F.N0. 14/11/2004-DGAD

GOVERNMENT OF INDIA

MINISTRY OF COMMERCE & INDUSTRY

DEPARTMENT OF COMMERCE

(DIRECTORATE GENERAL OF ANTI-DUMPING & ALLIED DUTIES)

 New Delhi, the 16^th November 2005

Final Findings

Subject:        Anti-dumping investigation concerning imports of 1-Phenyl-3-Methyl-5-Pyrazolone from China PR

A. Background and Initiation

F.N0. 14/11/2004-DGAD: Whereas on the basis of an application filed by M/s Prima Chemicals and Polygon Chemicals, Ahmedabad, (herein after referred to as applicants), the Designated Authority (hereinafter referred to as the Authority) initiated an investigation in terms of the Rules 5 of the said Rules, vide notification dated 1^st December 2004, published in the Gazette of India, Extraordinary, in accordance with the Customs Tariff Act 1975 as amended in 1995 (hereinafter referred to as the Act) and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, (hereinafter referred to as the Rules), into alleged dumping of 1-Phenyl-3-Methyl-5-Pyrazolone (herein after referred to as subject goods), originating in or exported from the Peoples Republic of China (herein after referred to as subject country).

B.        Procedure

            2.         Procedure described below has been followed with regard to this investigation after issuance of the public notice notifying the initiation of the above investigation by the Authority.

(i)         The Designated Authority sent copies of initiation notifications dated 1^st December 2004 to the Embassy of the subject country in India, known exporters from the subject country, importers as per the list available, and the domestic industry and requested them to make their views known in writing within 40 days of the initiation notification.

(ii)        Copies of the non-confidential version of the petition filed by the domestic industry were made available to the known exporters and the Embassy of the subject country in accordance with Rules 6(3) supra.

iii)        The Embassy of the subject country in New Delhi was informed about the initiation of the investigations in accordance with Rule 6(2) with a request to advise the exporters/producers from their country to respond to the questionnaire within the prescribed time.  A copy of the letter, petition and questionnaire sent to the exporter was also sent to the Embassy of subject country along with a list of known exporters/ producers.

iv)        The Authority sent questionnaire, to elicit relevant information, to the known exporters from subject countries as mentioned below in accordance with the rule 6(4):-

1.         GOLDLINK INDUSTRIES CO. LTD.,

17/F, 258, ZHONG SHAN ROAD,

WUXI, PEOPLES REPUBLIC OF CHINA

2.         DINOVHRM JISNHDU WUXI IMPORT EXPORT CORPORATION,

17/F, 258 ZHONG SHAN ROAD,

WUXI, PEOPLES REPUBLIC OF CHINA

3.         JIANGASU CHANGYU CHEMICAL CO., LTD.

ZHONGZHICHANG LEYU TOWN ZHANGJIAG CITY,

JIANGSU, 215621,

PEOPLES REPUBLIC OF CHINA.

v)         In response to the above notification no response has been received from any exporter from the subject country.

vi)        Questionnaires were sent to known importers and Consumers of subject goods in India calling for necessary information in accordance with Rule 6(4). However, only one response has been received from one importer of the subject goods i.e. M/s Apex Dyes and Intermediates.  Comments of the importer and other interested parties to the extent they are relevant to the case, have been taken into consideration in this finding.

vii)       Request was made to the Directorate General of Commercial Intelligence and Statistics (DGCI&S) and Central Board of Excise and Customs (CBEC) to arrange details of imports of subject goods for the past three years, including the period of investigations;

viii)      The Authority made available non-confidential version of the evidence presented by various interested parties in the form of a public file kept   open for inspection by the interested parties;

ix)        Optimum cost of production and cost to make and sell the subject goods in India based on the information furnished by the petitioner on the basis of Generally Accepted Accounting Principles (GAAP) was worked out so as to ascertain if Anti-Dumping duty lower than the dumping margin would be sufficient to remove injury to   Domestic Industry;

x)         A Public hearing was held on 12^th July 2005 to provide an opportunity to the interested parties to make oral submissions before the Authority. The views and arguments of the interested parties reproduced in writing has been taken on record and addressed at appropriately.

xi)        The Authority issued disclosure statements to all interested parties to this investigation on 6^th October 2005 intimating the essential facts under consideration by the Authority as well as methodology of determination proposed to be adopted by the Authority, and calling for the comments of the interested parties to the said disclosure. However, the Authority notes that only the domestic industry has filed its comments to the disclosure statement. Comments of the domestic industry to the disclosure statement, to the extent they are relevant, have been considered by the Authority in this finding

(xii)            Investigation was carried out for the period starting from 1.4.2003 to 31.3.2004 (POI).

xiv)      The Authority examined the confidentiality claims of various interested parties in respect of the data submitted by them. The information which by nature confidential or which have been provided on a confidential basis by the interested parties alongwith non-confidential summary thereof have been treated confidential. *** in this Notification represents information furnished by the petitioner on confidential basis and so considered by   Authority under the Rules;

C.        Product under Consideration

3.         The product involved is an organic chemical i.e.1-Phenyl-3-Methyl-5-Pyrazolone, (hereinafter termed as the subject good) used in dye and pharmaceutical industry for manufacture of Analgin, Solvent Dyes and Pigment Dyes, and Pigment Orange 13. The product is classified under Chapter 29 of Customs Tariff Act and sub heading 29331920. However, the product is allegedly imported under several other heads at six digit level including the following: 293319, 291634, 291739, 292429, 293311, 293359, 294200 and 980200.The Customs and ITC HS classifications are however, indicative only are in no way binding on the scope of the present investigation.

D.        Like Article

4.         In terms of Article 2.6 of the Agreement the term “like product” (“product similaire”) shall be interpreted to mean a product which is identical, i.e. alike in all respects to the product under consideration, or in the absence of such a product, another product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration. The Authority notes that several pyrazolones are manufactured by the domestic industry including this specific pyrazolone. Therefore, for the purpose of determination of the domestic industry and standing the specific pyrazololne has been considered as the like article to the product manufactured by the domestic industry.

E.                             Domestic industry and standing

5.         The application has been filed by M/s Prima Chemicals and Polygon Chemicals, Ahmedabad. Standing of the applicants to file the application has been examined in terms of the Rule 5 of the said Rules. Since there are no other known producer of this product having substantial production of the subject goods and no comments or opposition has been received from any interested parties, the Authority holds that the applicants command a major proportion of domestic production of the products involved and therefore, satisfy the criteria of standing as domestic industry to file this application in terms of Rule 5(3) (a) of the Rules.

F.                             Views of interested parties and issues raised

6.         The Authority notes that none of the exporters, importers (except M/s. Apex Dyes and Intermediates), and users of the subject goods have filed any response or submitted any comments on initiation of the above investigation.  M/s. Apex Dyes and Intermediates has filed an importer questionnaire and submitted that they are not the regular importer of the subject goods.

7.         The domestic industry in its submission has argued that the product under consideration is produced in very limited countries in the world. It has also been submitted that the technology for production is also not widely and easily accessible.  Therefore, it makes business sense for those holding significant unutilized capacities to attempt to get the third country producers out of business in order to gain monopoly. They have argued that this explains dramatic fall in the prices in respect of imports from China.  The domestic industry also contends that as per their information collected from the websites of Sinochem Tianjin and Anhui Bayi Chemicals Group co. Ltd., these Chinese producers are under state control. Therefore, the applicant has argued that they should be treated as operating under non-market economy and normal value in china is required to be determined in accordance with the provisions relating to non-market economy companies.

8.         The Authority has taken note of the above submissions of the domestic industry and interested parties for the final findings.

G.        Dumping determination

a)         Normal Value

9.         The Authority notes that no response has been received from any exporter of the subject goods from China PR. No information regarding the normal value of the subject goods in the subject country has been made available by any other interested party. The Authority also notes that non-market economy presumption has not been rebutted by any exporter from the subject country. Therefore, the Authority holds that the Chinese producers of the subject goods operate under non-market economy conditions and the normal value in China PR has been constructed in terms of Rule 7 of Annex I to the Rules.

10.       The domestic industry has submitted that normal value cannot be determined on the basis of price or constructed value in a market economy third country for the reason that the relevant information i.e. “comparable price in the ordinary course of trade for the like article when meant for consumption in such market economy third country” alongwith its cost of production and all other associated information are not reasonably available for the product under consideration. They have further argued that the product is produced in very limited countries in the World and as per their understanding India and China are the only producers of the product under consideration. Therefore,. price from such third countries to India could not be adopted for the reason that such prices are influenced by the prices from subject countries and the volume of imports is too low. In view of the above, the domestic industry has argued that the normal value in the non-market economy exporting country should be determined on any other reasonable basis, including the price actually paid or payable in India for the like product.

11.       The Authority notes that import of the subject goods from China PR constitutes almost 98% of total imports to India and therefore, there is no comparable price to determine the normal value in China on the basis of third country export price to India. The cost of production and prices of the subject goods in any third country is also not available to make an determination based on the first provision of Rule 7 referred above. Therefore, the Authority has constructed the normal value in China based on price actually paid or payable in India duly adjusted for a reasonable profit margin as per the said provision. Accordingly, the Normal value for Chinese exporters has been estimated as Rs ***** per Kg.

b)        Export price

12.       In the absence of any cooperation from the subject country the export price ahs been determined based on the CIF import price as per the import data available with the Authority. Based on the above data the net ex-works export price of the exports from China PR is proposed to be determined as Rs**** per Kg.

c)         Dumping margin

13.       The ex-works constructed normal value has been compared with the net ex-works export price to determine the dumping margin, which works out as follows:

                                                                                                Rs/Kg

H.        Injury and Causal Link Determination

14.       The following are the essential facts before the Authority in respect of alleged injury to the domestic industry caused by dumped imports from China, which will form the basis for the final determination by the Authority. The Authority notes that no interested party has made any submission in respect of the injury claims of the domestic industry.

15.       Having examined the degree and extent of dumping from China the Authority has examined the injury caused to the domestic industry, if any, and the causal link between the dumped imports and injury so suffered by the domestic industry. The Authority holds that the applicant Companies, i.e. M/s Prima Chemicals and M/s Polygon Chemicals, constitute major proportion of Indian production of the subject goods during the period of investigation. Therefore, for the purpose of injury determination the applicant companies have been held to constitute the domestic industry within the meaning of the Rules.

16.       Rule 11 of Antidumping Rules read with Annexure–II provides that an injury determination shall involve examination of factors that may indicate injury to the domestic industry, “…. taking into account all relevant facts, including the volume of dumped imports, their effect on prices in the domestic market for like articles and the consequent effect of such imports on domestic producers of such articles….” In considering the effect the dumped imports on prices, it is considered necessary to examine whether there has been a significant price undercutting by the dumped imports as compared with the price of the like article in India, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which otherwise would have occurred, to a significant degree.

17.       For the examination of the impact of the dumped imports on the domestic industry in India, indices having a bearing on the state of the industry such as production, capacity utilization, sales volume, stock, profitability, net sales realization, the magnitude and margin of dumping, etc. have been considered in accordance with Annexure II of the rules supra.

18.       All economic parameters affecting the Domestic Industry as indicated above such as production, capacity utilization, sales volume etc. have been examined as under:

H.1      Volume Effects of Dumped Imports: Import volumes and market share

19.       With regard to the volume of the dumped imports, the Designated Authority is required to consider whether there has been a significant increase in dumped imports, in absolute terms or relative to production and consumption in India. As far as import volume is concerned the DGCI&S import data as well as import data reported in secondary sources i.e. IBIS have been examined. The Authority notes that the product under consideration is imported under product classification No 293319 at 6-digit level and the same classification also covers several other pyrazolones. Therefore, after comparing the transaction level data of both the sources and pruning unrelated imports the volume of imports have been determined as follows:

a)                             Actual and potential increase in Volume of imports                                                                                                                                     Qty in Kgs

20.       The above data indicates that the dumped imports from the subject country account for almost 100% of the total import of the subject goods into India and the imports have grown in absolute terms by 1400% compared to the base year.

b)        Demand, Output and Market shares

i)          Production and Capacity Utilization of the Domestic Industry

21.       The Authority notes that the domestic industry produces several pyrazolones in the same plant and therefore, for the plant utilization total production of the plants has been taken into account. The above data indicates that capacity of the domestic industry has not increased. However, total production and capacity utilization of the domestic industry has declined significantly after showing an improvement in the year 2002-03. But the production of the subject goods has been constantly declining compared to the base year.

ii)         Sales of Domestic Industry

22.       The production of the domestic industry has been examined with reference to the demand in the domestic market and the ability of the domestic industry to sell in the domestic market, which is shown below.

Qty in Kgs

23.       The data indicates that while the demand of the product has increased by 66% compared to the base year, the sales of the domestic industry has declined by 23% and imports of the subject goods (out of which dumped imports from China accounts for about 98%) has grown by about 1400%.

iii)        Demand and Market Share

24.       The above data indicates that the market share of the dumped imports has increased from 6.68% in the base year, to 56.69% in the POI, while the domestic industry has lost significant market share from 93% in the base year to 43% in the POI.

H.2      Price Effect of the Dumped imports on the Domestic Industry

(i)         Price undercutting and underselling effects

25.       The impact on the prices of the domestic industry on account of the dumped imports from subject country has been examined with reference to the price undercutting, price underselling, price suppression and price depression. For the purpose of this analysis the weighted average cost of production, weighted average Net Sales Realization (NSR) and the Non-injurious Price (NIP) of the Domestic industry (worked out after normating the costing information of the Domestic Industry) have been compared with the landed cost of imports from the subject countries.

Rs/Kg

26.       While the cost of production of the subject goods shows a significant rise compared to the base year, the selling price (net sales realization) of the domestic industry shows a marginal decline.

27.       Price undercutting has been determined by comparing the weighted average landed value of dumped imports from the subject countries over the entire period of investigation with the weighted average net sales realization of the domestic industry for the same period. For this purpose landed value of imports has been calculated by adding 1% handling charge and applicable basic customs duty to the value reported in the DGCI&S transaction wise data of import prices from the subject countries.  The landed value of imports from the subject country shows significant decline after increase in the year 2001-02.

28.       The prices of the dumped imports from the subject country undercut and undersell the prices of the domestic industry and price undercutting and underselling is positive and significant.

(ii)        Price suppression and depression effects of the dumped imports:

29.       The price suppression effects of the dumped imports have also been examined with reference to the cost of production, net sales realization and the landed values from the subject countries. 

30.       The above table shows that the landed value of goods from the subject country has significantly declined compared to the base year while the cost of production of the subject goods shows substantial increase compared to the base year. But the selling price shows marginal decline in spite of increase in cost of production.  The above data indicates that the dumped imports have suppressing effect on the prices of the domestic industry, as the domestic industry has not been able to raise its prices to accommodate rising cost of production.

H.3      Examination of other Injury Parameters

31.       After having examined the effect of dumped imports on the volumes and prices of the domestic industry and major injury indicators like volume and value of imports, capacity, output, capacity utilization and sales of the domestic industry as well as demand pattern, with market shares of various segments in the earlier section, other economic parameters which could indicate existence of injury to the domestic industry have been analysed as follows:

i)          Productivity

32.       The above data shows that the productivity per employee has declined. However, the decline is also due to increase in the number of employees while the production of the subject goods has been declining.

ii)         Profits and actual and potential effects on the cash flow

33.       The Authority examined the cost of production of the domestic industry on the basis of their cost records for the product involved. The sales realization was also examined from their sales records. Accordingly, the profitability of the domestic industry has been examined as under.

Rs/Kg

34.       The above data indicates that the cost of production of the domestic industry has shown an upward trend compared to the base year. However, the sales realization of the domestic industry has marginally declined, resulting in decline in the profit margin of the domestic industry and the domestic industry has recorded significant loss in its domestic operation coinciding with the dumping from China PR

iii)        Employment and wages.

35.       Employment and wages as indicator of injury shows that the number of employees as well as, expenses on account of salary and wages have increased in spite of decline in the production level.

iv)                           Return on investment and ability to raise capital

36.       The return on capital employed by the domestic industry shows deterioration compared to the base year and the return on capital employed has become negative during the POI.

v)                 Investment

37.       There has been no capacity addition or any fresh investment by the applicants during the investigation period.

vi)               Magnitude of Dumping

38.       Magnitude of dumping as an indicator of the extent to which the dumped imports can injure the domestic industry shows that the dumping margin determined against the subject country, is substantial for the POI.

vii)             Factors affecting prices

39.       Change in cost structure, competition in the domestic market and prices of other sources have been examined for analyzing the factors other than dumped imports that might be affecting the prices in the domestic market. There is no viable substitute to this product and there is no other viable domestic producer of the subject good in India to provide domestic competition and affect the prices of the domestic industry. No other factor that could have affected the prices of the domestic industry has been brought to the notice of the Authority.

viii)           Inventories

40.       The inventory position of the domestic industry shows marginal increase in the inventory level, both in absolute terms and as a percentage of sales.

H.4      Other Known factors and Causal Link

41.       Having examined the volume and price effects of dumped imports from the subject country as well as other dumped sources, other factors that may have affected the performance of the domestic industry, have been examined as mandated under Article 3.5 of ADA to find if other factors if any, other than dumped imports have caused injury to the domestic industry. In this connection the following parameters have been examined:

i)                       Volume and prices of imports from other sources

42.       The Authority notes that imports from the subject country accounts for more than 98% of the total imports of the subject goods to India. Therefore, volume and price of imports from sources other than the subject country does not have any effect on the domestic industry.

ii)         Contraction in demand and / or change in pattern of consumption

43.       The data on domestic consumption of the product shows a significant growth. Therefore, contraction in demand or consumption factor could not have affected the domestic industry.

iii)        Trade restrictive practices of and competition between the foreign and domestic producers

44.       The Authority notes that the applicants are the only viable producers of the subject goods in India. Therefore, domestic competition does not have any adverse effect on the prices of the domestic industry. The subject goods are freely importable and there are no trade restrictive practices in the domestic market. Major portion of the imports of the subject goods takes place from the dumped sources, including the subject country. Other exporting countries do not have substantial market share in Indian market to effectively compete. Therefore, the current injury to the domestic industry cannot be attributed to trade restrictive practices or competition between foreign and domestic producers.

iv)        Development of technology and export performance

45.       There is no significant technological issue involved in the production of the subject goods. The domestic producers do not have any export of the subject goods in POI and the previous year. Therefore, technology or export performance of the domestic industry does not have any effect on the performance of the domestic industry.

H.5      Conclusion on Injury and Causal Links

46.       Examination of the above factors indicate that

a)         Imports of the subject goods from subject country have increased manifold. Rate of increase in imports from subject country was significantly higher than increase in demand, resulting in increase in market share of dumped imports. As a consequence, share of the domestic industry declined.

b)         Sales and production of the domestic industry have declined resulting in loss of market share of the domestic industry and thus resulting in increased in inventory. Further, petitioners are not able to increase their sales as a result of imports, even when both sufficient demand and capacity exist in the Country

c)         The prices of the domestic industry declined despite increase in the prices of raw materials. As a result of significant price undercutting, the domestic industry was forced to sell the product at sub-optimal prices. This resulted in adverse performance in terms of profitability, cash flow, and return on investment.

d)         No other factor such as volume and value of imports not sold at dumping prices, contraction in demand, changes in the patterns of consumption, trade restrictive practices of and competition between the foreign and domestic producers, developments in technology, export performance do not show injury.

H.6      NIP, Magnitude of Injury and injury margin

47.       The non-injurious price of the domestic industry has been determined taking into account normated cost of production and a reasonable profit for the domestic industry and the NIP so determined is compared with the landed value of the exports for determination of injury margin. The weighted average landed price of the exports from the subject country and the injury margin have been estimated as follows:

Rs/Kg

I.          Conclusions

48.       After examining the issues raised and submissions made by the interested parties and facts made available before the Authority as recorded in this finding the authority concludes that:

i)                    The subject good has entered the Indian market from the subject country at prices less than their normal values in the domestic markets of the exporting country;

ii)                  The domestic industry has suffered material injury;

iii)                And the injury has been caused to the domestic industry both by volume and price effect of dumped imports of the subject goods originating in or exported from the subject country.

J.         Indian industry’s interest & other issues 

49.       The Authority notes that the purpose of anti-dumping duties, in general, is to eliminate injury caused to the Domestic Industry by the unfair trade practices of dumping so as to re-establish a situation of open and fair competition in the Indian market, which is in the general interest of the country. Imposition of anti-dumping measures would not restrict imports from the subject country in any way, and, therefore, would not affect the availability of the products to the consumers.

K.        Recommendations

50.       The Authority initiated and conducted the investigation into dumping, injury and causal links between dumping and injury to the domestic industry in terms of the Rules laid down and having established positive dumping margin against the subject country, and having concluded that the domestic industry suffers material injury due to such dumped imports, the Authority is of the opinion that definitive measure is required to be imposed to offset dumping and injury being caused to the domestic industry. Accordingly, the Authority recommends imposition of definitive antidumping duty in the form and manner prescribed below.

51.       Having regard to the lesser duty rule followed by the authority, the Authority recommends imposition of definitive anti-dumping duty equal to the lesser of margin of dumping and margin of injury, so as to remove the injury to the domestic industry. Accordingly, antidumping duty equal to the amount indicated in Col 9 of the duty table annexed herewith is recommended to be imposed by the Central Government, on all imports of subject goods originating in or exported from the subject country. 

Duty Table

L.         Further Procedures

52.       An appeal against the order of the Central Government arising out of this determination shall lie before the Customs, Excise and Service tax Appellate Tribunal in accordance with the relevant provisions of the Act.

53.       The Authority may review the need for continuation, modification or termination of the definitive measure as recommended herein from time to time as per the relevant provisions of the Act and public notices issued in this respect from time to time. No request for such a review shall be entertained by the Authority unless the same is filed by an interested party within the time schedules stipulated for this purpose.

Christy L. Fernandez

Designated Authority

 Back