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Dumping and Countervailing Duties Act 1988

Table of Contents

Table of Abbreviations

1.1   PROCEEDINGS

On 5 April 2000 the Secretary of Commerce, acting pursuant to s.10 of the Dumping and Countervailing Duties Act 1988 ("the Act"), formally initiated an investigation into the dumping of standard plasterboard with dimensions of any width or length and up to, but not including a nominal thickness of 12mm (other than those dimensions already subject to anti-dumping duty) from Thailand, on being satisfied that sufficient evidence had been provided that:

1. The goods imported or intended to be imported into New Zealand are 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 s.10 of the Act, the Ministry’s investigation was to determine both the existence and effect of the alleged dumping of standard plasterboard with dimensions of any width or length and up to, but not including a nominal thickness of 12mm (other than those dimensions already subject to anti-dumping duty) from Thailand .

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.

Background

History of Anti-Dumping Action

Since anti-dumping duties were first imposed on plasterboard in 1989, there have been a number of reviews, investigations and reassessments. These arose in response to matters such as the coverage of goods subject to the duties, the basis for collecting duties, changed import arrangements, and matters arising in the settlement of judicial review proceedings. Significant events are summarised below.

The Minister of Commerce first imposed anti-dumping duties on plasterboard (9 or 9.5mm) from Thailand in December 1989 in the form of a specific amount of duty per square metre.

Following a reassessment, the basis for collecting duty was changed in April 1991 to a non-injurious price level mechanism.

Anti-dumping duties were again reassessed in February 1996 following a review. The review concluded that dumped imports threatened "further material injury additional to that found in the original investigation". The Non-Injurious Free on Board (NIFOB) anti-dumping remedy for standard plasterboard (9 or 9.5mm) was increased.

Following investigations, the NIFOB was extended to cover various lengths of 9 or 9.5mm plasterboard in March 1996 and was also imposed on 10mm plasterboard in July 1996.

An interim reassessment in July 1996 took account of a reduction in the rate of normal duty and the NIFOB value was increased.

A further reassessment in January 1997 took account of changes in the values of the elements of the formula used to determine the non-injurious free-on-board price and the NIFOB value was again increased.

An application for judicial review of the February 1996 review and reassessment decision was followed in August 1997, by a Settlement Agreement and initiation of a further reassessment which recommended that anti-dumping duties be based on a reference price formula, which allowed the calculation of the margin of dumping for each shipment. This recommendation was challenged by the New Zealand industry. Crown Law Office confirmed the Ministry’s interpretation of the Act in December 1998.

In September 1999, the duties were reassessed on 9, 9.5 and 10mm standard plasterboard on the basis of a normal value equivalent mechanism. The reassessment report noted that dumping margins had increased significantly. The Report also considered that the level of injury could only be reconsidered as part of a review.

Such a review was initiated in September 1999 and completed on 27 March 2000. The purpose of the Review was to establish whether the continued imposition of anti-dumping duties was necessary to prevent the continuation or recurrence of injury. This review concluded that anti-dumping duties on standard plasterboard from Thailand should not be revoked and that there should be a reassessment of the anti-dumping duty on standard plasterboard from Thailand following the completion of the review. This reassessment was initiated on 5 April 2000 and is continuing.

In its application for the current investigation, Winstone Wallboards Limited (Winstone) requested that provisional measures be imposed, and that any final measures be imposed retrospectively for 60 days prior to the date of the imposition of provisional measures. In June 2000 the Minister declined to impose provisional measures on the basis that he did not have reasonable cause to believe, at that stage of the investigation, that the dumping of goods had caused, was causing, or threatened to cause material injury to the New Zealand industry. The provisional measures report prepared for the Minister concluded that the investigation should not be terminated at that stage pending further investigation into a number of issues that may impact on the level of dumping and injury.

Grounds for Application

In its application for an investigation, Winstone claimed that as a result of the imports of the allegedly dumped goods, there is a threat of material injury resulting from:

• a significant rate of increase in the volume of the allegedly dumped imports;
• price undercutting, price depression, and price suppression ;

which is threatening:

• a decline in output and sales;
• a decline in market share;
• a decline in profits;
• a decline in productivity;
• a decline in return on investments;
• a decline in utilisation of production capacity; and
• adverse effects on cash flow, inventories, employment, wages, growth, ability to raise capital, and investments.

Since the initiation of the investigation, Winstone has claimed it is now suffering actual material injury, reflected in volume loss and price suppression and the consequent economic impact resulting from this and has provided additional information to support these claims.

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.

1.2   INTERESTED PARTIES

The industry consists of Winstone Wallboards Ltd, a wholly-owned subsidiary of Fletcher Challenge Ltd, the sole New Zealand producer of plasterboard.

Thai Producers

Two companies have been identified by the investigating team as being producers of the subject goods exported to New Zealand:

• Siam Gypsum Industry Company Ltd (Siam Gypsum)
• Thai Gypsum Products Public Company Ltd (Thai Gypsum)

Both companies have headquarters in Bangkok and production facilities elsewhere in Thailand. Siam Gypsum plasterboard is marketed under the "Elephant Board" brand, while Thai Gypsum markets its plasterboard under the "TG House Logo" brand.

Exporters

Two companies are involved in exporting plasterboard to New Zealand. They are:

• SCT Co Limited of Thailand (SCT); and

• Thai Gypsum Products Public Company Limited

SCT Co Ltd

SCT Co Limited is the export-marketing arm of the Siam Cement Group of companies and handles the Group’s international trading and marketing for a wide range of products, including plasterboard. The "Elephant Board" brand of plasterboard exported to New Zealand by SCT is manufactured by the Siam Gypsum – Navanakorn plant. Siam Gypsum operates other plants within Thailand that also produce plasterboard (for both the domestic and export markets). SCT does not sell on the domestic market.

Thai Gypsum Products Public Company Ltd

Thai Gypsum Products Public Company Limited manufactures for the Thai domestic market and exports plasterboard to a number of countries throughout the world. Thai Gypsum is also involved in the manufacture of a range of other building products, some of which are exported. Thai Gypsum has been a majority owned subsidiary of BPB Plc since December 1999.

Importers

Over the period of investigation only two companies imported the subject goods. Background information relating to these companies and details of their current operation, are set out below.

Sigma Agencies Ltd

At the time of the 1997 reassessment (see section 1.1 above), Sigma Agencies Ltd (Sigma) was described as the export sales agent for SCT in the North Island and arranged sales for a number of importers, including Rikki Merchants Ltd (Rikki) which has the same shareholders as Sigma. Some importers sold to both other resellers of plasterboard and to end-users and some importers sold only to end-users. Many of the importers were also resellers of other hardware and building products.

Under this arrangement, Sigma took orders from the importers, forwarded the orders on to SCT and arranged and paid for shipment of the orders to the port nearest the importer. Sigma also arranged and paid for port clearance charges and Customs clearance fees. The importer paid for Customs duty and any anti-dumping duty. SCT sold the plasterboard to Sigma, which in turn on-sold the board to the importers. Sigma ____________ to its sale price to importers such that the FOB price was slightly above the level at which anti-dumping duty was payable. Sigma’s invoice price to importers also covered the sea freight and port and Customs clearance fees, to which Sigma ______________

The arrangement described above came into effect at some time between January 1997 and September 1997. It has not been possible to establish from Sigma exactly when over this period this arrangement came into effect. Prior to this arrangement coming into effect SCT invoiced the importers direct, payment was made to SCT via Sigma which __________________ In addition _____________________________________________________________
_____________________________________________________________.   _____________________________ This arrangement came into effect in October 1994 and was therefore the arrangement that applied at the time of the 1996 review and reassessment.

In October 1999, Sigma advised that it had changed the structure of its import arrangements, in response to the increase in anti-dumping duties resulting from the 1997 reassessment. Under this new arrangement, ________________________________ and were invoiced directly by SCT. SCT invoiced the importers in ___ at a price designed to be slightly above the level at which anti-dumping duty is now payable. Sigma continued to ___________________________________ for which it separately invoiced importers after ________________ Also under this arrangement, Sigma entered into a ________________ with SCT whereby Sigma __________________________________________________________________________ for SCT products (i.e. product other than standard plasterboard was also included) in New Zealand and "elsewhere".

On 24 December 1999, Sigma advised that its __________________ with SCT would terminate with effect from 31 December 1999, and that the importing and transaction methods for imports of plasterboard into New Zealand had changed. Sigma advised that it would purchase at an undumped price from SCT, and act as a bulk store ____________________________________________ At the time this report was prepared, this system was still in effect, and is discussed in more detail under "level of trade" below.

The investigating team visited Sigma to obtain information relating to its import operation. During this visit, Sigma declined to provide any information relating to its imports in the period up to December 1999 on the basis that information relating to previous import structures is no longer relevant. Sigma did, however, provide full information relating to its current import and distribution structure that came into effect from January 2000.

CTS Quality Building Products Ltd

CTS Quality Building Products Limited (CTS) is an importer of the plasterboard subject to investigation from Thai Gypsum. CTS has refused to co-operate with the investigation. The investigating team is aware, from the last reassessment, the last review, and from information provided by other interested parties, that CTS sells plasterboard to resellers and to end-users, and is also a manufacturer of ceiling tiles using plasterboard as the main constituent.

The Ministry received a letter from Mr Stephen Tully, a director of CTS Quality Building Products Ltd, on 15 September 2000 "reconfirming" that CTS ceased being the importer of Thai Gypsum plasterboard as from 1 April 2000. Mr Tully advised in this letter that this information was passed to the Minister during a meeting, at which Ministry officials were present, held earlier this year (the meeting was held on 11 July 2000).

In the same letter Mr Tully advised that the importer of Thai Gypsum plasterboard is TG Plasterboard Ltd, and that imports are financed through CTS Direct Ltd. Mr Tully advised that both these companies are unrelated to CTS Quality Building Products Ltd, with CTS Direct Ltd having totally different owners and directors. Mr Tully also advised that CTS Quality Building Products Ltd is only one of a number of resellers who purchase Thai Gypsum plasterboard on an FIS basis from TG Plasterboard Ltd. Mr Tully submitted in that letter that with this import structure the level of trade for imports of Thai Gypsum plasterboard is FIS rather than ex-wharf, as stated in the ef&c.

The information given to the Minister was also provided to the investigating team and placed on the investigation file together with notes of the meeting. It is was not clear, however, from the information passed to the Minister that CTS Quality Building Products Ltd was no longer the importer. The investigating team also notes that the apparent change in import structure took effect after the end of the period of investigation (the period of investigation being the year ended March 2000). In addition, CTS (through Mr Tully) has refused to co-operate with the investigation and it has therefore not been possible to verify that the import structure apparently in place since April 2000 operates as stated by Mr Tully. Customs import data shows CTS Quality Building Products Ltd as the importer in April 2000, and from May to July 2000 shows CTS Direct Ltd as the importer.

Based on the foregoing considerations, the investigating team has examined level of trade for CTS Quality Building Products Ltd on the basis that it is the importer selling direct to end users.

1.3   IMPORTED GOODS

Standard plasterboard with dimensions of any width or length and up to, but not including a nominal thickness of 12mm (other than those dimensions already subject to anti-dumping duty).

Following a submission concerning the need to place a lower limit on the thickness of the board (see under "Like Goods" in section 2.1 below), the description of the goods has been refined as follows:

Standard plasterboard with dimensions of a nominal thickness from, but not including 6mm, and up to, but not including 12mm, of any width or length (other than those dimensions already subject to anti-dumping duty)

In the context of the 1999 review, the New Zealand Customs Service stated that standard plasterboard enters under the following tariff classifications:

Applicable duty rates are:

Normal		6.5%
Australia		Free
Canada		Free
LDC		5%
LLDC		Free
Pac		Free

The subject goods fall under the same tariff item as all other standard plasterboard.

1.4   INVESTIGATION DETAILS

In this report years are March and June years (the period covered by data is identified in the report) and dollars values are NZ dollars. In tables, column totals may differ from individual figures because of rounding.

The period for considering claims of dumping is from 1 April 1999 to 31 March 2000. The investigation of injury involves the evaluation of data up to 31 March 2000. Consideration of threat of injury involves evaluation of the likely effect of the allegedly dumped imports.

1.5   EXCHANGE RATES

Article 2.4.1 of the Anti-Dumping 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 Thai Baht, export transactions take place in New Zealand and US dollars, and any injurious effect is reflected in New Zealand dollars. As in the last reassessment and last review, the Ministry used the invoice date to establish the date of sale and the rate of exchange for each transaction. The exchange rates used are the interbank rates listed by the OANDA currency conversion site on the internet (http://www.oanda.com/converter/classic).

1.6   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 Anti-Dumping 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.

Verification visits were made to the following producers:

• Siam Gypsum
• Thai Gypsum

Copies of the verification reports were provided to the producers visited, and non-confidential copies were 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.

As stated earlier in this report information was requested, but not received or not received to the extent required, from CTS and Sigma. In view of the failure to provide all of the necessary information, the information used in respect of these companies has been based on the facts available. Details of the information used and the conclusions drawn are shown in sections 3 and 4 of the report.

Section 10a(1) of the Act provides as follows:

Subject to subsection (2) of this section, within 150 days after the initiation of an investigation under section 10 of this Act, the Secretary 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.

In order to meet this obligation, essential facts and conclusions (ef&c) were provided to interested parties on 25 August 2000, being 143 days after the initiation of the investigation. Comments received from Winstone, Sigma, Thai Gypsum and Siam Gypsum were taken into account in preparing this Final 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 goods which were the subject of the application were described as follows:

Standard plasterboard with dimensions of any width or length and up to, but not including a nominal thickness of 12mm (other than those dimensions already subject to anti-dumping duty).

Winstone produces standard plasterboard of 9.5mm nominal thickness and in multiple widths and lengths. The manufacturing process used in the production of plasterboard is a relatively standard process. The primary materials used in the manufacturing process are gypsum and paper. There may be minor differences in surface texture or colour between domestically produced plasterboard and the imported product. The distinguishing feature of the subject goods is that they are of a slightly different thickness to those currently subject to anti-dumping duty. Winstone has stated that "standard plasterboard of any thickness within a designated range is easily able to be substituted for 9.5mm standard plasterboard in the New Zealand market."

Winstone has stated that board of varying thickness within a range up to 12mm thick can be made by varying ____________________________ in the production process and does not necessarily involve or require a change in gypsum usage. With regard to the upper limit of the description of the goods, the next size up in terms of thickness of standard plasterboard that Winstone produces is nominally 12.5mm and, as has been reported in previous investigations, does not compete in the 9.5mm market. In past reviews and investigations, the Ministry has not considered the 12.5mm plasterboard as a like good to 9.5mm and has therefore excluded it from investigation. Winstone states that standard plasterboard with a thickness of 12mm and above is sold into a different market segment.

With regard to a lower limit for the description of the subject goods, Winstone states that a lower thickness limit is not needed as "the lower thickness limit is a function of technology limitation rather than market sector requirement".

A submission has been made by Gyptec Plasterboards Ltd (Gyptec), a former importer of 9.5mm standard plasterboard, that there should be a lower limit placed on the thickness of the plasterboard which is the subject of the investigation. That submission is summarised below.

Gyptec is working on the development and production of a ceiling panel system that requires 6mm thick standard plasterboard. Gyptec requested that Winstone manufacture a 6mm board but was advised by Winstone that it was unable to manufacture 6mm board without expensive modification of its plant. Winstone also advised Gyptec that it could not justify the expense of the modifications required for the volumes required just for its ceiling tile project. Winstone advised it had no other market for 6mm board.

If Gyptec is able to import some 6mm board and its ceiling panel system is successful, then it could use the imported price to obtain some leverage on Winstone’s plasterboard pricing. If 6mm board was to be subject to anti-dumping duty, then Gyptec would be very disadvantaged.

It is not possible for 6mm board to cause injury to Winstone’s market for 9.5mm board, as Winstone does not currently manufacture 6mm board. Plasterboard of 6mm in thickness would not be acceptable as a lining material to directly replace 9.5mm board as it would be far too flimsy to handle on the job and it would be easy to penetrate the wall.

Gyptec has noted that other potential uses for 6mm board may include curved walls (2 layer system) or for use over concrete block where expanded polystyrene is laminated to the back of the sheet for insulation. Such use of expanded polystyrene would make 6mm board sufficiently strong to be readily accepted. Gyptec stated that these potential uses of 6mm board should not be penalised through the imposition of anti-dumping duty when Winstone will not supply this thickness of board.

The investigating team asked Siam Gypsum, Thai Gypsum and Winstone to respond to the submission made by Gyptec. The responses of these companies are summarised below.

Siam Gypsum noted that 9mm board is the thinnest board sold on the Thai domestic market. Siam Gypsum consider that 6 mm board would not be a like good to the 9mm board sold on the Thai market because it is too thin to be used in applications where 9mm board is used.

Thai Gypsum considers that plasterboard is distinguished by type (standard, fire and water resistant board etc) rather than by size, and it is really not possible to distinguish board by size. Thai Gypsum considers that it is construction methods that dictate the thickness of board used, for example the width of the ceiling joints and the number of noggins used. Thai Gypsum considers that the thickness of the board is only relevant at the extreme ends of the size range being 19mm board for commercial buildings at the top end and 6mm board at the lower end. Thai Gypsum considers that 6mm board can only be used to produce ceiling products or for curved partitions. Thai Gypsum does not believe that 6mm board can be compared with either 9mm or 12mm board sold on the Thai domestic market.

Winstone has made the following observations:

• Plasterboard 6mm thick is a very unusual product and is not offered as a standard thickness in any developed market.
• Plasterboard 6mm thick has been used in the low cost end of the housing market in Chile where there is very little concern about quality. It has also been used in very small volumes in the USA for the mobile home market where weight is important.
• There may also be a very small volume made in Australia specifically for wrapping around circular pillars in high rise buildings. Other solutions to this niche market are also possible with 9.5mm product.
• Plasterboard 6mm thick is not offered in either the SCT or Thai Gypsum price lists in Thailand.

Winstone considers Gyptec’s stated intention to use the price of imported 6mm board to obtain some leverage on Winstone’s plasterboard pricing, seems to be a clearly stated intention to use a dumped 6mm price to depress Winstone’s 9.5mm price. Winstone considers that any sale of 6mm product would substitute for other product less than 12mm in thickness.

Winstone has stated that if Gyptec is convinced that there is a New Zealand market opportunity for 6mm product and is prepared to order in merchantable quantities, it would manufacture to a specific order.

In response to the ef&c Winstone has stated that Gyptec has acknowledged in its discussions with it that 6mm board is substitutable for 9.5mm plasterboard in its ceiling system, and that Thai Gypsum has also acknowledged that plasterboard of any thickness should fall within the description of the subject goods. Winstone has also submitted that there is no material physical difference between 6mm and 9.5mm plasterboard except for the thickness of the plaster core.

Ministry’s Consideration of the Issues

The description of the goods used by Winstone in its application encompassed board of a wider range of thickness than the thickness of the board actually being imported. The imported board which prompted the application is of a nominal thickness of 10.5mm. The description of the goods in the application covered all standard board up to but not including 12mm (excluding that board already subject to anti-dumping duty).

The existing anti-dumping duty covers standard board of a thickness from 8.75mm to 10.25mm of any length or width. The imported board is of a thickness just outside this range, but is generally substitutable for the board subject to anti-dumping duty. It is clear that Winstone opted for a broad description of the goods to avoid this type of situation. The investigating team agrees that it is reasonable that the description of the goods should cover board of a wider range of thickness than that of the board actually being imported. The question is: "Where should the limits be drawn?".

Winstone has provided evidence that in New Zealand board of 12mm or more occupies a separate market segment from board less than 12mm. The investigating team therefore considers that the upper range of the goods description is reasonable.

There is clearly a point at which board of sufficient thinness is no longer a like good to the 9.5 board produced by Winstone. The submission made by Gyptec concerns 6mm board. The investigating team therefore considers that board of this thickness should be the point at which considerations of a lower thickness limit should be focused.

The investigating team considers the evidence available indicates that 6mm board is not substitutable for the 9.5mm board produced by Winstone. Although Winstone has stated that Gyptec has acknowledged that 6mm board is substitutable for 9.5mm board in its ceiling system, Gyptec’s submission contains details of a patent application for a ceiling system ____________  ________________________________ The evidence from Gyptec indicates that 6mm board is not substitutable for 9.5mm board. The 6mm board is not suitable for use in applications where 9.5mm board would normally be used, i.e. as a wall and ceiling lining and in ceiling panels. Winstone has advised that, where 6mm board is used to cover curved walls, it is possible to use 9.5mm board. However, there is no evidence that 9.5mm board has actually been used in this type of application in preference to 6mm board, and no evidence that 9.5mm board is likely to be used instead of 6mm board.

The investigating team considers that 6mm board has a different end use to 9.5mm board and obviously has different physical characteristics being of a different thickness. The investigating team therefore concludes that the 9.5mm board produced by Winstone is not a like good to 6mm board. The investigating team consequently considers that the description of the goods under investigation should be narrowed to exclude board of a nominal thickness of 6mm. The description of the goods which are the subject of the investigation, hereinafter referred to as "other standard plasterboard" or "subject goods" has therefore been amended as follows:

Standard plasterboard with dimensions of a nominal thickness from, but not including 6mm, and up to, but not including 12mm, of any width or length (other than those dimensions already subject to anti-dumping duty)

Based on the information available, including that from previous investigations, the Ministry considers that the 9.5mm standard plasterboard produced by Winstone while not like in all respects, has characteristics closely resembling the amended description of the subject goods, and is therefore a like good to the subject goods.

2.2   NEW ZEALAND INDUSTRY

The New Zealand producer of like goods by or on whose behalf the application was made is Winstone Wallboards Limited. Winstone is the sole New Zealand producer of plasterboard. The investigation was initiated on the basis that the application met the requirements of s.10(3) of the Act.

2.3   IMPORTS OF PLASTERBOARD

Plasterboard of the type subject to investigation is not separately identified in the tariff. The import volumes of the subject goods have been compiled from invoices supplied by Sigma, SCT, Thai Gypsum and New Zealand Customs. The subject goods were first imported into New Zealand in October 1999. The investigating team is not aware of any imports of the subject goods from countries other than Thailand. Total imports of the subject goods from Thailand from October 1999 to March 2000 was ______ square metres.

2.4   NEW ZEALAND MARKET

Under section 2.1 above it was concluded that the 9.5mm board produced by the New Zealand industry is a like good to the subject goods. The goods currently subject to anti-dumping duty are described as follows:

Standard plasterboard with dimensions of a thickness falling between 8.75mm to 10.25mm and of any length or width

The investigating team is aware from the last review and the reassessment of the present duty currently underway, that the standard board imported into New Zealand which falls within the definition of the board subject to duty, is 9mm, 9.5mm and 10mm in thickness. This board therefore closely resembles or is identical to the 9.5mm board produced by the New Zealand industry. The investigating team considers that the New Zealand market consists of sales by Winstone of 9.5mm board, imports of the subject goods and imports of plasterboard currently subject to duty. Imports from other countries are negligible.

The following table shows the total New Zealand market. Import volumes for the subject goods and the goods currently subject to anti-dumping duty, have been compiled from invoices provided by Thai Gypsum and SCT and are for the year ended March 2000. Domestic industry sales are for the year ended June 2000.

3.   EVIDENCE OF 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   EXPORT PRICES

Export prices are determined in accordance with section 4 of the Act, which provides as follows:

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

In certain circumstances, export prices can be established under s.6 of the Act, which provides as follows:

(1) Where the Secretary 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 Secretary may disregard any information that the Secretary considers to be unreliable.

Siam Gypsum Industry Company Limited

Siam Gypsum Industry Co Ltd (Siam Gypsum) is part of the Siam Cement Group of companies, and manufactures plasterboard for both the Thai domestic market and for export. Exports to New Zealand are made through the subsidiary company SCT Co Ltd (SCT).

Exports to New Zealand of the plasterboard subject to investigation were made directly from SCT to Sigma. Siam Gypsum made to order for the New Zealand market and invoiced Sigma on a FOB basis. Sigma arranged and paid for sea freight and port and Customs clearance costs. The Ministry is satisfied that the sales from SCT to Sigma were arm’s length transactions.

Base Prices

The actual transaction values for all shipments made over the period of investigation were used as base prices for export price calculations. There were only __________________________________________ of the subject goods by SCT over the period of investigation, totalling ____ square metres. ____________ was invoiced in __ dollars and ___ invoiced in __ dollars. ____ shipments were invoiced on a FOB basis. Base prices are the invoiced FOB prices.

Adjustments

Export Packing

An adjustment has been made on the basis of verified information for the additional cost of packing for export sales to New Zealand.

Freight to Wharf

An adjustment was made on the basis of the verified freight to wharf costs.

Port Handling, Document Costs and Customs Clearance

An adjustment has been made for port handling and Customs clearance, including documentation charges, based on information verified.

Bill of Lading Fee

An adjustment has been made by allocating the verified bill of lading fee per square metre on the basis of the number of square metres in each shipment.

Cost of Credit

The ef&c advised that no adjustment was required for cost of credit. This decision was based on the verified fact that no credit was given on export sales to Sigma, and that sales to ____________ used to establish normal values were also made on a cash basis.

Winstone submitted, in response to the ef&c, that as Sigma are invoiced for the subject goods on the date of shipment, yet pay for these goods about one week prior to arrival in New Zealand, that an adjustment for credit should be made.

During a verification visit to Sigma, it was established that Sigma pays for the subject goods one week prior to the goods arriving into the port in New Zealand. New Zealand Customs entries show that it takes 22 days to ship the subject goods to New Zealand. The cost of credit to Siam Gypsum for its shipments to New Zealand for the subject goods would therefore be 15 days.

An adjustment for 15 days has been made by applying monthly lending rates for Thailand for the month the goods were shipped, sourced from the International Monetary Fund’s International Financial Statistics (May 2000) (Public File Document #131) to the FOB price of the subject goods exported to New Zealand.

Consultancy ___

Under the import structure that operated from October to December 1999, Sigma received a consultancy _____________________________________________________ it carried out for SCT. During the last review it was concluded that an adjustment should be made only for that part of the __ that could be attributed to administrative duties carried out by Sigma in arranging shipment of the goods to New Zealand. In the absence of any specific information from Sigma, an adjustment was made in the last review using the percentage rate charged by another company to other importers of plasterboard for administration.

In the ef&c an adjustment for administration costs was made for the shipment in ____________ It was stated, however, that as there was no consultancy ___ paid from 1 January 2000, no adjustment for administration costs was made for the _____________________

Sigma has advised the Ministry that the shipment of the subject goods which left Thailand on _____________ was arranged under the new importing structure, and therefore should not be subject to an adjustment for administration costs.

After analysing all the exports to New Zealand made by Siam Gypsum under both this investigation and the current reassessment on standard plasterboard, the investigating team is satisfied that the shipment which left Thailand on __________ was arranged under the new importing structure.

No adjustments have therefore been made for administration costs.

Export Prices Calculation

Export prices were calculated for each shipment to New Zealand during the period of investigation by deducting the adjustments above from the base prices.

Thai Gypsum Products Public Company Limited

Thai Gypsum Products Public Company Ltd (Thai Gypsum) manufactures for the Thai domestic market and exports plasterboard to a number of countries throughout the world, including New Zealand.

Exports to New Zealand of the plasterboard subject to investigation are made directly from Thai Gypsum to CTS. Thai Gypsum makes to order for the New Zealand market. The investigating team is satisfied that sales from Thai Gypsum to CTS are arms length transactions.

Base Prices

The actual transaction values for all shipments made over the period of investigation were used as base prices for export price calculations. During the period 1 April 1999 to 31 March 2000 _____ square metres of plasterboard subject to the investigation were exported to New Zealand by Thai Gypsum, the first shipment being made in October 1999. All shipments were invoiced in US dollars and on a CIF basis. Base prices are the invoiced CIF prices.

Adjustments

Inland Freight

An adjustment has been made for the cost of inland freight, based on the information verified.

Export Packing

An adjustment have been made for additional export packing material and labour costs, based on information verified.

FCL Term Holding Charge

An adjustment has been made on the basis of verified information, for an FCL Term Holding Charge.

Cost of Credit

An adjustment has been made for the difference in the days credit extended to CTS and ________ (normal values have been established on the basis of sales to ________ refer section 3.2). As the weighted average length of credit extended to CTS was greater than the length of credit extended to ________ an adjustment has been made to the export price.

Bill of Lading Fee

An adjustment has been made by allocating the verified bill of lading fee per square metre on the basis of the number of square metres in each shipment.

Sea Freight

An adjustment for sea freight has been made on the basis of verified costs.

Emergency BAF

The Emergency BAF is a surcharge to cover increased fuel oil costs. An adjustment has been made for this cost, on the basis of verified information.

Overseas Insurance

An overseas insurance adjustment has been made based on the information verified.

Export Prices Calculation

Export prices were calculated for each shipment to New Zealand during the period of investigation by deducting the adjustments above from the base prices.

3.2   NORMAL VALUES

Normal values are determined in accordance with section 5 of the Act. Section 5(1) and (3) of the Act provides as follows:

(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 Secretary—

(a) At the same level of trade; and

(b) In respect of sales made at as nearly as possible the same time; and

(c) With due allowances made as appropriate for any differences in terms and conditions of sales, levels of trade, taxation, quantities, and physical characteristics, and any other differences that affect price comparability.

In certain circumstances, normal values can be established under s.6 of the Act, which is quoted above under export price.

Siam Gypsum Industry Co Ltd

The Siam Cement Group underwent a major restructuring effective from January 2000. Prior to January 2000, sales were made through a subsidiary company, Siam Cement Public Company Ltd (SCC), which was the domestic marketing arm of the group. Plasterboard was transferred to SCC at transfer prices.

From January 2000 Cementhai Sale and Marketing Ltd (CSM) took over the domestic sale functions previously carried out by SCC. Under the restructuring, CSM is expected to operate at a profit.

The investigating team was satisfied, on the basis of verified information, that sales by Siam Gypsum made through both SCC and CSM over the period of investigation, were not made at a loss.

Level of Trade

Prior to 1 January 2000, SCC operated an extensive network of about __ warehouses throughout Thailand from which its customers were supplied. SCC had approximately ___ customers, which were grouped according to the nature of their business, including exclusive dealers and non-exclusive dealers. The largest group of customers (numbering about ___) was exclusive dealers. SCC incurred all selling and administration costs related to dealing directly with all of its customers, including the cost of debt collection. The selling price from Siam Gypsum to SCC was calculated back from SCC’s net selling price to its customer by deducting from the net selling price an "indirect marketing charge". This "charge" was designed to cover only SCC’s operating costs (including the costs of the warehouse network), but it did not provide a profit margin to SCC.

From 1 January 2000, CSM sells and markets plasterboard on the domestic market. Customers are still grouped according to the nature of their business and exclusive dealers still represent the largest group of customers. As part of the restructuring all of the warehouses, except _____ depots, were closed, and deliveries to customers are made direct from the factories. CSM incurs all selling and administration costs related to directly dealing with its customers, including the cost of debt collection. The selling price from Siam Gypsum to CSM is calculated back from CSM’s net selling price to its customers by deducting from the net selling price a ___ percent "marketing charge". This charge is designed to cover CSM’s operating costs and provide a margin for CSM.

Siam Gypsum has submitted that since January 2000, as a result of the changes in Sigma’s importing structure, CSM has no customers at the same level of trade as Sigma. Siam Gypsum considered, however, that prior to January 2000, sales to exclusive and non-exclusive dealers were at the same level of trade as sales to New Zealand importers. The investigating team agreed that prior to January 2000 sales to exclusive and non-exclusive dealers were at the same level of trade as sales to New Zealand importers.

Siam Gypsum submitted that from January 2000 its sales to CSM are at the same level of trade as SCT’s sales to Sigma. Siam Gypsum has submitted that its sales to CSM are at arm’s length and that the ___ percent marketing charge is reasonable and normal for this type of business and consequently base normal values should be established on the basis of its sales to CSM.

The verification team considered that it did not have sufficient evidence to show that that sales from Siam Gypsum to CSM were at arm’s length. The verification team noted that if it could be established that such sales were at arm’s length and could be used to establish base prices, then it is likely that base export prices would need to be established on the basis of Siam Gypsum’s selling price to SCT.

A possible adjustment for differences in level of trade is discussed further under adjustments below.

The 1999 review established normal values on the basis of sales to the largest non-exclusive dealer, ____________________ as this customer was considered to be at a comparable level of trade to New Zealand importers. The investigating team verified sales volumes to both _____, the next largest non-exclusive dealer and the two largest exclusive dealers. The customer closest in sales volume to the volume sold to Sigma was an exclusive dealer called ______________ Base prices were therefore established on the basis of sales to this dealer.

Following the release of the Interim Report on the concurrent reassessment of the existing anti-dumping duty, Winstone has made a submission on the selection of the customer used to establish normal values. This submission was received well after the closing date for submissions on the ef&c. Winstone has submitted that this submission was only made possible through information released in the Interim Report on the reassessment that has enabled it to estimate the approximate normal values. The investigating team agrees that this is the case and has therefore endeavoured to the extent possible (given the limited time available), to include the submission in this report. Winstone’s submission is summarised below.

• Winstone consider the investigating team made an error by changing from a non-exclusive dealer to an exclusive dealer to establish normal values. An exclusive dealer is a distributor that must stock and sell not only Siam Gypsum plasterboard but a wide range of Siam Cement Group products. Winstone has stated that plasterboard is a relatively minor part of the distributor’s business, and purchase decisions are made on a bundled basis.

• Winstone claim that an exclusive dealer acts as a Siam Cement Group branded dealer with a closely aligned strategic marketing campaign, and is really an extension of the marketing system of Siam Cement Group and CSM in particular.

• As a consequence Winstone argues that being tied to this extent results in an extraordinary additional discount/rebate to exclusive dealers as compensation for being tied to sell only Siam Cement Group products.

• Based on its estimate of the normal value, Winstone has calculated that the Ministry has allowed discounts of some __ – __ percent off the list price. Winstone’s own calculations contained in its original request for a reassessment , the correct adjustment for discounts and rebates would be in the order of __ – __ percent.

• Winstone claim that discounts to non-exclusive dealers are comparable with the total discounts and rebates given by Thai Gypsum off its list price.

During the verification visit to Siam Gypsum the verification team verified the invoiced prices, discounts and rebates for the two largest non-exclusive and the two largest exclusive dealers, for sales made as near as possible to the date of each export sale. An analysis of the weighted average prices net of all discounts and rebates for each of these companies shows that ________   ______________________________________ The analysis also shows that the weighted average net price of _______________ is ________ baht per square metre _______) to the ______________, and is ____ baht per square metre _______________________________________________

The evidence gathered by the investigating team does not show that ____________________________________ The selection of _________________ on the basis of its volume of purchases being closest to that of Sigma is appropriate for the purposes of fair comparison.

Base Prices

Siam Gypsum provided copies of invoices for sales to ________________ as near as possible to the same date as each export sale to New Zealand. Base prices have been established from the actual invoiced prices relating to sales made to ______________________________________________

Adjustments

Discounts

An adjustment has been made for the discount amounts shown on the invoices relating to sales made to ______________________________________________

An adjustment has also been made to ____________________________ base normal value to take account of an additional discount given by way of _________

Monthly and Bonus Rebate

An adjustment has been made for a monthly ______ rebate and a _________ bonus rebate given to ____________, on the basis of verified information.

Level of Trade

Siam Gypsum and Sigma both commented in submissions made in response to the ef&c that they did not believe that sales from CSM to exclusive distributors in Thailand are at the same level of trade to sales from SCT to Sigma. The reasoning given was that CSM and Siam Gypsum are independent entities that manage their own profit and loss accounts.

Sigma also submitted it is Siam Gypsum that performs the domestic distribution function not CSM, yet when exporting it uses SCT for the export distribution function from factory door to FOB point. Sigma believes therefore that the parallel price to reach normal value at the same level of trade would be the Siam Gypsum to CSM price and not the CSM to exclusive dealer price.

The investigating team agrees that from 1 January 2000, there could be a difference in the level of trade between Siam Gypsum’s sales to New Zealand and its sales on the Thai domestic market which could affect prices and therefore an adjustment may be required to take account of the difference.

The investigating team considers that an adjustment for differences in level of trade would need to be based on the difference in costs incurred by SCT and CSM. The investigating team sought additional information from Siam Gypsum on the difference in these costs. Siam Gypsum did not provide this information.

A level of trade adjustment has therefore not been made.

Taxation (Duty Drawback)

An adjustment for duty drawback has been made on the basis of verified information.

Physical Characteristics

An adjustment has been made on the basis of the verified information for the difference in the amount of gypsum used to produce the 9mm board sold on the domestic market and the 10.5mm board exported to New Zealand. The effect of the adjustment is to increase the normal value.

Rebate on Paper

An adjustment for a rebate on paper has been made based on the actual rebates Siam Gypsum received from its paper supplier.

Differences in Advertising, Marketing and Promotion Expenses

Siam Gypsum claimed an adjustment for advertising, marketing and promotion expenses. Siam Gypsum explained that these expenses promote the use and benefits of plasterboard in buildings and added that this expense was borne by Siam Gypsum rather than by CSM.

The investigating team considers that these expenses relate more to the general cost of business and notes that generally in the past the Ministry has not allowed such adjustments.

The investigating team notes that an adjustment for these types of expenses would only be made where they directly affect the price of the goods, i.e. they are effectively reflected in a reduction in revenue from the sales used to establish normal values. Examples would be, promotional programmes such as "free" board supplied if a set quantity is purchased, specific co-op advertising related to specific sales, and salespersons’ commissions where the level of commission is dependant on the volume of sales.

The investigating team has examined the evidence put forward by Siam Gypsum and concluded it could not identify any costs that would meet the criteria outlined above.

No adjustment has been made for advertising, marketing and promotion expenses.

Logistic Management Fee

Siam Gypsum claimed for an adjustment for a "logistic management fee" charged to it by CSM for arranging delivery of board to its customers.

As this fee related to a cost that arose after ex-factory the investigating team did not make an adjustment to the base normal values in the ef&c.

Siam Gypsum and Sigma both commented in submissions made in response to the ef&c that the logistics management fee should be an adjustment deducted from the base normal values. Siam Gypsum agreed with the investigating team that this fee does occur after ex-factory, however it stated that, as this cost is charged back to Siam Gypsum, it is a cost that must be deducted from the normal value.

The investigating team still considers that the fee is a cost that arises after ex-factory and therefore no adjustment is required.

Normal Value Calculation

Normal values were calculated by deducting the adjustments above, except for physical difference, from the base normal values. The physical difference adjustment was added to the base normal values.

Thai Gypsum Products Public Company Ltd

Thai Gypsum sells to two types of customer, distributors and contractors, the majority of its sales being made to distributors.

The investigating team was satisfied, on the basis of verified information, that sales by Thai Gypsum on the domestic market over the period of investigation, were not made at a loss.

Level of Trade

During the 1999 review base normal values were established on the basis of the best information available, which was Thai Gypsum’s price lists.

Thai Gypsum considers its sales to distributors are at the same level of trade as its sales to CTS. The investigating team agrees with this.

Base Price

The investigating team selected a distributor, _______, with annual sales of a similar volume to those made to CTS. Thai Gypsum provided a copy of invoices for sales to _______ as near as possible the same date as each export sale to New Zealand. Base prices have been established at the invoiced price of those sales to _______

Adjustments

Discounts and Credit Notes

An adjustment has been made for the discount shown on the invoices used to establish base normal values.

Thai Gypsum provided an additional discount in the form of a credit note, based on monthly sales. An adjustment has also been made on the basis of the credit notes actually issued to ______ during the period 1 April 1999 to 31 March 2000.

Taxation (Duty Drawback)

An adjustment for duty drawback has been made to _______ base normal values, on the basis of the verified information.

Physical Characteristics

Thai Gypsum advised it does not use any more gypsum in the 10.5mm board than it uses in 9mm board, ___________________________________________________ of the 10.5mm board. The investigating team considers that as the additional cost of this foaming agent was insignificant no adjustment should be made for physical differences.

Distribution Costs

Thai Gypsum operates a network of _______ regional warehouses throughout Thailand and makes all its sales on an ex-warehouse basis. Thai Gypsum claims that a deduction from the normal value should be made for the costs it incurs for the distribution of the plasterboard in order to take its prices back to ex-factory. In this context, distribution costs refer to the cost of freighting the board from Thai Gypsum’s factory to its warehouses.

The investigating team considers that the distribution costs are necessarily incurred in order to get the plasterboard in a position where it can be sold. There is therefore a direct relationship between the delivery cost and the sale of the board. The investigating team consequently considers that the cost for delivery will be directly reflected in the domestic selling price and therefore an adjustment for distribution costs should be made. The investigating team also considers that an adjustment for these costs is required to take the base normal value back to the ex-factory level to ensure the normal value is being compared at the same level as the export price which has been established on an ex-factory basis.

Thai Gypsum explained that ___________ collects the plasterboard from the regional warehouse (located in ______), and is charged a nominal delivery fee that covers only part of the actual delivery costs from _________ to the warehouse. This delivery fee is identified on a separate line on their invoice and is not included in the base price. The sales to _________ selected to establish normal values incurred a delivery charge of ____ baht/m2. Thai Gypsum provided information to the investigating team showing that the actual charge for delivery from _________ to ______ is ___ baht/m2. Thai Gypsum claimed therefore that an adjustment for distribution costs should be made at ____ baht/m2.

The investigating team considered making an adjustment for distribution costs on the basis of the cost of transport from the ____________ plant to the warehouse in _______________________ The investigating team considers however, that as the selling price does not vary according to the distance a warehouse is from the factory, an adjustment for the distribution component should be made using the average costs incurred by Thai Gypsum to distribute its plasterboard to its _____ warehouses. This average cost, verified by the investigating team, is ____ baht/m2.

As the distribution cost is partially recovered by the charge made to its customers, the investigating team considers that the adjustment should be net of the charge made to its customers. The average amount recovered in delivery charges was not available, so the investigating team has used the amount charged to ______ of ____ baht/m2.

On the basis outlined above, an adjustment for the cost of distribution of ____ baht/m2 has been made.

Warehousing Costs

Thai Gypsum operates a network of _____ regional warehouses throughout Thailand and makes all of its sales on an ex-warehouse basis. Thai Gypsum has claimed a deduction from the normal value for its warehousing costs in order to take its prices back to ex-factory.

The ef&c stated that the cost of warehousing was not directly related to the sales under consideration, as the cost of warehousing is a cost incurred regardless of whether or not an individual sale is made. This contrasts with the cost of delivery from the factory to the warehouse which are directly related to the sale of the product under consideration.

The ef&c also compared a domestic distribution system using warehouses with that of a producer which supplies its customers directly from its factory. In the case of direct supply from the factory, the costs of holding board at the factory are part of the factory overhead cost and would be reflected in the ex-factory price, and no adjustment for warehousing costs at the factory would be made. In the ef&c the investigating team considered that the same logic should apply where a warehousing system is maintained outside of the factory.

In response to the ef&c Thai Gypsum submitted that the adjustment sought related to a secondary warehousing cost which provided improved customer service (customers can purchase smaller quantity orders with prompt deliveries), and that the adjustment sought was not for stockholding. Thai Gypsum submitted that the same level of stock would be held in the factory whether or not Thai Gypsum operated these secondary warehouses. Thai Gypsum also advised that if it did not offer this service element its customers would be offered a lower domestic selling price because the extra service costs of secondary warehousing, as reflected in its higher domestic selling price, would not be incurred.

The base prices used to establish normal values are ex-factory prices. The investigating team considers that the adjustment sought relates to service costs that arise after ex-factory, relate more to the general cost of business and are incurred regardless of whether a particular sale is made.

No adjustment has been made for warehousing costs.

Differences in Advertising and Marketing Costs (Including Bad Debts)

Thai Gypsum made a claim for an adjustment to the normal value for the costs it incurs on the domestic market for all advertising and marketing expenses that are directly and solely related to domestic sales. These costs include bad debts and salaries for a large sales team devoted entirely to supporting sales, promotional and entertainment programmes. Thai Gypsum stated that CTS bears any advertising and marketing expenses incurred on the New Zealand market, and noted that CTS has always paid on account and there is therefore no bad debt incurred on its exports to New Zealand. Thai Gypsum also advised that it is the company’s policy to set prices to take account of this bad debt, and its domestic selling prices reflect the cost of bad debts.

Thai Gypsum also submitted that investigating authorities in other jurisdictions allow adjustments for salesman’s salaries, incentives and other expenses required to support domestic sales.

In the ef&c the investigating team considered that these expenses related more to the general cost of business and tended to be incurred irrespective of whether a particular sale was made. The investigating team noted that such costs are not generally considered to be directly related to the sales under consideration and in the past the Ministry has not allowed such adjustments.

In the ef&c the investigating team agreed that an adjustment for these types of expenses could be made where they directly affected the price of the goods, i.e. they are effectively reflected in a reduction in revenue from the sales used to establish normal values. Examples given were promotional programmes such as "free" board supplied if a set quantity was purchased, specific co-op advertising related to specific sales, and salespersons’ commissions where the level of commission is dependant on the volume of sales.

The investigating team noted in the ef&c that it had examined the evidence put forward by Thai Gypsum and concluded it could not identify any costs that would meet the criteria outlined above. The investigating team also noted that no evidence was provided to demonstrate that there is a specific increase in domestic prices to cover the cost of bad debts.

In response to the ef&c Thai Gypsum provided ______________________________________________________________________________________________________________________________________

The investigating team has analysed pricing information provided to the Ministry by both SCT and Thai Gypsum during the 1997 plasterboard from Thailand reassessment which reassessed duties on 9, 9.5 and 10mm standard plasterboard (refer paragraph 1.1.12 above). During this reassessment Thai Gypsum provided the Ministry with price lists which showed that from 1 January 1999 (________________________________) the per sheet price for 9mm plasterboard of 2400mm in length was 198 baht. This price matched exactly the SCT list price which came into effect on the same date (SCT made no claim for a bad debts adjustment). This indicates to the investigating team that market factors have set the price rather than a specific adjustment to take account of bad debts. The investigating team notes from invoices provided by Thai Gypsum during this investigation that this price of 198 baht was applicable until December 1999. The Ministry is not convinced that this new evidence presented by Thai Gypsum supports that any increases in domestic selling prices have been made to cover bad debt.

No adjustment has therefore been made for the bad debt component of advertising and marketing costs.

Thai Gypsum also submitted, in response to the ef&c new evidence to support an adjustment for salespersons’ commissions. As stated above, the investigating team agrees that an adjustment could be made for expenses where they directly affect the price of the goods, such as salespersons’ commissions, where the level of commission is dependant on the volume of sales. In its response to the ef&c, Thai Gypsum has provided the actual per square metre cost for commissions to salespersons’, during the POI. Thai Gypsum stated that such commissions are directly dependent on the volume of sales and should be accepted as an adjustment to the base normal values.

Information obtained during the verification visit indicated that ________________________________ The investigating team sought clarification of this point and the amount of any such commission paid on export sales to New Zealand. No response was received. No adjustment has therefore been made for salesperson’s commissions.

No adjustment has been made for other differences in advertising and marketing costs.

Differences in Cost of Production

Over the period of investigation, Thai Gypsum supplied the domestic market exclusively from the older of its two plants. The export market was supplied exclusively from its newer (and more efficient) plant. Thai Gypsum claimed an adjustment for the differences in cost of production between its two plants.

The investigating team considered that Thai Gypsum had made a choice to allocate the efficiencies of its newer plant to its export prices rather than to average its prices between the two plants.

No adjustment has therefore been made for differences in costs of production between the two plants.

Board of Investment Privilege

Thai Gypsum stated that it had been granted an exemption from corporate tax on that part of its taxable income earned on export sales, by the Thai Board of Investment. Thai Gypsum claimed that the existence of this tax exemption allows it to price its exports lower than its domestic sales, and that therefore an adjustment should be made to the normal value.

In the ef&c, the investigating team considered that as Thai Gypsum did not earn any taxable income during the period of investigation the tax exemption was extinguished. Thai Gypsum had also claimed that where a loss was made, there was an extended right to carry forward losses that will provide a benefit when it returns to profitability. In the ef&c the investigating team considered, however, that while there may have been a benefit in the future, that this was unlikely to have been reflected in the export price over the period of investigation.

Thai Gypsum advised the Ministry in its response to the ef&c that it has now returned to profit and will receive the benefit of BOI privilege earned on export sales during the POI. Thai Gypsum stated that this will be evidenced in its published quarterly results for the July to September period. As stated under section 1, the period of investigation for examining dumping is from 1 April 1999 to 31 March 2000. The investigating team does not accept that the benefit of BOI privilege would have been reflected in the export prices set during the period 1 April 1999 to 31 March 2000.

No adjustment has been made.

Normal Value Calculation

Normal values were calculated by deducting the adjustments above from base prices.

3.3   COMPARISON OF EXPORT PRICE AND NORMAL VALUE

Margins of Dumping

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

Siam Gypsum Industry Co Limited

There were ___ shipments, representing __ transactions, from SCT in the period 1 April 1999 to 31 March 2000. Of these transactions 100 percent were dumped with a weighted average dumping margin of 37 percent, with a range of margins from 28 percent to 47 percent, expressed as a percentage of the export price.

Thai Gypsum Products Company Limited

There were __ shipments, representing __ transactions, from Thai Gypsum in the period 1 April 1999 to 31 March 2000. Of these transactions 100 percent were dumped with a weighted average dumping margin of 55 percent, with a range of margins from 49 percent to 63 percent, expressed as a percentage of the export price.

Thai Gypsum did not co-operate with the last review and export prices and normal values were established on the basis of the best information available. Thai Gypsum has co-operated fully with the current investigation and as a result the export prices and normal values established for this investigation differ from those established at the last review.

Summary of Export Prices and Normal Values

The following table shows on a weighted average basis the FOB export price, total adjustments to the base export price and the export price; and the base normal value, total adjustments to the normal value and the normal value, for both Siam Gypsum and Thai Gypsum.

Table 3.1: Summary of Export Prices and Normal Values
(Baht/m2)
	Siam Gypsum	Thai Gypsum
Base FOB Export Price	CONFIDENTIAL	CONFIDENTIAL
Total Adjustments	CONFIDENTIAL	CONFIDENTIAL
Export Price	CONFIDENTIAL	CONFIDENTIAL
Base Normal Value	CONFIDENTIAL	CONFIDENTIAL
Total Adjustments	CONFIDENTIAL	CONFIDENTIAL
Normal Value	CONFIDENTIAL	CONFIDENTIAL

3.4   CONCLUSIONS RELATING TO DUMPING

The investigating team concludes that other standard plasterboard from Thailand is dumped.

4.   EVIDENCE OF 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 Secretary 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   INTRODUCTION

There have been three separate investigations carried out prior to the current investigation, into various types and sizes of plasterboard from Thailand. In addition, there have been two reviews of the continued need for anti-dumping duties and several reassessments of the levels of anti-dumping duty. Details of these cases are set out in section 1.1 above.

As noted above, certain standard plasterboard is currently subject to anti-dumping duty. Plasterboard of the type subject to anti-dumping duty is generally substitutable for the subject goods.

The assessment of injury needs to be considered in the context of the earlier cases referred to above, and the existence of anti-dumping duty in place on plasterboard which is closely related to the subject goods.

The application by Winstone was made on the basis of a threat of injury. Since the investigation was initiated, Winstone has claimed that it is now suffering actual injury. The investigation of injury reported below therefore examines the evidence of actual injury to Winstone. As noted in section 1.1 above, the Ministry will only consider evidence of a threat of injury in the absence of actual injury.

4.2   SETTLEMENT AGREEMENT

As noted in section 1.1 above, the New Zealand industry lodged an application for judicial review of the review and reassessment completed in February 1996. In August 1997 the Ministry entered into a Settlement Agreement which suspended the judicial review action.

While not legally required to do so, the Ministry considers it should have regard to the principles set out in the Settlement Agreement in this investigation. The Ministry does not, however, consider that the Settlement Agreement requires it, when investigating injury, to undertake anything additional to what it is required to do in terms of the Act.

4.3   IMPORT VOLUMES

Section 8(2)(a) of the Act provides that the Secretary 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.

Thailand is the major source of plasterboard imported into New Zealand. With the exception of the subject goods, all Thai imported standard plasterboard competing with the domestic industry’s 9.5mm plasterboard is subject to anti-dumping duty.

As noted in section 2.4 above, the investigating team considers the New Zealand market consists of sales by Winstone of 9.5mm board, imports of the subject goods and imports of board currently subject to anti-dumping duty (9.5mm and 10mm imports). Domestic industry sales are for the years ended June 1999 and June 2000. Import figures are for the years ended March 1999 and March 2000. The import figures for the year ended March 2000 were compiled on the same basis as the figures in Table 2.1 above. The import figures for the year ended March 1999 were taken from the last reassessment. Imports from countries other than Thailand are insignificant and have been excluded from the table.

The table shows an increase in the volume of imports of the subject goods relative to New Zealand production and consumption. This increase occurred from a zero base in the previous year and occurred in a period when the total market increased significantly.

Conclusion

Imports of the subject goods increased significantly in absolute terms but cannot be regarded as increasing significantly relative to production and consumption in New Zealand.

4.4   PRICE EFFECTS

Price Undercutting

Section 8(2)(b) of the Act provides that the Secretary 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.

Background

The measurement of price undercutting, and the translation of the extent of price undercutting into a remedy, was a major issue in the judicial review proceedings referred to above. In particular, the level of trade at which prices of the imported and domestic product should be compared, and the establishment of a non-injurious price (NIP) for the New Zealand industry against which import prices should be compared, were significant issues. Level of trade and the establishment of a non-injurious price are also specifically referred to in the Settlement Agreement.

During the judicial review proceedings, Winstone provided evidence on these matters from a number of experts. Winstone has made further submissions on this question during the last review and in this investigation. Submissions on price undercutting were also made by Sigma during the last review, and issues related to price undercutting were also discussed with Sigma at a verification visit during the current investigation. All of this evidence has been taken into account by the investigating team in its assessment of the extent of price undercutting, together with information from previous investigations, reassessments and reviews, and is referred to below where appropriate.

Level of Trade

Background

In order to assess the extent of any price undercutting, prices of the imported and domestically produced plasterboard must be compared at the same level of trade. It is essential that prices be compared at the same level of trade to ensure that the existence of any price undercutting, and its extent, is correctly assessed and that any remedy applied at less than the margin of dumping is calculated in such a way as to ensure that the prices of the dumped goods when imported do not undercut the New Zealand industry’s non-injurious price.

The normal practice of the Ministry is to compare prices at the level of trade at which the imported and domestic goods first compete on the New Zealand market, and in doing so to exclude distribution costs to ensure that differences in such costs do not confuse the impact of dumping.

In the 1996 review and reassessment, in establishing the amount of price undercutting, the Ministry compared prices at the ex-factory level for the New Zealand industry, and at the into store and ex-store level for the imported goods. However, in the calculation of the NIFOB, the level of trade for the imported goods was taken at the ex-store level, as this was considered to be the point at which the goods first compete in the New Zealand market.

In the subsequent judicial review proceedings expert evidence given on behalf of Winstone contested this approach as not being economically justified. Expert evidence given on behalf of Winstone noted that the use of an importer’s selling price was incorrect where the importer is also a retailer. The evidence given sought to highlight what was considered to be the absurdity of the Ministry’s approach by considering the case of one particular company, New Plymouth Building Supplies (NPBS), which both purchased plasterboard from Winstone and imported plasterboard from SCT. It was submitted that applying the Ministry’s level of trade approach to NPBS, results in comparing its purchase price ex-factory from Winstone, with its selling price for imported board, which it claimed would be an absurd approach. The expert evidence therefore submitted that the appropriate level of trade for the imported product to be compared with Winstone’s ex-factory price, is the price that Sigma receives from its customers, which was effectively an ex-wharf price (this evidence was given in relation to the situation which existed at the time of the 1997 reassessment, which is outlined in section 1.3 above).

During the last review, extensive submissions were made by both Winstone and Sigma concerning the correct level of trade. These submissions were considered by the Ministry in the context of the import arrangements that existed over the period of investigation used for the review (this being the period from September 1998 to September 1999). Over this period there were two groups of importers importing plasterboard from SCT under the umbrella of Sigma and Elephant Trading Ltd (ETL).

Sigma operated two import structures from September 1998 to September 1999. The first import structure operated from 1997 to August 1999, and the second from September 1999 to December 1999. Details of these import structures are outlined in section 1.2 above.

Importers operating under the umbrella of ETL ceased importing in August 1999. ETL, however, operated a system whereby it arranged imports from SCT for a group of South Island companies which were also shareholders in ETL. The companies involved in this arrangement sold to end-users and also usually sold other hardware and building products to end-users. Under this arrangement, the shareholder companies placed orders with ETL and ETL forwarded the orders on to SCT in its own name. SCT invoiced ETL on a FOB basis and ETL paid SCT. ETL arranged and paid for sea freight, port and Customs clearance and freight from wharf to store. ETL invoiced its shareholder companies on an FIS basis. The shareholder companies appeared in the Customs data as the importers.

CTS refused to co-operate with the last review. It was known, however, from the reassessment which preceded the last review that CTS was an importer direct from Thai Gypsum and sold to end-users.

In the last review, the review team concluded that for all importers the relevant level of trade at which to compare prices for price undercutting purposes was ex-factory for Winstone versus ex-wharf for the imported product. The review team noted Winstone had a rigorous set of requirements to be met for a company to be appointed a distributor and it therefore appeared more likely that a Winstone distributor would transfer its custom to imported board than it would be for an importer to establish a Winstone distributorship. The review team also noted that the possibility of distributors switching to imported board made Winstone’s pricing responsive to changes in the price of imported board at the ex-wharf level. The review team concluded that the price ex-wharf therefore appeared to reflect market forces and could consequently be considered the point at which the product competed on the New Zealand market.

In the last review the review team also noted that another relevant consideration was that many importers were both distributors and retailers. (The term "distributor" was used in the sense that the company on-sold to retailers. Winstone considers that the correct terminology for a company which on-sells to retailers, but does not obtain its board direct from a manufacturer, is a "reseller"). As retailers, the review team noted that importers were faced with the choice of importing (through either Sigma or ETL) or buying from Winstone. In facing this choice, the review team noted that the point at which the buying decision would be made was either at the ex-wharf versus ex-factory level, or at the into store price from both sources.

Submissions by Interested Parties

Submissions by Sigma

Sigma has advised that in order to make it clear that it is operating at what it considers to be the same level of trade as Winstone, it restructured the way in which it operates, with effect from 1 January 2000 (that is, in relation to orders placed with SCT from 1 January 2000). This restructuring has also affected the operation of Rikki Merchants Ltd (Rikki), a company which is owned by the owner of Sigma, that person also being the managing director of Sigma. Rikki has been operated in conjunction with Sigma for many years. Under the import structure that operated from 1997 to September 1999, Rikki was one of the importers operating under the umbrella of Sigma, and was _________ such importer. From October 1999 to December 1999, Rikki imported directly from SCT, under the arrangement that operated over that period. Under both of these import structures, Rikki sold to both retailers and _________

From 1 January 2000, Sigma became an importer selling only to companies (including Rikki) which on-sold to end-users, i.e. Sigma does not sell direct to end-users. In Sigma’s terminology, the companies it sells to under this arrangement are "distributors" (in Winstone’s terminology such companies are "resellers"). From 1 January Rikki ceased importing and purchased its board from Sigma and sold only to end-users. Sigma has provided evidence from its accountant that Sigma and Rikki are operated as independent companies. The accountant has advised that:

• __________________________________
  
• _________________________________

• _________________________

• _______________________________

• ________________________________

• _________________________________________

• ____________________________________

The accountant has also advised that "We understand there is no compensatory relationship between the two companies." Sigma has also provided evidence that the terms on which it sells to Rikki are the same as those on which it sells to its other customers. Sigma advised that __________________________________________________

Sigma advised, in response to the ef&c, that under the present import arrangement, it has the sole rights to manage the import process into New Zealand, i.e., it has the sole rights to decide who will be the importer, but does not have an arrangement which requires that it is the only importer. Sigma advised it does not have a _______________ with SCT to this effect. SCT has advised that "There is currently ________________________ however, there will follow shortly a _____________ of the ___________ that exists between SCT and Sigma which __________________" (At the time this report was prepared the ______________ had not been received). SCT, however, went on to state that ETL has ceased importing into the South Island and "Sigma currently has marketing and distribution rights throughout NZ for the Elephant Brand Plasterboard." SCT also confirmed during the verification visit that Sigma has sole rights to import into New Zealand. SCT also stated that if was to be approached directly by a large New Zealand buyer such as a Winstone distributor, it would refer that buyer to Sigma rather than dealing with them direct.

Sigma has submitted that any distributor wishing to purchase Elephant brand board must, because of Sigma’s rights to import this board, purchase the board from Sigma. Sigma has therefore submitted that the choice facing a distributor is that of purchasing ex-factory from Winstone or ex-store from Sigma.

Under the present arrangement, SCT sells to Sigma (________________________) at a price, for the board currently subject to anti-dumping duty, designed to be at or slightly above the threshold level for anti-dumping duty. Sigma claims that the current arrangement is designed not only to ensure it is at the same level of trade as Winstone, but also to ensure that it is selling to "distributors" at a price above what it estimates is Winstone’s non-injurious price (NIP). Sigma, however, notes that because the NIP has been kept confidential it has difficulty in establishing what the NIP in fact is.

In response to the ef&c Sigma has noted that whether Sigma sells ex-store (in Auckland) or ex-wharf (e.g. in Wellington) it serves the same distributor level function. Sigma therefore considers that it is selling at the equivalent of the ex-store level when selling ex-wharf. Sigma also stated that ________________________________________

Submissions by Winstone

Winstone has submitted that the point at which the imports first compete on the New Zealand market must first be identified. Winstone consider that this is achieved by reference to the sales of the domestic industry because it is injury to the domestic industry that is being examined. Winstone notes that (as stated in the final report on the last review) its selling price to distributors is clearly the first point at which its product enters the New Zealand market and this would be taken at the ex-factory level. Winstone states that "Thus distributors when they evaluate supply options are the entities who make the first competitive choice between domestic industry and import product."

Winstone submits that the question is then what is the first point at which imports can compete with Winstone’s sales. Winstone consider that point is when Sigma and CTS place orders with SCT or Thai Gypsum rather than Winstone, i.e. competition is occurring at the point at which Sigma and CTS purchase imported board. Winstone submits that "This occurs, at the latest, at the border as SCT and Thai Gypsum are not the importers. Hence, the first point of competition in the NZ market is at the wharf gate."

Winstone goes on to provide a number of examples to support its conclusion. These are summarised below.

• Distributors of Winstone plasterboard have the choice of purchasing from the domestic industry or of purchasing imported product. For example, given their sales volume, Carters would very likely be able to negotiate to purchase direct from a Thai manufacturer, "thus modifying the seemingly exclusive status of the incumbent ‘agents’ in New Zealand."

• A selection of Winstone distributors also re-sells plasterboard to resellers.

• CTS is another New Zealand distributor which operates a warehouse, and sells plasterboard to installers and also to a number of small resellers.

• In the previous decade CTS purchased all domestic industry product and still purchases some specialist plasterboard from Winstone. For some time, however, CTS has purchased 10mm board, and more recently, 10.5mm board, from Thailand. "In making this purchase decision they have the generic economic value choice between the cost of the imports (ex-wharf), or the cost of domestic product (ex-plant)."

• "The enmeshed Sigma/Rikki operation" make the majority of their sales to installers rather than to resellers. Like other distributors Sigma/Rikki operate a warehouse and carry out marketing and advertising. Like Carters or CTS they have a choice between buying imported product or goods from the domestic industry, and therefore the point of economic comparison is ex-factory versus ex-wharf. The changes made by Sigma/Rikki to have one entity as the importer and one as the retailer, are cosmetic in nature only. The Ministry must be cognisant of the fact that Sigma/Rikki frequently change their import structure, usually just as a reassessment commences and usually again once it is complete.

Winstone has also highlighted the fact that Rikki does not hold inventory and is therefore supplying its customers on an indent basis. Winstone advised that supplying on an indent basis means arranging for supply direct from a supplier to a customer without physically handling the goods.

In response to the ef&c Winstone made further submissions on level of trade and these are summarised below.

In considering whether sales from Sigma to Rikki were at arm’s length, Winstone said the Ministry has misdirected itself by applying the definition of arm’s length transactions in section 3(2) of the Act. That definition applies to the calculation of the export price purchased by the importer from the exporter under section 4 of the Act. The definition in section 3(2) of the Act is not directed to assessing material injury under section 8 of the Act and related level of trade questions which are essentially matters of fact and commercial reality. Winstone said the Ministry is not constrained in forming a correct view by the definition in section 3(2).

Winstone goes on to state that Rikki and Sigma are two private companies with identical ownership and overall management control:

• Sigma and Rikki operate from the same site. Rikki apparently no longer has the usual warehousing facilities that it would require to operate as a true retailer, as these facilities are provided by Sigma. Sigma is thus carrying out a crucial retail function in the sale to end-users.

• Rikki has an economic advantage over all other Sigma customers through being co-located with Sigma. Rikki does not incur any freight cost into store as there is no physical movement of the goods.

• Rikki does not have a completely separate sales staff. Sigma’s staff also work for Rikki’s benefit, and in relation to retail sales. Rikki recently terminated the employment of two key sales staff – hence Sigma is subsidising Rikki’s cost of sales and carrying out retail functions.

• Mr Kevin van Hest who owns and controls both Sigma and Rikki has the ability to target their marketing and sales. He can channel most of Sigma’s sales through Rikki. He can give Rikki preferred supply if he chooses. He can decide to take a low profit on a Sigma sale and a higher one on the later Rikki sale or vice versa. It does not matter in commercial terms where the owner of Sigma/Rikki notionally allocates costs or takes his profit on the sale of the dumped plasterboard.

• The price at which Sigma sells to resellers other than Rikki will be driven or influenced by the non-arm’s length price established for Rikki and not vice versa.

Winstone continues that it is all the more unreasonable for the Ministry to treat Rikki as a separate and unrelated entity having regard to the history and conduct of these importers (van Hest/Sigma/Rikki). There has been a history of numerous rearrangements of import structures (in form at least), invariably with effect of avoiding or minimising payment of anti-dumping duty and hence the effectiveness of the remedy.

Winstone said it is also inappropriate for the Ministry to disregard the fact that in the present investigation Sigma has:

(a) refused to give the Ministry any details of the trading arrangements during the period from April 1999 to December 1999; and

(b) based its new import structure on a verbally created (allegedly) sole right to import, which SCT/Sigma has now said they will put in writing and which is not said to be binding for any reliable period.

(The investigating team notes that information was not supplied by Sigma only for the period October to December 1999. Full information was provided by Sigma up to September 1999 during the last review and this included one month, being September 1999, under the consultancy ___ structure).

Winstone said even if it were appropriate to consider whether transactions between Sigma and Rikki are at arm’s length in terms of section 3(2) of the Act, the Ministry cannot properly conclude that such sales are at arm’s length. Sections 3(2) and 3(4) of the Act provide:

(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 Secretary, 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.

(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).

Winstone argues sales from Sigma to Rikki are not arm’s length because they would be caught under both paragraph (b) and (c) of section 3(2). Both of these paragraphs incorporate the concept of "related persons", which is defined in section 3(4) of the Act. Sigma and Rikki are related persons in that both of them are controlled by Mr van Hest (section 3(4)(b)). Also it is clear that each of Sigma and Rikki are related to Mr van Hest in that he directly or indirectly controls each one of them (section 3(4)(a)).

Winstone said under section 3(2)(b) sales are not arm’s length if the price is influenced by a relationship between the buyer, or a related person, and the seller, or a related person. The Ministry has concluded [in the ef&c] that the relationship has not influenced the price because Sigma has provided evidence to show that the terms and conditions on which it sells to Rikki are the same as those which apply to its other customers. This conclusion does not follow from the facts of the close relationship between Sigma and Rikki, as set out above. The fact that Sigma sells to Rikki on the same terms as to its other customers does not indicate that the relationship has not influenced the Sigma/Rikki price; it just indicates that the relationship has influenced all those prices.

Winstone said in addition, in terms of section 3(2)(c) of the Act, Mr van Hest, a party related to Rikki, will receive a benefit as the owner of Sigma from the profit component of the price which Rikki pays to Sigma on the purchase. Similarly, in terms of section 3(2)(c) Rikki will receive a benefit for that part of the cost of Rikki’s operation which is subsidised by Sigma.

Winstone said if Sigma were a true importer in the sense that it was not intertwined with a related retail operation, i.e., if Rikki ceased to operate, and if Sigma had sole rights to buy the board and sold only to independent retailers, then the approach would be to treat the importer as being at the same level of trade as Winstone (i.e. competing with Winstone for sales to the retailer/distributor level).

Ministry’s Consideration of the Issues

As stated in the final report on the last review, and again referred to above by Winstone, the investigating team considers that in the case of the New Zealand industry, its selling price to its distributors is clearly the point of entry at which its product first enters the New Zealand market. This price is taken at the ex-factory level. The relevant level of trade for the importers has therefore been considered in relation to the point at which the imported product first competes with Winstone’s ex-factory price in the New Zealand market.

The investigating team has considered issues relating to level of trade separately for CTS and Sigma because it considers there are distinct issues that need to be addressed for each importer.

CTS Quality Building Supplies Ltd

As noted in section 1.2 above, CTS refused to co-operate with the investigation. The investigating team therefore based its level of trade considerations for CTS on the basis of the facts available.

CTS was an importer of plasterboard of the type currently subject to anti-dumping duty over the period of investigation for the last review. CTS, however, also refused to co-operate with the review, and no response was received from Thai Gypsum during the review. There is therefore little information available from that review.

Thai Gypsum has, however, provided a response to the Ministry’s questionnaire for this investigation. Thai Gypsum has advised that it supplies direct to CTS, that CTS is its only customer in New Zealand but has noted that it has no exclusive distribution/sole supply contracts in any of the countries it exports to. Thai Gypsum provided a chart showing that CTS sells to retailers, subcontractors, builders and original equipment manufacturers. Thai Gypsum also advised that "CTS undertakes all marketing and distribution expense for Thai Gypsum products in New Zealand."

During verification visits to Winstone and Sigma, the investigating team asked those companies what information they had concerning CTS’s import and distribution structure. Both companies advised that CTS sells to end-users and to resellers, and uses some of the imported product in the manufacture of ceiling tiles.

The information available indicates that CTS has not changed its operation since the period covered by the last review to the end of the POI in March 2000, except that it has changed from importing 10mm board (which is currently subject to duty) to importing 10.5mm board, which is covered by this investigation. The last review found that the relevant level of trade for CTS was at the ex-wharf level. The investigating team has not received any information during this investigation that suggests the relevant level of trade for CTS has changed since the last review. In particular the investigating team notes that CTS sells to both end-users and resellers. As an importer and a seller to end-users, CTS is faced with an economic choice of buying from either the domestic industry ex-factory or from Thai Gypsum and bearing the import costs to the ex-wharf level. The investigating team also notes that CTS does not have exclusive imports rights from Thai Gypsum, so Winstone distributors potentially have the option to purchase direct from Thai Gypsum.

The investigating team therefore concludes that the relevant level of trade for CTS is at the ex-wharf level.

Sigma Agencies Ltd

The import structure operated by Sigma from October 1999 to December 1999 was fully considered during the last review. The last review concluded that the relevant level of trade for imports under that structure was at the ex-wharf level for imports versus ex-factory for the domestic product. The investigating team has seen no evidence to change the conclusion reached by the last review and therefore concludes that this remains the relevant level of trade for that period.

The import and distribution structure now operated by Sigma is like that more normally encountered by the Ministry in an investigation. That is, there is an importer who on-sells to other companies, who sell to end-users. In that more normal situation, the Ministry has usually taken the relevant level of trade for the imported goods to be at the ex-importers’ store level versus the ex-factory level for the domestic product. The Ministry has usually considered this to be the relevant level of trade because that is the point at which the goods first compete on the New Zealand market, i.e., the first potential buyer in the New Zealand market place is faced with the choice of purchasing the goods from either the importer or the New Zealand industry.

The investigating team has considered whether the present import and distribution structure operated by Sigma differs, if at all, from the more normal situation referred to in the paragraph above, as a guide to determining the level of trade for the imported goods. The investigating team considers the areas that need to be fully examined are the close relationship between Sigma and Rikki, and the possibility of distributors being able to source directly from SCT rather than from Sigma. These areas are considered below.

The investigating team notes that while Rikki is ____________________ Sigma, it is not the only customer and that approximately __ percent of Sigma’s sales are to other customers. The concerns raised by Winstone about the "enmeshed" nature of what Winstone refers to as the "Sigma/Rikki" operation do not therefore apply to these sales. The investigating team notes, however, that ____________ Sigma’s sales are made to Rikki and that in determining level of trade for Winstone more weight needs to be given to the structure through which the _________ of Sigma’s sales are made.

The Managing Director of Sigma owns both Sigma and Rikki and is also a director of both companies, and both companies operate from the same premises. At the same time, Sigma has provided evidence from its accountant that Sigma and Rikki are operated as separate entities, _______________________________________________ Sigma has also provided evidence that the terms on which it sells to Rikki are the same as those on which it sells to its other customers.

Sigma has stated that Rikki ____________________________________ It is unclear, however, whether this involves __________________________________________________________________________ Other customers of Sigma were also supplied on a delivered to building site basis as well as on a delivered into store basis. The investigating team notes that Winstone also supplies on a delivered to building site basis, i.e. for sales on this basis, the Winstone distributor does not physically handle the goods.

It is clear that Sigma and Rikki are closely associated through having the same owner and director, operating from the same premises, and through ___________________________________________ The investigating team considers it entirely legitimate that the owner of Sigma and Rikki wishes to remain in the business of retailing plasterboard through Rikki. The investigating team is of the view that ownership of a retail business should not of itself automatically and forever preclude Sigma being at the same level of trade as Winstone.

The economic advantage that Winstone has submitted is held by Rikki over all other Sigma customers through not holding stock and not incurring in wards freight costs in the view of the investigating team are a natural result of the way in which Sigma and Rikki have structured their import and distribution system. The investigating team considers that the existence of an economic advantage to Rikki does not of itself mean that sales from Sigma to Rikki are not at arm’s length.

It is difficult to assess Winstone’s claim that Rikki does not have completely separate sales staff. Winstone has not explained the basis on which this assertion was made. It is also unclear to what extent (if at all) Winstone’s claim that the termination of two of Rikki’s sales staff means that staff from Sigma are now assisting with sales by Rikki.

It is unclear what Winstone is claiming when it asserts that Mr van Hest has the ability to "target" both Sigma and Rikki’s marketing and sales. It is also unclear why giving Rikki preferred supply (of which there is no evidence) would mean that the transactions were not arm’s length. There is also no evidence that Mr van Hest has decided to take a low profit margin on a Sigma sale and a higher one on the later Rikki sale, or vice versa, the terms and conditions of sales to Rikki being the same as those to other customers.

The investigating team cannot accept Winstone’s assertion that the price at which Sigma sells to resellers other than Rikki will be driven by or influenced by the price established for sales to Rikki. Sales to customers other than Rikki constitute approximately __ percent of all Sigma’s sales and are therefore a significant proportion of total sales. To assert that Sigma would deliberately reduce or inflate its prices to its other customers would be to deny the operation of the market in setting prices.

While it could be argued that a greater separation could have been achieved through Rikki operating from separate premises and ___________________________ the investigating team considers that by operating the companies separately as noted above, reasonable steps have been taken to operate these companies as separate entities.

In considering the application of section 3(2) of the Act to sales by Sigma to Rikki, the investigating team notes that it states "For the purposes of this Act" (emphasis added) indicating that it applies to all of the Act, not only to the calculation of export prices under section 4 of the Act. The investigating team also notes that footnote 11 to Article 4.1 of the Anti-Dumping Agreement contains a definition of when the domestic industry is deemed to be related to exporters or importers, i.e., the definition in footnote 11 is not given in the context of whether exporters are related to importers for the purpose of establishing an export price. The definition in footnote 11 is reflected in section 3(4) of the Act, indicating that this section and the related section 3(2) have a general application to all of the Act.

The investigating team therefore considers that in determining whether sales from Sigma to Rikki are at arm’s length, it should apply the definition in section 3(2), taking into account the provisions concerning related persons in section 3(4).

Section 3(2) and 3(4) of the Act are quoted above under submissions by Winstone. Each of the criteria in section 3(2) for determining if sales are not at arm’s length are considered below.

Sigma has stated that there is no form of compensation or transfer between Sigma and Rikki other than the transaction price. The investigating team has not been provided with any evidence to show there is any consideration other than the price of the goods.

The investigating team agrees with Winstone’s submission that Sigma and Rikki are related in terms of section 3(4) of the Act. Sigma has provided evidence to show that the terms and conditions on which it sells to Rikki are the same as those which apply to its other customers. As already noted above, the investigating team does not accept that the price at which Sigma sells to resellers other than Rikki will be driven by or influenced by the price established for sales to Rikki. The relationship between Sigma and Rikki has, therefore, not influenced the price.

Winstone has claimed that the profit earned by Sigma on its sales to Rikki constitutes a benefit in terms of section 3(2)(c). Having concluded, in terms of section 3(2)(b) that the price from Sigma to Rikki is not influenced by the relationship between the two companies, it would be unreasonable to accept that the profit arising from that sale would constitute a "benefit" in terms of section 3(2)(c). To accept this argument would make it impossible for any transaction between two related parties to be considered an arm’s length transaction.

Winstone has also claimed that Rikki will directly or indirectly be reimbursed, be compensated or otherwise receive a benefit, in terms of section 3(2)(c), because part of its operation is subsidised by Sigma. The investigating team does not consider that any convincing evidence has been provided that Rikki is being "subsidised" by Sigma. Even if this were the case, there is no evidence that any such subsidy is related to the price paid by Rikki. If Rikki were receiving such a benefit that allowed it to undercut other customers of Sigma, then that should be evident in the marketplace.

On the basis of the above considerations, the investigating team concludes that the sales from Sigma to Rikki are arm’s length transactions in terms of section 3(2) of the Act.

The investigating team has no reason to accept Winstone’s claim that existing sole rights to manage imports held by Sigma would be overridden by SCT if a large Winstone distributor sought to buy directly from SCT. SCT has stated that Sigma has the sole rights to import and that if it was approached direct by a large Winstone distributor, it would not deal with such a company directly but would refer them to Sigma. Weight must be given to the known fact that Sigma has sole import rights. Large Winstone distributors have had over ten years to seek to import directly from SCT but have not done so. On the basis of the information available, if a Winstone distributor wishes to purchase imported product from SCT, then it must do so through Sigma.

The investigating team considers that the distinction that Winstone has drawn between a distributor and a reseller, is artificial when their function in the New Zealand market is considered. Both a distributor and a reseller (in Winstone’s parlance) supply board to end-users in the New Zealand market. It is true that some Winstone distributors also supply to "resellers", but this is a relatively minor proportion of sales. As noted above in connection with Sigma’s relationship with its customers, more weight should be given to the structure through which the greater part of Winstone’s sales are made. Sales by Winstone distributors to resellers appear to arise because either the "reseller" has been unable to meet the Winstone criteria to be appointed a distributor, or because its sales volume is not great enough to warrant seeking a distributorship. This does not, however, detract from a reseller’s function of supplying to end-users.

The investigating team has also considered Winstone’s submissions that account should be taken of the frequent changes to Sigma’s import and distribution structure, usually just before a reassessment. The importing structures operated by Sigma are outlined in section 1.2 above. From 1994 to 1997, the same structure was in place and that structure was in place during and well after the 1996 review and reassessment. A different structure operated from 1997 to September 1999, and was the structure in place over the reassessment carried out over the same period. In response to the reassessment completed in September 1999, Sigma changed its structure for a brief period from October to December 1999, that covered part of the period over which a review was undertaken (this review was completed in March 2000). A further change in structure was adopted from January 2000 and is still in place. The investigating team considers that the changes to Sigma’s import structure have not in fact been that frequent and have not been undertaken just prior to reassessments. In any event, the Ministry must apply the provisions of the Act to whatever import structure is in place in the period of investigation.

The investigating team considers that the approach that should be taken concerning Sigma’s changes in import structure is to consider the known import structure (the one operating since January 2000), rather than speculating on how long the current structure might last for, and to what it might change to.

Based on the foregoing considerations, the investigating team concludes that the major economic choice facing a potential buyer at the first point of entry of the goods into the New Zealand market, are those of purchasing from Winstone or purchasing from Sigma. The relevant level of trade is therefore ex-factory for the domestic product versus ex-store for the imported product.

Conclusion on Level of Trade

The investigating team concludes that the relevant level of trade at which prices should be compared for price undercutting purposes is:

(a) For imports by CTS, at the ex-wharf level versus ex-factory for the domestic product.

(b) For imports by Sigma from October to December 1999, at the ex-wharf level versus ex-factory for the domestic product.

(c) For imports by Sigma from January 2000 to the present, at the ex-store level versus ex-factory for the domestic product.

Non-Injurious Price

Background

In carrying out a comparison of prices to establish the extent of any price undercutting, it is necessary to establish the unsuppressed price at which the New Zealand industry can sell its product. Such a New Zealand industry selling price is the non-injurious price (NIP). Establishing the level of the NIP is significant because any remedy at less than the margin of dumping would be set at a level designed to ensure that the imported product does not undercut the New Zealand industry’s NIP.

In the 1996 review and reassessment, the Ministry calculated the NIP on the basis of the pre-dumping level of profitability (in 1988), adjusted for inflation and with allowance made for efficiency gains and one-off costs. This method of calculating the NIP was the subject of extensive expert evidence provided on behalf of both Winstone and the Ministry during the judicial review proceedings. The expert evidence provided on behalf of both Winstone and the Ministry was to the effect that the approach adopted by the Ministry in the 1996 review and reassessment could not be justified on economic grounds. This was primarily because of the length of time that had elapsed since 1988 and the extensive changes that had taken place in the New Zealand economy since then, and the existence of other competitive pressures that constrained the extent to which Winstone could increase its prices. In a report prepared in 1995 for Winstone by Mr Anthony Frankham, an independent financial expert (also largely reiterated in affidavits given during the judicial review proceedings), it was argued that Winstone’s price will only be constrained by:

• price thresholds which would be established by imported goods offered at non-dumped prices.
• excessive profit margins conducive to the investment of capital so as to establish local competition, notwithstanding capital investment barriers to entry which may exist.
• broad economic guidelines derived from annual inflationary increases generally acceptable in the community.

At the time of the 1996 review and reassessment, Winstone had argued that its NIP should be calculated using an "import parity approach". The basis of this approach is that prices of undumped imports will set a price limit for Winstone, i.e., that set out in the first bullet point in the paragraph above.

The principles to be followed in calculating the NIP are also referred to in the Settlement Agreement. The Settlement Agreement does not refer to a specific method for establishing the NIP, only that in calculating the NIP, the Ministry must have regard to the position the industry would be in "but for" the dumping. However, the Settlement Agreement does record the Ministry’s agreement that the "1988 benchmark" approach used in the 1996 review and reassessment did not correctly calculate a non-injurious price for Winstone and that in future reassessments the Ministry would have regard to the position the industry would or would likely be in but for the dumping.

During the last review, further extensive submissions were made by Winstone and Sigma on the approach that should be adopted in establishing a NIP. These submissions were fully considered during the last review and were summarised in the final report on the review. The last review essentially agreed with the submissions made by Winstone that the NIP should be based on a "but for" approach using an import parity price to establish the actual amount of the NIP. An import parity approach bases the NIP on the lowest priced undumped board available or potentially available in the New Zealand market. The last review found that lowest priced undumped board was that from Thailand.

Winstone increased its prices in November 1999 following the increase in the anti-dumping duty as a result of the reassessment completed in September 1999. The last review found that these prices were those Winstone could achieve in the absence of dumped imports, the anti-dumping duty now being at the full margin of dumping. The November 1999 prices were therefore taken as the NIP after the deduction of certain discounts. The last review also made an adjustment to the importer’s ex-wharf costs, in order to ensure a fair comparison with Winstone’s NIP, for differences in cost of credit incurred by Winstone and the importers, and for damage to the imported board.

The investigating team has seen no additional evidence since the last review that has caused it to re-consider the approach to setting the NIP. For this investigation the NIP has therefore been established on an import parity basis.

Submissions by Interested Parties

Winstone Wallboards Ltd

Winstone has submitted that normal values in Thailand have increased significantly since the period covered by the last review, and therefore there has been a corresponding increase in the import parity or undumped price from Thailand and as a result an increase in its NIP. At the same time Winstone has submitted that because of the presence of dumped 10.5mm board in the market, it has been unable to increase its net prices to the extent of the NIP established at the last review.

Following the release of the ef&c Winstone made a further submission on establishing the NIP and this is summarised below.

If a lesser duty were required, then the Ministry, having calculated the NIP, should only deduct from the NIP those costs which are incurred from ex-wharf in Bangkok to on wharf in New Zealand in order to set the remedy at an FOB level (i.e. a NIFOB).

A lesser duty is only reasonable if it is sufficient to prevent the material injury being suffered by a domestic industry. To do that it must be effective against the lowest cost method of import sales because that is potentially the lowest price and hence most injurious method of import trading. In the plasterboard industry, because of high handling costs, that method is sales on indent. It would be wrong to calculate a remedy which made an allowance for costs into importer’s store and warehousing costs where the importer can (and does) also sell on indent without incurring these costs. A remedy so calculated would allow him to sell at a price lower than the non-injurious price.

To ensure that the NIP reflects current costs of importing board, in calculating the NIP, the normal value should be converted into New Zealand dollars at the most recent exchange rate available.

Sigma Agencies Ltd

Following the release of the ef&c Sigma made an extensive submission on establishing the NIP and this is summarised below.

Sigma has stated that "our numerous objections to IPP [import parity price] methodology have been stated frequently so we will not re-state them here". Sigma has also noted its submission assumes that the Ministry is wedded to the concept of the import parity price to establish a NIP.

Potential Imports from Australia

Sigma has referred to a statement in the ef&c that "An import parity approach bases the NIP on the lowest priced undumped board available or potentially available in the New Zealand market". This means the IPP represents the lowest price irrespective of the level of trade at which that importer actually competes with the New Zealand industry.

Sigma believes the Ministry has correctly identified that undumped board potentially available in the New Zealand market is to be taken into account. This is similar to the argument accepted by the Commerce Commission when considering merger/acquisition requests that would substantially increase market dominance where potential competition is considered. The Commerce Commission Business Acquisitions Guidelines 1996 state:

• At 5: "The Commission accepts that potential competition can act as a constraint on business activity".

• At 5.1 to 5.5 they set out the factors involved in that assessment of potential constraint, namely: likelihood of entry (theoretical possibility is insufficient, it must be likely in commercial terms); extent of entry (must be at a level and spread of sales as to likely cause the New Zealand supplier to react); timeliness of entry (within two years as a rule of thumb); sustainability of entry (must be lasting economic incentive); barriers to entry (what barriers are there? E.g. costs, regulatory barriers, brand loyalty to the incumbent, technology, distribution, incumbent response, access to essential facilities).

Sigma said the joint statement by the Australian Trade Practices Commission and New Zealand Commerce Commission, as to establishing contraventions of the respective market dominance laws, requires as step 5: "Identify the conditions of entry relevant to the market and whether barriers to entry exist which would hinder potential competitors from entering the market . . ."

Sigma contends the enquiry as to that potential needs to go well beyond simply looking at the history of actual importations to date. It is not a "threat of injury" threshold in the sense used in the Act, so the Ministry cannot use the "container ship on the horizon" test applied in threat of injury cases.

Sigma argues that in essence Frankham [an independent expert engaged by Winstone] has applied the Commerce Commission’s "potential competition can act as a constraint" proposition and applied it to dumping legislation. Accordingly, in applying the IPP methodology the Ministry must buy into the precise way in which the Commerce Commission would assess that "potential Competition".

Sigma considers the Ministry must therefore put itself in Winstone’s shoes and ask how can it price before it runs the risk that somebody imports. Winstone would not ignore that potential constraint and would not put significant price rises into the market right up to the point of seeing a container ship on the horizon.

Sigma claims that this potential factor impacts on the NIP in two ways, in relation to plasterboard:

(a) it means the Ministry must recognise the potential for further imports from Australia; and

(b) it means the Ministry must recognise the potential at all times for importations (from Thailand or Australia) at a New Zealand wharf gate cost, irrespective of level of trade.

Sigma said the standard sized board in Australia is 10mm. This board can be landed in New Zealand at a wharf gate price ___________________________________

Sigma notes that the Final Report on the last review concluded that board from Australia could not be taken into account in establishing a NIP because:

• There were no actual imports from Australia at the time even though there had been importations by CSR in 1998.

• The Australian industry did not then have spare capacity.

• Australian producers did not have an existing distribution network in New Zealand.

Sigma said the Australian industry now has the capacity to export, because of the slump in their domestic building market. (Sigma provided a report from the 22 August 2000 Australian Financial Review which substantiates this point).

Sigma claim the fact that CSR exported board to New Zealand in 1998, showed that it was serious. Sigma is aware that following that exportation, __ ______________________________________________ In the Final Report on the last review it was noted that Winstone attributed the lack of exports from Australia since then to the likelihood of Winstone exporting to Australia. Given the lower price of plasterboard at all levels of trade in Australia, Sigma claim it is difficult to see how Winstone could be a threat there unless it sold at well below its New Zealand price structure.

Sigma has stated "There must be more than a "sniff" of an arrangement as between Winstone and CSR arising out of that abortive exportation in 1998. If so, Winstone’s argument that it does not face Australian competition is tantamount to saying that it should be able to take advantage of a contravention of Trans Tasman trade practices laws, to maintain its prices in the NZ market, and that "but for the dumping" it cannot take advantage of that illegal act. MED ought not accept such an argument for dismissing the potential for Australian manufacturer competition as a constraint on Winstone’s NIP".

Sigma claim that even if there is not a form of arrangement between Winstone and the Australian producers, there is nothing to stop a customer of the New Zealand industry requesting supply from an Australian distributor for export to New Zealand. Sigma considers that if the Australian producer were to attempt to interfere with that transaction, it would contravene Australian trade practices law.

Sigma said of the three Australian producers __________________________________________ Sigma claim that ________________________________________________________________________________________ (Sigma provided details of a cost build up to an ex-wharf cost of NZ$____ per square metre).

Sigma argue that Australian exporters would not need to establish a distribution system in New Zealand to have a constraining effect on Winstone’s NIP. Sigma said that neither of the importers of Thai board has the kind of distribution network that Winstone has but still manage to sell board. Sigma gives the example that if a large construction company in New Zealand imported board from Australia for use in its construction programmes, it would be importing at the wharf gate. Sigma note that Winstone has claimed that a small amount of dumped 10.5mm board has prevented it from raising its prices to the NIP and therefore consider that a similar quantity of Australian board would have the same constraining effect on its prices.

Sigma said Australia is one of New Zealand’s largest trading partners, is close by and is a familiar source of supply for New Zealand customers. Sigma notes that a significant number of downstream customers of the New Zealand industry are also downstream customers of the Australian industry. Sigma claim that Australia is such an obvious source of "potential" constraint on Winstone’s NIP that the Ministry must investigate that potential and not dismiss it unless it can produce evidence.

Establishing NIP at Wharf Gate

Sigma claims that its overheads ___________ from wharf gate to ex-store are not relevant in calculating the NIP, their relevance is in calculating a non-injurious price free on board (NIFOB) price for SCT/Sigma. Sigma said the following illustrate why it is incorrect to add Sigma’s overheads ___________ ________ to the NIP when deciding which __________________________________________

(a) The NIP is the lowest undumped price restraining Winstone, and as there always exists the potential for an importer trading at the wharf gate, that wharf gate cost must always be the NIP.

(b) Because "traditional" importers like Sigma are incurring local overheads ____________ which "non-traditional" importers are not incurring, then to the extent of those costs _____________ Sigma is unable to undercut and therefore unable to injure Winstone. Sigma’s overheads _________ from ex-wharf to ex-store, therefore, _________________________________________________ in order to arrive at the NIFOB for SCT/Sigma.

(c) If Sigma’s overheads __________ are added to calculate the NIP, and then deducted again to calculate a NIFOB, you are engaged in a pointless exercise of deducting off precisely the same elements that have just been added on to calculate a NIP.

(d) Sigma’s overhead _________ per square metre ____________________________________ If overhead _________ per square metre are added to the NIP, then _____________________________________________________________ the NIP keeps increasing, because as ___________________________________   Consequently, the per square metre overhead __________________ which in turn increases the NIP. The reverse also applies, _________ ___________________________________________________________

(e) If the Ministry adopted this approach, and CTS altered its method of trading __________________________________________________________

Sigma argues that to avoid the problems outlined above, the NIP must always represent an ex-wharf cost. Sigma considers this recognises the reality that "traditional" manufacturers (like Winstone) and "traditional" importers (like Sigma) are always under threat of competition by non-traditional importers like CTS or a potential importer such as a downstream customer of the New Zealand industry importing direct. In Sigma’s view this must always be the case in New Zealand where for the imported product there are no technical or legal barriers to entry. Sigma claims there is always a realistic prospect of imports at the ex-wharf level, regardless of Sigma’s or Winstone’s preferred method of distribution.

Sigma said it is highly significant that CTS does not have exclusive rights to Thai Gypsum product in New Zealand. Thai Gypsum would sell at an ex-wharf price to any potential customer irrespective of the level of trade. This clearly means that Thai Gypsum could potentially sell at a wharf gate price at $4.07 undumped.

Impact of Settlement Agreement

Sigma claims the Settlement Agreement does not require the addition of a "traditional" importer like Sigma’s local margin and overheads to be part of the cost build up to the NIP. Sigma consider the Settlement Agreement, correctly interpreted, means that a "traditional" importer should have its internal freight and profit margin and costs deducted from the NIP, to calculate its NIFOB. Sigma therefore consider this must logically include sales and distribution costs incurred by a traditional importer.

Exchange Rates

Sigma said the conversion of the normal value from which the NIP is calculated from baht to ____________________ should use the most recent exchange rate available. (The ef&c used the exchange rate at the date the normal value was established). That is because an import parity price based NIP is by definition a foreign currency price. In practical terms Sigma said the normal value in baht has not likely altered since the end of March, but the exchange rate has changed. Sigma therefore argue that those costs used in the cost build up to the NIP denoted in US dollars, particularly sea freight, should also be converted into New Zealand dollars at the latest exchange rate, rather than the rate applying at the time the shipments were made.

Ministry’s Consideration of the Issues

Potential Imports from Australia

The investigating team agrees, as stated earlier in this report, that in establishing a NIP on an import parity basis, consideration must also be given to the price of board potentially available in the New Zealand market. It is reasonable to assume that the most likely source of board available in the New Zealand market, for the reasons stated in Sigma’s submission, is Australia.

The investigating team considers that the Commerce Commission guidelines used to assess the constraint from potential competition generally provide a reasonable basis on which to consider the likelihood of board from Australia entering the market, except as regards the timeliness of entry. At the same time, in establishing a NIP for use in determining whether a lesser duty should be imposed, it is unreasonable to consider the likelihood of entry into the market within two years. An anti-dumping duty is designed to provide a more immediate remedy from dumped imports.

The investigating team has considered, therefore, the potential for import competition from Australia using the Commerce Commission guidelines, except that the timeliness of entry is considered on a more near term basis. Sigma has provided evidence to show that there is sufficient spare capacity in Australia for that industry to export significant quantities of board to New Zealand. In the last review, based on the actual invoiced prices of the 1998 imports, the Ministry estimated that Australian board could be landed at wharf gate in New Zealand for NZ$___ per square metre. At the time of the last review, Sigma estimated that prices had increased by __ percent since those 1998 shipments. Those prices indicate that Australian board would be competitive in the New Zealand market indicating that lack of competitiveness is not a constraint.

There are no regulatory barriers to entry, and there is no import duty (and there can be no anti-dumping duty if origin requirements are met) on imports of plasterboard from Australia. While there may be some brand loyalty, plasterboard is largely a commodity product where price is likely to play a large part in purchasing choices. Winstone would be able to offer quicker delivery and may be able to offer better product support and a wider range of product in the New Zealand market, but as imports from Thailand have demonstrated, these factors would not necessarily stop imports gaining some significant market share.

The lack of an existing distribution system may provide some limitation on the penetration of Australian board in the New Zealand market. The investigating team considers reasonable Sigma’s argument that an Australian exporter would not need to establish a distribution network to have constraining effect on Winstone’s NIP.

Winstone’s average selling price in the year ended June 1988, when board was imported from Australia, was $____ per square metre. In the year ended June 2000, the price had risen to $____ per square metre. Over the same period Winstone’s cost of sales declined from $____ to $____ per square metre, resulting ____________ rise in profitability, the EBIT per square metre rising from $____ to $____ During this investigation, Winstone consider its NIP (based on undumped prices from Thailand) has risen to such an extent, it has requested that the Ministry __________________
_____________ Winstone envisage __________ would introduce a duty such that Winstone could achieve a price of $____ per square metre. _____________________________________________ would allow Winstone to achieve a price of $____ per square metre.

The increase in prices on the New Zealand market, and _________________________ in profitability of selling plasterboard on the New Zealand market since board was last imported from Australia has not resulted in any further imports from Australia. Winstone has proposed that anti-dumping duty be increased such as ____________________________________ In proposing ___________________ in its prices, Winstone is clearly not deterred by the prospect of import competition from Australia. The lack of any actual imports from Australia and the __________________________ by Winstone strongly indicate that there is not any realistic prospect that there will be imports from Australia.

While there are economic reasons why imports could be expected from Australia, the lack of any actual imports and Winstone’s actual pricing on the New Zealand market and its _______________________ clearly indicate that imports from Australia are not likely in the near term. The investigating team therefore concludes that potential imports from Australia cannot be taken into account in establishing a NIP.

Establishing NIP at Wharf Gate

Both Winstone and Sigma have submitted that the NIP should be established at the wharf gate (ex-wharf) level. The basis for Winstone’s submission is that "Sigma/Rikki" compete with Winstone at the ex-wharf level, and therefore any remedy should be calculated (if a lesser duty is to apply) taking account of only those costs to the ex-wharf point.

Sigma’s submission is based on the premise that ex-wharf is appropriate because there is always the potential for ex-wharf competition, but the remedy for Sigma, because it is trading at the ex-store level should be calculated taking account of costs _________ to the ex-store level.

The potential for an importer to trade at the ex-wharf level is similar to the argument concerning the potential for imports from Australia. The investigating team accepts, as noted above, that the concept of potential imports is relevant when considering an import parity price. The argument in this case appears to relate to the potential for importers, in addition to CTS, to import from Thai Gypsum at the ex-wharf level. Sigma has emphasised this point as CTS does not have exclusive rights to import Thai Gypsum board.

It is the view of the investigating team that the Commerce Commission guidelines should be used in the same way as they were applied to consideration of the potential for imports from Australia when considering the potential for ex-wharf imports from Thai Gypsum. The investigating team considers that there is sufficient spare capacity in Thailand to significantly increase the volumes of exports to New Zealand (see threat of injury section below). If a duty was to be put in place on the basis of importers competing at the ex-store level with Winstone, in the absence of CTS from the market, then there would be a clear price incentive for a potential importer to import and compete at the ex-wharf level at undumped prices (see price undercutting analysis below).

There are no regulatory barriers to entry of the board from Thailand. As noted in respect of potential Australian imports, plasterboard is a commodity product where price is likely to play a large part in purchasing choices. The existing imports from Thailand have demonstrated that a distribution network is not needed to have a significant constraining effect on Winstone’s prices.

Given the open access and no significant requirement to establish a distribution network, and therefore the relatively low cost of setting up to import, it is likely that plasterboard could potentially be imported from Thai Gypsum by other importers in the near term.

The investigating team concludes that there is potential for import competition at the ex-wharf level. In establishing a NIP the investigating team therefore considers that potential undumped imports from Thai Gypsum competing at the ex-wharf level, should be taken into account. As there is currently an importer, CTS, competing at the ex-wharf level, the NIP taking into account potential imports, should be based the ex-wharf cost of imports by CTS.

Sigma has claimed that it is a pointless exercise to calculate a NIP by adding its overheads (after ex-wharf) __________ and to then deduct the same costs ______________ from the NIP to calculate a NIFOB. On the assumption that Sigma is the only importer, the investigating team has calculated a NIP for Sigma at the ex-store level, and then calculated a NIFOB by deducting Sigma’s costs after FOB to ex-store. The resulting NIFOB is exactly the same as calculating a threshold price based on the full margin of dumping. In other words under this scenario, using the undumped price to establish a NIP, it is not possible to have a lesser duty. Calculating a NIFOB based on an ex-store level of trade from a NIP based on an ex-wharf level, would allow an effective lesser duty to be imposed.

The investigating team agrees with Sigma’s submission that its per square metre overhead costs will vary __________ given that most of these costs are of a fixed nature. A NIP calculated on an ex-store basis will therefore vary in accordance with the ____________________ The investigating team does not consider, however, that on its own, this means that a NIP cannot be established on an ex-store basis.

It is also clear that if Sigma became the only importer or CTS changed its operation so it was competing with Winstone at the ex-store level (as it claims to have done from April 2000), then there would be large increase in the NIP, if the NIP was to be built up to an ex-store level.

Based on the foregoing considerations, the investigating team concludes that the NIP should be based on an ex-wharf cost. The investigating team has considered whether that should be on the basis of the lower of the ex-wharf cost of imports by both Sigma and CTS, or on the basis only of the ex-wharf cost of imports by CTS, given that there is potential for wharf gate competition from imports from Thai Gypsum.

Winstone has pointed out that Sigma has traded ex-wharf. The investigating team is aware that Sigma has sold __ shipments of 9.5mm board ex-wharf in Wellington. The prices at which this board was sold ____________________
_________ at which it sold board ex-store in Auckland. Sigma has also stated that _________________________
______________________________________ Sigma has also stated that it still incurs costs _____________
________________________________ The costs incurred for sales made in this manner are, however, clearly lower than the costs of selling ex-wharf. The potential therefore exists to sell ex-wharf at lower prices, effectively on an indent basis.

The investigating team does not have sufficient information to establish what the actual costs of Sigma selling ex-wharf are. After adding an importer’s margin it is considered unlikely that an ex-wharf sale would be lower than the ex-wharf cost of imports by CTS. The NIP has therefore been established on the basis of the ex-wharf cost of imports by CTS. The possibility of Sigma selling at lower prices ex-wharf, but including its margin raises the issue of setting a separate rate of anti-dumping duty for imports sold on this basis. The investigating team considers that the issue of setting a separate rate for Sigma for imports sold on an ex-wharf basis should be considered when the type and rate of duty is addressed (see duties section below).

Impact of Settlement Agreement

As noted in section 4.2 above, while not legally obliged to do so, the Ministry considers it should in this investigation have regard to the principles set out in the Settlement Agreement.

The Settlement Agreement does not prescribe in any detail how the NIP is to be calculated other than stating the general principle that it is the price at which the industry would or would likely sell its goods in the market but for the dumping. Because it is not prescriptive, Sigma’s submission that the Settlement Agreement does not require _____________ and overheads to be part of the cost build up is, in the view of the investigating team, of no relevance.

Sigma’s submission that the Settlement Agreement requires that a traditional importer’s internal freight and profit margin must be deducted from the NIP in calculating a NIFOB, is based on the Agreement’s requirement that in a non-traditional structure, internal freight and profit shall not be deducted. The investigating team agrees that Sigma’s overhead costs and reasonable margin should be deducted when calculating a NIFOB (when sales are made ex-store).

Exchange Rate

A NIP based on an import parity price should reflect as near as possible the actual costs to land undumped board into New Zealand. The investigating team notes there has been a significant movement in the exchange rate of the New Zealand dollar against both the baht and the US dollar since the end of the period of investigation. Any remedy must be effective to the extent possible against imports entering New Zealand after the remedy is put in place. The investigating team therefore agrees that it should be based on the most recent exchange rates available for the New Zealand dollar against both the baht and the US dollar.

Calculation of NIP

The investigating team considers that the basis used to establish a NIP at the last review was appropriate at the time because the price set by Winstone in November 1999 followed closely from an increase in the anti-dumping duty to the full margin of dumping and at that time there was no 10.5mm board in the market. Those conditions no longer apply. Prices in the market are, at least to some extent, being influenced by the availability of 10.5mm board, and there have also been changes in normal values.

The investigating team therefore considers that a NIP should be calculated from the most recent normal value established over the period of investigation by adding to this normal value the costs required to get the board into the New Zealand market place at the level at which it competes with board produced by Winstone. As concluded above, the most recent normal value should be that of Thai Gypsum which should be built up to the ex-wharf level. The investigating team considers that the costs to get the board to the ex-wharf level should be the most recent costs available over the period of investigation. (Because this is a cost build up to ex-wharf, importer’s costs and margin after ex-wharf are not included).

The normal value and costs denoted in baht and US dollars have been converted into New Zealand dollars at the most recent interbank exchange rate available at the time of writing (16 September). Those exchange rates are one New Zealand dollar equals 17.5308 baht and 0.4175 US dollars.

The calculation of the NIP on the basis set out above, is shown in the table below.

ased on the table above, the investigating team has set the NIP at $4.51 per square metre.

Price Comparison

Imports by Sigma

There have been _______ importations of the subject goods by Sigma. In the ef&c it was noted that ______________________ made under the old import structure and _________ the new structure. The _________ treated as being under the old import structure in the ef&c __________________________
________ Sigma has advised that _______________ in fact made under the new structure even though the ___________ ____________________ The Customs documentation for this importation shows Sigma as the importer. For this final report, ____________ have been treated as being made under the new import structure.

The weighted average ex-store price was calculated from a sample of Sigma’s selling prices under its new structure over the period from February to April 2000. Sigma sells largely on a ____________ For those sales in the sample sold on a ___________________ an ex-store price was estimated by ______________________________________

The ex-store price calculated on this basis is $___ per square metre.

An adjustment is required for differences in credit terms and damaged board. Because of the change in level of trade to ex-store, the investigating team considers credit terms under the current import structure should be based on the difference between the credit terms Sigma provides to its customers and the credit terms on which Winstone’s sells to its distributors. The difference in days of credit extended is __ days (________________________________
______________). An interest rate of 9.42 percent has been used, being the average of the base lending rate for January to March 2000, taken from Reserve Bank statistics. This interest rate over __ days is equivalent to an annual rate of ___ percent.

An adjustment for damaged board in the last review was made using a damage rate of _ percent, which was taken from the 1996 review. Sigma has claimed its damage rate is higher than this, but has not provided any evidence to substantiate a higher rate. An adjustment has therefore been made at _ percent.

The following is a summary of Sigma’s ex-store price and the adjustments thereto for cost of credit and damage.

	$/m2
Ex-store price	$CONFIDENTIAL
Plus:
- Cost of credit @ ___%	$CONFIDENTIAL
- Damage @ _%	$CONFIDENTIAL
Adj. ex-store price	$CONFIDENTIAL

Imports by CTS

As noted above, CTS has refused to co-operate with the investigation. Thai Gypsum has supplied copies of its invoices to CTS for all importations by CTS over the period of investigation. Thai Gypsum invoices CTS on a CIF basis. The investigating team has estimated the ex-wharf cost of imports by CTS using cost information after CIF provided by Sigma. The investigating team has calculated the weighted average ex-wharf from this data, the weighted average ex-wharf cost being NZ$___

Thai Gypsum has advised that for its sales to CTS "__________________________________________________" This is _______ than the period of credit extended by Winstone, the difference being __ days. An interest rate of 9.42 percent has been used (as for Sigma). This interest rate over __ days is equivalent to an annual rate of ___ percent.

CTS has not provided any information on damaged board, so no adjustment has been made.

The following is a summary of CTS’s ex-wharf cost and the adjustments thereto for cost of credit.

Ex-wharf cost	$CONFIDENTIAL
Less:
- Cost of credit @ CONFIDENTIAL%	$CONFIDENTIAL
Adjusted ex-wharf cost	$CONFIDENTIAL

Amount of Price Undercutting

The following table shows Winstone’s NIP and the ex-wharf costs for Sigma and CTS, and the amount of price undercutting.

The tables show there was undercutting of Winstone’s NIP by the subject goods imported by both CTS and Sigma.

The margin of price undercutting must be related to the margin of dumping in order to establish the extent to which price undercutting can be attributed to dumping. The weighted average margin of dumping for exports by SCT and Thai Gypsum for the year ended March 2000 was respectively NZ$___ and NZ$___ The investigating team has added these dumping margins to the ex-wharf costs and ex-store price and compared the result to Winstone’s ex-factory NIP. The figures are shown in the table below.

The table shows that the addition of the dumping margin results in no price undercutting for exports by SCT, indicating that a duty at less than the margin of dumping will remove the injury attributable to dumping.

The table shows that for exports by Thai Gypsum, there is still price undercutting after the dumping margin is added back, indicating that a duty at the full margin of dumping should be imposed.

Conclusion on Price Undercutting

The investigating team concludes that:

• there was price undercutting by the plasterboard imported by CTS from Thai Gypsum;

• there was price undercutting by the plasterboard imported by Sigma from SCT; and

• there is no price undercutting by the plasterboard imported by Sigma from SCT after the margin of dumping is added to the margin of price undercutting, indicating that a duty at less than the margin of dumping will remove the injury attributable to dumping.

Price Depression

Section 8(2)(c) of the Act provides that the Secretary 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.

The first imports of the subject goods did not arrive in New Zealand until October 1999. The existing anti-dumping duty was increased significantly in September 1999, and as a result Winstone increased its prices in November 1999. The subject goods are substitutable for plasterboard currently subject to anti-dumping duty. Winstone claims that while it was able to increase its prices in November 1999, because of the presence of the subject goods in the market, it has been unable to increase its prices to either the NIP established in the last review or to what it claims is now a higher NIP.

The following table shows the average selling prices of like goods sold by Winstone for the years ended June 1999 and June 2000.

Table 4.5: Price Depression
	$/m2
Year Ended June 1999	$CONFIDENTIAL
Year Ended June 2000	$CONFIDENTIAL

The table shows no evidence of an actual decrease in average prices. This is not unexpected, given the increase in anti-dumping duties in September 1999 on board competing in the same market. The investigating team also notes that the last review found that the anti-dumping duty in place up to September 1999 was not fully remedying the injurious effects of the dumped imports and prices had been depressed and suppressed as a result. Prices for the year ended June 1999 therefore are lower than those that could be expected in the absence of dumped imports.

Winstone’s average selling price for the year ended June 2000 is below the NIP established for this investigation. Winstone’s most recent average monthly selling prices are not available. Winstone’s average prices are increasing, however, (the average price in the six months to December 1999 and in the nine months to March 2000 was $___ and $___ respectively) and it is likely that the most recent prices are above the average price for the year ended June 2000.

Winstone has submitted that the use of the dumping margin by CTS to price undercut has allowed it to "aggressively seek incremental business". Winstone has submitted that "This type of dumping margin-enabled price led competitive behaviour has been very injurious to Winstone" and has "required Winstone ________________________________
____________________". Winstone has noted that the effect on its prices is real whether or not CTS win a particular job or not and "It is for this reason that the effect on Winstone price in this situation is much more substantial than a simple observation of relatively low market shares would suggest." Winstone has also pointed out that CTS held a promotion in Christchurch on 25 July at which 10.5mm board was offered as immediately available ex CTS’s Auckland store. The promotion also advised that a shipment of board direct to Christchurch is due.

The investigating team considers it likely that price undercutting by CTS has had an effect on Winstone’s prices, but still finds it difficult to attribute all of the difference between Winstone’s average selling price for the year ended June 2000 and the NIP to the effects of the dumped imports, given the small import volumes and their relatively restricted distribution within New Zealand.

Conclusion

There is no evidence of actual price depression, but average prices for the year ended June 2000 are below the NIP.

Price Suppression

Section 8(2)(c) of the Act also provides that the Secretary shall have regard to the extent to which the effect of the dumped or subsidised goods is or is likely significantly to prevent price increases for those goods that otherwise would have been likely to have occurred.

The Ministry has generally based its assessment of price suppression on positive evidence, in particular the extent to which cost increases have not been recovered in prices. However, the Settlement Agreement notes that in considering whether there has been any price suppression caused by dumping . . . "any such price suppression is not limited only to those price increases which would have been likely to have occurred to cover actual cost increases."

The following table shows average per unit selling prices and costs for Winstone for the years ended June 1999 and June 2000.

The table shows that total costs have reduced in relation to sales, which is attributable to a decline in total costs and an increase in revenue. As noted above under price depression, this is not unexpected, given the increase in anti-dumping duty on 9mm and 9.5mm board. The comment above under price depression concerning the prices for the year ended June 1999 is also relevant here.

As noted above, prices for the year ended June 2000 are below the NIP and the comments under price depression concerning Winstone’s latest prices and the effect of the dumped imports on Winstone’s prices, also apply here.

Conclusion

There is no evidence of actual price suppression, but average prices for the year ended June 2000 are below the NIP.

4.5   ECONOMIC IMPACT

Section 8(2)(d) of the Act provides that the Secretary shall have regard to the economic impact of the dumped or subsidised goods on the industry, including—

(i) Actual and potential decline in output, sales, market share, profits, productivity, return on investments, and utilisation of production capacity; and

(ii) Factors affecting domestic prices; and

(iii) The magnitude of the margin of dumping; and

(iv) Actual and potential effects on cash flow, inventories, employment, wages, growth, ability to raise capital, and investments.

Output and Sales

Movements in sales revenue reflect changes in volumes and prices of goods sold. Dumped imports can affect both of these factors through increased supply of goods to the market and through price competition.

The following table shows Winstone’s sales of like goods by volume and value for the years ended June 1999 and June 2000.

The table shows no evidence of an actual decline in sales. The last review found no evidence of decline in volume attributable to dumped imports. The volume of sales for the year ended June 1999 should therefore provide a reasonable baseline to compare against the following year. As noted above the last review found that the remedy in place up to September 1999 was not fully remedying the injurious effects of dumped imports. The revenue for the year ended June 1999 therefore does not fully reflect the revenue that could be expected in the absence of dumped imports. The increase in Winstone’s sales took place in the context of a significant increase in the size of the total market. The increase in Winstone’s sales was slightly less than the increase in the total market, which is reflected in a small decline in market share (see below).

The demand for plasterboard varies according to building activity. The statistics for new building consents were available to June 2000 at the time this report was prepared. These statistics show there was a 7 percent increase in new building consents from the year ended June 1999 to the year ended June 2000. This increase is less than the increase in Winstone’s sales volume and revenue. It should be noted however that Winstone advised that demand for plasterboard is also influenced by maintenance and renovation work and its sales would not therefore follow precisely the trend in new building consents.

The demand for plasterboard is not elastic with price, i.e. lowering the price of plasterboard will not increase the total demand for plasterboard because plasterboard is a relatively minor part of the total cost of constructing a building. Any sales of dumped plasterboard in the New Zealand market will therefore result in an equal loss of sales to other suppliers. Other suppliers are Winstone and importers of 9mm, 9.5mm and 10mm plasterboard that is currently subject to anti-dumping duty. The investigating team considers it likely that there has been some substitution of the imported 9mm and 9.5mm board by the dumped subject goods in addition to a loss of sales by Winstone. Indeed, CTS appears to have largely replaced its previous imports of 10mm board with imports of 10.5mm board. Sigma has imported some 10.5mm board although it continues to import 9.5mm board.

Winstone held a __ percent market share in the year ended June 1999. The investigating team considers that this percentage forms a reasonable basis for estimating the sales volume lost by Winstone to the dumped subject goods. On this basis the investigating team has estimated that __ percent of the volume of the dumped imports represents sales lost by Winstone.

In the year to March 2000, the volume of dumped goods was _______ square metres and __ percent of this is ________ square metres (the remaining _ percent, or _____ square metres is therefore estimated to be sales lost by other importers). The estimated loss of volume of ______ square metres represents _ percent of Winstone’s sales volume for the year ended June 1999 and ___ percent of the sales volume for the year ended June 2000. At the average sale price achieved by Winstone for the year ended June 2000, the loss of this volume represents a loss of revenue of $_______ This revenue represents _ percent of Winstone’s sales revenue for the year ended June 1999 and ___ percent of the sales revenue for the year ended June 2000.

The import volume of the dumped goods used in the paragraph above covers a period from October 1999 to March 2000 or 6 months. On an annual basis the estimated sales volume lost by Winstone is _______ square metres. This volume represents ___ percent and ___ respectively of Winstone’s sales volume for the years ended June 1999 and June 2000. At the average sale price achieved by Winstone for the year ended June 2000, the loss of this volume represents a loss of revenue of $________ This revenue represents _ percent of Winstone’s sales revenue for the year ended June 1999 and ___ percent of the sales volume for the year ended June 2000.

Conclusion

The investigating team concludes there has been a loss of volume and revenue by Winstone, and there is a larger potential loss on an annual basis, that can be attributed to the dumped goods. The investigating team concludes, however, that such losses are not material.

Market Share

The analysis of market share must take account of changes in the growth of the market as a whole. A decline in the share of the market held by the domestic industry in a situation where the market as a whole is growing will not necessarily indicate that injury is being caused to the domestic industry, particularly if the domestic industry sales are also growing. There is no "entitlement" to a particular market share.

The following table shows market share and changes in market share. As noted in section 2.4 above, the investigating team considers the New Zealand market consists of sales by Winstone of 9.5mm board, imports of the subject goods and imports of board currently subject to anti-dumping duty. Domestic industry sales are for the years ended June 1999 and June 2000. Import figures are for the years ended March 1999 and March 2000. The import figures for the year ended March 2000 were calculated on the same basis as the figures in Table 2.1 above. The import figures for the year ended March 1999 were taken from the last reassessment. Imports from countries other than Thailand are insignificant and have been excluded from the table.

The table shows there has been a small decline in the market share held by Winstone of ____ percent, which can be attributed to dumped imports. The table also shows that 9.5mm and 10mm board of the type currently subject to anti-dumping duty, lost __ percent market share to the dumped imports. The investigating team notes there was a significant increase in the total market and Winstone’s total sales increased.

Imports of the subject goods are for a six month period. If imports continued at the same rate for a year and the market size remained the same, then the loss of market share would double to ____ percent.

In response to the ef&c, Thai Gypsum submitted that given the trend of like product imports, the Ministry’s conclusion of an ongoing trend of market share loss is misleading. The investigating team notes that the calculation of market share held by the New Zealand industry in the table above represents its share after taking account of imports of the subject goods and board currently subject to anti-dumping duty.

The investigating team notes that although 9.5mm and 10mm board lost market share, there was a slight increase in the volume of imports. Anti-dumping duty on this type of board was increased significantly to the full margin of dumping on 23 September 1999. Of the total imports of 9.5mm and 10mm board in the year ended March 2000, __ percent was imported in the 6 months to September 1999, showing there was a significant fall off in import volumes following the increase in the anti-dumping duty.

Conclusion

The investigating team concludes there has been a small decline of market share by Winstone, and there is a larger potential loss on an annual basis, that can be attributed to the dumped goods. The investigating team concludes, however, that such losses are not material.

Profits

Changes in net profit reflect changes in prices, sales volumes or costs. Dumped imports can impact on any or all of these.

The table below shows Winstone’s EBIT, per square metre EBIT and EBIT relative to sales, in relation to its production of like goods, for the years ended June 1999 and June 2000.

The table shows no evidence of a decline in actual EBIT. Total EBIT has increased at a greater rate than the increase in sales volume and revenue, as indicated by the increase in EBIT relative to sales and the increase in per square metre EBIT. For the reasons noted above relating to the increase in anti-dumping duty in September 1999 and the inadequacy of the remedy up until that time, an increase in profits is not unexpected.

The investigating team has estimated the impact on Winstone’s EBIT using the annual loss of volume estimated above under sales and output of ______ square metres. At the EBIT per square metre achieved for the year ended June 2000, this represents a loss of profits of $_______

A loss of EBIT of $_______ represents ___ percent of Winstone’s EBIT for the year to June 1999 and ___ percent of the EBIT for the year ended June 2000.

Conclusion

The investigating team concludes that there has been no actual decline in total EBIT, per square metre EBIT or EBIT relative to sales. At the same time the investigating team concludes there has been a loss of EBIT by Winstone, and there is a larger potential loss on an annual basis, that can be attributed to the dumped goods, i.e., without this loss of EBIT there would have been an even larger increase in EBIT than that actually achieved. The investigating team concludes, however, that such losses are not material.

Productivity

Productivity is the relationship between the output of the goods and the inputs of resources used to produce them. Changes in productivity are affected by output levels and by the level of capacity utilisation.

In its submission under productivity, Winstone has referred to its discussion on volume effects. The investigating team has concluded that the economic impact resulting from the dumped imports is not material when output and sales, market share, profits and return on investment (see below) are considered. Consequently the investigating team concludes that the effect on productivity is unlikely to be material.

Return on Investments

A decline in return on investments will result from a decline in returns with or without a relative increase in the investment factor being used. Movements in the return on investments affect the ability of the industry to retain and attract investment.

The following table shows Winstone’s return on assets and shareholders funds for the years ended June 1999 and June 2000.

The table shows no evidence of a decline in return on investments. As noted previously, this is not unexpected.

If the estimated loss of profits calculated above of $_______ are deducted from the EBIT for the year ended June 2000, the rate of return (in whole numbers) on assets and shareholders funds ____________

The investigating team concludes that while the increase in return on investments would have been greater but for the dumped imports, it is not material.

Utilisation of Production Capacity

The utilisation of production capacity reflects the changes in the level of production, although in some cases it will arise from an increase or decrease in production capacity. In either case, a decline in the utilisation in production capacity will lead to an increase in the unit cost of production, and a consequent loss in profit.

The investigating team has concluded that the economic impact resulting from the dumped imports is not material when output and sales, market share, profits and return on investment are considered. Consequently the investigating team concludes that the effect on capacity utilisation is unlikely to be material.

Other Adverse Effects

Winstone has made no claims of actual material injury reflected in adverse effects on cash flow, inventory, employment, wages, growth, ability to raise capital, and investment (but has claimed a threat of injury in these areas).

The investigating team has concluded that the economic impact resulting from the dumped imports is not material when output and sales, market share, profits and return on investment are considered. Consequently the investigating team concludes that there is unlikely to be material adverse effects on the above factors.

4.6   OTHER CAUSES OF INJURY

Sections 8(2)(e) and (f) of the Act provide that the Secretary shall have regard to factors other than the dumped goods which have injured, or are injuring, the industry, including—

(i) The volume and prices of goods that are not sold at dumped prices; and

(ii) Contraction in demand or changes in the patterns of consumption; and

(iii) Restrictive trade practices of, and competition between, overseas and New Zealand producers; and

(iv) Developments in technology; and

(v) Export performance and productivity of the New Zealand producers; and

the nature and extent of importations of dumped or subsidised goods by New Zealand producers of like goods, including the value, quantity, frequency and purpose of any such importations.

Factors Other than Dumping

The last review found no evidence of factors other than dumping causing injury. No evidence has been provided during this investigation to change that finding.

Imports by the Industry

Winstone has not imported the subject goods.

Conclusion on Other Causes of Injury

The investigating team concludes that factors other than dumping have not been a cause of injury to Winstone.

4.7   THREAT OF MATERIAL INJURY

Having found there is no evidence of actual material injury, the investigating team has examined the evidence relating to a threat of material injury, on which basis the application by Winstone was originally lodged. Article 3.7 of the Anti-Dumping Agreement states as follows:

A determination of a threat of material injury shall be based on facts and not merely on allegation, conjecture or remote possibility. The change in circumstances which would create a situation in which the dumping would cause injury must be clearly foreseen and imminent10

In making a determination regarding the existence of a threat of material injury, the authorities should consider, inter alia, such factors as:

(i) a significant rate of increase of dumped imports into the domestic market indicating the likelihood of substantially increased importation;

(ii) sufficient freely disposable, or an imminent, substantial increase in, capacity of the exporter indicating the likelihood of substantially increased dumped exports to the importing Member's market, taking into account the availability of other export markets to absorb any additional exports;

(iii) whether imports are entering at prices that will have a significant depressing or suppressing effect on domestic prices, and would likely increase demand for further imports; and

(iv) inventories of the product being investigated.

No one of these factors by itself can necessarily give decisive guidance but the totality of the factors considered must lead to the conclusion that further dumped exports are imminent and that, unless protective action is taken, material injury would occur.

10 One example, though not an exclusive one, is that there is convincing reason to believe that there will be, in the near future, substantially increased importation of the product at dumped prices.

The evidence of a threat of material injury has therefore been examined in relation to the criteria set out in Article 3.7, as set out below.

Rate of Increase of Dumped Imports

The following table shows the monthly imports of dumped goods, since the subject goods were first imported.

Over the 6 month period covered by the table the average importation per month was ______ square metres. While there was an increase in March 2000 over the previous month, the total for March was less than that imported in October and was about the same as the imports in December.

In response to the ef&c, Thai Gypsum has submitted that there has not been a significant rate of increase in exports from Thailand and has provided combined export figures for itself and Siam Gypsum showing plasterboard exports from 1996 to August 2000 and projected figures for the remainder of 2000. The investigating team notes that the subject goods were first exported to New Zealand in October 1999, and assumes figures prior to this date are for board currently subject to anti-dumping duty.

The investigating team does not consider the trend in the imports of the dumped goods represents a significant rate of increase.

Freely Disposable Capacity of Thai Industry

During the last review Winstone provided extensive evidence showing that there was significant freely disposable capacity available to the Thai industry. During this investigation Winstone has provided evidence from Thai export statistics to show that previously large export volumes of plasterboard to the United States ceased entirely after November 1999. Winstone does not believe that Thailand’s export markets in Indonesia and Thailand will help in absorbing the loss of volume to the United States market because these countries have initiated anti-dumping actions against Thailand.

Thai Gypsum has made a submission related to threat of injury. Those parts relating to capacity are summarised below.

Thai Gypsum’s strategy is focused on how to improve its existing market share in New Zealand in terms of value added products. Thai Gypsum wishes to offer the small stockists in New Zealand a quality product that can at least assure their survival against the dominance of Winstone. Thai Gypsum "is looking forward to exporting around _______ Sq.m. to New Zealand during April 2000 to March 2001 __________________________________________________" Thai Gypsum has no forward orders.

Thai Gypsum has 2 plants in Thailand, one devoted to the export market and the other to the domestic market. These 2 plants represented over capacity in 1997 during the Asian crisis, but BPB is considering the closure of the less efficient plant. Whether this occurs depends on a decision of BPB management as it is considered that __________________________________________________________________________________________________

Should both plants be maintained ____________________________________________________________
______________________________________________________________________ In any event there is no freely disposable capacity for the New Zealand market.

Since making that submission, Thai Gypsum has advised that it has closed down plasterboard production at its older less efficient plant which was previously devoted to supplying the domestic market. This closure took effect from 1 June. Thai Gypsum advised during the verification visit that following the closure of this plant its remaining plant is operating at an 85 percent utilisation of production capacity, based on operating 24 hours per day for 6 days a week with planned shut downs for maintenance and public holidays (effectively operating about 288 days per year). In response to the ef&c Thai Gypsum has pointed out that the closure of one of its plants has resulted in an overall decrease in capacity.

In response to the ef&c, Thai Gypsum has submitted that an increase in capacity in the past has not resulted in an increase in exports to New Zealand. In particular, Thai Gypsum has submitted that:

• during the height of the Asian crisis, Thai exports to New Zealand actually declined;
• exports to New Zealand have declined since the cessation of exports to the US market; and
• the only other country applying anti-dumping measures on plasterboard from Thailand is Malaysia, but Thai exports to Malaysia are still substantial.

Siam Gypsum/SCT (referred to as SCT) has also made a submission concerning threat of injury and those parts relating to capacity are summarised below.

Domestic sales in the first quarter 2000 are ________________________________________________________
____________ There has been a ________________ in the ______ economy resulting in ____________ of sales and there has also been an _______ of sales into other markets. SCT has noted that "The US market is ________." SCT is targeting a __ percent capacity utilisation and is confident this target can be met solely from _____________ Other markets in South Asia and the Middle East are ______________ to as exports are made in __________ and therefore need no _______ and result in no _______

SCT’s policy for the New Zealand market is to compete on quality. SCT predicts that its export volumes to New Zealand will _________________ If the level of trade for plasterboard of the type currently subject to duty was to be set at the level of __________________ then exports of 10.5mm board to New Zealand would probably _______

During the verification visit SCT advised that it has surplus capacity and noted that it still exports some plasterboard to the USA but sales are well down.

The investigating team notes that Thai Gypsum currently has spare capacity and its submission that there is no spare capacity for New Zealand relies on an increase in sales in other markets which have yet to eventuate.

In response to the ef&c Siam Gypsum has stated that it did not in fact mention or imply that it had surplus capacity or that its sales to the USA are well down. Siam Gypsum has submitted that it is confident that domestic demand in the year 2000 will be sufficient to use __ percent of its capacity. Siam Gypsum has also reiterated that the USA market is still strong, and considers that expansion into new markets and the recovery in Asia will help to push capacity utilisation well over __ percent. Siam Gypsum has submitted that with capacity utilisation of more than __ percent it does not have any excess capacity for export to New Zealand.

The investigating team notes that during the period of the Asian crisis and the cessation of exports to the USA, exports to New Zealand were of board of the type subject to anti-dumping duty, not the subject goods. The existence of the anti-dumping duty would have had a constraining effect on exports. The investigating team also notes that Thai Gypsum’s statement about the cessation of exports to the USA _______________ Siam Gypsum’s statement that exports to the USA _________ The export statistics from Thailand provided by Winstone also clearly show that there were no exports to the USA for the period December 1999 to February 2000.

After considering all of the evidence, particularly that from Winstone relating to a cessation of exports from Thailand to the United States, the investigating team considers there is evidence that the Thai industry has sufficient freely disposable capacity to significantly increase exports to New Zealand. This is particularly so when the small size of the New Zealand market is considered in relation to the size of the Thai industry.

Prices

The price undercutting analysis shows there is price undercutting by exports from Thai Gypsum, and there was price undercutting by exports from SCT up to December 1999. The investigating team notes that __ percent of the dumped board exported over the period of investigation came from Thai Gypsum.

Thai Gypsum has stated that it has no intention to export to New Zealand below its domestic prices as this would minimise its overall rate of return. Thai Gypsum has also commented that "We believe that resale prices offered on our products are primarily of interest to small independent stockists who are unable to lever competitive prices from the dominant supplier whose parent company’s activities also compete with these same stockists."

In response to the ef&c Thai Gypsum has pointed out that the Ministry itself has acknowledged that there has been no evidence of price depression or suppression, which are hardly grounds to suggest there will be in future.

SCT has submitted that its sale price to Sigma has ____________________ for the board in New Zealand, the relevant price being Sigma’s ____________________

The investigating team notes that while CTS is undercutting the New Zealand industry’s price, there is no evidence that this undercutting is depressing or suppressing the New Zealand industry’s price. However, the prices at which CTS is able to sell into the market provide an incentive to CTS to continue importing. At the same time, the volumes imported by CTS over the period of investigation have not increased significantly, indicating that prices have not stimulated an increase in demand.

The investigating team notes that since January 2000, Sigma has been selling at prices which are above the NIP and which are also above Winstone’s average selling price for the year ended June 2000. Sigma has imported _______ shipments of the subject goods, representing __ percent of all imports over the period of investigation. The investigating team notes that while Sigma’s buying price may provide an incentive for Sigma to import the subject goods, there is no evidence that this has resulted in a significant increase in its imports. Sigma has, however, advised that the outcome of this investigation will dictate whether it __________________________________   ______________________________________________________________________________________

The investigating team notes that if Sigma’s selling and administration expenses and an amount for reasonable profit are added to its ex-wharf cost, then the price is above Winstone’s NIP. Imports by Sigma are therefore unlikely to have a suppressing or depressing effect on Winstone’s prices. Sigma has, however, in the past sold at prices above those of Winstone’s and maintained its market share. The difference in the buying price between 10.5mm and 9.5mm board, in the absence of anti-dumping duties on 10.5mm board, is considered below.

Inventories

Thai Gypsum has advised that it receives only one order at a time which represents no more than one consignment which is always made to order. Thai Gypsum has also stated that it has no inventory available for export and does not stockpile inventory.

SCT has stated that the 10.5mm board was only produced for the New Zealand market, that it currently holds no stocks and has no plan to do so unless that is the only alternative for making sales to New Zealand.

The investigating team has no other evidence to suggest there are significant inventories of the subject goods, either in Thailand or New Zealand. Inventories of the subject goods are therefore not considered by the investigating team to be a relevant to threat of injury.

Other

Sigma has advised that it has ________________________________________________ Sigma advised that the ___ shipments it has imported were in response to sales of 10.5mm board in the New Zealand market by CTS. Sigma has also advised that _____________________________________________   The investigating team notes that the last import by Sigma was in ______________

As noted above, however, Sigma has advised that should anti-dumping duties not be imposed on 10.5mm board, then ______________________________   _________________________ in spite of the disadvantage of 10.5mm board not being a standard size.

SCT has advised that, should the Ministry decide that the level of trade for Sigma’s imports is at the _____________________________________________, then "SCT/Sigma would have no choice but to _________________________________________________ and _______________________________________________." The Ministry interprets this to mean that should the existing duty not be reduced through taking the level of trade for price undercutting purposes at the _______________________________________________________________________________________________________________________.

Thai Gypsum has advised the Ministry that plasterboard is distinguished by type (standard, water resistant, fire resistant etc) rather than by size. Thai Gypsum considers that 9mm board is a like product to 12mm board and it is the construction methods used that dictate what thickness of board will be used, for example the width of ceiling joints and the amount of noggins used. Winstone also advised that throughout the world plasterboard of less than a nominal thickness of 12mm is marketed as a "like product". Winstone consider that other standard plasterboard of any width or length can easily be substituted for 9.5mm standard plasterboard in New Zealand.

In its application for the investigation, Winstone requested that any final duties be applied retrospectively for 60 days prior to the date of the application of provisional measures, in accordance with section 17(3) of the Act. (Retrospective measures cannot be imposed unless provisional measures are applied). CTS advised the Minister on 30 May that because of the risk that measures may be applied retrospectively, it was immediately ceasing all imports of 10.5mm standard plasterboard. The Minister declined to impose provisional measures in June 2000. Following the Minister’s decision, CTS advised that it was importing board sufficient only to fulfil existing contracts in the meantime, but intended to stay in the business of importing board of the type subject to investigation.

Ministry’s Consideration of the Issues

As already noted above, the following factors are in favour of an argument that there is a threat of injury to the New Zealand industry:

• there is sufficient freely disposable capacity in Thailand to have a significant impact on the New Zealand market,
• the prices of the subject goods exported by Thai Gypsum undercut the New Zealand industry’s NIP; and
• the existence of anti-dumping duty on 9.5mm and 10mm board provides a strong incentive to switch to 10.5mm board should no anti-dumping duty be imposed on 10.5mm board.

Arguments against there being a threat of injury are that:

• there is no indication of a significant rate of increase of dumped imports;
• there is no significant inventory; and
• CTS has stated that it is for the time being importing only sufficient quantities to meet existing contracts.

The analysis of whether there is any actual material injury shows that the current level of imports is not sufficient to cause material injury. In considering threat of injury it is therefore not sufficient to simply show there is evidence that the current level of imports will continue. The question then becomes is there a clearly foreseen and imminent likelihood there will be a substantial increase in dumped imports in the near future.

The goods under investigation are close in size to the 9.5mm and 10mm board which is currently, or was previously, imported and which is subject to an existing anti-dumping duty. The existing anti-dumping duty is imposed by a reference price mechanism. This mechanism sets a benchmark price that is designed to be the equivalent of the normal value. Should board which is subject to the anti-dumping duty enter New Zealand at a price below the benchmark price, then anti-dumping duty is payable on the difference between the actual price and the benchmark price. The benchmark price for exports by both SCT and Thai Gypsum is set at a FOB level. The following table shows the benchmark prices set for the existing anti-dumping duty compared to the most recent FOB prices for 10.5mm board in the period of investigation.

The table shows there is a significant price advantage held by the 10.5mm board. A reassessment is currently underway of the existing anti-dumping duty and that may result in a change in the level of the duty, but is unlikely to remove the significant price advantage held by the 10.5mm board. There will therefore be a clear price incentive for Sigma to switch from 9.5mm board to 10.5mm board should no anti-dumping duty be imposed on 10.5mm board. Although Sigma has stated that the 10.5mm board is ___________________   ____________________________ both Thai Gypsum and Winstone consider that 10.5mm board is readily substitutable for 9.5mm board. Even if there is _______________________________ the investigating team believes that if Sigma geared its operation to the sale of this size board, then it is likely that volumes of 10.5mm board could be sold at similar levels as sales of 9.5mm board. (The investigating team notes that import volumes of 10.5mm board by CTS from October 1999, when it switched to 10.5mm board, to March 2000, were close to its previous import volumes of 10mm board in the 6 month to September 1999).

The investigating team considers that the best indication of the likely volumes of 10.5mm board which would be exported by SCT should it switch to that size board from 9.5mm board, are SCT’s exports prior to the increase in the anti-dumping duty in September 1999. The most recent figures available prior to that increase in the anti-dumping duty are for the year to August 1999, when SCT exported _______ square metres of 9.5mm standard board.

This volume of board represents _ percent of Winstone’s sales for the year ended June 2000. At Winstone’s average selling price for the year ended June 2000, it represents a loss of revenue of ___ million dollars. Combined with the loss of revenue estimated from existing imports over 12 months, the loss of revenue represents _ percent of Winstone’s revenue for the year ended June 2000. At Winstone’s average EBIT per square metre for the year ended June 2000, this volume of board would represent a loss of EBIT of _________ dollars. If this is combined with the loss of EBIT estimated from existing imports over 12 months, the loss of EBIT represents _ percent of Winstone’s EBIT for the year ended June 2000. The investigating team also notes that there would likely be a significant impact on other economic indicators.

The investigating team considers that impacts of the magnitude estimated above are material.

Thai Gypsum and SCT have stated they have no current plans to significantly increase exports to New Zealand, unless, in the case of SCT, there ___________________________________________________ It is clear that the Thai industry has sufficient capacity to significantly increase its export volumes to New Zealand.

While the trend in import volumes shows there has not been a significant rate of increase in import volumes, those trends were measured over a period when Sigma was essentially waiting on the outcome of the present investigation.

The investigating team considers that the significance of the price advantage held by 10.5mm board, because of the existence of anti-dumping duty on 9.5mm and 10mm board, provides a strong incentive to switch to 10.5mm board. If this price incentive is considered in conjunction with the ___________________________________________ then the investigating team considers it is highly likely that Sigma will import sufficient volumes of 10.5mm board to cause material injury to the New Zealand industry.

The investigating team is of the view that while there is a difference between the duty on substitutable products, there will always be a price incentive to switch between them. The normal values and NIP established in this investigation are the same as those established for the reassessment being carried out at the same time. The investigating team notes that any anti-dumping duty imposed as a result of this investigation (whether a lesser duty or a duty at the full margin of dumping), using a reference price mechanism, will therefore result in the same level of anti-dumping duty as that which will result from the reassessment.

Conclusion on Threat of Material Injury

The investigating team concludes there is a clearly foreseen and imminent threat of material injury to the New Zealand industry.

This conclusion differs from that in the provisional measures report, where it was concluded there was no threat of material injury. The conclusion reached in the provisional measures report was reached in the context of the requirements of the Act relating to provisional measures. That is, the investigating team considered there was no threat of material injury at the time the provisional measures report was prepared as ____________________________________________ was not likely until the final outcome of the investigation was known.

4.8   CONCLUSIONS RELATING TO INJURY

The investigating team has reached the following conclusions relating to injury:

Volume Effects

Imports of the subject goods represent a significant increase in absolute terms but do not represent a significant increase relative to production and consumption in New Zealand.

Price Effects

There is evidence of price undercutting by Thai Gypsum and by SCT.

There is no evidence of actual price depression or price suppression, but Winstone’s average price for the year ended June 2000 is below the NIP.

Economic Impact

There is evidence of a loss of sales volume and revenue, a small decline in market share and a loss of profit. There is no evidence, however, that the economic impact reflected in these factors is material.

Threat of Material Injury

There is evidence of a threat of material injury.

5.   CONCLUSIONS

On the basis of the information available, it is concluded that

6.   ANTI-DUMPING DUTIES

The provision of the Act relating to the imposition of anti-dumping duties is section 14, the relevant parts of which are set out below.

14. ANTI-DUMPING AND COUNTERVAILING DUTIES

(1) At any time after the Minister makes a final determination under section 13 (1) of this Act in relation to goods, the Minister may give notice of the rate or amount of duty determined under subsection (4) of this section (which notice may be given simultaneously with, or at any time after, the notice given under section 13 (2) of this Act) and there shall, with effect on and from the applicable date referred to in section 17 of this Act, be imposed,-

(a) In respect of those goods that are dumped, a duty to be known as anti-dumping duty:

(b) In respect of those goods that are subsidised, a duty to be known as countervailing duty.

(2) Anti-dumping duty or countervailing duty, as the case may be, imposed under subsection (1) of this section, shall be collected and paid on the demand of the Customs on and from the day after the date on which the notice under subsection (1) of this section is published in the Gazette.

(4) The anti-dumping duty or countervailing duty in the case of goods to which this section applies shall be a rate or amount determined by the Minister,-

(a) In the case of dumped goods, not exceeding the difference between the export price of the goods and their normal value; and

(b) In the case of subsidised goods, not exceeding the amount of the subsidy on the goods.

(5) In exercising the discretion under subsection (4) of this section, the Minister shall have regard to the desirability of ensuring that the amount of anti-dumping or countervailing duty in respect of those goods is not greater than is necessary to prevent the material injury or a recurrence of the material injury or to remove the threat of material injury to an industry or the material retardation to the establishment of an industry, as the case may require.

6.1   INTRODUCTION

The investigating team is recommending to the Minister that he defer the imposition of anti-dumping duty until after his final determination (see section 6.5 below), to allow interested parties time to make submissions on the method for imposing anti-dumping duty.

The sections below relating to the method of imposing anti-dumping duty are included in this report to provide interested parties with a basis on which to make such submissions. It should be noted therefore that the method for imposing final anti-dumping duties may differ from that proposed in this report as a result of submissions received from interested parties. It should also be noted that the anti-dumping duties proposed in this report do not take account of any submissions received in response to the Interim Report on the concurrent reassessment of the existing anti-dumping duties on other sizes of plasterboard from Thailand.

In accordance with section 17 of the Act, the final anti-dumping duties imposed will be payable retrospectively from the day after the date the Minister makes a final determination. This means that any plasterboard of the type under investigation imported into New Zealand from Thailand from the day after the date the Minister makes his final determination, will be liable for anti-dumping duty at the rate or amount finally imposed.

6.2   LEVEL OF DUTY

In accordance with section 14(4)(a) of the Act, the rate or amount of anti-dumping duty which may be applied cannot exceed the margin of dumping that has been found, while under section 14(5) the Minister is required to consider the level of duty necessary to prevent material injury.

The price undercutting analysis in section 4.4.1 above has found that anti-dumping duty at less than the margin of dumping will remove the injury attributable to dumping in relation to exports by Siam Gypsum. The same analysis has found that anti-dumping duty should be imposed at the full margin of dumping in relation to exports by Thai Gypsum.

The investigating team therefore considers that anti-dumping duty should be imposed at a level less than the margin of dumping on exports by Siam Gypsum and at the full margin of dumping on exports by Thai Gypsum. The method by which this should be done and the amount of anti-dumping duty, is discussed below.

6.3   METHOD OF IMPOSING DUTY

Anti-dumping duties can be applied in a number of ways and can be imposed as a rate or amount, including any rate or amount established by a formula. The basic approaches are: a specific amount per unit of product; an ad valorem rate; and a reference price approach under which the duty payable is the difference between the transaction price and a reference price. The reference price would normally be based on the normal value or the non-injurious price.

The main objective of an anti-dumping duty is to remove the injurious impact of dumping. In deciding on the form of duty, considerations relating to ease of administration, ability to ensure the dumping margin is not exceeded, fairness between parties, and predictability all need to be taken into account. The objective of the anti-dumping duty is to remove injury attributable to dumping, and is not to punish the exporter or to provide protection to an industry beyond the impact of the dumping.

Section 14(4) of the Act provides that the Minister must not impose a duty that exceeds the margin of dumping for the dumped goods. The Solicitor-General has advised that the references to "export price" and "normal value" in this section is to be read as a reference to the export price and normal value established in the investigation or to the values at the time the goods subjected to the duty are imported. Given this, the Ministry's approach is to adopt a form of duty that minimizes the possibility of exceeding the margin of dumping on shipments subsequent to the imposition of the duty by the Minister.

A specific duty, based on the monetary value of a margin of dumping, has the advantages of being convenient to apply and impossible to evade by incorrectly stating the value for duty. A specific rate clearly indicates to the importer the amount of duty payable. However, difficulties can arise where there is a wide range of goods involved, where exchange rates fluctuate to the extent that the margin of dumping will be exceeded without constant reassessments of the specific amount, or where the exporter otherwise changes prices so that the duty is either greater than the margin of dumping or less than the margin of dumping previously established. A specific duty expressed as a monetary amount can really operate only when prices and exchange rates are consistent and stable and where the transaction-to-transaction comparison does not result in a range of different dumping margins. An alternative approach to deal with this problem is to express a specific duty as a formula, being the difference between equivalent prices to the normal value and the export price of a particular shipment, with the values for the normal value and export price being fixed. When those elements of the formula are expressed in terms of the currency of each transaction, the problem of exchange rate movements can be dealt with. However, such an approach does not deal with the problem of changes in export prices for reasons other than exchange rate movements or movements in normal values.

An ad valorem duty, based on the dumping margin expressed as a percentage of the export price, and itself expressed as a percentage of the dutiable value is convenient to apply and is not so affected by exchange rate movements. However, it can be affected by false statements about the value of the goods. Ad valorem rates are often appropriate where there is a large range of goods or where new models appear, provided that the transaction-to-transaction comparison does not result in a range of different dumping margins. An ad valorem rate gives an indication of the impact of the duty, but is not as clear an indication as the other forms of duty.

A reference price duty has advantages in that it is best able to deal with movements in the export price and exchange rates (if expressed in the currency of the normal value), and is particularly appropriate for dealing with situations where a lesser duty is applicable. However, it has been argued that it is more easily evaded than the other forms of duty, by overstating the value for duty of the goods. Nevertheless, a reference price does have the advantage that it clearly signals to the exporter and importer what level of price is undumped or non-injurious, and provided it is carefully described the problem of evasion can be dealt with.

A reference price method is therefore considered the best method for assessing and collecting anti-dumping duties in the circumstances presented in this case. Anti-dumping duty on other sizes of standard plasterboard is currently collected using a reference price approach by way of a Normal Value Equivalent (NVE) method so using a reference price method would be consistent with the way the existing duty on plasterboard is imposed.

6.4   AMOUNT OF ANTI-DUMPING DUTY

SCT/Siam Gypsum

It was concluded above that injury to the New Zealand industry attributable to dumping could be removed by a duty at less than the margin of dumping. The investigating team considers that under a reference price approach, imposing an anti-dumping duty at less than the margin of dumping can best be achieved through a non-injurious free-on-board (NIFOB) method.

The Settlement Agreement sets out how a NIFOB should be calculated, i.e., by establishing a NIP and deducting from the NIP those costs and margins the importer incurs or is properly entitled to an allowance for, after FOB to the point in the market at which the imported goods compete with the industry’s NIP. The investigating team agrees that the method for calculating a NIFOB set out in the Settlement Agreement is correct when Sigma sells on an ex-store basis.

The investigating team considers that in calculating a NIFOB it should use the most recent costs available over the period of investigation. As noted above under non-injurious price, Sigma is _______________ The investigating team consider that Sigma is properly entitled to an allowance for a reasonable margin.

The investigating team has no information available on the net margin earned by Sigma or any other plasterboard importer, prior to the increase in anti-dumping duty in September 1999. The investigating team therefore considered other sources of profit information, details of which are set out below.

The investigating team obtained from the Statistics New Zealand internet site a report on the annual enterprise survey 1999 for the wholesale trade sector for the 1997/98 year. The report notes that "The term "wholesale trade" is used here in the broad sense to include the resale (as agents or principals) of new or used goods to business or institutional (including government) users." The report states that profit margins on sales were 4.1 percent, and notes that the average margin across all industries was 10.1 percent. While Sigma is not exactly at the wholesale level, the investigating team considers that the statistics provide at least a guide to what may be a reasonable profit margin.

The investigating team also considered whether any recent investigations involved products of the same general category which could provide a guide to a reasonable profit margin to be allowed in this case. The most relevant investigations were those into clear float glass and Portland cement.

Clear float glass importers provided profit margin information for the period 1 October 1996 to 30 September 1997. The investigating team calculated the average profit margin as a percentage of the ex-store price at __ percent, from the information provided by importers in this case.

The Portland cement importer provided profit margin information for the period 1 October 1996 to 30 September 1997 relating to bulk and bagged cement. The average profit margin as a percentage of the ex-store price was
__ percent.

Sigma suggested that a profit margin of __ percent on sales would be reasonable, but did not provide any explanation of how this figure was arrived at.

In considering the various profit margins above, the investigating team notes that clear float glass importers were not competing with a domestic producer, the case being a third country dumping investigation involving an industry in Australia. The price pressures on importers may therefore not have reflected the pricing pressure faced by importers competing with a domestic manufacturer. The profit margins achieved by float glass importers were also ________ than any of the margins taken from other sources and even the margin suggested by Sigma. The margin achieved by the cement importer is close to the average margin earned by wholesalers as reported by Statistics New Zealand. The Statistics New Zealand figure is more up-to-date than that from the cement investigation. The investigating team therefore considers that a reasonable profit margin for Sigma should be set at 4.1 percent, expressed as a percentage of the ex-store price.

Sigma provided details of its selling and administration expenses for the period February to April 2000. Sigma advised that because these costs are largely fixed, its costs on a per square metre basis were significantly higher over this period than has historically been the case due to a significant decline in sales volume. The investigating team has examined the import volumes of 9.5 mm standard board over the period from January to March 2000 and compared this to the volume of imports of 9.5 mm board over the same period in 1999. Import volumes in 1999 were __ percent higher than those in 2000. In calculating an undumped price for Sigma, the investigating team considers that per square metre selling and administration expenses should be calculated on the basis of what could be considered a more normal import volume. The selling and administration expenses for Sigma have therefore been adjusted to take account of the __ percent difference in volumes noted above.

Following the release of the Interim Report on the concurrent reassessment of the existing anti-dumping duty, Winstone has made a submission on the amount allowed by the Ministry for Sigma’s selling and administration expenses, based on its estimate of what those costs were. This submission was received well after the closing date for submissions on the ef&c. Winstone has claimed that this submission was only made possible through information released in the reassessment Interim Report that has enabled it to estimate the approximate selling and administration expenses. The investigating team agrees that this is the case and has therefore endeavoured to the extent possible (given the limited time available), to include the submission in this report. Winstone’s submission is summarised below.

• Winstone considers the allowance is based on historical costs for only a short period (February to April 2000), whereas the correct approach would be to determine what is a reasonable cost for selling and administration expenses reflecting Sigma’s investment in the subject goods.

• The correct approach according to Winstone, when calculating a lesser duty, is to allow the importer a reasonable gross margin. This should be an objectively assessed figure and actual historical figures can be disregarded if not reasonable. Winstone calculate that the Ministry is allowing Sigma a gross margin of __ percent on costs into store which is unreasonable when Sigma can sell mainly on indent.

• Even if it were appropriate to have regard to actual historical costs, Winstone argues the Ministry’s calculation of such a high figure suggests an incorrect allocation of:

(a) selling and administration expenses between standard plasterboard and other products or between activity relating to New Zealand sales and sales elsewhere; and

(b) selling and administration expenses between Sigma and the retail activities of Rikki.

The amount allowed for Sigma’s selling and administration expenses is based on Sigma’s actual costs allocated across all of Sigma’s sales of all types of plasterboard (not just standard plasterboard), adjusted as outlined above to take account of the decline in Sigma’s sales resulting from the increase in anti-dumping duty in September 1999. It is unclear from Winstone’s submission why this figure should be affected by only covering a 3 month period. It is also very unclear from Winstone’s submission exactly how a reasonable cost would be calculated such that it would reflect Sigma’s investment in the subject goods.

The NIP was calculated on the basis of current exchange rates. The investigating team therefore consider that in calculating a NIFOB those costs denoted in a foreign currency should be converted into New Zealand dollars at the exchange rate applying at the time of writing (16 September). The cost of sea freight and BAF have therefore been converted from US dollars into New Zealand dollars at the 16 September interbank exchange rate.

The investigating team has calculated a NIFOB for exports by SCT to Sigma, where the board is sold by Sigma on an ex-store basis, on the basis set out above. Details are shown in the table below.

SCT invoices Sigma in __ dollars. The investigating team considers that for ease of administration and the minimisation of exchange rate effects, the NIFOB should be set in NZ dollars. The liability for any anti-dumping duty would be equal to the amount of the difference between the FOB price of the goods and the NIFOB amount where the FOB price of the goods is less than the NIFOB amount.

At the exchange rates at the time of writing (16 September 2000) this NIFOB is approximately US$0.82 per square metre. The FOB price of the most recent importation of the subject goods by Sigma was NZ$____ per square metre. The FOB price paid by Sigma to SCT for 9.5mm standard plasterboard prior to the increase in the existing anti-dumping duty in September 1999, was US$____ per square metre. These prices indicate that the proposed NIFOB is below the price that Sigma is likely to obtain from SCT. The investigating team nevertheless considers that it is preferable to have a NIFOB in place at this level, should the price of board drop below this level.

As noted in section 4.4 above under "Non-Injurious Price", Sigma has sold board on an ex-wharf basis in Wellington. Winstone has also submitted that a remedy must be effective against imports sold on an indent basis ex-wharf which should not allow for selling and administration expenses, but allow a reasonable margin.

In its response to the ef&c Sigma has stated that it has the sole rights to manage the import process in New Zealand, i.e. it does not have an arrangement with SCT which requires that it is the only importer. This contradicts advice from SCT that Sigma has the sole rights to import. Sigma’s statement indicates, however, the possibility that it may authorise other importers to import Siam Gypsum board at the ex-wharf level. This possibility further reinforces the need to have a separate NIFOB for imports either sold by Sigma ex-wharf, or for Siam Gypsum board imported by importers other than Sigma.

As noted under "Non-Injurious Price" in section 4.4 above, there will be some costs involved in selling ex-wharf, but these will be much less than those incurred selling ex-store. The investigating team, in the absence of any specific information on the selling and administration costs involved in selling ex-wharf, has estimated the costs at __ percent of the selling and administration costs used above to calculate the ex-store NIFOB. The reasonable profit margin allowed is the same as that allowed in the NIFOB calculation. Details of the NIFOB for imports sold ex-wharf are shown in the table below.

This NIFOB should also be in New Zealand dollars. At the exchange rates at the time of writing (16 September 2000) this NIFOB is approximately US$1.25 per square metre.

Thai Gypsum

It was concluded above that anti-dumping duty should be imposed at the full margin of dumping for exports by Thai Gypsum. The existing anti-dumping duty on certain other sizes of standard plasterboard is currently imposed at the full margin of dumping using a Normal Value Equivalent (NVE) reference price. The reference price was established on the basis of the normal value with adjustments made for costs from ex-factory to FOB. The liability for any duty is calculated by establishing if the "Thai Producer Value" is less than the NVE amount, and if so, anti-dumping duty is payable at the amount equal to the difference between the NVE amount and the Thai Producer Value. The Thai Producer Value is a reference price and is essentially the FOB price, but exclusive of any of the agents’ or resellers’ margins or commissions that existed at the time the last reassessment was completed.

To ensure consistency with the existing anti-dumping duty, the investigating team considers that the same method should be used to impose anti-dumping duty on exports by Thai Gypsum of the board which is the subject of this investigation. Normal values for this investigation and for the reassessment have been established on the same basis, i.e. on the basis of sales by Thai Gypsum of 9mm board on the Thai domestic market. Because of this the investigating team considers that NVEs should be calculated using normal value and cost data from both this investigation and the reassessment.

The investigating team has used the normal value established from the most recent shipment made during this investigation and the reassessment, consistent with the method used to calculate a NIFOB for Siam Gypsum, which is ____ baht per square metre. It should be noted that this differs by only ____ baht from the weighted average normal value using the normal values established for both this investigation and the reassessment. Costs from ex-factory in Thailand to FOB have been calculated from the most recent shipment. Details of the calculation of the NVE for exports by Thai Gypsum are shown in the following table.

he NVE for exports by Thai Gypsum for the existing anti-dumping duty on certain other sizes of standard plasterboard is ____ baht per square metre. The reduction in the NVE results from a reduction in normal values. Normal values have reduced even though base normal values used in this reassessment are higher than those used in the last reassessment. Final normal values are lower because of the greater value of the adjustments made which can be attributed to Thai Gypsum fully co-operating with the current reassessment.

Other Exporters

The existing residual rate of anti-dumping duty plasterboard from Thailand is 99 percent ad valorem of the Thai Producer Value. This rate was based on the weighted average dumping margin for SCT, being the higher of the weighted average dumping margins of SCT and Thai Gypsum.

The investigating team considers that the same principle should apply in establishing the "other" rate for this investigation. There is a high degree of substitutability between board currently subject to anti-dumping duty and board which is the subject of this investigation. Because of this the investigating team consider that the "other" rate should be based on the highest weighted average margin of dumping from either this investigation or the reassessment. The highest weighted average dumping margin is 55 percent for Thai Gypsum relating to the investigation.

The residual rate of anti-dumping duty for newcomers would therefore be set at 55 percent ad valorem of the Thai Producer Value.

Summary of Proposed Duties

The following is a summary of the proposed anti-dumping duties:

SCT/Siam Gypsum
- Sales by Sigma Ex-Store	NIFOB of NZ$1.97
- Sales by Sigma Ex-Wharf	NIFOB of NZ$3.01
- Importers from SCT other than Sigma	NIFOB of NZ$3.01
Thai Gypsum	NVE of CONFIDENTIAL baht
Other Exporters	55% ad valorem

6.5   DEFERRAL OF DECISION ON TYPE AND LEVEL OF DUTY

In response to the ef&c Winstone noted that the report did not contain any conclusions relating to the calculation of the remedy beyond signalling a lesser duty in the case of exports by SCT. Winstone has submitted that it would be unfairly prejudiced, particularly given the terms of the Settlement Agreement, if it does not have details about the form of lesser duty proposed. At the same time Winstone has submitted that the Minister’s notice of the imposition of duty must follow within a reasonable time after his final determination, having regard to the particular circumstances and the scheme and purpose of the legislation.

The Ministry released on 13 September an Interim Report on the concurrent reassessment of the existing anti-dumping duty applying to other sizes of plasterboard from Thailand. The Interim Report contained details of the type of duty and the amount to which it should be reassessed, which would also apply to this investigation. Interested parties have been given until 22 September to comment on that report. Sigma has pointed out that any submissions made by interested parties on the Interim Report relating to the type and amount of duty would not be made in time to be considered for inclusion in the final report on this investigation.

Under section 13 of the Act the Minister must make a final determination within 180 days after initiation as to whether or not the goods are dumped and thereby causing material injury. If dumping has caused, is causing, or threatens to cause material injury, the Minister may impose anti-dumping duties.

Section 14(1) of the Act clearly allows the Minister to give notice of the rate or amount of anti-dumping duty at any time after giving notice of the final determination. It should be noted, however, that while the Minister may give notice of the rate or amount of anti-dumping duty after the final determination, section 17 of the Act provides that such duties will in fact be payable retrospectively from the day after the date that the Minister makes a final determination. This means that any plasterboard of the type under investigation imported into New Zealand from Thailand from the day after the date the Minister makes his final determination, will be liable for anti-dumping duty at the rate or amount finally imposed.

On the basis of the submissions made by both Winstone and Sigma, the investigating team considers that the Minister should delay giving notice of the rate or amount of anti-dumping to allow interested parties sufficient time to comment on the method of imposing anti-dumping duty.

As this report is not likely to be released to interested parties until 2 October, the investigating team recommends that interested parties be given until 13 October to make submissions on the establishment of the NIP and on the type and rate or amount of anti-dumping duty.

7.   RECOMMENDATIONS

It is recommended on the basis of the information obtained during the course of the investigation into the dumping of certain other standard plasterboard from Thailand:

1. That the Minister determine pursuant to section 13 of the Dumping and Countervailing Duties Act 1988 that in relation to the importation or intended importation of certain other standard plasterboard from Thailand into New Zealand:

(a) the goods are being dumped; and

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

2. That the Minister, having made a determination under section 13 of the Act, authorise the Ministry to advise parties that a decision on the rate or amount of duty has been deferred to allow interested parties sufficient time to make submissions on the type and rate or amount of duty.

3. That the Minister sign the attached Gazette notice, and give notice of the final determination to interested parties in accordance with sections 9 and 13 of the Act.

[Signed by the Minister of Commerce on 27 September 2000]