GOVERNMENT OF INDIA

MINISTRY OF COMMERCE & INDUSTRY

DEPARTMENT OF COMMERCE

(DIRECTORATE GENERAL OF ANTI-DUMPING & ALLIED DUTIES)

NOTIFICATION

NEW DELHI,

The   3rd June 2005

MID TERM REVIEW

FINAL FINDINGS

Sub: Mid term review of definitive Anti-Dumping duty on imports of Potassium Permanganate originating in or exported from Peoples Republic of China, Chinese Taipei and Hong Kong

No. 15/2/2004-DGAD - WHEREAS, the Designated Authority, having regard to the Customs Tariff Act, 1975 as amended in 1995 (herein after also referred to as the ACT) and the Customs Tariff (Identification, Assessment and Collection of Antidumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (herein after also referred to as Rules), recommended imposition of provisional Anti Dumping Duty on imports of Potassium Permanganate (hereinafter referred to as subject goods) originating in or exported from China P.R., Hong Kong and Chinese Taipei (hereinafter referred to as subject countries). The preliminary findings were published vide Notification no. 46/1/2000 dated 30^th December 2000 and provisional duty was imposed on the subject goods vide Customs Notification No. 29/2001-Customs dated 12.03.2001. The Designated Authority came out with the final findings on 8^th Sept 2001 and definitive antidumping duty was imposed by Customs vide Notification No: 113/2001 dated 01.11.2001 as amended by Notification No: 85/2003-Customs dated 27.05.2003.

2.         AND WHEREAS, The Designated Authority, received an application from one of the exporters of the subject goods from China PR i.e. M/s Groupstars Chemical (Yunan) China LLC, China PR, a joint venture between Yunan Province Jianshui County Chemical Industry Factory, China PR’ Groupstars Chemical LLC, USA and Beijing Zhonghui Yuantong Investment consultation Centre, Beijing for review of the antidumping duties levied on the subject goods, on the grounds of changed circumstances. On the basis of positive information submitted by the above mentioned applicant the Designated Authority considered that mid-term review of the Anti Dumping Duty in force would be appropriate in view of the changed circumstances brought to the notice to the authority by the exporter. The Authority issued a public notice dated 10.03.2004, published in the Gazette of India, Extraordinary, initiating Anti-Dumping mid term review investigation under Section 9A (5) of the Act and Rule 23 of the Antidumping Rules read with Article 11.2 of the Agreement on Antidumping, in respect of the duty in force against the subject countries as above, to determine whether the continued imposition of the duty is required to offset dumping, and whether injury would be likely to continue or recur if the duty were removed or varied, or both.

A         BACK GROUND OF THE CASE

3.         On the basis of an application filed by the M/s Universal Chemicals and Industries Pvt. Ltd, Mumbai, the domestic producer in India, in October 2000, the Designated Authority conducted an investigation into Dumping, Injury and Causal link of the imports from the above named countries and on the basis of its determination of Dumping, Injury and Causal link, notified its final findings vide Notification No: 46/1/2000-DGAD dated 8^th Sept 2001. Acting Upon the findings of the Authority the Central Government imposed antidumping duty on imports of the subject goods from the subject countries vide Customs notification No: 113/2001 dated 01.11.2001. However, the domestic industry appealed against the findings of the Designated Authority and Notification of the Central Government before the CEGAT (now renamed as CESTAT). While disposing off the petition, the Hon’ble CESTAT rejected the verification of data submitted by M/s Yunnan Province Jiangsui County Chemical Industry Factory (YPJCCIF), PR China, who participated in the investigation and declared them non-cooperative. As a result of this, the individual treatment granted to this exporter was withdrawn and exports from this company attracted residual duty. Acting upon the orders of the CESTAT, the Central Government amended the duties vide Notification No. 85/2003-Customs dated 27.05.2003. The present investigation to review the need for continuation of duty has been initiated on the basis of an application filed by one of the producers/exporters from China.

B.        PROCEDURE

4.         The procedure described below has been followed with regard to this investigation:

i)          After initiation of the review the Authority sent questionnaires, alongwith the initiation notification, to all known exporters/producers in the subject countries, and domestic industry in India in accordance with the Rule 6(4), to elicit relevant information;

ii)         The Embassies/High Commissions/ Representatives of the subject countries in New Delhi were informed about the initiation of the investigation, in accordance with Rule 6(2), with a request to advise the exporters/producers in their respective countries to respond to the questionnaire within the prescribed time.

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iii)        Questionnaires were sent to known importers and consumers of subject goods in India calling for necessary information in accordance with Rule 6(4).

iv)        Investigation was carried out for the period starting from 01.01.2003 to 31.12.2003 (POI). However, injury examination was conducted for a period from 2000-01 to 2002-03 and POI.

v)         Request was made to the Directorate General of Commercial Intelligence and Statistics (DGCI&S) to arrange details of imports of subject goods for the past three years, and the period of investigations;

vi)        In addition to the original applicant for the review, response to the initiation communications were received from one more exporter from China i.e. M/s Chongquing Jialing Chemicals Ltd. PR China, who filed its response through their representatives/importer in India.

vii)              No other exporter from any of the other countries named, have submitted any response, in any manner, to the initiation notification. However, the respective Governments of Chinese Taipei and Hong Kong made their brief submissions arguing that these countries did not export the subject goods to India.

viii)            M/s Universal Chemicals, Mumbai, the domestic producer of the subject goods and the original petitioner in the original investigation submitted its responses opposing the review;

ix)                M/s Kanhaiyalal & Co. Pune, importers of the subject goods also filed its responses to the initiation notification

x)         The Authority has considered all views expressed and submissions made by various interested parties to the extent they are relevant for the present investigation.

xi)        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;

xii)       The Authority verified the information furnished by the domestic industry to the extent possible to examine the injury suffered and to work out optimum cost of production and cost to make and sell the subject goods in India on the basis of Generally Accepted Accounting Principles (GAAP) and the information furnished by the applicants so as to ascertain if Anti-Dumping duty lower than the dumping margin would be sufficient to remove injury to Domestic Industry;

xiii)      The Authority also verified the data of the cooperating exporter and applicant for the subject review, to determine the normal value and dumping margin as per the Rules.

xiv)      The Authority held a public hearing on 30.07.2004 to hear the interested parties orally, which was attended by representatives of the domestic industry, exporters of the subject goods from China and representative of the Economic Division of Taipei Economic and Cultural Center. The parties attending the public hearing were requested to file written submissions of views expressed orally. The written submissions received from interested parties have been considered by Designated Authority in this finding;

xv)               In accordance with Rule 16 of the Rules supra, the essential facts under consideration of the Authority and the basis of determination proposed to be adopted were disclosed to known interested parties as general disclosures and confidential disclosures to parties involved vide letters dated 21^st December 2005.

xvi)             A second disclosure was also issued by the Authority on 13^th May 2005 including the additional facts and arguments placed before the Authority after issue of the first disclosure dated 21^st December. The interested parties were required to file their comments to the second disclosure by 24^th May 2005. The comments of the interested parties have been duly considered by the Authority in these findings to the extent they are relevant.

xvi)      **** In the Notification represents information furnished by interested parties on confidential basis and so considered by the Authority under the Rules.

C.        PRODUCT UNDER CONSIDERATION AND ‘LIKE ARTICLE’

5.         The product under consideration in the original investigation and the product attracting antidumping duty is Potassium Permanganate, which is an inorganic chemical. Potassium Permanganate is a dark purple crystalline material. It is a compound of manganese, potassium and oxygen. The product is odorless and soluble in water.  The chemical formula of Potassium Permanganate is KmnO4. The product is classified under custom sub-heading 2841.61 of the Custom Tariff Act, 1975. This being a changed circumstances mid-term review investigation, the investigation covers the product covered in the original investigation only. No argument has been extended, by any interested party, on the issue of product under consideration or like article and therefore, the Authority holds that the product being manufactured by the domestic industry and the product being manufactured and exported from the subject countries are alike in all respect.

D.        Initiation of the Review and arguments raised

D.1      Views of the applicant for the review i.e., M/s Groupstars LLC. China

6.         The application for the review has been filed by M/s Groupstars LLC, China. The applicant exporter in its original application seeking review made the following submissions:--

·        That in the original investigation definitive anti dumping duties were levied vide notification no. 113/2001 dated. 1.11.2001 and the duties were imposed at the rate of US$ 64 per MT on exports by M/s Yunnan Province Jiangshui County Chemical Industry Factory (YPJCCIF) and residual duties were imposed at the rate of US$440 per MT for all non-cooperating exporters from PR China.  However, on the basis of an appeal filed by domestic industry i.e. M/s Universal Chemical and Industry Ltd., Mumbai, CESTAT, vide order dated. 20.10.2002, treated the exporter as a non-cooperative exporter and anti dumping duty of US$440 per MT was levied on them at par with all other exporters;

·        That in the meantime the status of the exporter i.e. YPJCCIF changed and the Potassium Permanganate unit of YPJCCIF was taken over by a Sino-American joint venture formed by YPJCCIF with an American company i.e. M/s Groupstars Chemical LLC, USA as a majority share holder and M/s Beijing Zhonghui Yuantong Investment Consultation Centre, Beijing as the other joint venture partners.  The new joint venture, M/s Groupstars Chemicals (Yuannan) LLC, was formed on April, 23^rd, 2001 as a fully private share holding company engaged in the manufacture and marketing of Potassium Permanganate and export of the subject goods to various countries including India;

·        That prohibited duties are in existence for more than three years against Chinese exports and circumstances as well as the market dynamics have undergone a significant change since imposition of such high definitive duties warranting a review;

·        That in the original case the exporter i.e. M/s YPJCCIF was considered cooperative by the Designated Authority after verification of their data.  However, the Hon’ble CESTAT was of the view that information provided by the company did not merit acceptance on the grounds that the information furnished by the exporter was for the calendar year i.e. from 1.1.1999 to 31.12.1999, while the period of investigation was 1.4.1999 to 31.3.2000 and the information provided in the questionnaire was insufficient and unreliable as much as the verification was also not meaningful since the books of accounts and the other official documents were in Chinese;

·        That after incorporation of Sino-American joint venture, they have proper record maintenance system and the records are maintained both in Chinese as well as in English, which will make any verification or scrutiny easier and meaningful;

·        That there is substantial reduction of prices of Potassium Permanganate in the international market and substantial imports are taking place into India from countries other than China at prices lower than the export prices from China;

·        That landed value of Chinese exports are much higher than the selling price of domestic industry in India and prohibitive anti dumping duties against Chinese exports has caused the serious anomaly by artificially closing the Indian market to Chinese exports;

·        That there has been a substantial change in the international market dynamics due to expiry of anti dumping duty on imports of Potassium Permanganate to EU from India, thereby opening up of the European market to the Indian exports and therefore, if any part of the domestic industry’s production is directed towards EU market there will be a serious problem of demand supply gap in the country;

·        That there has been a substantial drop of 18.5% in customs duty during the intervening period which in itself is a sufficient ground for initiation of a mid term review.

7.         The domestic industry in its submissions during the course of the investigation has raised various arguments against the initiation of the review. In response to these arguments the applicants have further submitted intera alia that:

·        That there is nothing in the Rule 23 of the Indian Antidumping Rules that requires the Designated Authority to verify, prior to initiation, that the petitioner has supplied sufficient information or evidence warranting initiation of mid term review. The Indian Rule in this context is more liberal than the obligation under the Agreement and therefore, initiation of the review based on the request of the applicant cannot be flawed. In this connection, they have cited the decision of CESTAT in the case of M/s. Simalin Chemical Industries Vs. Designated Authority [2003 (155) ELT 51 – Del. Tr.], to argue that the Indian rules have to be interpreted in accordance with the Indian law and not the provisions of the WTO Agreement. It has also been argued that the Hon’ble Supreme Court in its various decisions has also pronounced the circumstances under which the municipal law has to be interpreted in the context of international treaties;

·        That Without prejudice to the above legal position, Groupstars has given sufficient grounds in their petition necessitating the initiation of mid-term review even when no evidence or information is necessary to be given as stated above;

·        They have further reiterated the grounds of review and refuted the arguments by the domestic industry that there was any misleading information in any of their submissions before the Authority.

8.         In summary, the applicant has pleaded that there were sufficient grounds for a changed circumstances review of the antidumping duty in force against them and review initiated is in order.

D.2      Views of the domestic industry:

9.         The domestic industry, in its various submissions, has opposed the initiation of the review and has inter alia submitted:

• That the present review has been initiated without sufficient justification and based on misleading representation filed by the applicant.
• That the sole responding exporter from China (the petitioner in this case and referred to as petitioner in these submissions) did not sufficiently cooperate with the Designated Authority in the previous investigation. Besides filing of documents in Chinese language, the exporter provided almost negligible information, on the basis of which the Hon’ble CESTAT commented that the Designated Authority should have rejected the submissions made by the exporter.
• That the exporter has been found, in the past, having made false and misleading claims not only before the Hon’ble Designated Authority in India, but also before the US Department of Commerce in their antidumping investigations against the same product, because of which the US Department of Commerce, assigned the Peoples Republic of China (PRC), including Groupstar, a dumping margin of 128.94%, which is the highest margin calculated for any party in that proceeding.
• That the exporter has not provided sufficient evidence to establish, even prima facie, that the exporter satisfies market economy conditions. That assuming, though not admitting, that the exporter provided sufficient evidence to merit review of his dumping margin, the same does not imply review of the entire case against all countries involved. Since the request for review was from an exporter from China, review should have been restricted to the imports from China only. Domestic industry relies upon the scope of Rule 23 and Agreement on Anti Dumping, which, in their opinion, provides that the scope of review should be restricted to what has been requested for by the applicant. In the instant case, even when the review request is in respect of imports from China, the review is being carried out in respect of all the countries (i.e. including Taiwan and Hong Kong) for which no representation has been filed by any interested party.
• Quoting Rule 23 of Antidumping Rules and Article 11 of the ADA, the domestic industry has argued that the Rules provide for initiation of investigations in two manners – either on the basis of a request for review made by an interested party or on the Authority’s own initiative. In case the review is initiated by the Authority based on a request made by an interested party, it is evident that such a request must be based on positive information substantiating the need for a review. The applicant for the reviews has argued that there is no need for positive information for initiation of a review and has not furnished any positive information for the said review.
• That the Exporter has resorted to bald statement without providing sufficient verifiable evidence and has made factually incorrect, misleading contradictory statements regarding its legal status and applicability of duty on them during the currency of the duty.
• That mere availability of books of accounts in English is insufficient. It is not even the claim of the exporter that it complies with International Accounting Standards (Generally Accepted Accounting Principles).
• That the claims of the petitioners that there is a fall in the international prices of the product are wrong and based on incorrect data to mislead the Authority.

·        That the producer/exporters in the People’s Republic of China continue to dump Potassium Permanganate in the Indian market in spite of imposition of anti-dumping duty. 

• That there has been import of the subject goods from sources like Switzerland where no manufacturing facility for the product exists and this indicates transshipment of goods of Chinese origin to avoid antidumping duty. According to domestic industry’s information, Potassium permanganate is being shipped directly from China as also from the traders in third countries. Most prominent amongst these are Singapore, UAE, Iran and Switzerland. Domestic industry has argued that since the present review is a complete review into all aspects, the present investigations should be extended to Singapore, UAE, Iran and Switzerland also. Further, the anti-dumping duty may be recommended on imports of this product regardless of country of export, so long as the country of origin is any of the subject countries.
• That the actual volume of exports from China are much higher than what has been reported by the data compiling agencies
• That the petitioner is not the sole producer of the subject goods in China, nor does the petitioner command maximum quantum of exports to India. There are about 12 other major producers of subject goods in China.
• That there were two other producers of the subject goods in India namely  M/s Curti Enterprises Ltd. Ponda, Goa and M/s Super Electro Manganese Chemicals, Kundai, Goa,  However, these producers have suspended their production long back, and Universal Chemicals & Industries Pvt. Ltd. today remains the sole producer of the product in India. In spite of imposition of anti-dumping duty on imports from China, the exporters from China continued their dumping and have been exporting the product at prices below optimum cost of production and fair selling price of the Indian industry.
• That the Chinese producers have been dumping indiscriminately in several countries in the world including India. Already, USA, Europe and India have suffered material injury as a result of this indiscriminate dumping and Chinese dumping has already eliminated production facilities in Europe.  Now Chinese dumping is targeted at elimination of the sole Indian producer of the subject goods.
• That China has been treated as non-market economy by European Commission and United States in the past three years. In India also, the Designated Authority has treated China as non-market economy in a number of cases. Therefore, China should be treated as a non-market economy in the instant case also and same treatment should also be extended to the exporters for determination of normal value.
• That Yunnan Province Jianshui County Chemical Industry Factory (YPJCCIF) has been claimed as a private company, whereas the company in its previous submissions at the time of original investigations claimed that Yunnan Province is a 100% State Owned Company.
• That there are a number of requirements to be satisfied to get the market economy treatment and individual dumping margin. Firstly, decision of the exporter must be in response to market signals. Secondly, such decisions must be without significant State interference. Thirdly and most importantly, such decisions must reflect market values of the inputs. Such being the case, neither, the electricity and water price claimed by the exporter can be accepted as it is, nor the exporter can be granted market economy treatment, unless the above provision is satisfied.
• That the company has claimed that it is entitled to refund of VAT paid on raw materials purchased. However, the fact is that the company has not claimed refund on account of VAT paid.
• That M/s Group stars, as the producer of the product under consideration, sells the product to YPJCCIF. It invoices the product to YPJCCIF and receives its payment from YPJCCIF. Group stars is not concerned with the price charged by YPJCCIF to the Indian exporters. YPJCCIF directly dispatches the product to the importers in India on the basis of goods invoiced by them. Group stars does not pay any commission, etc. to YPJCCIF. Because of this arrangement it needs to be demonstrated as to how these transactions can be treated as exports by the petitioner. Further, the price at which the company sells the goods to YPJCCIF can not be treated as “export price”.
• That the DGCI&S data cannot be relied upon unless the transaction-wise data is carefully studies because of huge fluctuation of prices of this commodity found in this data without any reason for such huge fluctuation.

·        That there can be little trade directly between the consumers and the sellers and invariably some agent in both the countries would be involved. There are indenting agents in India, who procure the business from the consumers and places orders on the agents in the exporting countries. It is, therefore, submitted that commission @ 3% for the Indian agent and commission @ 3% for the agent in china should be deducted from the FOB export price.

·        That the requirement under the review provision is to examine the likelihood of continuation or recurrence of dumping and injury also while examining whether continuation of duty is required to offset dumping. Such being the situation, it can not be said that merely because there are no imports from Hong Kong and Taiwan, there is no dumping. They argue that there are no imports from these sources as a result of Anti Dumping duty in force. China’s export data shows significant export of this product to both Hong Kong and Taiwan and therefore, there is a potential threat of dumping from these countries.

D.3      Views of the other interested parties:

10.       In addition to the above submissions made by the applicant exporter and the domestic industry on various aspects, other interested parties have also made certain submissions which have also been taken on record. 

D.3.1   Chinese Taipei

11.       Taipei Economic and cultural Centre, New Delhi and Bureau of Foreign Trade, Ministry of Economic Affairs, Taiwan, Republic of China in its brief submission made before the Authority submitted that Potassium Permanganate is made from manganese ore and often used as an oxidant, antiseptic or bleach in the manufacturing process.  Due to the lack of manganese mine, Taiwan mainly relies on imports of Potassium Permanganate to meet the needs of its domestic consumption.  According to their import and export statistics of this product, China is the largest source of import, which supplied US****** worth of the product to Taiwan and accounted for ***% of its total imports between January 1999 and January 2004.   While Taiwan still exported rather small volume of this product to certain countries, none of the exports was destined for India during the above mentioned period.

12.       It has also been submitted that in the course of the original anti dumping investigation, government of Chinese Taipei and the Taiwanese exporters under investigation provided clarifications to the Authority that Taiwan did not export the product to India during the investigation period.  They have further reiterated that there is no export of the subject products to India between the investigation period and now.  Nevertheless, their potential trade interests are seriously hindered by this measure.  Therefore, they have pleaded for revocation of the measure against that country.

D.3.2   Hong Kong

13.       Trade and Industry Department, Government of the Hong Kong Special Administrative Region, produced extracted trade statistics from the Hong Kong External Trade Statistics and in their brief submission before the Authority have argued that according to their trade statistics, Hong Kong has not exported any potassium permanganate to India since 1999.  They have further argued that in terms of Article 5.8 of the ADA “there shall be immediate termination (of the measure) 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”. They have also argued that for the above determination “the volume of dumped import shall normally be regarded as negligible if the volume of dumped import from a particular country is found to account for less than 3 percent of imports of the like product in the importing Member”. Therefore, in view of zero imports of the subject goods from Hong Kong during this period the duty against this country should be removed immediately.

D.3.3   M/s Chongquing Jialing Chemicals Ltd. PR China, and M/s Kanheyalal, Pune

14.       M/s Chongquing Jialing Chemicals Ltd. PR China, filed a questionnaire response through their importer in India, M/s Kanheyalal, Pune, alongwith a brief response to the non-market economy questionnaire. They have not raised any substantial issue in their submissions except supporting the review application filed by M/s Groupstars.

D.4      Examination by the Authority

15.       Rule 23 of the Anti Dumping Rules provides that the Designated Authority shall from time to time review the need for continued imposition of anti dumping duty and shall, if it is satisfied on the basis of information received by it that there is no justification for the continued imposition of such duty, shall recommend to the Central Govt. for its withdrawal. 

16.       Article 11.2 of the Agreement provides that the Authorities shall review the need for the continued imposition of the duty, where warranted, on their own initiative or, provided that a reasonable period of time has elapsed since the imposition of the definitive anti dumping duty, upon request by any interested party which submits positive information substantiating the need for a review.  Interested parties shall have the right to request the authorities to examine whether the continued imposition of the duty is necessary to offset dumping, whether the injury would be likely to continue or recur if the duty were removed or varied, or both.  If, as a result of the review under this paragraph, the authorities determine that the anti dumping duty is no longer warranted, it shall be terminated immediately.

17.       The domestic industry has argued that under Article 11.2 of ADA read with Rule 23 of Indian Antidumping Rules, substantiation of grounds of review are mandatory and the applicant has failed to do so. Therefore, the initiation of the review is flawed. The applicant exporter has argued that the Indian Law is broader, in the sense that it requires the Authority to review the need for continuation of duty from time to time and does not cast an obligation on the party seeking a review to provide substantial evidence. In spite of this liberal position, they had provided positive information, as required under Article 11.2 of ADA, on several grounds and sufficient information was available with the Authority to initiate a review. They have further argued that there is no contradiction or misleading information in their submissions as alleged by the domestic industry.

18.       The Authority has examined these arguments and is of the view that the condition ‘satisfaction’ in Rule 23 refers to the satisfaction of the Authority of the need of continued imposition of duty after conducting a proper investigation and not for initiation of the review. What is required for initiating a review is positive information with the Authority on which the Authority can rely upon to decide whether a review is required to examine the need for continued imposition of the duty. In the instant case the applicant had filed sufficient information before the Authority in its review application and the review was initiated based on the positive information filed. Production of evidence to substantiate the claims and counter claims by various parties are the matter of investigation and are to be submitted by the parties including the party making a request for review during the course of investigation. The outcome of the review will however, depend upon the quality of evidence submitted by various parties to the review. Therefore, the Authority is of the view that the review has been correctly initiated on the basis of positive information available with the Authority, which suggested that a review of the duty in force was warranted.

19.       It has also been argued by the domestic industry that the review should not have been extended to other countries namely, Chinese Taipei and Hong Kong since the request for review was from a single exporter from China. The Authority is of the view that the Agreement as well the Rules casts an obligation on the Authority to review the need for continuation of the measures in force. Therefore, nothing in the Agreement or in the Antidumping Rules prevents the Authority from including all countries within the scope of the review when the positive information available with the authority suggests that such a review is appropriate.

20.       The domestic industry has also raised several issues regarding the correctness of the information submitted by the applicant in their review application, their status and eligibility to get the market economy status. The domestic industry has also questioned the locus standi of the new JV to file the review application and claim separate dumping margin, on the grounds that they are not the direct exporters of the product. It has also been argued that the US Antidumping Authority has found that this Company had filed misleading information before them about their status.

21.       In this connection the Authority turns to Article 11.2 of the Agreement which provides that any interested party shall have the right to request for a review and Article 6.11 defines a producer of the subject goods in the exporting country as an interested party. Therefore, the right of the party to ask for a review does not seem to be restricted only because the producer does not export the commodity directly and uses a trader to export, which in this case is an associate company who has provided the certificate of authenticity and authorization for their part of the data. Being an associated party to the exporter investigated in the original investigation, in terms of Rule 22 this party could not have approached the Authority for a new shipper review for a separate dumping margin and duty for itself. However, the Authority is of the view that examination of the status of various parties and other issues raised are the subject matters of investigation and have been addressed adequately at appropriate places in the findings. As regards the US investigation is concerned, the Authority is of the view that these are independent investigations and therefore, do not have any bearing on this case.  However, contradiction if any, in the data submitted by the same exporter before two different Authorities have been addressed at the appropriate places in the findings depending upon the evidences placed before the Authority.

22.       Considering all arguments raised, the Authority holds that in view of the positive information on changed circumstances brought before the Authority the mid-term review initiated in this case is in order.

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E.        DUMPING DETERMINATION

E.1      Chinese Taipei

23.       Taipei Economic and Cultural Centre, New Delhi and Bureau of Foreign Trade, Ministry of Economic Affairs, Taiwan, Republic of China in their submissions have argued that Chinese Taipei does not have any raw materials required or any manufacturing facility to produce potassium permanganate and they are dependant on imports of this commodity mostly from China. Quoting the Taipei trade data they have further argued that between Jan 1999 and January 2004 Chinese Taipei did not export this product to India though they have very few exports of this commodity to other countries during this period.

24.       The trade statistics submitted by Taipei indicates total imports worth US$******* of this product by Taiwan during Jan 1999 and Jan 2004 and imports from China accounted for imports worth US$****** during the same period. During the same period China has exported the subject goods worth US$****** to different countries. No export is indicated against India. The Indian trade statistics for the same period shows import figures as follows:

25.       Even if the Indian trade statistics showed a small quantity of imports from Taiwan, during 2000-01 considering the fact that there is no manufacturing facility in that country, the goods exported from that country appear to have different origin, mostly of Chinese origin, as per the submission of the Taipei authorities. The duty imposed in the original case is against goods originating in or exported from the subject countries. Therefore, the goods exported from Taipei but manufactured elsewhere shall attract the antidumping duty as per the certificate of origin. In the instant case if the goods originate in China and are exported from Chinese Taipei it would attract duty applicable to Chinese exports, if any.  It has also been brought to the notice of the Authority that even during the original period of investigation there was no imports from Chinese Taipei. In view of the above, the Authority is of the opinion that this country does not have any direct source to export the subject good to India and there is no current dumping of the subject goods from this country, therefore, there is no need to continue with the duty against Chinese Taipei.

E.2      Hong Kong

26.       Trade and Industry Department, Government of the Hong Kong Special Administrative Region has also produced their trade statistics claiming that there is no export of the product from that country since 1999. The trade statistics submitted by the Hong Kong Authorities indicates NIL exports of domestic production and re-export worth HK$****** during the period 1999-2003. However, none of these exports are directed against India. The Indian Trade statistics for the injury investigation period also does not show any import from Hong Kong. Hong Kong also does not seem to have any facility to manufacture the product under consideration. Therefore, re-export of goods imported from other countries or transshipment is not ruled out. However, such re-exports or transshipments, if any, of the goods of Chinese origin will, in any case, attract duty as applicable against China. Therefore, the Authority finds no reason to continue with the duty against this country.

E.3      Peoples Republic of China

27.       The following exporters from China PR filed their questionnaire response after initiation of the review:

1.                  M/s Groupstars (Yunnan) LLC, PR China as producer, exporting through M/s YPJCCIF

2.                  M/s Chongquing Jialing Chemicals Ltd. PR China, producer-exporter

28.       In view of the non-market economy presumption in respect of the Peoples Republic of China, and market economy claims by the individual exporters mentioned above, the Authority has examined as to whether the responding exporters can be given individual market economy treatment. In this connection the Authority examined whether these exporters are operating under market signals and their commercial operations are not affected by any significant state intervention.

E.3.1   Examination of Market Economy Status

a.         M/s Groupstars (Yunnan) and M/s YPJCCIF, China PR

29.       The Authority notes that applicant for this mid term review in the instant cases is M/s Group Stars Chemical (Yunnan) China L.L.C which is the producer of Potassium Permanganate, the product involved in this investigation. The exporter of the subject goods i.e. M/s Yunnan Province Jianshui Chemical Factory (YPJCCIF) has also provided the relevant information pertaining to export of the subject goods manufactured by the above named company. The applicant has claimed to be a joint venture formed between M/s Groupstars LLC, USA, M/s Yunnan Province Jianshui County Chemical Industry Factory, China, and M/s Zhonghui Yuantong Investment Consultation Center, Beijing, China. The producer, however, exports this product through M/s Yunnan Province Jianshui County Chemical Industry Factory, China.

30.       The applicant for the review has made a claim for market economy treatment and accordingly filed a detailed submission in terms of para 7 & 8 of the Annexure-I of the Antidumping Rules. Additional information was also called for from the applicant on its claim of market economy status and the applicant furnished the required information as called for.

31.       On the basis of these claims verification was carried out at the premises of all the three partners of the Joint venture to examine their shareholding pattern, as well as involvement of state control, directly or indirectly, through equity holding or otherwise in the commercial decision making of the manufacturer and exporter. This examination was necessitated because of the Non Market Economy presumption in this case and Market Economy status and individual treatment claim by the applicant for the review. The exporter has claimed individual treatment on the grounds that they are operating under full market economy condition irrespective of general economic situation in the country and that there is no direct or indirect state interference or influence in their business activities. On the request of the Chinese Ministry of Commerce, Bureau of Fair Trade, detailed discussions were also held with them in Beijing to examine the status of the exporters involved and other parameters for determination of market economy status of the companies. Information provided by them in response to a detailed questionnaire, to the extent they are relevant, was considered by the Authority.

32.       The Authority notes that the applicant for the review i.e. M/s Groupstars (Yunnan) LLC, China claimed market economy status in view of the changed status of the company and changed managerial and operational practices of the company. In support of their claim they produced various documents and arguments to prove that the Joint venture formed between Groupstars LLC USA, YPJCCIF and M/s Zhonghui Yuantong Investment Consultation Center, Beijing, China, which has taken over the potassium permanganate manufacturing facility from the erstwhile state-owned YPJCCIF, is a fully private enterprise free from all government controls and directions and the business of the joint venture is being carried out by the JV as per market principles.

33.       The domestic industry, in its various pre-disclosure submissions, opposed the initiation of the review and the claim of market economy treatment by the exporter on the grounds that the exporter and applicant for the review in the instant case continues to have substantial state involvement as their JV partner YPJCCIF continues to be a state-owned enterprise. They also argued that this company has been found to have made false claims of market economy status and submitted misleading information before this Authority as well as the US Antidumping Authority in the past. In this regard they have produced certain findings of the US DOC. They have further claimed that no country has granted market economy status to China. However the exporter has contended that this claim of the domestic industry is factually incorrect as many of the WTO members such as New Zealand, Singapore, Malaysia, among others, have already given market economy status to china PR.  Even India has given market economy status to several companies from China.

34.       Based on the information submitted by the applicant and examined during the on-the spot verification, as well as the submissions made by the Chinese Authorities, the Authority issued a detailed disclosure statement proposing to grant market economy status to the producer-exporter combination. However, in their post disclosure submissions the domestic industry contested the proposed grant of market economy status to the producer exporter combination on several grounds and produced additional information and documents in the form of translated copies of an application filed by M/s YPJCCIF before the concerned Chinese Authority. The domestic industry claimed that in the said application submitted by YPJCCIF in September 2001, before the relevant Registering Authority in China, for Registration of Alteration of Business Entity of the Company, the said business entity has declared its business ownership as ‘state-owned’. The domestic industry therefore, claimed that the exporter has misled the Authority in its various submissions to accept it as a privately owned business entity. The domestic industry also made several arguments on the manner in which the erstwhile state-owned potassium permanganate plant was privatized through the joint stock route without adopting transparent and just valuation and bidding methodology.

35.       Keeping in view the critical nature of the information and evidence provided by the domestic industry in its post disclosure submissions and its bearing on the case, the Authority took note of the information and the arguments of the domestic industry. However, in order to give the exporter a fair chance to defend its interests, the document referred above was sent to the exporter for their comments and confirmation. The exporter requested for additional time to comment on it and time was granted to the extent possible.

36.       In their reply the exporter, while objecting to admission of additional facts at the late stage of disclosure, clarified that ‘export of potassium permanganate’ was actually deleted from the business scope of YPJCCIF which continued under the state-ownership without PP unit. It was further clarified that the PP unit was bought by the erstwhile employees (‘YPJCCIF-Employees’) of PP business and Groupstars USA to form a Joint venture in 2001, which necessitated this change in the business license. It was further clarified that YPJCCIF continues under state ownership with 7 other units.

37.       However, the above clarification made by the exporter contradicted their earlier submissions that YPJCCIF is now a private Company and continues as trader only. In their earlier submissions the exporter has submitted that disinvestments of YPJCCIF started in 1998 and various facilities of YPJCCIF were sold to different parties subsequently and only the manufacturing unit of Potassium Permanganate was sold to Mr Zhang Guo Yi and others in 1998. However, the name YPJCCIF continued with the manufacturing facility of PP unit.  It was also stated that apart from the PP unit other units such as electrolytic Manganese Dioxide units, Zinc product unit and drum-manufacturing units were sold to other bidders by the state and they carry out business in different names and YPJCCIF became a private trader. In their submission the exporter tried to distinguish between YPJCCIF as a state-owned enterprise from YPJCCIF Potassium Permanganate Unit (owned by employees of the PP Unit).

38.       Since the statements of the exporter appeared contradictory they were sent a brief questionnaire to clarify the issues along with supporting documentary evidence about the status of YPJCCIF (state-owned entity) and YPJCCIF (PP-Employee entity, if at all it existed in that form and manner). Copies of two business registration certificates issued on the same date showing two different business scope and status of the same entity i.e. YPJCCIF were sent to the exporter to comment and confirm the correctness of the same. Copy of this communication was also sent to the Bureau of Fair Trade (BOFT) Ministry of Commerce, Government of Peoples Republic of China for their comments.

39.       In response to this query no response was received from BOFT. The exporter filed their comments on 5^th May 2005. However, they failed to file any document in support of their claims except a certificate from the Local Authority certifying that YPJCCIF do not have the PP unit with it. None of the documents requested by the Authority have been furnished by the applicant along with its reply.  In their reply the applicant has clarified inter alia as follows.

·        PP unit was completely disinvested by the state through sale to private entities in the form of a joint venture namely Groupstars Chemical (Yunnan) LLC China. The JV had a share-holding of 52% by Groupstars USA, 40% by the former employees of YPJCCIF (PP Unit) and remaining 8% by Yuangtong investment Consultation Centre and there is no shareholding by the erstwhile state-owned YPJCCIF. It was further clarified that in order to retain the brand name associated with the PP business the employees of erstwhile PP unit decided to continue to use the same name.

·        It has been further clarified that all alteration to the business scope etc. have been done under the same ‘register’ number for the simple reason that all changes in YPJCCIF (Non-PP business under state control) and YPJCCIF (PP private business) are recorded in the same register of County Industrial and Commercial Administration Bureau. It has been clarified that the Register No. is a reference number for YPJCCIF as a whole which has been split into two viz. State Controlled and privately owned.

·        It has been argued that the YPJCCIF (state-controlled unit) has no direct or indirect control over Mr. Zhang Guo Yi and others who hold the 40% stake of the JV in their individual capacity as natural persons. They have produced a copy of a certificate purportedly issued by Honghe State Jiangsui County Industrial and Commercial Bureau certifying that YPJCCIF has no more manufacturing facility of Potassium Permanganate.

·        It has been clarified that exports to India during the POI was done by YPJCCIF to honour the sales commitments prior to the formation of JV.

·        It has been further clarified that PP export business is conducted by Mr Zhang Guo Yi and others without using the terminology of ‘Limited Company’.

·         They have further submitted that they have stopped exporting through YPJCCIF and therefore, they do not want a separate dumping margin for YPJCCIF.

·        The exporter has further argued that even if YPJCCIF continues as a state-owned enterprise and assuming that this enterprise exported the subject goods during the POI it would not affect the normal value determination of the applicant i.e. exporter which is a fully private joint venture enterprise. They have argued that while determining individual normal value for enterprises in non-market economies the Authority is required to examine whether there is significant state interference in the business activities of the enterprise affecting its cost of production and pricing decisions.

40.       Since substantial issues were raised by the domestic industry and the exporter from China in respect of the claim of market economy status a second disclosure statement was issued by the Authority on 13^th May 2005 disclosing the additional facts brought before by the interested parties after issue of the first disclosure statement which will for the basis of determination by the Authority alongwith the information already furnished by the interested parties earlier.

41.       In response to the said disclosure the domestic industry has reiterated its stand on the issue of market economy status of the producer-exporter from China. They have further argued that there was no change in the legal status of YPJCCIF and the export license is also in favour of the state-owned YPJCCIF. Only the PP unit was transferred to the JV and the state was holding all rights to export the product. They have also argued that even the third partner of the JV i.e. M/s Zhonghu Yuanting Investment Consultation center is an entity floated by Mr Zhang Guo Yi and some other employees of Groupstars. The domestic industry has further argued that market economy status could be granted only if both the producer and exporter pass the test of market economy. Since the exporter to India is admittedly a SOE and Groupstar did not have any license to export the product during the POI. Therefore, market economy status cannot be granted to them.

42.       In its response to the said disclosure the exporter has again reiterated its concern and objection about admission of additional facts after disclosure of essential facts in terms of Rule 16. Not withstanding certain statements in their submissions which are not clear they have reiterated their stand that the issue of NME arises only in the context of Normal value, which is to be decide in the context of Groupstars alone, which is a private joint venture. They have further argued that a producer can claim an individual dumping margin provided it is able to establish a complete chain of exports to India.

43.       The comments of the interested parties to the second disclosure to the extent they are relevant have been considered by the Authority in these findings and the Authority has re-examined the issue of ownership and grant of market economy status to Groupstars and YPJCCIF afresh in view of the post disclosure submissions and clarifications by the interested parties.

Examination by the Authority

44.       It was submitted before the Authority during the course of the investigation and also through the submissions by the Chinese Government that disinvestments of YPJCCIF started in 1996 and various facilities of YPJCCIF were sold to different parties subsequently and only the manufacturing unit of Potassium Permanganate was sold to Mr Zhang Guo Yi and others in 1998. However, the name YPJCCIF continued with the manufacturing facility of PP unit.  It was also stated that apart from the PP unit, other units such as electrolytic Manganese Dioxide units, Zinc product unit and drum-manufacturing units were sold to other bidders by the state and they carry out business in different names. It was further submitted that YPJCCIF is now a private Company and continues as trader only. However, in their above submissions it was mentioned that YPJCCIF continues as a State Owned entity with the following business in its list: Manufacture and sale of inorganic salts, Zinc sulphates, active Zinc oxide, manganese sulphate, electrolytic manganese dioxide…etc. It was aslo submitted that Potassium permanganate business has been taken out of the business scope of YPJCCIF vide the amendment dated 7^th December 2001.

45.       Vide their submission dated 18.6.04 the applicant submitted a copy of the business registration certification with registration no. 5325241000451 alongwith its translated version and claimed that YPJCCIF, is a privately owned company by M/s Zhang Guo Yi.  This business licence was modified on 7.12.2001.  The business scope indicated in this registration certificate includes production and sales of chemical products and export of potassium permanganate, import of raw material and equipment for production etc.

46.       The domestic industry has submitted the copies of business registration certificate modified on the same date bearing the same number and showing same registered capital with similar business scope.  However, the same business registration certificate indicates the status of the enterprise as state-owned. 

47.       It was also submitted by the applicant that since the new joint venture i.e. M/s Groupstars Chemical (Yunnan China LLC) did not have the requisite export licence for Potassium Permanganate the exports were routed through the erstwhile YPJCCIF under their export licence. 

48.       It was submitted by the exporter during the verification process that the potassium permanganate unit was attempted to be privatized through the joint stock-route way back in 1998. However, due to the inability of the employees to raise the resources to the extent of 100% of asset valuation done, the equity of the company was taken over by the employees of the potassium permanganate unit to the extent of 40% only and rest was divested to the other JV partners to the extent of 52% to Groupstars LLC, USA and M/s Zhonghui Yuantong Investment Consultation Center, Beijing, China though, the applicant has mentioned in all their submissions that the joint venture was formed between YPJCCIF, Groupstars LLC, USA and M/s Zhonghui Yuantong Investment Consultation Center, Beijing, China. In support of this argument the applicant submitted the share certificates of the employee portion of the holding in the JV. It was also understood that YPJCCIF as it exists today is a private enterprise after divestment of all its other units and continues trading activities only in respect of the product manufactured by Groupstars. It was also submitted that YPJCCIF continues as a trading concern to complete outstanding commitments.

49.       However, in their subsequent submissions the applicant has contradicted itself in many respects. Now it reveals that original entity i.e. YPJCCIF exists as a state-owned manufacturing facility without the Potassium Permanganate but with other units which have not yet been privatized. Only the potassium Permanganate plant has been transferred to the Joint Venture Company referred above. The exporter has clearly confirmed that YPJCCIF continues as a state-owned enterprise.

50.       Having confirmed that YPJCCIF as an entity continues as a state-owned enterprise in the same name and form, the question arises about the identity of the entity which has entered into the JV in the name of YPJCCIF, with the other two JV partners as mentioned above. The applicant now contends that though the name of YPJCCIF has been used in the said JV it was actually the joint stock holding of the employees, which account for 40% of the shares of Groupstars China and not the YPJCCIF (State-owned entity) which has signed the JV. If that is the case then the exporter has clearly misdeclared, not only its status as a legal person, but also it’s legal composition.

51.       The applicant has tried to segregate the identity of the YPJCCIF (PP unit) from the YPJCCIF (original state-owned entity) as if two separate entities in the same name existed. It has been contended that the employees of the erstwhile YPJCCIF Potassium Permanganate Unit had retained the same name as YPJCCIF in view of its brand name though they had already broken away from the original entity and formed a separate entity along with other partners. However, it has not been explained how a group of employees can constitute themselves as an entity and retain the name of the original entity while the original entity itself continues in the same name and style.

52.       The domestic industry furnished a copy of the business license of YPJCCIF bearing the same registration number as the one produced by the applicant and it was noticed that the scope of business and the status of the entities in the said license are different. In response to the query regarding the registration number of the entities the applicant has further clarified that the registration number in fact is the file number from which the modification of the status and business scope of the entities have been done by the competent Government agency and therefore, bears the same name while the business scope is different.

53.       The applicant has not clarified, assuming that two entities in the same name existed, which entity has actually exported the goods. Groupstars admittedly did not have the export licence for the product. The export licence obviously belonged to the state-owned YPJCCIF only who was trading the goods and not the YPJCCIF (PP-unit) as has been made out by the applicant. Therefore, the exports could have been through the SOE only and this fact has also been suppressed by the applicant as they have tried to make out a case that the exports were through their JV partner YPJCCIF (PP-Unit). In their clarification dated 5^th May 2005 they have again provided an apparently incorrect statement by clarifying that the exports during the POI was actually done by Mr Zhang Guo Yi & others, which did not appear to have a legal entity within the JV set up. Even if the export was conducted by Mr Zhang Guo Yi and others in their individual capacities, as has been made out, they could not have used the export licence of YPJCCIF which is a SOE. In the same clarification the applicant again submits that Groupstars exported through YPJCCIF during the POI to honour the commitments made by YPJCCIF earlier and they do not wish to export through YPJCCIF in future. This clearly contradicts their statement that the export was done by Mr Zhang Guo Yi and others.

54.       It was also noticed that the Mr Zhang Guo Yi is the majority shareholder in the JV out of the 40% portion of the shares held by the erstwhile employees of the PP Unit and is the Director of the JV and at the same time he continues as the legal representative of the YPJCCIF (SOE). The applicant has submitted that there is no legal bar in Chinese law for Mr Zhang Guo Yi to protect his individual interests and he has been retained by the SOE during its process of transition.

55.       The above submissions of the applicant and the domestic industry and examination of the issues by the Authority indicates that

·        Though 40% of the shares of the JV are held by the erstwhile employees of PP Unit, identity and status of the YPJCCIF (PP) unit, as a separate entity within the JV and its role in the export of the product under consideration as claimed by the applicant is blurred and not supported by any credible evidence.

·        The applicant has clearly produces incorrect and inconsistent information as far as the composition of the JV and status of YPJCCIF is concerned. The original YPJCCIF admittedly continues as a state-owned enterprise and was involved in the export of the product during the POI. The documents of transition/transfer of PP unit submitted by the applicant shows that YPJCCIF (SOE) is the JV partner.

·        The applicant has further misrepresented the Authority to believe that the exports during the POI, were effected by a private company related to the applicant, which does not appear to be true. The exports are clearly through the SOE. No categorical clarification about the exporter and its status has been given.

·        Mr Zhang Gyu Yi, is the common factor in the JV as well as the SOE and due to his involvement in both the entities their relationship has remained all the more confusing. Sometime he has been shown to represent the YPJCCIF (SOE) and sometime he has been shown to represent the so-called YPJCCIF (PP) unit.

56.       In view of the foregoing, the Authority finds that the applicant for the review has clearly placed incomplete, inaccurate and inconsistent information before the Authority to hold that the Potassium Permanganate Plant of the erstwhile state-owned enterprise bearing the name M/s Yunnan Province Jiansui Chemical Company Factory was transferred to the Joint Venture company formed in 2001 and the original company with the same name was transferred to private hands with the majority shareholding by Mr Zhang Guo Yi and the employees of the company and with effect from April 2001 both the companies, i.e. Groupstars (Yunnan) LLC China and M/s YPJCCIF, continue to operate as two private companies under the Chinese Joint Venture Law and Chinese Company law respectively.  The above examination also clearly establishes the fact that the applicant for the review has submitted inconsistent, inaccurate and incorrect information and withheld information from the Authority about the status of YPJCCIF as it exists today.

57.       In addition to the above it was also noted that the export realization of the YPJCCIF as the exporter of the subject goods manufactured by Groupstar is less than its VAT paid purchase price from Groupstar because of the fact that VAT refund is not available to the exporter in this case. This loss on account of VAT and other SGA expenses have been absorbed by the exporter, which is clearly a state-owned enterprise.

58.       The status of the JV also remains unclear in view of the fact that on the one hand the JV documents show YPJCCIF as 40% partner of the JV and on the other hand the share certificates shows that this 40% has been held by the employees of the PP unit.

59.       In view of the foregoing the Authority is of the view that the applicant has not provided sufficient evidence to demonstrate that their business decisions are not subject to state interference. Further, on the basis of the examination, the Authority notes that the transactions have not been carried out without significant distortions, which is evidenced by the transactions with the state controlled YPJCCIF. Therefore, the Authority holds that the producer-exporter cannot be extended market economy treatment under the above circumstances. Accordingly, Normal value in respect of this exporter has been worked out based on facts available and non-market economy presumption.

b)        M/s Chongquing Jialing Chemicals Ltd. PR China

60.       M/s Chongquing Jialing Chemicals Ltd. PR China submitted its response through M/s Kanhaiyalal & Co., Pune. However, the questionnaire response was found incomplete as several appendices to the standard questionnaire were not furnished alongwith the response. The applicant also failed to file a complete and meaningful response to the market economy questionnaire even after issue of a deficiency note to the company in this regard. In view of the above, neither their market economy claim, nor the general questionnaire response data could be accepted by the Authority. Therefore, the above named exporter from China has been treated as non-cooperative for the purpose of this investigation and the data submitted by it has been rejected. Accordingly, all determinations in respect of this exporter have been based on facts available and non-market economy presumption.

E.3.2   Determination of Normal Value, Export Price and Dumping Margin, PR China

E.3.2.1            Normal Value: All exporters from China

61.       The Authority notes that the applicant’s request for determination of normal value on the basis of their domestic sales transaction and grant of market economy status of the said purpose has been rejected in view of the reasons recorded in the previous section. The only other exporter who filed a partial response to the mid-term review initiation is M/s Chongquing Jialing Chemicals Ltd. PR China. However, the data produced by this exporter was incomplete and the exporter did not adequately rebut the non-market economy presumption. Therefore, this exporter was declared non-cooperative by the Authority.  No other exporter from China made any submission. Since none of the responding exporters have met the requirements for grant of individual market economy status for the purpose of determination of individual normal value in terms of Paragraph 8 of Annexure-I of the Antidumping Rules the Authority constructed the normal value for all Chinese exporters in terms of para 7 of the Annexure-I of the Antidumping rules, based on cost of raw materials in the country of exports and cost of utilities and other associated costs as determined by the Authority and a profit margin of ***% on the cost of production. Constructed normal value for all exporters worked out as US$***** Per MT.

E.3.2.2            Export Price: M/s Groupstars LLC China

62.       M/s Group stars and YPJCCIF in their combined submissions have provided information on their exports to India. During the POI Group stars have supplied 11 consignments to YPJCCIF and YPJCCIF have, in turn, exported these 11 consignments of 230 MT to India. In the post disclosure submissions the domestic has argued that the producer i.e. M/s Groupstars (Yunnan) LLC has not exported even a single consignment to India during the POI and therefore, it could not be treated as an exporter at the first place. They have argued that Groupstar’s supplies to the trader-exporter M/s YPJCCIF has been treated in their own submissions as domestic sales and therefore, they cannot be assigned a separate dumping margin.  There can at best be a single dumping margin for the producer-exporter combination. The Authority has examined this argument and also notes that there has been considerable confusion about the actual identity and status of the exporter in this case. In the instant case the producer has not exported even a single consignment to India during the POI. M/s Groupstars has pleaded that they did not export directly during the POI precisely because they did not have an export license at that time. However, subsequently they have started exporting to India and therefore, they have requested for determination of a separate dumping margin for them. They have pleaded that they cannot be wedded to a particular exporter for ever. As long as the chain of export supply could be established the Authority can always determine the export price at the factory gate of the producer. They have cited earlier precedence of determination of separate dumping margin for the producer. The Authority has examined this issue and is of the opinion that as long as the export price can be traced back to the factory gate of the producer there is no reason why a separate dumping margin for the producer cannot be determined if they wish to export directly. In fact the applicant has made it very clear that they do not wish to continue to export through YPJCCIF any more and no separate dumping margin for YPJCCIF would be required. Therefore, a single dumping margin has been worked out for the applicant based on the export price and constructed normal value for China PR.

63.       In its post disclosure submissions the domestic industry has also raised certain substantive issues concerning the adjustments applied to arrive at the net ex-factory export price of the trader. The domestic industry has argued that the S&D expenses of the trader and a reasonable profit margin should be deducted from their export price to arrive at the net export price. In this connection the Authority notes that the exports are through a related party which is also a State Owned Enterprise. Therefore, the arguments of the domestic industry in this respect is valid and a profit margin of **% needs to be deducted from the export price to arrive at the net export price. This profit margin would also reasonably cover the indirect S&D expenses by the trader. During the verification it was noticed that the exporter has not claimed the VAT refund on the export sales transactions to India. Therefore, adjustment towards VAT has not been admitted for the purpose of determination of net-export price.

64.       Accordingly, net export price has been determined on the basis of actual CIF export price (Net of VAT) of YPJCCIF after allowing for adjustments towards inland and ocean freight, storage and handling charges, insurance etc. and a reasonable profit margin for the trader as explained above as per exporter’s records to bring it to Groupstars ex-factory level.

E.3.2.2            Export Price: All other exporters from PR China

65.       M/s Kanheyala, Pune in its post disclosure submission has pleaded that though M/s Chongquing Jialing Chemicals Ltd. PR China has not fully cooperated in the investigation and therefore, the normal value determined for all non-cooperative exporters may be applicable to this exporter, the transaction-wise data of their exports to India should be accepted for determination of their export price and separate dumping margin for them. The Authority has examined these arguments and is of the view that the exporter concerned has not cooperated with the investigation and their data, including their export details could not be verified. It would therefore, not be possible to accept the export price as claimed by the exporter without verification. Accordingly, net export price for all non-cooperating exporters from China PR has been determined based on the lowest export transaction value from the DSGCIS data, after allowing for adjustments towards transportation, ocean freight commission etc. Net export price works out to US$****per MT. 

E.3.2.3            Dumping Margin:

66.       The normal value constructed has been compared with the net export price determined at the ex-factory level to determine the dumping margin. The dumping margin for the exporters from China works out as follows:

67.       The Dumping Margins so determined for all exporters from China has been found to be significant and above de-minimis.

F.         INJURY DETERMINATION

F.1      Cumulative Assessment of Injury

68.       The Authority notes that there is no dumped import from Chinese Taipei and Hong Kong during the period for which injury is being examined and dumped imports from China alone is being examined in this review therefore, cumulative assessment of injury is not an issue in this case.

F.2      Continuation of Injury

F.2.1   Views of the interested parties                

69        The domestic industry argues that it continues to suffer material injury due to continued dumping from China even after imposition of the duties. Though the volume of imports decreased temporarily after imposition of duty, the volume has gone up once again due to intensified dumping.

70.       The exporters and other interested parties in their various submissions have claimed that the performance of the domestic industry would clearly reveal that there is no injury to the domestic industry on account of the alleged dumped imports. They have argued that in its submissions Universal has accepted that between 2000-01 and POI its sales volumes have increased by about 33% and their sales value has gone up by 17%. However, decline in their domestic selling price is not due to imports from China but due to its own decision to peg the prices at a particular level as reflected in its own submissions. Their output and capacity utilization and market share has improved during this period indicating no injury. In summary the interested parties have argued that the domestic industry has improved its performance and suffers no injury at the moment and injury, if any, is due to their own inefficiencies and therefore, cannot be attributed to the imports from these sources.

F.2      Examination by the Authority

71.       The Authority has taken note of various arguments raised by various parties in their submissions and issue of continuation of injury to the domestic industry has been examined in the light of these arguments made before the Authority. 

72.       Article 3.1 of the ADA and Annexure II of the AD Rules provide for an objective examination of both, (a) the volume of dumped imports and the effect of the dumped imports on prices in the domestic market for the like products; and (b) the consequent impact of these imports on domestic producers of such products, with regard to the volume effect of the dumped imports. The authorities are required to examine whether there has been a significant increase in imports, either in absolute term or relative to production or consumption in the importing member. With regard to the price effect of the dumped imports, the authorities are required to examine whether there has been significant price undercutting by the dumped imports as compared to the price of the like product in the importing country, or whether the effect of such imports is otherwise to depress prices to a significant degree, or prevent price increase, which would have otherwise occurred to a significant degree.

73.       For the purpose of injury analysis the Authority has examined the volume and price effects of dumped imports of the subject goods on the domestic industry and its effect on the prices and profitability to examine the existence of injury and causal links between the dumping and injury, if any.

74.       Since positive dumping margin has been established for the exports from China, entire exports from those countries has been treated as dumped imports for the purpose of injury analysis and causal links examination.

(A)       VOLUME EFFECT: Volume Effect of dumped imports and Impact on domestic Industry

75.       The effects of the volume of dumped imports from the subject country as well as imports from other countries have been examined as follows:

i)          Import Volumes and share of subject countries:

76.       The domestic industry had raised the issue of correctness of import data as reported by DGCI&S due to unreasonable variation in the prices and indication of imports from unlikely sources. The Authority has examined the transaction level data of DGCI&S.  However, no major aberration in the data was noticed requiring rejection of this data. Therefore, the Authority has accepted the data after pruning the same of few unrelated transactions. The import figures of the product under consideration are as follows:

Quantity in MT

Source: DGCI&S data

77.       The data shows that after imposition of antidumping duty in 2001 imports from China fell substantially from 92% of total imports in 2000-01 to 81% in 2001-02 and 59% in 2002-03. However, the imports have again substantially increased during the POI both in absolute term and in relation to the total imports to 69%.

ii)         Demand, Output and Market shares

a)                    Production of the Domestic Industry

Quantity in MT

78.       The production data of the domestic industry reveals that the domestic industry has improved its production compared to the base year though there is no capacity addition during this period. The capacity utilization has also improved and the Company is operating above its installed capacity. However, the production is also to be examined with reference to the demand in the domestic market and the ability of the domestic industry to sell in the domestic market.

b)        Sales of Domestic Industry

                                                            Quantity in MT

79.       The data above shows that though the production increased by 23%, the domestic sales has increased by 20% whereas major increase in the sales is in the export segment. The domestic industry has argued that un-remunerative price in the domestic market, due to dumped imports, has forced them to increase the exports.

c)         Demand and Market Share

Quantity in MT

80.       Total domestic demand of the product under consideration, after declining from 2000-01 till 2002-03 has increased substantially during the POI. The share of domestic industry in the demand, after increasing after imposition of the duty has shown declining trend, whereas the share of China has increased substantially during the corresponding period.

(B)       Price Effect of the Dumped imports on the Domestic Industry

81.       The impact on the prices of the domestic industry on account of the dumped imports from China has been examined with reference to the price undercutting, price underselling, price suppression and price depression, if any.

82.       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.

 (i)        Price undercutting and underselling effects

Values in Rs/MT

83.       The selling price (net sales realization) of the domestic industry shows significant decline. Price undercutting has been determined by comparing the weighted average landed value of dumped imports from China 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 data of import prices from the subject country. 

84.       In determining the net sales realization of the domestic industry, the rebates, discounts and commissions offered by the domestic industry and the central excise duty paid have been rebated.

85.       For the purpose of price underselling determination the weighted average landed price of imports from China has been compared with the Non-injurious selling price of the domestic industry determined for the POI and cost of production for the remaining years.

86.       The price undercutting and price underselling (without considering the antidumping duty in force) has been found to be substantial.

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

87.       The price suppression effect 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. 

88.       The cost of production of the subject goods shows substantial increase after the base year and thereafter shows a moderate increase in the last three years. However, the selling price shows decline during the corresponding period indicating the inability of the domestic industry to raise its prices to recover full cost due to price effects of the dumped imports from China. The interested parties have argued that the duty paid import price from China is much above the selling price of the domestic industry and the domestic industry was free to raise its prices to that level. Their inability to do so indicates that the market cannot accept such a high price. The domestic industry seems to have been forced to benchmark its prices with the CIF import price to retain its market share.

F.4      Examination of other Injury Parameters

89.       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 here as follows:

i)                    Productivity

90.       Productivity of the domestic industry has been measured in terms of its labour productivity of the output and it has been noticed that the productivity has improved because of marginal increase in output and marginal reduction in the workforce. The industry has attempted an improvement in productivity to cut cost and remain competitive. However, improved productivity has not resulted in commensurate profitability.

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

91.       Though total revenue and cash flow of the domestic industry from its domestic operations has improved due to increase in domestic sales, the industry continues to suffer loss during the investigation period due to declining per unit realization. The industry has not been able to realize a fair price to recover its cost due to prevailing price level of dumped imports.

Indexed

iii)        Employment and wages

92.       The employment level has declined marginally. But the expenses on account of salary and wages have increased by about 14%. However, increase in the expenses towards salary and wage is in tandem with the increase in production during the comparable periods.

iv)                           Return on investment and ability to raise capital

93.       The return on capital employed by the domestic industry shows deterioration compared to the base year and previous years.

v)                 Investment

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

vi)               Magnitude of Dumping

95.       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 country named, for the POI, is substantial, even when the antidumping duty is in force.

vii)             Factors affecting prices

96.       Change in cost structure if any, competition in the domestic industry and prices of competing substitutes 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. M/s Universal Chemicals is the sole producer of the subject good in India and therefore, domestic competition does not affect the prices. Therefore, the dumped import prices appear to affect the prices of the domestic industry.

viii)           Inventories

97.       The domestic industry has been able to liquidate inventories with the imposition of Anti Dumping Duty. However, the exports of the domestic industry rather than its domestic sales appear to have helped in inventory liquidation.

98.       The examination of the above economic parameters indicate that though the domestic industry has improved its performance in several parameters including output and sale volumes, this has not translated into improvement in its profitability and the industry still suffers loss in its domestic operation. Therefore, the Authority concludes that the domestic industry continues to suffer material injury.

F.5      Other Known factors and Causal Link

i)                       Volume and prices of imports from other sources

99.       During the POI, other than China, imports have taken place from USA and Switzerland only. However, total import from these two sources is small compared to imports from China. The Authority notes that dumped imports from China constitute about 70% of total imports and imports from all other sources account for remaining 30%. While imports from USA is almost same price level, the imports from Switzerland is at a higher price level. Therefore, these imports do not appear to have significant effect on the domestic industry, both in terms of volume and value. 

100.    Therefore, volume and prices of imports from China appear to have more adverse effect on the domestic prices, significantly contributing to the current injury of the domestic industry than the imports from any other sources. 

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

101.    `Total domestic demand of the product under consideration, after declining from 2000-01 till 2002-03 has increased substantially during the POI. The share of domestic industry in the demand, after increasing after imposition of the duty has shown declining trend whereas the share of China has increased substantially during the corresponding period. There is no significant change in consumption pattern of the product in the domestic market, which can be attributed to the injury to the domestic industry.

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

102.    The subject goods are freely importable and there are no trade restrictive practices in the domestic market. M/s Universal Chemicals is the sole producer of the subject goods in the country. Major portion of the imports of the subject goods takes place from China. Other exporting countries do not have substantial market share in Indian market to effectively compete with these two market players. 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

103.    Production of Potassium Permanganate is not a highly technology intensive process. The production facility of the foreign producer in China was also verified and it was seen that the producers apply similar production technology and rather old plant and machinery. Therefore, development of technology or inefficient method of production of the domestic industry cannot be treated as a cause of injury to the domestic industry.

104.    The export performance of the domestic industry was found to be better than its domestic performance. They have been able to realize higher price in the export market and their export volume has substantially increased during these years. Therefore, export performance cannot be attributed as a reason of injury suffered by the domestic industry.

v)                 Productivity of the Domestic Industry

105.    Productivity of the domestic industry in terms of labour output and daily output has shown substantial improvement. Therefore, productivity is not a factor which can be attributed to the injury of the domestic industry. In fact domestic industry has tried to reduce its losses in its domestic operation through improvement in productivity.

106.    The above analysis of injury parameters and examination of non-attribution factors indicate that though there is improvement in several parameters in the performance of the domestic industry they do continue to suffer material injury in terms of drop in profitability, cash loss, and price suppression and depression due to the dumped imports from the subject country.

F.6      Determination of Non-injurious Price of the Domestic Industry

107.    Non-injurious Price for the subject goods has been worked out by the costing division after a detailed analysis and scrutiny of information provided by the domestic industry. Weighted average Non-injurious price for the domestic industry has been determined by the Authority as Rs.****** per Kg.

F.7      Magnitude of Injury and injury margin

108.    The non-injurious price determined by the Authority has been compared with the weighted average landed value of the exports from the subject country for determination of injury margin and the injury margins have been worked out to be positive.

G.        LIKELIHOOD OF CONTINUATION OR RECURRENCE OF DUMPING AND INJURY

109     The Authority has already established that dumping is continuing from China in spite of the antidumping duty in force and the domestic industry continues to suffer material injury due to such dumped imports. Therefore, examination of the likelihood of recurrence of dumping and injury is not required. However, the Authority has examined the likelihood of continuation of dumping and injury in the event of withdrawal or variation in the duty. The Article 11.2 of the ADA provides that

The authorities shall review the need for the continued imposition of the duty, where warranted, on their own initiative or, provided that a reasonable period of time has elapsed since the imposition of the definitive anti‑dumping duty, upon request by any interested party which submits positive information substantiating the need for a review. Interested parties shall have the right to request the authorities to examine whether the continued imposition of the duty is necessary to offset dumping, whether the injury would be likely to continue or recur if the duty were removed or varied, or both. If, as a result of the review under this paragraph, the authorities determine that the anti‑dumping duty is no longer warranted, it shall be terminated immediately.

110.    The domestic industry has pleaded that the current state of the condition of the domestic industry is not the material fact for a review of this nature. They plead that in a midterm review the Authority is required to examine the likelihood of continuation or recurrence of dumping and injury to arrive at a decision to continue or vary or remove the duty so as to offset dumping.  The domestic industry in its submission has quoted the law and practices and standards of reviews in several countries to highlight the fact that determination of likelihood of ‘continuation or recurrence of dumping and injury’ is vital in a review investigation. They have inter alia submitted:

i.                    That the Chinese producers in general and the petitioner in particular, are still dumping material in the Indian market.

ii.                  That Domestic industry is suffering continued injury due to dumped import from subject countries and should the Anti Dumping Duty be revoked, the injury to the domestic industry would recur or intensify.

iii.                That export price and landed price of imports from China and subject countries has not materially changed over the years. In fact, it may have, at best, further declined in US $ term after imposition of Anti Dumping Duty;

iv.                 That Volume of imports from subject countries first declined due to anti dumping duty in force and thereafter increased. This clearly shows that the Chinese exporters can not sell in the Indian market without resorting to dumping. As regards subsequent increase in the import volumes, domestic industry understands that large scale imports are being made taking undue advantage of duty free import exemptions granted by the Govt. of India;

v.                   There is increase in the cost of production. However, the Chinese exporters have reduced their export price to India;

vi.                 There is decline in selling price of the domestic industry. The price at which domestic industry is selling material is not a remunerative price.

vii.       That the Chinese producers are holding significant surplus capacities and the demand in China is significantly below the capacities created by them. It has been argued that China’s production of over 20,000 Tonnes per year of the subject goods is far in excess of its domestic consumption and therefore, they have to be necessarily exported. Therefore, there is a great possibility that revocation of duty would lead to surge in imports and severe injury to the domestic industry.  

111.    The Authority has examined all these arguments. It has also been brought to the notice of the Authority that Chinese exports are already attracting antidumping duty in the USA and the EU for past several years and a review is underway in the EC. Therefore, their major markets being already affected because of the antidumping duty in force, Chinese exporters would be looking for alternative markets. Therefore, revocation of duty would most likely lead to continuation of dumping.

112     It has already been established that dumping is continuing in spite of the fact that duty is in force against China, though volume has considerably declined. Considering the extent of dumping margin and the volume of current imports as well as the volume of exports of Chinese exporters to other countries, the Authority holds that dumping will continue to occur if the duties are withdrawn.

113.    As far as continuation or recurrence of injury to the domestic industry is concerned the Authority has examined the price levels at which the goods are entering Indian market from the subject country in spite of the duty in force. There is a significant price undercutting and underselling by the Chinese exporters while the landed value of current imports without antidumping duty is compared with the net sales realization and non-injurious price of the domestic industry. There is no indication or valid argument that the price structure of imports from the subject country will change once the duty is revoked. On the contrary looking at the spare capacity and demand supply position in China there is every likelihood that the price level may further depress causing further injury to the domestic industry, if the duty is revoked.

I.          Conclusions

114     After examining the issues raised and submissions made by the interested parties and facts available before the Authority through the submission of interested parties or otherwise as recorded in the above findings and on the basis of the above analysis of the state of current dumping and injury and likelihood of continuation or recurrence of dumping and injury the authority concludes that:

i)                    The subject goods have entered from the Republic of China at less than its fair value and the dumping margins of the subject goods imported from China are substantial and above de minimis level;

ii)                  There is also a likelihood of dumping to continue or recur from China if the duties are revoked;

iii)                The domestic industry continues to suffer marginal material injury at present and the cause of the current injury is due to the volume as well as price effect of the dumped imports from the Republic of China;

iv)                Injury to domestic industry is likely to continue if the duties are revoked in respect of imports from Republic of China.

v)                  Therefore, continued imposition of the antidumping duty is warranted against goods originating in or exported from China to offset dumping.

vi)                There is no imports and therefore, dumping from Chinese Taipei and Hong Kong, during the injury investigation period. There is also no production of the subject goods in these two countries. Therefore, there is no likelihood of dumping to continue and/or recur from Chinese Taipei, if the duties are revoked. However, re-export or transshipment of goods of Chinese origin, if any will be adequately covered under the duty imposed against China. Therefore, continued imposition of duty against these two countries is not warranted.

J.         Indian industry’s interest & other issues 

115.    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

116.    Having concluded that there is no likelihood of continuation of dumping and injury on account of imports from Chinese Taipei and Hong Kong, the Authority finds no justification for continuation of the duty against these countries and therefore, recommends revocation of duty in force against these countries.

117.    However, in view of positive determination of continuation of dumping, injury and causal links as well as likelihood of continuation of dumping and injury on account of imports from Peoples Republic of China, the Authority is of the opinion that continuation of the measure is required against imports from that country. However, considering the current level of dumping from that country and injury suffered by the domestic industry, the Authority is of the opinion that the measure in force needs to be revised. Therefore, Authority considers it necessary and recommends continuation of anti-dumping duty on imports of subject goods from Peoples Republic of China in the form and manner described hereunder.

118.    Having regard to the lesser duty rule followed by the authority, the Authority recommends continued imposition of definitive anti-dumping duty on imports of the subject goods originating in or exported from China PR, equal to lower of margin of dumping and the margin of injury, so as to offset dumping and remove the injury to the domestic industry. The Authority notes that the duty in the original investigation was imposed on fixed price basis. Therefore, the Authority considers it appropriate to impose the antidumping duty on fixed duty basis and accordingly, recommends imposition of definitive antidumping duty as indicated in Col 9 of the table below, to be imposed from the date of notification to be issued in this regard by the Central Government, on all imports of subject goods originating in or exported from China. 

L.         Further Procedures

119.    An appeal against this order shall lie before the Customs, Excise and Service tax Appellate Tribunal in accordance with the relevant provisions of the Act.

120.    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 limit stipulated for this purpose.

Duty Table

Christy L. Fernandez

Designated Authority

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