have not commented on marketing issues in respect of like goods.

Other Relevant Matters

Standards

In this regard the Initiation Report noted F&P’s claim regarding washing machine capacities in Korea not being the same as those used on the New Zealand market due to the use of different standards in each market due to the differences in the standards used.

Information provided by importers since initiation indicates that while this may be true in regard to washing machines sold in Korea, the goods being exported to New Zealand are in fact manufactured and rated according to the same Australia/New Zealand standard as those produced by F&P.

Tariff Classification

The Initiation Report noted the separation within the relevant tariff item of the two types of washing machines at the statistical key level. This aspect was also noted in Davenports submission.

The Initiation Report noted F&P’s concern that if as a result of this investigation an anti-dumping remedy were to be imposed on top loading machines only, any material injury being caused by front loading machines would be exacerbated, particularly in respect of price depression.

The structure of the Tariff of New Zealand follows that of the internationally used Harmonised System, which standardises goods classification to the six digit level. The remaining 2 digits used are country specific and inter alia provide a means of differentiating between tariff rates. Beyond this level, statistical keys are used, as the name suggests, for the most part for the purpose of collecting import statistics.

Criteria for classification of goods are internationally agreed and relate to the placement of goods down to the six digit, generic level. For anti-dumping purposes, due to their relatively generic nature tariff classifications by themselves do not provide a sufficiently specific basis for the description of goods and at least in New Zealand are used for convenience of duty collection and Customs purposes only.

The differing statistical keys relating to top loading and front loading washing machines within the same tariff classification do not therefore provide a sufficient basis to necessitate a re-evaluation of the like goods question.

Conclusion

The investigating team has examined the points raised by Davenports and others and for the most part, these do not differ from the like goods aspects discussed at some length in the Initiation Report. Additional information relating in particular to the aspect of top loading vs. front loading has been requested from and supplied by F&P. This information comprises;

• Performance testing reports by the New Zealand Consumers Institute in which no differentiation is drawn between the two types and in which direct performance and feature comparisons are made.
• An extract from the Australian/New Zealand Standard relating to energy consumption and performance which again does not distinguish between washers with horizontal and vertical axis.
• A non-attributed generic comparison of major components and manufacturing requirements, and
• A similarly non-attributed overview/evaluation of "The Laundering Process" which discusses the washing cycle itself.

F&P and all other parties have also had the opportunity, through their access to the public file, to comment on the matters summarised above.

It is clear that differences in physical appearance, performance and technology do exist between the washing machines imported from Korea and those produced in New Zealand by F&P. This fact was acknowledged by F&P at the time of lodging its application. Little information beyond that which was considered at the time of initiation has become available in the interim. In the absence particularly of technical information from the Korean suppliers the Ministry does not consider that the information submitted and comments made by the importers etc provides a sufficient basis on which to reconsider its like goods decision.

Should further relevant information come to hand during the period leading up to the release of essential facts and conclusions in early May 2001, this aspect may be revisited by the investigating team.

2.2   New Zeland Industry

The present investigation was initiated on the basis that F&P was the sole New Zealand producer of fully automatic household washing machines and that those washing machines were like goods to the subject goods imported from Korea. The application was therefore considered to meet the requirements of s.10 (3) of the Act.

Submission by Davenports

In its submission to the investigating team, Davenports has questioned whether in fact F&P can be considered to be a New Zealand industry for the purposes of the Act. The points raised by Davenports are discussed below.

As summarised above, Davenports (and other interested parties) have questioned whether or not the washing machines produced by F&P are like goods to those being imported. As noted in paragraph 2.1.23 above, the points raised by these parties are not considered to provide a sufficient basis for the Ministry to alter its current position.

Davenports has noted that F&P has itself imported washing machines from Australia and Korea. Davenports has estimated that F&P’s imports of washing machines in 1999 and 2000 from Korea amount to 10 percent of all washing machines imported from Korea which it submits is "not a negligible amount". Davenports has noted that in the Initiation Report, in considering importations of dumped goods by the New Zealand industry in terms of section 8(2)(f) of the Act, the Ministry excluded F&P’s imports from Australia on the basis they are not subject goods (not being from Korea). Davenports has opined that "To adopt such an approach in this context is unfairly discriminatory, and contrary to the tenor and effect of article 4.1 of WTO Anti-Dumping Agreement".

Consideration by the Ministry

As noted above under "Like Goods" F&P has advised that it imports washing machines from Korea for evaluation purposes only. On this basis F&P’s imports of dumped goods appear to be for sound commercial reasons. The investigating team consequently considers these imports do not constitute sufficient reason to exclude F&P from consideration as the domestic industry.

Section 8(2)(e) of the Act, however, requires the Ministry to have regard to the effects of non-dumped imports when considering injury. By definition, imports by any party (including F&P) from any source other than Korea would fall within the ambit of this requirement and are considered later in this report.

In addition, section 8(2)(f) of the Act requires consideration by the Ministry of the nature and extent of imports of dumped goods by the New Zealand industry and F&P’s imports of dumped goods from Korea are dealt with in this context later in this report.

The investigating team notes that the injury considerations of section 8(2) of the Act should not be confused with the standing and industry definition considerations of Articles 4.1 and 5.4 of the Anti-Dumping Agreement via sections 3a and 10(3) of the Act. The investigating team also notes that imports from countries other than Korea are taken into account when considering whether import volumes of the dumped goods are negligible in terms of Article 5.8 of the Anti-Dumping Agreement (see paragraphs 3.4.8 and 3.4.9 below).

2.3   Imports of Washing Machines

Import data relating to the tariff items and statistical keys in section 1.3 above and sourced from the Statistics New Zealand INFOS database for the years ending March 1998, 1999, 2000 and the four months to July 2000 was provided in the application. For the purposes of this and subsequent reports on this investigation the Ministry has obtained and analysed import information from NZCS. The NZCS figures for the years ending March 1998, 1999 and 2000 differ slightly from the Statistics New Zealand (INFOS) figures used in the initiation report. The following table shows the updated import volumes of washing machines, imports from Australia have been isolated as they are subject to further discussion elsewhere in this report.

2.4   New Zealand Market

The following table shows the New Zealand market for washing machines and was prepared from NZCS information on imports plus F&P information on domestic production. Once again Australian imports have been isolated for reference purposes in later discussion.

3.   Dumping

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   Introduction

In the absence of a response to the manufacturers questionnaire from Daewoo, LG and Samsung, the New Zealand legislation provides for a decision to be made having regard to all available information, that is, on the basis of the best available information. In this case, the Ministry has used information provided by F&P in its application and a subsequent submission, information provided by the importers, and information from a previous investigation involving Korea¹.

1 Review Investigation; Automotive Lead Acid Batteries From Indonesia, Korea, Singapore and Taiwan: Completed 15 December 1999

In using this information as the basis for its provisional considerations, the Ministry has borne in mind the commercial context in which the information has been provided.

3.2   Export Prices

In the normal course of events, when considering provisional measures, export prices would be determined in accordance with section 4 of the Act using information provided in submissions made by the relevant overseas producers in response to a questionnaire.

Section 4 provides:

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-

1. 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

2. Any other costs, charges, and expenses resulting from the exportation of the goods, or arising after their shipment from the country of export;

In certain circumstances, export prices can be established under s.6 of the Act. The provisions of section 6 are shown in paragraph 1.5.3 above.

Base Prices

The actual transaction values for all shipments made by LG, Samsung and Daewoo over the period of investigation were used as the base price for export price calculations. This information was provided by the importers in their respective submissions.

Samsung’s sales to its importer Radiola were invoiced in [Text deleted due to confidentiality] on a Free On Board (FOB) basis. [Text deleted due to confidentiality], Daewoo invoiced its sales to Eurolife in US dollars on a FOB basis. LG’s sales to LMR and Electrolux were invoiced in US dollars on an [Text deleted due to confidentiality] and in [Text deleted due to confidentiality] basis respectively. The exchange rates used are the interbank rates at the date of the invoice as listed by OANDA (see paragraph 1.4.2).

Adjustments

Ocean Freight

LG’s sales to Electrolux were in [Text deleted due to confidentiality] . Electrolux provided information on its combined [Text deleted due to confidentiality]  charges but did not separately identify the cost of [Text deleted due to confidentiality]. To establish the cost of [Text deleted due to confidentiality] [Text deleted due to confidentiality], an amount for [Text deleted due to confidentiality], based on information provided by F&P, was deducted from the combined [Text deleted due to confidentiality]  cost.

Inland Freight

A deduction of [Text deleted due to confidentiality] percent, based on information provided by F&P in its application, was made to the base price to account for cost of inland freight from factory to wharf.

Port Services Charge

F&P did not provide any information relating to port services charges in Korea and this information is not known to the New Zealand importers. An adjustment of [Text deleted due to confidentiality] percent was therefore made based on verified information obtained from Korean suppliers in the recently completed Lead Acid Batteries review. The port services charge includes wharfage, brokerage, fumigation and terminal handling charges.

Total Adjustments

The adjustments noted above for inland freight and port services charges have been deducted from the [Text deleted due to confidentiality] base prices established for Samsung, LG and Daewoo. The adjustment noted above for ocean freight, inland freight and port services charge have been deducted from the [Text deleted due to confidentiality] base prices established for LG.

3.3   Normal Values

Introduction

As noted in relation to export prices, in the normal course of events provisional normal values would be determined in accordance with section 5 of the Act using information provided in the relevant producer submissions.

Section 5 provides, inter alia:

(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.

(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.

(5) Where-

(a) The actual country of export of goods imported or intended to be imported into New Zealand is not the county 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 certain circumstances, normal values can be established under s.6 of the Act, which is quoted at paragraph 1.5.3 above.

In the absence of appropriate information from the Korean producers, provisional normal values have been established in accordance with section 6 of the Act having regard to all available information.

Base Prices

F&P in its application and a subsequent submission provided the Ministry with retail prices for a sample of front and top loading washing machines sold in the Korean domestic market, which it considered were equivalent to a selection of the models exported to New Zealand. This information was based on research conducted by F&P in Korea during May/June and December 2000. The investigating team used the May/June 2000 retail prices to establish normal values in relation to all export transactions between November 1999 and July 2000, the retail prices in May/June 2000 being as near as possible to the export sales from November 1999 to July 2000. Similarly, the December retail prices were used to establish base normal values in relation to all export transactions between August and October 2000.

For those washing machines where retail price information was unavailable, the investigating team estimated the base price by selecting a model, as near as possible in capacity and features, for which a retail price was available. The percentage difference in the FOB US$ or AUD C&F export prices for these two models was calculated. This percentage difference was then applied to the available retail price in order to estimate the previously unknown base price.

Adjustments

Value Added Tax (VAT)

F&P in its application advised that Korea currently has a 10 percent VAT on whiteware products and that base retail prices are inclusive of VAT. An adjustment was made to deduct the VAT included in the retail price.

Retailer’s Margin

In its initial application, F&P estimated a [Text deleted due to confidentiality] percent adjustment for retailer’s margin based on a discussion with [Text deleted due to confidentiality] , a Korean retailer, during its independent research carried out in May 2000. The report on the December 2000 research noted that:

"[Text deleted due to confidentiality]."

F&P has now stated that its estimate of the retailer’s margin of [Text deleted due to confidentiality] percent in its application was excessive and have submitted that an adjustment of [Text deleted due to confidentiality] percent, which is based on the most recent information, should be used to deduct the retailer’s margin included in the VAT exclusive selling price. At this point in the investigation, an adjustment of [Text deleted due to confidentiality] percent has been made.

Wholesaler’s Margin

F&P has submitted that an adjustment should be made to the base retail price to take into account a wholesaler’s margin as its December research shows that the [Text deleted due to confidentiality] are made through wholesalers. F&P has also submitted that sales from domestic manufacturers (Daewoo, LG and Samsung) in Korea to wholesalers who then on-sell to retailers are at the equivalent level of trade to the Korean manufacturers’ sales to NZ importers who also on-sell to retailers. An adjustment has been made to deduct a [Text deleted due to confidentiality] percent wholesaler’s margin included in the wholesale selling price.

Warranty

F&P stated in its submission that there is likely to be a warranty cost in the domestic price which is not included in the export price. F&P has further stated that the accepted figure for warranty in the whiteware business is [Text deleted due to confidentiality] percent. An adjustment of [Text deleted due to confidentiality] percent of the wholesaler’s price has been made to take into account the warranty cost.

Internal Freight

F&P submitted in its application that an adjustment be made to cover freight from the distributor/wholesaler to the retailer in Korea. F&P stated that information obtained by it suggests that washing machines are delivered to the end consumer either direct from the manufacturing site or through regional warehouses belonging to the manufacturer.

F&P has estimated the internal freight cost on the basis of the costs it incurs in Australia. These costs are [Text deleted due to confidentiality]] percent for delivery from warehouse to retailer plus a [Text deleted due to confidentiality]- percent loading to cover delivery into the home and installation. An adjustment of [Text deleted due to confidentiality] percent on the wholesaler’s price has been made to take into account the internal freight costs.

Normal Value Calculation

The adjustments outlined above have been deducted from base normal values

3.4   Comparison of Export Price and Comparison of Export Price and Normal Value

Margins of Dumping

A comparison of provisional export prices, as established in section 3.1 of this report, and provisional normal values, as established in section 3.2 has been made. Provisional dumping margins have been calculated on a transaction-to-transaction basis and are expressed as a percentage of provisional export prices.

Daewoo Electronics Co. Ltd

There were a total of [Text deleted due to confidentiality] transactions relating to the subject goods from Daewoo to Eurolife in the period 1 November 1999 to 31 October 2000. Of these transactions, 100 percent were dumped. Provisional dumping margins ranging from 61 to 68 percent and a weighted average of 63 percent have been calculated.

The range of normal values and export prices was as follows:

Normal Values	xxxxx won
Export Prices	xxxxx to xxxxx won

LG Electronics Inc.

A total of [Text deleted due to confidentiality] transactions relating to the subject goods from LG to Electrolux and LMR during the period 1 November 1999 to 31 October 2000 were examined. Of these, 100 percent were found to have been dumped with a weighted average dumping margin of 72 percent. Individual provisional dumping margins range from 42 to 97 percent.

The range of normal values and export prices was as follows:

Normal Values	xxxxx to xxxxx won
Export Prices	xxxxx to xxxxx won

Samsung Electronics Co. Ltd

There were a total of [Text deleted due to confidentiality] transactions relating to the subject goods from Samsung to Radiola in the period 1 November 1999 to 31 October 2000. Of these transactions 100 percent were dumped with a weighted average dumping margin of 80 percent. Provisional margins on individual transactions ranged from 64 to 105 percent.

The range of normal values and export prices was as follows:

Normal Values	xxxxx to xxxxx won
Export Prices	xxxxx to xxxxx won

Volume of Dumped Goods

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 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.

All of the subject goods were found to have been dumped. The volume of dumped goods is therefore equal to the volume of imports of the subject goods. The volume of dumped goods has therefore been taken from table 2.1 above. The volume of dumped goods and the volume of other imports, for March year 2000 and April – December 2000, and the percentage of total imports represented by the dumped goods, are shown in the table below.

On the basis of this information, imports of the dumped goods are not negligible

3.5   Conclusions Relating to Dumping

The investigating team provisionally concludes that washing machines from Korea are being dumped at weighted average margins ranging from 63 to 80 percent.

4.   Material Injury

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] 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   Import Volumes

Section 8(2)(a) of the Act provides that the [Chief Executive] shall have regard to the extent to which there has been or is likely to be a significant increase in the volume of imports of dumped or subsidised goods either in absolute terms or in relation to production or consumption in New Zealand.

The F&P application provided Statistics New Zealand import volume figures for the March years 1998 to 2000, and the year-to-July 2000. Statistical keys for imports were amended in 1998 and comparative statistical keys are not available for 1997. Subsequent to initiation, the investigating team has updated the import volume figures to the year-to-December 2000 using NZCS import information.

The following table shows the volume of imports of the subject goods provisionally found to have been dumped into New Zealand over the period 1998 to 2000 and for the nine months to December 2000, and compares them with the New Zealand industry’s production and consumption in the New Zealand market. Imports from Australia are separately identified for reference purposes in later discussion.

This analysis shows that during the period examined, imports of dumped subject goods from Korea increased significantly in absolute terms and relative to production and consumption in New Zealand.

Imports during the Remainder of the Investigation Period

The terms of section 16(1) of the Act require that provisional measures only be imposed where they are necessary to prevent material injury being caused during the investigation period. In respect of import volumes, this leads to consideration of the likely volumes of dumped imports during that period and the consequent impact of those imports.

Information regarding forward orders and projected import volumes for the period until the end of June 2001 was requested from each of the importers identified in paragraph 1.2.9. Of these, information was received from LMR, Radiola and Electrolux.

The investigating team would normally have had some corroborating information contained within submissions from the relevant Korean suppliers. As noted elsewhere however, no submissions in response to the Ministry’s questionnaire have been received from the suppliers concerned.

Certain of the importers have stated in their submissions that the imposition of an anti-dumping duty would lead to their immediate withdrawal from the market. In the main these statements have been made in the context of definitive anti-dumping duties but it is reasonable to assume that the imposition of provisional measures would have a similar effect and that imports of dumped goods other than those currently in transit or subject to irrevocable purchase contracts may not occur.

Chapman Tripp, on behalf of Radiola, [Text deleted due to confidentiality], has stated that any imposition of provisional measures would require (Radiola) [Text deleted due to confidentiality]

The investigating team notes that it is not the purpose of anti-dumping measures (whether provisional or definitive) to disrupt international trade by restricting or halting the importation of products, but rather to remedy any material injury which may be caused by the dumping of those products. In the case of provisional measures, the effect is intended to be preventative and is strictly time limited.

The information provided by the importers regarding forward orders and projected import volumes during the remaining period of investigation is summarised in table 4.2 below.

L M Rankine

LMR had provided forward order (production) information through to July 2001. In response to a request to indicate likely importation volumes during the remaining period of investigation based on those forecasts, LMR advised that due to a) [Text deleted due to confidentiality] it was not possible to clarify the likely import volumes.

The investigating team has therefore assumed, for the purposes of this report that the volume of washing machines ‘ordered’ by LMR for production in the months of February to May 2001 represents the maximum number which will in fact be imported from LG during the remainder of the investigation period.

In selecting these months the investigating team has assumed production and shipment no later than mid May 2001 and has added an approximate transit period of 18 days from Pusan to Auckland plus a further 3 to 5 days to take account of pre-shipment requirements and loading. These estimates are based on information obtained from P&O Nedlloyd regarding its vessels travelling between Pusan and Auckland. On this basis any washers produced in the latter part of May would not arrive in New Zealand during the remaining period of investigation. A total of [Text deleted due to confidentiality] washers fall into this conditional category, and represent [Text deleted due to confidentiality] percent of the projected LMR/LG total.

Radiola

Radiola has commented in its response to the request for updated forward order/imports information, that the volumes provided are ". . .[Text deleted due to confidentiality]", reinforcing the comments made on its behalf by Chapman Tripp and referred to above. These imports are therefore also somewhat conditional.

In its submission, in respect of inventory levels (of dumped goods) as at 10 January 2001, Radiola also stated its intention to [Text deleted due to confidentiality]   This [Text deleted due to confidentiality] is in part due to the increased difficulty it has experienced in [Text deleted due to confidentiality] commented on elsewhere.

Eurolife

Eurolife noted in its submission that it had no current intentions [Text deleted due to confidentiality] as Daewoo had [Text deleted due to confidentiality] previously imported. Eurolife is [Text deleted due to confidentiality]

Electrolux

Electrolux provided forward order information showing that it intended importing a total of [Text deleted due to confidentiality] washing machines over the remaining period of investigation.

Total Imports During the Remaining Investigation Period

Based on these responses, the following maximum import volumes over the remainder of the investigating period have been estimated.

The investigating team has compared the projected import volumes to which any provisional measure would apply, to the actual import volumes recorded by Statistics New Zealand for the period April to June (inclusive) 1997, 1998, 1999 and 2000. That comparison is shown in the chart below. Recorded volumes for the first three of these years (0, 3 and 1 units respectively) have been disregarded for the purposes of the chart.

The chart is confidential in its entirety

The figures shown in the table and chart indicate that projected import volumes of washing machines, whilst considerably higher than the equivalent period in 1999 are significantly ([Text deleted due to confidentiality]%) below those recorded for that period in 2000.

The significance of the reduction in volumes between April and June 2000 and the current projections may indicate that the volumes recorded in March – June 2000 were an aberration brought about by the need to establish initial stockholdings in New Zealand rather than an indicator of any future trend or intentions. Imports of the subject goods during the period April – June 2000 represented [Text deleted due to confidentiality] percent of the subject goods imported in the nine months ending December 2000.

The investigating team also notes the seasonality of washing machine imports whereby the next few months would be expected to be a period of higher import volumes than those in the immediate past few months. This is due to the increased demand for washers during the winter months and the consequent need to build-up / maintain stocks to cover these sales. This may be a further factor contributing to the large volumes recorded for the April – June 2000 period.

F&P has expressed some concern regarding the veracity of the forecasts made by importers citing the commercial context in which they are made and import patterns in previous years. F&P also alleges a recent change to the product mix for one importer claiming that this alters the focus of material injury. The Ministry notes that F&P's comments are themselves made in a particular commercial context.

The Ministry recognises that it is possible that the projections provided by the respective importers have been affected by the initiation of this investigation, previously reported comments on behalf of [Text deleted due to confidentiality] would certainly indicate this. It is however considered that the information provided by the importers is the best indication of the likely volume of imports over the remaining period of investigation.

Comparison of forecast levels of domestic production with forecast imports allows the analysis of imports in comparison to production and consumption in New Zealand over this period. This comparison is shown below in table 4.2. The "Other Imports Projection" figure has been calculated using the average monthly rate of imports recorded by the NZCS during the nine months ended December 2000 inclusive of imports during that period by F&P.

This analysis indicates that during the remaining period of investigation dumped imports will be significant in relation to both the projected domestic production and the projected New Zealand consumption. These proportions will however be considerably reduced on those that would have been found in the equivalent period of the 2000-year.

The investigating team notes that the arrival of a proportion ([Text deleted due to confidentiality]%) of the projected subject goods imported by LMR during the remainder of the investigation period are conditional on the actual date of production. However, even if these washing machines were not to be imported the remaining projected volume ([Text deleted due to confidentiality]) is still significant.

Conclusion

The investigating team has concluded that during the period up until December 2000, and on a projected basis to the end of the March year 2000/2001, imports of dumped subject goods from Korea increased significantly in absolute terms and relative to production and consumption in New Zealand.

The information available to the investigating team, at this point in the investigation indicates that import volumes of dumped goods during the remaining period of investigation are likely to be considerably reduced from those of the previous equivalent period but are likely to still be significant relative to production and consumption in New Zealand

4.2   Price Effects

Price Undercutting

Section 8(2)(b) of the Act provides that the Chief Executive shall have regard to the extent to which the prices of the dumped or subsidised goods represent significant price undercutting in relation to prices in New Zealand (at the relevant level of trade) for like goods of New Zealand producers.

Introduction

In considering price undercutting, the Ministry will normally seek to compare prices at the ex-factory and ex-importer’s store levels, to ensure that differences in distribution costs and margins do not confuse the impact of dumping.

Radiola has submitted that differences in features between F&P washing machines and imported washing machines mean that the cost of manufacture differs and this cost difference should be taken into account when carrying out a price comparison for price undercutting purposes. For the purpose of considering the need for provisional measures, any difference in prices arising from different costs of production relating to differing features has not been taken into account. Little information regarding this aspect is currently available and the need for any such adjustment will be considered for the essential facts and conclusions report. As a general point, the investigating team notes that any difference in costs would be taken into account only if it could be demonstrated that they have affected the selling price.

Radiola advised that it is invoiced by Samsung on a [Text deleted due to confidentiality] dollars. Radiola stated that "Up to 1 October 2000, for internal accounting purposes, Radiola costed all product imports using a "padded" FX [Text deleted due to confidentiality] rate which partly reflected the more favourable exchange rates in forward exchange contracts purchased by Radiola. From 1 October we changed this accounting policy to cost all imports at the exchange rate on the date of import." Radiola went on to state "For the purposes of this exercise the relevant rate is the actual rate on the date of import. Any forward FX contracts Radiola may or may not have purchased must be ignored to enable a fair comparison with Fisher & Paykel costs calculated on the same basis." For the purpose of considering the need for provisional measures, Radiola’s imports have been costed at the exchange rate applying on the date of import. The need to use any forward exchange rate will be considered in the essential facts and conclusions report.

F&P and some importers have provided details of their credit terms. For the purposes of considering the need for provisional measures, any difference in credit terms has not been taken into account because of the limited information available at the time this report was prepared. The need for any such adjustment will also be considered in the essential facts and conclusions report. As noted above, an adjustment would only be made if it could be demonstrated that differences in credit terms has affected the price.

F&P has provided details of the Samsung and LG models which it considers are comparable to each of its models for price undercutting purposes (this information was not provided for Daewoo models). For the purposes of considering the need for provisional measures, this information has been used to select the Samsung and LG models for comparison against the relevant F&P models. In the case of those models not shown on this list, the investigating team has selected the most comparable washing machine based on capacity and features.

Other information provided by the importers and F&P relevant to price undercutting is summarised below, the importers being listed under the name of the Korean producer from whom they import.

Fisher & Paykel Ltd

F&P transfers finished goods from its factory at [Text deleted due to confidentiality] F&P operate 3 warehouses from which it supplies its customers in all parts of New Zealand.

F&P has provided its average selling prices for selected models, which it considers are directly comparable to the imported goods, over the period of investigation (the year ended 31 October 2000) on a free-into-store, ex-F&P warehouse and into F&P warehouse basis.

The F&P application provided information that was considered by the Ministry to be sufficient for the purposes of initiation. This information, in-so-far-as it relates to F&P’s ex-factory costs has subsequently been verified by the investigating team.

Samsung Corporation

Radiola Corporation Ltd

Radiola advised that it purchases direct from Samsung and that [Text deleted due to confidentiality] percent of its sales are to the PRG. Radiola said that approximately [Text deleted due to confidentiality] percent of all imports are cleared through the port of Auckland and [Text deleted due to confidentiality] Radiola added that the balance of its imports are landed in Wellington and distributed to various southern North Island and South Island stores from its warehouse in Seaview (Hutt Valley). Radiola stated that "Product is invoiced to Pacific Retail Group on delivery [Text deleted due to confidentiality]" Radiola advised that the [Text deleted due to confidentiality] applies to deliveries made direct to the PRG warehouse in Auckland or from its Seaview warehouse.

F&P has submitted that the relevant price comparison is between Radiola's into PRG warehouse price and F&P’s into warehouse price. The cost build up to selling price provided by Radiola includes warehouse-operating costs. The investigating team therefore considers that the appropriate point of comparison is between F&P ex-warehouse and Radiola’s ex-warehouse prices.

Radiola has provided cost build up to selling price information on a quarterly basis for the year ended 31 October 2000 together with details of its imports in each quarter. The cost build up includes an amount for freight under costs after store and this has been deducted to establish an ex-warehouse/wharf price. For the purposes of comparing prices with F&P models, the investigating team has calculated weighted average prices, weighting each quarterly price by the volume of imports in that quarter.

On the basis set out above, the following table shows a comparison of F&P prices with those of Radiola.

The table shows that the Samsung models are undercutting the equivalent F&P model in 2 out of 3 cases. The Samsung model that does not undercut the equivalent F&P model accounts for only  percent of Radiola’s imports. In the one case where there is no undercutting, the equivalent F&P model ([Text deleted due to confidentiality]) is undercut by the 2 other Samsung models imported by Radiola.

It should be noted that F&P instituted a price increase in October [Text deleted due to confidentiality] in both November and December 2000. These [Text deleted due to confidentiality] which are not reflected in the above analysis will clearly have an effect on the incidence of price undercutting.

LG Electronics Ltd

LM Rankine Trading Co Ltd

LMR advised that it markets [Text deleted due to confidentiality] and that distribution is carried out by [Text deleted due to confidentiality] The investigating team considers the point of comparison is between F&P ex-warehouse and LMR ex-warehouse prices.

LMR has provided cost build up to selling price information at November 1999, April 2000 and October 2000. LMR advised that because it is a small importer, there was no single month during the period of investigation that an accurate breakdown of all the price elements could be produced and noted that in some months no imports were made. LMR considered that if it had attempted to reconstruct a single build-up for the entire period of investigation, the figures would be distorted. LMR said that in the interests of providing the Ministry with a clear and balanced picture it has provided cost build up information for 3 typical months evenly spread over the period of investigation.

For the purposes of comparing prices with F&P models, the investigating team has calculated weighted average prices, weighting each price by the volume of imports in November 1999, December 1999– April 2000, and May – October 2000. The costs after store include distribution and freight costs, so these costs have been deducted from the invoice price to customer to establish an ex-warehouse price.

On the basis set out above, the following table shows a comparison of F&P prices with those of LMR.

The table shows that the LG models are undercutting the equivalent F&P model in all but one case, although in the case of the [Text deleted due to confidentiality] the amount of undercutting is negligible. The LG model that does not undercut the equivalent F&P model accounts for only [Text deleted due to confidentiality]  percent of LMR's imports. In the one case where there is no undercutting, and in the case where the undercutting is negligible, the equivalent F&P model ([Text deleted due to confidentiality] ) is undercut by 2 other LG models imported by LMR.

Electrolux Home Products (NZ) Limited

Electrolux has advised that it operates as a wholesale distributor marketing its products through established retail appliance stores nation-wide. The cost build up information provided by Electrolux indicates that it distributes its product through a warehouse system. The investigating team considers the appropriate point of comparison is between F&P's and Electrolux's ex-warehouse prices.

Electrolux has provided cost build up to selling price information for each model imported over the year ended 31 October 2000. The information shows that its ex-store selling prices [Text deleted due to confidentiality]  November 1999 – September 2000 and [Text deleted due to confidentiality] October 2000. For the purposes of comparing prices with F&P models, the investigating team has calculated weighted average prices, weighting the 2 prices by the volume of imports in November 1999 – September 2000 and in October 2000.

On the basis set out above, the following table shows a comparison of F&P prices with those of Electrolux.

The table shows that only one of the 2 LG models are undercutting the equivalent F&P model, and where there is price undercutting, it is by a relatively small amount. The LG model that does not undercut the equivalent F&P model accounts for [Text deleted due to confidentiality] percent of Electrolux ’s imports. In the case of the model where there is no undercutting, the equivalent F&P model (GW709) is undercut by the other LG model imported by Electrolux.

Daewoo Electronics Co Ltd

Eurolife NZ Ltd

Eurolife has advised it sells directly to The Warehouse Ltd. The cost build up to selling price information provided by Eurolife refers to costs into store and selling prices ex-store, so it has been assumed that goods are distributed through a warehouse system. The investigating team considers the undercutting comparison should be made between F&P’s ex-warehouse price and Eurolife's ex-warehouse price.

Eurolife has imported only one model of washing machine and has provided cost build up to selling price information for each of its [Text deleted due to confidentiality] importations over the year ended 31 October 2001. Freight to customer is shown as a separate item and has been deducted to obtain an ex-warehouse price. The investigating team has calculated a weighted average ex-warehouse price by weighting the ex-warehouse price for each importation according to the volume of goods in each importation.

On the basis set out above, the following table shows a comparison of F&P prices with those of Eurolife.

The table shows that the Daewoo model is undercutting the equivalent F&P model, although as noted above the Rapid 7 has been [Text deleted due to confidentiality]

Price Undercutting During the Remainder of the Investigation Period

Pricing information during the remainder of the investigation period was not requested from either importers or the New Zealand industry. The likelihood of price undercutting by dumped product during this period can therefore to a large extent only be implied from the results shown above.

The information examined by the investigating team indicates that the majority of the models of washing machines imported from Korea have undercut F&P prices for equivalent goods. It is noted that price increases by both F&P and [Text deleted due to confidentiality] in late 2000 have not been reflected in the analysis completed so far. These increased prices may have the effect of reducing the incidence of price undercutting and therefore material injury by the Samsung range during the remainder of the investigation period.

Conclusion

On a provisional basis, there is price undercutting by a large proportion of the subject goods, the volume of imported models found to be undercutting the equivalent F&P model representing [Text deleted due to confidentiality] percent of all imports of the subject goods.

The investigating team notes that in some cases the particular models of washing machine which have been compared differ with respect to their rated capacity (e.g. Samsung SW55ASP @ 6.5 kg was compared to the F&P GW509 @ 5.5 kg) and that in several cases the comparison has been made between a top loading and a front loading machine. Comment is made in the introduction to this section regarding additional work which is required in order to quantify any adjustments which may be necessary to provide a more precise comparison in these respects.

In the absence of information to the contrary it is reasonable to assume that the pricing of any imports made during the remaining period of investigation which are subsequently released into the market will undercut to some degree those of the equivalent F&P products.

Price Depression

Section 8(2)(c) of the Act provides that the Chief Executive shall have regard to the extent to which the effect of the dumped or subsidised goods is or is likely significantly to depress prices for like goods of New Zealand producers.

Price depression occurs when prices are lower than those in a market unaffected by dumping, usually in a previous period.

At the time of initiating this investigation the Ministry did not consider the information provided by F&P in its application was sufficient to show price depression for the purposes of initiation. F&P have subsequently provided additional and verified information regarding price depression.

Based on the updated financial data provided by F&P at a late stage in the preparation of this report, the following table has been prepared showing average prices for F&P washing machines since financial year 1998 and including F&P’s own projection for the full year 2001.

F&P transferred its production of 6.5kg machines to Australia in February 1999. In order to provide a more meaningful comparison, Table 4.8 below is exclusive of the reported data in respect of F&P’s 6.5kg washing machines.

F&P’s sales mix has altered over the period under investigation. The following is the percentage of F&P’s total sales (excluding 6.5kg machines) represented by 5kg machines and 7kg machines (inclusive of the Quantum series since its introduction):