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Dumping and Countervailing Duties Act 1988
Dumping Application 

Trade Remedies Group

Ministry of Commerce

March 1998

ISBN 0-478-00062-6

ABBREVIATIONS

The following abbreviations are used in this Report:

1. PROCEEDINGS

1.1 PROCEEDINGS

On 15 August 1997, the Secretary of Commerce accepted a properly documented application from Heinz-Wattie Ltd (Heinz-Wattie), alleging that canned peaches from Greece were being dumped and by reason thereof causing and threatening to cause material injury to the New Zealand industry.

On 12 September 1997, the Secretary of Commerce formally initiated an investigation pursuant to section 10 of the Dumping and Countervailing Duties Act 1988 (the Act), on being satisfied that sufficient evidence has been provided that:

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

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

In accordance with section 10 of the Act, the Ministry’s investigation was to determine both the existence and effect of the alleged dumping of canned peaches from Greece.

Heinz-Wattie requested in its application that provisional measures be imposed.

On 7 October 1997, the Minister of Commerce declined to impose provisional measures on canned peaches from the European Union in the context of a concurrent subsidy investigation. This was on the basis that imports of the subject goods over the remaining period of the investigation were unlikely. The goods covered by that decision are the same as those subject to this current investigation. In response to queries raised by Heinz-Wattie prior to the release of essential facts and conclusions the Ministry has continued to monitor known importers from Greece regarding forward orders. The Ministry also undertook that if a final determination was not made in this investigation by the end of January 1998 the question of provisional measures would be addressed. Information to hand indicates that no orders which may result in importations into New Zealand in the immediate future have been placed by any of the known importers. The situation regarding the necessity for provisional measures is therefore unchanged.

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

Concurrent with this investigation the Ministry undertook an investigation into the alleged subsidisation of canned peaches originating in the European Union, of which Greece is a member. The subsidy investigation was initiated on 16 July 1997 and essential facts and conclusions were released to interested parties on 10 December 1997, a final, affirmative determination on that case was made on 9 January 1998 and countervailing duties were imposed.

Grounds for the Application

Heinz-Wattie claims that as a result of the alleged dumping, material injury is resulting from:

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

and is resulting in:

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

Heinz-Wattie has stated in its application that the material injury resulting from the importation of allegedly dumped canned peaches commenced in March 1996.

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

1.2 INTERESTED PARTIES

New Zealand Industry

The application was submitted by Heinz-Wattie. The Secretary of Commerce was satisfied that the application was made by or on behalf of the New Zealand industry producing like goods, and had the amount of support required by section 10(3) of the Act.

There are no other known producers of like goods.

Importers and Exporters

From information currently available to the Ministry, importers and exporters of the canned peaches subject to the application for the year ending 31 March 1997 are known to be:

Food Marketers NZ Ltd (Food Marketers) has been represented in this investigation by its parent company, Food Marketers Pty Ltd of Sydney Australia.

Additional information was also provided during the course of the investigation by the Association of Hellenic Agricultural Processors (EKE), an industry organisation located in Skydra, Greece.

1.3 IMPORTED GOODS

The goods which are the subject of the application, hereinafter referred to as canned peaches, or ‘subject goods’, are:

Peaches (halves, slices and pieces) packed in retail sized cans

The New Zealand Customs Department has stated that the canned peaches enter under the following tariff classification:

2008.70 - Peaches:

[- - Cooked and preserved by freezing, not containing added sugar]

2008.70.09 00L - - Other

Applicable duty rates are:

Normal 10% (reducing to 5% by 7/2000)
Australia Free
Canada Free
LDC 8% (reducing to 4% by 7/2000)
LLDC Free
Pac Free

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

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

and section 5(5) provides:

Where—

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

(b) The Secretary is of the opinion that the normal value of the goods should be ascertained for the purposes of this Act as if the country of origin were the country of export,—

the Secretary may direct that the normal value of the goods shall be so ascertained.

In the current investigation all the subject goods were produced in and exported from Greece. One shipment, from Vermion Naoussa, was incorrectly recorded on the Customs Service database as having been exported from France.

1.4 INVESTIGATION DETAILS

In this report, unless otherwise stated, years are April years and dollar values are NZ$. In tables, column totals may differ from individual figures because of rounding. The term VFD refers to value for duty for Customs purposes.

The period for considering claims of dumping is 1 April 1996 to 31 March 1997, while the consideration of injury involves evaluation of data for the period 1 January 1995 to 30 April 1997.

1.5 EXCHANGE RATES

Article 2.4.1 of the Code 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 sale1, 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.

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

Neither AL.M.ME nor Vermion Naoussa provided the investigating team with information regarding the exchange rates (Greek drachma/US dollars) used in respect of their exports to New Zealand. Therefore, in this report, when dealing with information provided by exporters, the exchange rate used is a rate established on the basis of information provided through an on-line currency conversion source, Oanda [WWW.oanda.com] , for the date of each invoice concerned. Further discussion on this aspect appears in section 3 of this report in relation to export prices and normal values.

In this report, when dealing with Customs data, including VFD and CIF values in NZ$, the amounts are converted to foreign VFD and CIF values by use of the Customs exchange rate applicable to that shipment or in force at the time of the investigation. The rates are published each fortnight in the Customs publication, Customs Release.

1.6 DISCLOSURE OF INFORMATION

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

Article 6.7 of the Code 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 exporters:

• Vermion Naoussa
• AL.M.ME

and, in combination with a visit relating to the above cited subsidy investigation, to the offices of the Association of Hellenic Agricultural Producers (EKE).

Copies of Verification Reports were provided to the exporters visited, and meeting notes were provided to the EKE. In each case non-confidential copies have been placed on the Public File.

No comments on the verification reports were received.

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 were provided to interested parties on 18 December 1997, being 99 days after the initiation of the investigation. Comments received from the Hawke’s Bay Fruitgrowers’ Association, the Association of Hellenic Agricultural Processors (EKE), and Trade Consultants Ltd, (on behalf of the applicant Heinz-Wattie Ltd), were taken into account in preparation of this Final Report.

There is a high degree of commonality between the present case and the subsidy investigation cited above in that the same goods are involved in both cases over the same period of investigation. Also, the Greek exporters specifically investigated with respect to dumping were also investigated with respect to subsidisation. Therefore, where appropriate and relevant, comments by those parties common to both investigations made in the context of responses to the essential facts and conclusions on the subsidy investigation have also been taken into account in preparing this report.

2. NEW ZEALAND INDUSTRY

Section 3a provides the definition of ‘industry’.

3a. Meaning of "industry" For the purposes of this Act, the term "industry", in relation to any goods, means—
(a) The New Zealand producers of like goods; or
(b) Such New Zealand producers of like goods whose collective output constitutes a major proportion of the New Zealand production of like goods.

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

"Like goods", in relation to any goods, means—
(a) Other goods that are like those goods in all respects; or
(b) In the absence of goods referred to in paragraph (a) of this definition, goods which have characteristics closely resembling those goods:

2.1 LIKE GOODS

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

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

Peaches (halves, slices and pieces) packed in retail sized cans

Heinz-Wattie produces inter alia a range of canned peaches in various retail size cans under the "Watties", "Oak" and various house brands, up to a nominal size of 3 kilograms. In the year to March 1997, imports of the subject goods were in 820 gram cans, which compete with retail size cans produced by Heinz-Wattie. In response to the Essential Facts and Conclusions on the subsidy investigation, Food Marketers (NZ) Ltd submitted that insufficient attention was paid to the fact that the New Zealand market is mainly a 425 gram can market while its imports have been of the 820 gram cans which make up a smaller share of the market. The investigating team considers, however, that 820 gram cans compete with all retail size cans produced by Heinz-Wattie and therefore separate examination of the market for 820 gram cans only is not required

On the basis of the information available, the Ministry considers that the canned peaches produced by Heinz-Wattie, while not alike in all respects because of differences in can sizes, varieties of peaches used and variations in the liquid medium within which the peaches are canned, have characteristics closely resembling the imported canned peaches, they compete in the same markets and have the same end uses as the imported product, and are therefore like goods to the subject goods.

2.2 NEW ZEALAND INDUSTRY

Heinz-Wattie is the sole New Zealand producer of canned peaches of the type under investigation. The investigation was initiated on the basis that the application met the requirements of section 10(3) with regard to required levels of support, and that the applicant had standing to make an application.

2.3 IMPORTS OF CANNED PEACHES

The following table shows imports of the subject goods. Imports from Australia and South Africa are shown as these are the major sources, in addition to Greece, of canned peaches imported into New Zealand.

It is noted that the tariff item and statistical key 2008.70.09 00L covers a wider range of goods than those specified in the application.

Section 11(1) of the Act provides that where the Minister is satisfied in respect of some or all of the goods under investigation, that there is insufficient evidence of dumping or injury to justify proceeding with the investigation then it shall be terminated. Section 11(2) of the Act provides that evidence of dumping shall be regarded as insufficient if the volume of imports of dumped goods, expressed as a percentage of total imports of like goods into New Zealand, is negligible, having regard to New Zealand’s obligations as a party to the WTO Agreement. The WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the Anti-Dumping Code), deals with the negligibility of dumped imports under Article 5:8 as follows:

An application under paragraph 1 shall be rejected and an investigation shall be terminated promptly as soon as the authorities concerned are satisfied that there is not sufficient evidence of either dumping or of injury to justify proceeding with the case. There shall be immediate termination in cases where the authorities determine that the margin of dumping is de minimis, or that the volume of dumped imports, actual or potential, or the injury, is negligible. The margin of dumping shall be considered to be de minimis if this margin is less than 2 per cent, expressed as a percentage of the export price. The volume of dumped imports shall normally be regarded as negligible if the volume of dumped imports from a particular country is found to account for less than 3 per cent of imports of the like product in the importing Member, unless countries which individually account for less than 3 per cent of the imports of the like product in the importing Member collectively account for more than 7 per cent of imports of the like product in the importing Member.

The following table shows imports of the subject goods and total imports in the most recent year covering the period of investigation of dumping:

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

2.4 NEW ZEALAND MARKET

The following table shows the New Zealand market for canned peaches

* This figure excludes estimated imports by Heinz-Wattie.

3. DUMPING INVESTIGATION

Section 3(1) of the Act states:

"Dumping", in relation to goods, means the situation where the export price of goods imported into New Zealand or intended to be imported into New Zealand is less than the normal value of the goods as determined in accordance with the provisions of this Act, and "dumped" has a corresponding meaning:

3.1 EXPORT PRICES

Export prices are determined in accordance with section 4(1) of the Act which states (inter alia) as follows:

(1) Subject to this section, for the purposes of this Act, the export price of any goods imported or intended to be imported into New Zealand which have been purchased by the importer from the exporter shall be—
(a) Where the purchase of the goods by the importer was an arm’s length transaction, the price paid or payable for the goods by the importer other than any part of the price that represents—
(i) Costs, charges, and expenses incurred in preparing the goods for shipment to New Zealand that are additional to those costs, charges, and expenses generally incurred on sales for home consumption; and
(ii) Any other costs, charges, and expenses resulting from the exportation of the goods, or arising from their shipment from the country of export;

Vermion Naoussa

Base Prices

Vermion Naoussa (Vermion) exports to New Zealand through an export agent, IBS Ltd, located in Thessaloniki, Greece. Sales made through IBS Ltd are subject to commission of __ percent of the invoice price.

Invoices were supplied by Vermion showing sales during the period to Food Marketers Ltd. Vermion also provided details of the costs of preparing the canned peaches for export.

Invoices were available for all shipments to New Zealand during the period of investigation. All sales to New Zealand are made on a per carton Cost and Freight (C&F) basis with prices in US dollars. Sales to New Zealand have been converted into per kilogram figures and all subsequent adjustments have been recorded on a per kilogram basis.

Base prices were established from invoices for shipments made during the period of investigation.

Preparation for Export

Section 4(1)(a)(i) of the Act provides for adjustments as follows:

Costs, charges, and expenses incurred in preparing the goods for shipment to New Zealand that are additional to those costs, charges, and expenses generally incurred on sales for home consumption;

Inland Freight

A deduction has been made for the cost of inland freight.

Wharfage and Handling Costs

Vermion pays a charge for wharfage and handling, including documentation charges. A deduction has been made for this charge.

Letter of Credit Charge

Sales to New Zealand are on the basis of letters of credit. A cost is incurred by Vermion for the processing of each letter of credit. The processing charge for each shipment has been calculated and a deduction made.

Customs Brokerage

A deduction has been made for a brokerage fee incurred by Vermion for each container in a shipment.

Other Export Costs

Section 4(1)(a)(i) of the Act provides for adjustments as follows:

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

Overseas Freight

The actual cost of freight has been deducted from invoiced prices for each shipment.

Agent’s Commission

A deduction from the invoiced price of each shipment has been made for commission paid to Vermion’s export agent.

Export Prices

Export prices were established for each shipment to New Zealand during the period of investigation by deducting the verified deductions from the base prices.

AL.M.ME

Base Prices

AL.M.ME’s sales to New Zealand were also made through IBS and are subject to a commission of __ percent of the invoice price.

AL.M.ME provided invoices showing sales during the period to Food Marketers Ltd. AL.M.ME also provided details of the costs of exporting the canned peaches, but provided no details of the costs of preparing the goods for export. Information concerning the costs of preparing the goods for export was sourced from another seller of like goods, Vermion, on the basis that since exporting goods involves such cost, the Vermion information was the best available regarding these costs.

AL.M.ME’s sales to New Zealand are made on a C&F basis per carton in US dollars. Invoices for all shipments to New Zealand during the period of investigation were provided and these sales have been converted into per kilogram prices. All subsequent adjustments have been recorded on a per kilogram basis.

Base prices were established from invoices for shipments made during the period of investigation.

Preparation for Export

Inland Freight

A deduction has been made for inland freight based on information provided by Vermion, as explained in paragraph 3.1.13 above.

Wharfage and Handing Costs

A deduction has been made for wharfage and handling costs, including documentation charges, based on information provided by Vermion, as explained in paragraph 3.1.13 above.

Letter of Credit Charge

AL.M.ME’s sales to NZ are made on the basis of letters of credit. A deduction has been made for each shipment for the cost of processing each letter of credit, based on information provided as explained in paragraph 3.1.13 above.

Customs Brokerage

A deduction has been made for customs brokerage based on information provided by Vermion, as explained in paragraph 3.1.13 above.

Finance Cost

AL.M.ME incurs a cost for short term finance. As this cost is applicable across total production, the Ministry does not consider it to be a cost additional to those costs generally incurred in sales for home consumption, and accordingly, no deduction for financing costs has been made.

Other Export Costs

Overseas Freight

A deduction for freight has been made on the basis of the actual cost of freight for each shipment.

Agent’s Commission

A deduction of __ percent of the invoiced price has been made for commission paid to AL.M.ME’s export agent.

Export Prices

Export prices were established for each shipment to New Zealand during the period of investigation by deducting the verified deductions from the base prices.

3.2 NORMAL VALUES

Normal values are determined in accordance with section 5 of the Act which, inter alia, 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.

Vermion Naoussa

Base Prices

Vermion provided invoices showing sales to the Greek market during the period of investigation. The Ministry considered that the volume of sales involved in a number of these invoices was of insufficient quantity for the purposes of comparison with sales to New Zealand. For the purposes of comparison, base prices have been established from an invoice from September 1996 of a similar quantity to the sales to New Zealand.

In response to the essential facts and conclusions, Heinz-Wattie queried whether the use of a single domestic transaction was in accordance with Article 2.2 of the Agreement and section 5 of the Act. These queries related to the volume of sales by Vermion into the domestic market and to whether the use of a sale made in the third quarter of the investigation period was appropriate having regard to the time of sale and to exchange rate movements which may have affected export sales against which the normal value is compared.

Heinz-Wattie has referred to pricing information it had provided which was obtained from retail sources in Greece, and which it claimed provides the best information available for the establishment of normal values in this case.

The Verification Report relating to Vermion details pricing structures on the Greek domestic market and the investigating team’s reasoning for the approach taken.

In brief, the investigating team verified that the total of the sales made into the domestic market by Vermion were in excess of the 5 percent "normal" threshold outlined in footnote 2 of the Agreement. The investigating team also examined and verified the methodology by which prices for domestic sales are set. The volume represented on the majority of individual domestic invoices meant that they were inappropriate for comparison purposes on a transaction to transaction basis, but the pricing structure used and which applied to all domestic sales made regardless of the time of sale (within a given season), meant that the one sale which was of a similar volume to those made to New Zealand did provide an appropriate basis for comparison.

Adjustments

Section 5(3) of the Act provides:

Where the normal value of goods imported or intended to be imported into New Zealand is the price paid for like goods, in order to effect a fair comparison the normal value and the export price shall be compared by the Secretary—
(a) At the same level of trade; and
(b) In respect of sales made at as nearly as possible the same time; and
(c) With due allowances made as appropriate for any differences in terms and conditions of sales, levels of trade, taxation, quantities, and physical characteristics, and any other differences which affect price comparability.

Vermion has provided no information regarding adjustments which may be necessary in terms of section 5(3) of the Act. The Ministry is aware of no aspects other than the Export Sugar rebates received by the company, established in the subsidy investigation Canned peaches from the European Union, for which an adjustment must be made.

Terms and Conditions of Sale

No adjustment has been made for terms and conditions of sales.

Levels of Trade

No adjustment has been made for levels of trade.

Taxation

Vermion’s invoiced prices are exclusive of VAT, therefore no adjustment has been made.

Quantities

No adjustment has been made for quantities.

Physical Characteristics

No adjustment has been made for differences in the physical characteristics between canned peaches sold for export and those sold on the domestic market.

Other Differences Affecting Price Comparability

The Ministry has carried out an investigation in relation to the subsidisation of canned peaches from the European Union, including Greece. In the subsidy investigation, which covers the same period as this dumping investigation, an export subsidy of ______ drachma per kilogram in the form of an export refund for European Union sugar used in fruit processing was found to be received by Vermion.

In a 1992 New Zealand Court of Appeal decision it was established that to the extent that an element of price discrimination was an export subsidy, the matter had to be dealt with under the countervailing action provisions, as the authorities could not resort to the anti-dumping provisions of the Act.

The principle established in that case, that no element of price reduction resulting from an export subsidy should be included in an anti-dumping remedy, is applicable to the present case. Accordingly, it is appropriate to clearly identify the extent of price reduction not attributable to subsidy, and to make relevant adjustments to ensure that anti-dumping action is not taken in respect of the subsidy.

Accordingly, an adjustment for export subsidies received has been made to the base price.

The EU subsidy investigation also established that payments in the form of Production Aid had been received by Vermion. However, this subsidy is payable across total production, and is therefore applicable to both domestic sales and sales to export markets, including New Zealand. No adjustment is therefore required for this element.

Normal Values

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

AL.M.ME

Base Prices

AL.M.ME made only one sale on the Greek market during the period of investigation. This sale was to another peach processing factory, which then exported the goods. The Ministry considers that this sale does not represent a sale in the Greek market for ‘home consumption’ in terms of section 5(1) of the Act, and therefore base prices for AL.M.ME have been established by reference to other sellers of like goods, pursuant to section 5(1) of the Act.

Base prices for AL.M.ME have been determined by reference to relevant sales made in the Greek market by Vermion Naoussa Ltd, as the Ministry regards these sales as relevant and suitable for this purpose.

Adjustments

Terms and Conditions of Sales

No adjustment has been made for terms and conditions of sales.

Levels of Trade

No adjustment has been made for levels of trade.

Taxation

AL.M.ME’s invoiced prices are exclusive of VAT, therefore no adjustment has been made.

Quantities

No adjustment has been made for quantities.

Physical Characteristics

AL.M.ME provided information showing a slight difference between the cost of labour per carton for domestic and export sales. Labour costs more for the higher quality product sold by AL.M.ME on its domestic market as a result of the extra care taken in processing choice quality peaches compared to the standard quality exported to New Zealand.

The European Community has also advised that there are European Union quality standards applicable to peach processing. While the investigating team found that these standards are not rigidly applied, there are industry wide terms referring to quality standards that reflect the care taken in processing the fruit. However, when this difference is extrapolated to a per kilogram amount, the resultant figure is extremely small and would have no impact on the price comparison.

Other Differences Affecting Price Comparability

Finance Costs

AL.M.ME incurs a cost for short term finance. As this cost is applicable across total production, the Ministry does not consider it to be a difference in cost, and accordingly, no deduction for financing costs has been made.

Subsidies

The Ministry has carried out an investigation in relation to the subsidisation of canned peaches from the European Union, including Greece. In the subsidy investigation, which investigated the same period as this dumping investigation, an export subsidy of _______ drachma per kilogram in the form of an export refund for European Union sugar used in fruit processing was found to be received by AL.M.ME.

For the reasons outlined in section 3.2. above, an adjustment has been made in respect of the export subsidy but not in respect of the production subsidy.

Normal Values

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

3.3 COMPARISON OF EXPORT PRICE AND NORMAL VALUE

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.

In response to the essential facts and conclusions report, Heinz-Wattie also queried the conversion of export prices from US dollars to Drachma at the exchange rate (as described in section 1.5 above) applicable at the time of invoicing. Heinz-Wattie stated that due to the movements in the exchange rate between the two currencies, particularly in the fourth quarter of the investigation period, any comparison on this basis would "result in an incorrectly low margin of dumping". Heinz-Wattie goes on to state that the only correct methodology would be to convert all the export sales at the rate applicable (on the basis described in section 1.5) on the date of the domestic invoice used to establish Normal Values.

The investigating team considered this approach, and that of using average exchange rates calculated from those applicable on the actual invoice dates both for the individual suppliers and across the total range. The exchange rates used range from 235.99 - 278.55 (GDR/US$) giving an overall average of 243.00. The Oanda exchange rate applicable on 10 September 1996 was 239.340. When applied to the invoices concerned both the individual supplier average rates and the Oanda rate for 10 September 1996 reduced the individual dumping margins but did not affect the weighted average margin of dumping. The application of the overall average exchange rate reduced both the individual dumping margins and the weighted average.

The Ministry is satisfied that in this particular case the method of pricing into the Greek domestic market is such that on a per kilogram basis the date of sale (within a particular selling "season") does not affect the relevance of that sale for the purpose of establishing normal values for the purpose of comparison. Further, the Ministry considers that US dollar export prices, should be calculated using the exchange rates applicable to the date of sale, in this case being the date of the applicable export invoice, because it is not an abnormal situation involving a sustained movement in exchange rates during the period investigated. It is the export sales which are being used to determine whether or not dumping is occurring, and it is the comparison of the price received for those export sales with the comparable normal values, which are relevant.

Dumping margins have been calculated on a per kilogram basis for each shipment for each company. The margins calculated range from nil to twenty five percent.

The weighted average dumping margin for each company is as follows:

Volume of Dumped Goods

The volume of dumped goods has been calculated by applying the percentage of goods found to be dumped during the investigation period to the volume figures shown in Table 2.1 of this report. In the case of Vermion Naoussa __ percent of its exports were found to be dumped while none of AL.M.ME’s exports were dumped. Taken over the total volume of exports by both companies during the investigation period, 31 percent of imports from Greece were dumped. The following volumes of dumped goods have been estimated using this percentage.

3.4 CONCLUSIONS RELATING TO DUMPING

3.4.1 The investigation has established that a significant proportion of canned peaches exported to New Zealand from Greece by Vermion Naoussa are being dumped.

4. INJURY INVESTIGATION

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

8. Material injury to industry(1) In determining for the purposes of this Act whether or not any material injury to an industry has been or is being caused or is threatened or whether or not the establishment of an industry has been or is being materially retarded by means of the dumping or subsidisation of goods imported or intended to be imported into New Zealand from another country, the 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 MATERIAL INJURY CAUSED BY DUMPING

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

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

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

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

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

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

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

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

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

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

In addition, the Secretary must have regard to factors other than dumping which may be injuring the industry, since in accordance with Article 3 of the Agreement, it must be demonstrated that the dumped imports are, through the effects (as set out in section 4.1 above) of dumping, causing material injury. The demonstration of a causal relationship between the dumped imports and the injury to the domestic industry must be based on an examination of all relevant evidence before the authorities, who must examine any known factors other than the dumped imports which at the same time are injuring the domestic industry, and the injuries caused by these other factors must not be attributed to the dumped imports. Factors which may be relevant in this respect include, inter alia, the volumes and prices of non-dumped imports of the product in question, contraction in demand or changes in the patterns of consumption, trade restrictive practices of and competition between the foreign and domestic producers, developments in technology and the export performance and productivity of the domestic industry.

Section 11(1) of the Act provides for the termination of an investigation where the Minister is satisfied in respect of some or all of the goods under investigation, that there is insufficient evidence that material injury to a New Zealand industry has been or is being caused or is threatened by means of the dumping of the goods.

4.2 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.

The following table shows imports of the dumped goods and the relationship of these imports to both the domestic industry’s production and consumption. Import figures have been compiled on the basis set out in paragraph 2.3.2. Dumped goods have been calculated on the basis laid out in paragraph 3.3.4. Domestic production has been compiled from figures supplied by Heinz-Wattie.

Heinz-Wattie claims that injury caused by imports of dumped goods commenced in March 1996. Imports in the year ended April 1996 are therefore mainly in the period before the claimed commencement of injury. The table shows that from 1996 to 1997 imports of dumped goods increased in absolute terms and in relation to production and consumption in New Zealand.

Conclusion

The investigating team concludes that imports of dumped goods have increased in absolute terms and in relation to production and consumption in New Zealand. However, the actual increase is not large in relation to the market, and for the reasons outlined later in this section, it is difficult to attribute all of the increase to dumping, and therefore it is difficult to conclude that the increase in imports attributable to dumping is significant.

4.3 PRICE EFFECTS

4.3.1 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.

In considering price undercutting, the Ministry will normally seek to compare prices at the ex-factory and importer’s ex-store levels, to ensure that differences in distribution costs and margins do not confuse the impact of dumping. Accordingly, the Ministry’s position is generally to compare importers’ prices, including relevant selling and administration costs, which involve similar cost elements to those in the New Zealand manufacturer’s ex-factory price, but not including cost elements relating to the distribution of goods.

The table below shows price undercutting at the ex-factory and ex-store level on a per kilogram basis. Ex-factory prices for each Heinz-Wattie brand are based on average selling prices net of temporary price discounts, permanent discounts, settlement discounts, growth incentives and outwards freight, for the year ended April 1997. Ex-store prices for importers are weighted average prices of imports over the year ended March 1997.

The Ministry has also carried out an investigation into the alleged subsidisation of canned peaches from the European Union, which includes Greece. The extent to which the margin of price undercutting can be attributed to dumping from Greece (based on the amount of the margin of dumping established to this point in the dumping investigation), subsidisation, and other factors, is summarised in the table below.

The tables above show that there is price undercutting attributable to dumping.

4.3.2 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 refers to reductions in prices which have been made by the domestic producers in order to meet the competition from prices of dumped goods. Prices are depressed when they are lower than those in a previous period.

The following table shows the average per kilogram ex-factory selling prices of like goods produced by Heinz-Wattie, by brand and in total for all brands. The selling prices are net of temporary price reductions, permanent discounts, settlement discounts, growth incentive discounts and outwards freight. The cost of can credits, trade marketing, and consumer spend have been treated as selling expenses.

Heinz-Wattie claims injury as a result of imports of the subject goods, commenced in March 1996. The year to April 1996 therefore covers a period largely before injury is claimed to have commenced. The table shows significant depression of prices from 1996 to 1997 for the Wattie’s brand and when all brands are considered.

4.3.3 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. Cost increases not recovered in prices will be reflected in rises in costs expressed as a percentage of sales. Where cost savings have been made, the lack of any price increase will not normally be regarded as price suppression. While the inability to recover cost increases in prices is an important indicator of price suppression, the Ministry will consider any other factors raised as positive evidence of price suppression, including evidence of prices that would have been achieved but for the dumping.

The following table shows Heinz-Wattie’s average per kilogram selling prices and costs.

The table shows that costs have remained static from 1996 to 1997. While costs have increased relative to sales revenue, this results from a decrease in sales revenue rather than an increase in costs, and therefore cannot be considered price suppression.

On the basis of the price information summarised in section 4.5 below, it is unlikely that Heinz-Wattie would have been able to increase its prices, irrespective of the price levels of Greek goods, because of the prices of imports from South Africa which have the impact of dumping and subsidisation removed.

Conclusion On Price Effects

The investigating team concludes there is evidence of price undercutting and price depression, which can be attributed to the dumping of imported goods. There is also evidence of price undercutting when the effects of dumping have been removed which must be attributable to other reasons. There is no evidence of price suppression.

4.4 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.

4.4.1 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 chart shows Heinz-Wattie’s total brightstack (unlabelled finished product, exclusive of Heinz-Wattie imports) for the 1995 to 1997 canning seasons (the February to April periods during which peaches are processed).

Figure 4.2: Brightstack Production

Graphic shows brightstack production levels over the period 1995 to 1997

The chart shows that production increased in 1996 and declined in 1997, but to a level still higher than that achieved in 1995. The recently completed dumping and subsidy investigations into canned peaches from South Africa concluded that the availability of raw peaches was the determining factor of total output. In response to a request for further information on this matter, Heinz-Wattie has stated that:

. . . there is more raw produce available than is required to meet Heinz-Wattie New Zealand markets. There was surplus raw stock available in the 1996/97 season but pressure from the dumped and subsidised imports and the subsequent reduced demand for finished product forced Heinz-Wattie to place constraints on the raw fruit uptake.

The 1996/97 season covers the production canned in the February to April 1997 period. Heinz-Wattie has also supplied details of its raw peach uptake from growers for the 1995/96 and 1996/97 seasons, both of which are up on previous years which were affected by climatic conditions. The peach uptake figures show a small decline from the 1995/96 to 1996/97 season.

In light of Heinz-Wattie’s explanation about the availability of raw fruit, the investigating team accepts that at least in the 1996/97 season, the availability of raw peaches was not a limiting factor on total output. The decline in output from 1996 to 1997 cannot therefore be attributed to a decline in the availability of raw peaches.

Heinz-Wattie has provided the following information relating to its total sales of canned peaches. The figures include sales of imported canned peaches, but sales of imported peaches over the period covered by the table were not significant. Sales revenue is net of temporary price reductions, permanent discounts, settlement discounts, growth incentive discounts, and outwards freight.

The table shows a decline in both volume and revenue from 1996 to 1997, the more significant decline being in revenue.

Conclusion

The investigating team concludes there is evidence of an adverse economic impact reflected in a decline in output and sales, over the period since injury is claimed to have commenced.

4.4.2 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’s sales are also growing. There is no "entitlement" to a particular market share.

The following table shows market share and changes in market share.

The table shows a small decline in the market share held by the New Zealand industry from 1996 to 1997, in a total market which declined over the same period, as a result of an increase in the market share held by the subject goods which also took market share from other imports.

Conclusion

The investigating team concludes there is evidence of an adverse economic impact reflected in a small decline in market share over the period since injury is claimed to have commenced.

4.4.3 Profits

Changes in net profit reflect changes in prices, sales volumes or costs. Dumped imports can impact on any or all of these. Normally, the extent of any decline in profit will be measured against the level achieved in the period immediately preceding the commencement of dumping.

Heinz-Wattie has estimated that, based on sales volume, EBIT per kilogram and market share achieved in the year ended March 1996 for 820 gram cans, and on the assumption that the same levels would have been achieved in the year ended March 1997, it has foregone profits as a result of imports of the subject goods of $_______, covering the effects of both dumping and subsidisation.

While the Ministry does not exclude evidence of loss of profits calculated on the basis outlined above, the assessment of the impact of dumped imports is based on an examination of trends in actual profits in order to establish whether or not there is an actual or potential decline in profits. In some circumstances it may be possible to determine that injury is being caused where profits are not declining, but that would depend on the circumstances of the case, and would need to be based on positive evidence. Such an impact would also need to be attributable to the dumping of imports.

The table below shows an analysis of the actual profits achieved by Heinz-Wattie in years ended April, for all brands and sizes of canned peaches of the type under investigation.

The table shows a significant decline from 1996 to 1997 in total EBIT, in EBIT per kilogram and in EBIT in relation to revenue. However, since dumping has contributed only partly to price undercutting and price depression, the full extent of the decline in profits cannot be attributed to dumping.

Conclusion

The investigating team concludes there is evidence of an adverse economic impact reflected in a significant decline in profits, over the period since injury is claimed to have commenced, not all of which is attributable to dumping.

4.4.4 Productivity

Productivity is the relationship between the output of 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.

Heinz-Wattie has not provided information to quantify the effects on productivity, but has stated:

. . . The productivity of the canned peaches process relies on the efficient utilisation of the plant and facilities required for the process. The importation of the dumped and subsidised peaches by taking market share reduces the volume and/or potential volume of throughput of the plant. Reduced throughput requires the reallocation of resources and skills to other functions in order to contain operating costs. This reduction in resources and skills ultimately results in lower productivity and profitability for the remaining allocated resources.

There is evidence of a decline in output and evidence of a loss of market share to the subject goods. It is therefore likely that there will be a consequent adverse impact on productivity which can be attributed in part to dumped imports.

Conclusion

The investigating team concludes that there is evidence of a likely adverse economic impact reflected in a decline in productivity, over the period since injury is claimed to have commenced.

4.4.5 Utilisation of Production Capacity

The utilisation of production capacity reflects 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 of production capacity will lead to an increase in the unit cost of production, and a consequent loss of profit.

In its conclusions on the dumping investigation into canned peaches from South Africa, which was completed in May 1997, the Ministry considered that any surplus production capacity available to Heinz-Wattie could only to be used to the extent that there were raw peaches available to process. At the time of that investigation it was understood that Heinz-Wattie had processed all the raw peaches available from its suppliers and it was therefore concluded that any under-utilisation of production capacity could not be attributed to dumped imports.

However, as noted above under sales and output, the investigating team accepts that the availability of raw peaches was not a limiting factor on production in 1997.

Heinz-Wattie has provided the following figures relating to its production capacity utilisation, based on a 24 hour day, 7 days per week:

• 1995 over __ days of production, __ percent
• 1996 over __ days of production, __ percent
• 1997 over __ days of production, __ percent

As output declined in 1997, the increase in capacity utilisation recorded in that year presumably results from a decline in capacity.

Heinz-Wattie has stated that during the season capacity not used for peaches is, where possible, used for other products. However, it is not clear to what extent, if any, the surplus capacity has been used for other products.

Conclusion

The investigating team concludes there is no evidence of an adverse economic impact related to a decline in the utilisation of production capacity.

4.4.6 Factors Affecting Domestic Prices

The investigating team is not aware of an adverse economic impact related to factors affecting domestic prices.

4.4.7 The Magnitude of the Margin of Dumping

As shown in section 3.3, the investigating team has found, based on the information available at this point, dumping during the period of investigation occurred only on shipments from Vermion Naoussa which showed a weighted average dumping margin of __ percent.

In 1997 dumped imports from Greece, on the basis described in section 3.3 represented approximately 7 percent of all imports.

While the margin of dumping is substantially lower than the margin of undercutting, as shown in Table 4.3, on a $/kg basis it constitutes a significant proportion of this element of material injury.

4.4.8 Other Adverse Effects

Inventories

Heinz-Wattie claims that "The taking of market share by the dumped imports will leave Heinz with surplus inventory", and that "In the short period this [inventory] will have to be disposed of on the export market at reduced returns .... In the longer term this will result in cancelled intake from growers who have just increased their capacity to meet the projected demand".

Because all production takes place between February and April of each year, inventory levels will normally peak at the cessation of production and then, apart from imports, will decline for the remainder of the season as stocks are sold.

The following table shows inventory levels for the quarters ending April (peak inventory after production), July, and October for the 1995, 1996, and 1997 production years. The table also shows inventory as a percentage of Heinz-Wattie’s production in the same year.

The inventory levels in the table in 1996 and 1997 relate to a period after the time Heinz-Wattie claim injury commenced. Quarterly inventory levels in 1996 increased in absolute terms, but declined in relation to production in comparison to 1995 levels. The inventory level in April 1997 has increased significantly, both in absolute terms and in relation to production, indicating an adverse economic impact resulting from a build up of inventory in that year.

Growth

Heinz-Wattie claims that while the total New Zealand market for canned peaches has grown, imports of the dumped goods have prevented it from attaining its expected share in this growth. However, the information available on market share shows that the total New Zealand market declined from the year ended April 1996 to the year ended April 1997, while Heinz-Wattie lost market share over this period.

Employment

In its application, Heinz-Wattie has stated that because of efforts made to halt falls in market share, there has been little impact on employment. Details of employee numbers supplied by Heinz-Wattie confirm this.

Brand loyalty

Heinz-Wattie has claimed that price undercutting by imports of the subject goods "unfairly erodes brand loyalty" and that this reduction of brand loyalty "allows other brands easier entry to the fragmented market thus producing further erosion of Heinz-Wattie market share." However, no quantifiable evidence has been provided to support these claims.

Wages, Cash flow, Return on Investments, and Investments

In response to requests for specific information on these factors, Heinz-Wattie has stated that "These issues were discussed with the Ministry during the verification visit into dumping of peaches from South Africa. The same conditions still apply . . ." However, Heinz-Wattie has made some general comments on some of these factors in its application. Each of these factors is therefore considered separately below by reference to the Final Report on the dumping of canned peaches from South Africa (referred to as the South African Final Report), along with reference to the general comments made by Heinz-Wattie where applicable.

Wages

In the South African Final Report (under the heading "Employment and Wages") it is reported that Heinz-Wattie stated that _____________________________________ ______________________________________ .

The extent to which injury would need to be suffered before this option would be exercised is not stated, nor is the loss of employment which would result quantified.

Cash Flow

The South African Final Report notes that the industry provided no information relating to claims about any adverse effects on cash flow.

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 South African Final Report notes that information provided relates to all of Heinz-Wattie’s activities, and because canned peach sales account for only five percent of total sales, the figures were not considered to be a useful indicator of injury to the canned peach industry.

In its application, Heinz-Wattie states that, "…the failure to maintain market share in a market that has been increased mainly as a result of market development initiatives and expenditure by Heinz deprives them of a return on their investment". Heinz-Wattie has not provided return on investment calculations. However, the decline in profitability in 1997 noted above suggests that there will be a corresponding decline in the rate of return on investments.

Investments

The South African Final Report notes that Heinz-Wattie stated that future investment in production capacity could occur only if domestic volumes are maintained along with satisfactory returns.

In its application, Heinz-Wattie explained that future investment policies are determined by its multinational owner based on world standard efficiencies of production. Heinz-Wattie stated that, "Should considerable market share be lost or sales returns become uncompetitive Heinz-Wattie would have to consider sourcing branded peaches from other world producers .... In which case there would be no future investment in local production capacity." However, this statement provides insufficient evidence on which to base analysis and enable any conclusions to be drawn in this area.

Conclusion On Other Adverse Effects

The investigating team concludes there is evidence of an adverse economic impact reflected in a build up in inventory, and a likely decline in the return on investments, over the period since injury is claimed to have commenced. There is no evidence of an adverse economic impact related to a decline in growth, employment, wages, brand loyalty, cash flow and investments.

4.5 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

Subsidisation

The Ministry has carried out an investigation into the alleged subsidisation of canned peaches from the European Union, which includes Greece. The injurious effects of subsidy and dumping cannot be cumulated. In the price undercutting calculations in section 4.3.1 above, in order to differentiate any injurious effects of any dumping from any injurious effects of subsidisation, the margin of price undercutting was calculated after adding back to the imported price the weighted average margin of dumping established to this point in the dumping investigation and the amount of subsidy. This calculation showed there was still a margin of price undercutting remaining, indicating that if a remedy was applied which is equal to the full amount of dumping it would remedy only the injurious effects resulting from any dumping and not remedy any injurious effects resulting from subsidisation. Therefore, while the extent of price undercutting which can be attributed to subsidisation is significant, and consequently is likely to be another cause of adverse economic impact, the price undercutting analysis shows that the price effects of dumping can be differentiated from those resulting from subsidisation. It is more difficult to separate any impact arising from increases in volume where the volume increase can be attributed to both dumping and subsidisation.

Volume and prices of imports not sold at dumped prices

Heinz-Wattie has stated that "Other imports of like goods from Australia are sold in the New Zealand market but these products have retail pricing equivalent to the Oak product and as such do not cause injury to Heinz-Wattie. The dumped and subsidised products that set the undercutting price levels are those from Greece and South Africa".

Imports from countries other than Greece declined in absolute terms, and in relation to the total New Zealand market, from the year ended April 1996 to the year ended April 1997. However, imports from other countries in the year ended April 1997 were still about three times greater than imports of the subject goods. In the years ended April 1996 and 1997, Australia was by far the largest source of imports from other countries, representing 73 percent and 83 percent of such imports in 1996 and 1997 respectively. The only other significant source of imports from other countries was South Africa, which represented 24 percent and 14 percent of such imports in 1996 and 1997 respectively.

Anti-dumping duty was imposed on imports of canned peaches from South Africa in August 1996. A price undertaking relating to an export subsidy was accepted in March 1997 from Langeberg Foods International, the largest exporter to New Zealand of canned peaches. Countervailing duties were imposed on imports of canned peaches from South Africa from exporters other than Langeberg Foods International, in May 1997. Both countervailing duties and the associated undertaking were terminated on 26 November 1997 with effect from 19 July 1997.

Anti-dumping duty on imports of canned peaches from South Africa was in place over most of the year ended April 1997 and should therefore have largely removed injury attributable to dumped imports over that period. The price undertaking and countervailing duty were in place either largely or wholly outside of the year ended April 1997, and therefore any injury due to subsidised imports from South Africa would have occurred over this period. However, the dumping and subsidy investigations showed that even after the margin of dumping and amount of subsidy was removed, there was still a price advantage remaining with the South African product, which may have had an economic impact on Heinz-Wattie, and which could not be attributed to dumping or subsidisation.

The following table shows volumes of dumped and non-dumped imports.

Analysis of the table shows that imports of dumped goods increased by 141,000 kilograms or 503 percent between 1996 and 1997 whereas non-dumped imports declined by a total of 297,000 kilograms or 12 percent over the same period. The largest individual decline between 1996 and 1997 was by South African imports (by definition un-dumped due to the operation of anti-dumping duties) which fell by 50 percent, whilst imports from countries other than those specified in table 4.12 declined by 81 percent. The chart below shows these trends.

In volume terms, imports from Greece constituted four percent of total imports in 1996 (a drop from 13 percent in 1995) but had risen to 23 percent in 1997. On the basis outlined in 3.3.4 above, dumped imports fell from four percent in 1995 to one percent in 1996 before rising in 1997 to 7 percent, a faster increase than overall Greek imports.

The following table analyses trends in pricing. The ex-store prices for imports from Australia and South Africa have been estimated by adding the average cost of importing over the period of investigation to the average VFD/kg for 1997. (it should be noted that the tariff item and statistical key from which the average VFD/kg figures are taken cover a wider range of goods than those subject to investigation, and that no anti-dumping duty was paid on imports of canned peaches from South Africa from its imposition in August 1996 to April 1997). The figures for Greece have been adjusted to remove both dumping and subsidisation.

The table indicates that, on the basis of price, imports from South Africa are likely to be price undercutting, with a consequent impact on Heinz-Wattie, while those from Australia are not, although the VFD/kg figure for Australian imports appears to be higher than would be expected for canned peaches only and may be affected by the price of other goods included under the tariff item. The table also shows there is a price advantage remaining with canned peaches from Greece after taking account of the amount of dumping and subsidisation.

Surplus Production Capacity

In section 4.4.6 above the production capacity utilisation figures are recorded and show significant under-utilisation of capacity. However, the canning of peaches takes place over only a short period each year (__ days in 1997), and Heinz-Wattie has stated that during the season capacity not used for peaches is, where possible, used for other products. Details of the extent to which capacity has been used for other products during the peach season have not been provided.

While there is evidence of significant under-utilisation of capacity, the short period during which peach canning takes place and the possibility of spare capacity being used for other products, make it unlikely that under-utilisation of capacity is a significant cause of injury not related to dumping.

Changes in Consumption Patterns

Food Marketers has submitted that markets around the world are trending away from canned fruits to other kinds of desserts because the assortment of desserts on offer has widened enormously and because consumers are eating away from home more often. Food Marketers has also submitted that as a result of social change, there is a trend towards smaller packages of all kinds of prepared food, which in the case of canned fruit is in the form of a trend towards single serve 140 gram plastic tubs. Food Marketers therefore consider that the long term outlook for 820 and 425 gram cans is a continuation of their declining market share. Food Marketers did not provide any analysis of actual sales trends to support its submission, and therefore the Ministry is unable to reach a conclusion about whether or to what extent this factor may be relevant.

Heinz-Wattie has stated that, "There has been no contraction in demand and as demonstrated in both the subsidy and dumping complaints the market has grown both overall and in respect to the 820 gram product".

The information available on market size shows that the total New Zealand market declined from the year ended April 1996 to the year ended April 1997. However, it is not clear if this represents a longer term decline in the market, since the market increased in 1996, and in 1997 market size was still ahead of that in 1995. Information from previous investigations into canned peaches from South Africa shows that the total New Zealand market increased consistently from 1993 to 1996.

Restrictive Trade Practices and Competition

There is no information available to the investigating team to indicate that this factor has had an adverse impact on the New Zealand industry.

Developments in Technology

Heinz-Wattie has stated that it, "is unaware of any developments in technology or presentation of the dumped or subsidised imports. There is also no suggestion of any in the presentation and marketing of the product".

No other submissions relating to developments in technology were received. Research carried out by the investigating team did not reveal any developments in technology which have had an adverse impact on the competitive position of the New Zealand industry.

Export Performance and Productivity

Heinz-Wattie has provided details of the volume of its exports for the years ended April 1995, 1996 and 1997 which shows that the volume of exports is negligible.

Imports by the Industry

Heinz-Wattie has in the past imported canned peaches from Greece. However, such imports were in response to the shortages of raw peaches available for processing following the 1993/94 growing season. Recent imports by Heinz-Wattie have been of snack packs of peaches from Australia. Heinz-Wattie has not imported any canned peaches from Greece during the period injury is alleged to have been caused by dumped imports from Greece.

Conclusion on Other Causes of Injury

The investigating team concludes that the subsidisation of peaches from Greece and Spain, the subsidisation of peaches from South Africa, and the price advantage held by peaches from South Africa after the effects of dumping and subsidy are removed, have also adversely affected the New Zealand industry. However, the extent of price undercutting remaining after the effects of dumping have been removed, indicates that any anti-dumping duty applied to remedy injury caused by dumping of peaches from Greece will not also remedy the effects of other factors.

The investigating team concludes that it has not attributed injury to dumping which is attributable to surplus production capacity, changes in the consumption patterns, restrictive trade practices and competition, developments in technology, the export performance of the industry, and imports by the industry.

4.6 CONCLUSIONS RELATING TO INJURY

The following is a summary of the conclusions reached during the investigation:

(a) Import volumes of dumped goods have increased in absolute terms and in relation to production and consumption in New Zealand, but it is not concluded that the increase attributable to dumping was significant.

(b) There is evidence of price undercutting and price depression, proportion of which can be attributed to the dumping of imported goods. There is no evidence of price suppression.

(c) Consequent primarily upon the price effects, there is evidence of an adverse economic impact reflected in a decline in output, sales and profits; a decline in market share; likely declines in productivity and in return on investments; and a build up in inventory.

(d) Factors other than Greek dumping have had an impact on the industry.

It is concluded that on the basis of these findings, material injury to the New Zealand industry can be attributed to the dumping of canned peaches from Greece.

5. CONCLUSIONS

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

(a) some of the goods under investigation are being dumped; and

(b) by reason thereof material injury to an industry has been caused.

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 Collector 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 these 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 LEVEL OF DUTY

In accordance with section 14(2)(a) of the Act, the rate or amount of dumping duty which may be applied cannot exceed the margin of dumping that has been found, while under section 14(3) the Minister is required to consider the level of duty necessary to prevent material injury.

As noted in table 4.3 above, when taken across all Heinz-Wattie brands, some __ cents/kg price undercutting was present of which __ percent could be attributed to dumping. The investigating team examined the price levels which could be expected to result from the removal of dumping, and found that it would be equivalent to an average increase of __ cents/kg. The margin of price undercutting is higher than this figure, and price increases of a greater magnitude would be necessary to remove injury.

The investigating team considers that the setting of anti-dumping duties at the level of the margin of dumping found will redress the injury due to dumping and will not affect injury due to other factors.

6.2 AMOUNT OF ANTI-DUMPING DUTY

As noted in paragraph 3.3.3 above, no dumping was found in respect of the canned peaches exported by A.L.M.ME, but a significant level of dumping was found in respect of exports by Vermion.

The range of can sizes and product types covered by the definition of the goods under investigation is outlined in section 2.1 of this report, which also notes that imports during the period of investigation were solely of 820 gram cans. As stated in paragraph 2.1.3 the Ministry did not consider that cans of this size should be separately considered within the investigation as they compete in the retail sector with all other can sizes (the retail sector is considered to include all product types in can sizes up to and including a nominal size of 3 kilograms). It should also be noted that all dumping calculations in this case have been made on a per kilogram basis.

The investigating team considered three approaches to the amount of anti-dumping duties, namely:

• a specific amount representing the weighted average dumping margin found,
• an ad valorem rate set at the weighted average dumping margin of 17 percent, and
• Normal Value (Value For Duty Equivalent) amounts based on the actual export prices found during the investigation.

Duties set as specific amounts, namely the dollar equivalent of the difference between normal values and export prices, would have the disadvantage of being based on normal values and export prices in the year ended March 1997. The investigating team is aware that since that time price movements have occurred for the goods under investigation and any duty based on an earlier period may be greater than any current margin of dumping. An ad valorem rate based on the weighted average dumping margin of 17 percent would give rise to similar problems.

It is proposed that the duty imposed should be based on the margin of dumping, being the difference between the Normal Value (Value For Duty Equivalent) (NV(VFDE)) amount per kilogram, established from exports of the subject goods by Vermion, and the value for duty of the goods at the time of importation. The NV(VFDE) amounts are calculated by adding the relevant adjustments made in respect of the export price, as summarised in section 3.1 of this report, to the normal values established on the basis summarised in section 3.2 of this report. The effect of such a duty is to ensure that the amount of anti-dumping duty collected does not exceed the margin of dumping. Administratively, this approach also ensures that reassessments of the anti-dumping duty can be completed in a timely manner to reflect the current dumping situation.

It is proposed that the NV(VFDE) amount imposed should cover only exports of 820 gram cans by Vermion. The actual rate calculated for Vermion is based on the average Normal Value of dumped transactions during the period investigated, converted to US dollars at the average exchange rate for the period 1-10 February 1998. This approach ensures that exchange rate movements since the investigation period are taken into account. For exports by Vermion in can sizes other than 820 grams the weighted average margin of dumping, currently 17 percent, should be applied. Exports by A.L.M.ME should be assigned a nil rate of anti-dumping duty. Exports by Greek suppliers other than Vermion and A.L.M.ME should be subject to anti-dumping duty at the weighted average margin of dumping, being 17 percent.

Greek suppliers other than Vermion and A.L.M.ME will have the opportunity to lodge a request, with relevant supporting evidence, that NV(VFDE) amounts be established. Similarly, Vermion will have the opportunity to request the establishment of NV(VFDE) amounts for can sizes other than 820 grams. It is proposed that any additional NV(VFDE) amounts established through this process be advised to the New Zealand Customs Service and notice given in the New Zealand Gazette by the Secretary.

It is further proposed that the Greek Drachma to US dollar exchange rate be monitored and that should it be necessary, new NV(VFDE) amounts be established by the Secretary.

Anti-dumping Duties

The proposed anti-dumping duties are therefore as follows, the NV(VFDE) amount for Vermion has been expressed in US dollars as this is the currency in which the dumped goods are invoiced:

6.3 IMPACT OF ANTI-DUMPING DUTIES

For the New Zealand producer the primary impact of the imposition of anti-dumping duties will be the removal of the dumping element in the price of canned peaches being imported from Greece and hence the removal of this cause of injury to the industry.

It is considered that results of the proposed anti-dumping duties will not remove the price sensitivity of the category as the ongoing competition between Australian producers and Heinz will continue. As noted in paragraph 4.5.9 above, canned peaches from both South Africa and Greece will continue to provide competition for New Zealand like goods even with the remedial duties in place.

7. RECOMMENDATIONS

It is recommended on the basis of the information obtained during the course of the investigation into the dumping of canned peaches from Greece:

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 canned peaches from Greece into New Zealand:

(a) the goods are being dumped; and

(b) by reason thereof material injury to an industry has been or is being caused.

2. That the Minister, having made a determination under section 13 of the Act, give notice of the rate or amount of duty determined under section 14(4) of the Act to be imposed in respect of those canned peaches from Greece that are dumped, and that in accordance with section 17 of the Act, such duty shall be payable from the day after the date of the Minister’s decision.

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.