Government of India
Ministry of Commerce
Directorate General of Anti-Dumping and Allied Duties
Udyog Bhawan
……

                 New Delhi, 7th October 2004

                            Final Finding

Subject: Sunset Review of Anti-Dumping duties imposed on imports of Polytetrafluroethylene (PTFE) originating in or exported from Russia: Final finding

 

No. 15/6/2003-DGAD - Having regard to the Customs Tariff Act, 1975 as amended in 1995 and the Customs Tariff (Identification, Assessment and Collection of Anti Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, thereof;

A. PROCEDURE:

1.    The procedure described below has been followed: -

1.1    The Designated Authority initiated the sunset review investigation of anti-dumping duty imposed on imports of Polytetrafluroethylene (PTFE) (hereinafter also referred to as PTFE or subject goods) originating in or exported from Russia (hereinafter also referred to as subject country) following a request to this effect by the Domestic Industry M/s. Hindustan Flurocarbon Limited, Hyderabad that the expiry of the anti dumping duty would likely to lead to continuation or recurrence of dumping and injury. This sunset review was initiated vide notification no. 15/6/2003-DGAD dated 8^th October 2003. The authority recalls that the final findings of the original investigation were notified vide notification No.24/1/98-DGAD dated 9^th June 1999.

1.2    The Designated Authority sent a copy of initiation notification to the embassy of subject country, the known exporters, importers and the domestic industry as per the list available in the findings of the original anti-dumping investigation and requested them to make their views known in writing within 40 days of the initiation of this review investigation. A copy of the application filed by the domestic industry along with the relevant questionnaires were also sent to all interested parties in terms of anti dumping rules requesting them to respond in the form and manner as per the relevant questionnaires. None of the exporters responded to the initiation notification as well as to the application filed by the domestic industry requesting continuation of anti dumping duty. None of the importers have also filed the response to the exporters’ questionnaire in the form and manner as prescribed therein. However, some of the importers have submitted some arguments, which have been analyzed in detail by the designated authority to the extent they have been found relevant to the investigation.

1.3    The investigation of dumping and injury covered the period from 1^st April 2002 to 30^th June 2003 also called the Period of Investigation or POI. The examination of trends in the context of injury analysis covered the period from 1^st April 1999 to the end of the period of investigation (also called the period under consideration). The import data has been examined from the transaction wise data made available by the DGCI&&S and the import quantity and value of imports from subject countries have been determined through the transaction wise DGCI&S data.

1.4    **** in this notification represents information furnished by the interested parties on confidential basis and so considered by the authority under the rules.

1.5    The authority kept available the non-confidential version of the evidence presented by various interested parties in the form of a public filed maintained by the authority and kept open for inspection by the interested parties.

1.6    The authority sought and verified all the information it deemed necessary for the purpose of final finding with regard to dumping, injury and causal link. The Authority conducted on-the-spot investigation of the domestic industry to the extent considered necessary. The cost of production of domestic industry was also analyzed to work out the best cost of production and the cost to make and sell the subject goods in India on the basis of GAAP based on the information furnished by the applicant so as to ascertain if anti-dumping duty lower than the dumping margin would be sufficient to remove injury to the domestic industry.

1.7    In accordance with Rule 6(6), the Authority also provided opportunity to all interested parties to present their views orally in a public hearing held on 27^th February 2004. The parties, which presented their views in the public hearing, were requested to file written submissions of the views expressed. In accordance with Rule 16 of the anti-dumping Rules, the essential facts/basis considered for these findings were disclosed to the known interested parties on 10^th September 2004 and comments received on the same are duly considered in the final findings. All the interested parties were requested to submit the response to the disclosure by 23^rd September 2004. It is noted that none of the interested parties except the domestic industry has filed the response to the disclosure statement.

B. PRODUCT UNDER CONSIDERATION AND LIKE ARTICLE

2. The product considered in this investigation is Polytetrafluroethylene (PTFE)). The basic raw material for manufacture of this product is Anhydrous Hydrochloric Acid and chloroform. It is produced in the moulding grade, fine powder grade, aqueous dispersions and compound grades of filled grades.

3. The subject gods is primarily used in the electrical, electronic, mechanical and chemical industries due to its unique character tics which are chemical inertness, low coefficient of friction, non toxic, non inflammable, resistance to radiation and outstanding electrical properties over a wide frequency range.

4. PTFE is classified under customs Sub heading 390461 of the Customs Tariff Act 1975. However as stated in the initiation notification, the customs classification is indicative in nature and is in no way binding on the scope of the investigation. There are no arguments by any of the interested parties on the product under consideration.

5. It has been argued by various interested parties consisting of importers that there are many grades of the subject goods which are not manufactured by the domestic industry and these grades are used mainly for high end electronics such as in nuclear and space establishments. It has also been argued that grades used for making the wires and cables have not been manufactured in a consistent quality by the domestic industry and therefore, the same is required to be imported. The authority has examined the transaction-wise information of imports from subject country and after a detailed examination based on the submissions by interested parties , it notes that the subject goods exported by Russian producers and the products supplied by the domestic industry is comparable to each other in terms of various parameters like physical characteristics, chemical properties, manufacturing process, technology, functions and uses, pricing, distribution and marketing and tariff classification of the goods. Besides, the prices at which the goods from Russia are being exported to India are broadly in the same price range. Further it has not been disputed by any of the interested parties that certain grades other than those manufactured by domestic industry are coming in from Russia and which cannot be substituted with the subject goods manufactured by the domestic industry. An analysis of the imports made by other countries suggests that these different grades might have been originating or exported from countries other than subject countries, as the prices from these countries appeared to be much higher than the subject goods exported from Russia. With regard to the end use of the subject goods, the authority notes that the subject goods manufactured by domestic industry have been consistently supplied to the manufacturers of high end electronics. There is no known difference in PTFE from Russia and PTFE produced by the domestic industry. The two are technically and commercially substitutable and the consumers are using the two interchangeably. On the basis of the above examination, the authority concludes that the PTFE produced by the applicant is a like article to the goods imported from Russia in accordance with anti dumping rules. It is further noted that this issue has been investigated in detail in the previous investigations and settled.

C. Domestic Industry

6. The petitioner is the sole producer of the PTFE in India and hence has a standing to file the petition in terms of Rule 5(3) a of the Anti-dumping rules read with Rule 2(b).

E. Injury

It is noted that the demand of the product under consideration shows positive trend. The absolute quantum of imports from subject country increased during the period under consideration.

14. The Authority has also examined impact of changes in demand on price of the domestic industry. It is found that while demand increased, imports from subject countries as also other countries also shows significant positive trend in the volume. In fact import from other countries has also increased significantly in the demand. Regarding imports from other countries, China is the major exporter-exporting product under consideration during the period under consideration. The Authority recalls that the domestic industry had filed an application against imports from China, and for which investigation is under progress by the Designated Authority.

It is evident from the above that imports from subject country have increased by 62% over the period under consideration. The authority further notes that the domestic consumption increased by 59 % during the period under consideration. It is therefore concluded that there has been steady and significant increase in demand and also the volume of dumped imports has significantly increased over the period under consideration and increase in imports has been more than increase in demand, resulting into decline in share of domestic industry.

Share of subject country in total imports:

16. Over the period under consideration, the share of the dumped imports from the subject countries remain at significant level. As present investigation is a review investigation, therefore, anti dumping duty continues to be in force. However, even after the imposition of anti dumping duty, imports remain at a significant level. It is therefore, noted by the Designated Authority that market share of dumped imports from Russia remains at significant level.

 

 

The Designated Authority has examined share of Russia in total imports of subject goods in India. It may be seen that Russian share in total imports have declined, which could be due to imposition of duty against Russia and commencement of imports from newer sources.

Market share of dumped imports in total demand

17. The Authority has also examined share of dumped imports from subject countries in demand of subject goods in India. The Authority finds that share of subject country, which was 13.12% in 1999-2000 marginally increased to 13.29% during the POI. The demand, however, increased to 17.56%.

It is evident from the above that domestic industry has lost significant market share, which is captured by subject countries as also other countries. As mentioned earlier, in other countries, China is a major exporter of the subject goods, against which investigation is under progress.

18. It is found that dumped imports from subject country have increased in relation to production of the domestic industry.

On the basis of above examination, it is concluded that there has been a significant rise in the market share of dumped imports from Russia during the period under consideration as compared to previous years.

Evolution of import price

19. During the period under consideration, the average CIF prices of the imports originated in Russia decreased significantly by 13.00%..

The Authority notes that prices of the subject goods fluctuate in view of the fact that the input prices also keep fluctuating. It is evident from the above that import price of PTFE from Russia, which was increasing over period under consideration till 2001-02 declined significantly during the period of investigation.

Price Undercutting,

20. A comparison for selling price of domestic industry and landed price of imported material was made between the Russia and the domestic industries selling price in the domestic market, net of all rebates and taxes to unrelated customers, at the same level of trade. The prices of the domestic industry were determined at the ex factory level. The CIF prices of Russia were added for post importation applicable duties (basic customs duty).

This comparison showed that during the period of investigation, the subject goods originating in the subject country were sold in the domestic market at prices which undercut the domestic industry’s prices when expressed as a percentage of the domestic selling prices of the domestic industry.

 

Price Underselling

21. The Authority has also examined the claim of the applicant that the domestic industry is suffering on account of the losses from the sale of PTFE. The Authority notes that price underselling is an important indicator to make an assessment of the injury. The Authority has worked out the Non-injurious price for the product under consideration and compared the same with the landed value to arrive at the extent of price underselling. The analysis shows a significant level of incidence of price underselling of 30-40% on account of dumped imports from Russia.

Situation of the Domestic Industry

Preliminary remarks

22. For the examination of the impact of the imports on the domestic industry in India, the Authority considered such indices having a bearing on the state of the industry   as production, capacity utilization, sales quantum, stock, profitability, net sales   realization, the magnitude and margin of dumping, etc. in accordance with Annexure II (iv) of the Rules supra

Sales

23. Sales volumes of domestic industry were as follows:-

It is seen that the sales volumes of the domestic industry increased between 1999-00 and 2001-02. However, sales volume have shown declining trend thereafter in the investigation period. The sales volumes have shown declining trend even when the demand has shown an increase. As a result, the market share of the domestic industry has shown a decline even when the demand has grown.

 

Likely Impact if the duty is withdrawn

24. Considering the level of price undercutting and price sensitivity of the product, there could be further decline in sales of the domestic industry.

Profits:

25. Profit/loss of the domestic industry per unit of production and for the quantities sold has been as under:

 

It is evident from the above that profits of the domestic industry have significantly been eroded. The domestic industry continues to make losses even after imposition of duty.

Production, capacity and capacity utilization

26. Production, capacity and capacity utilization of the domestic industry have been as under.

It is seen from the above that production of the domestic industry has increased However, it is noted that increase in production has not helped the domestic industry as domestic industry continues to make losses due to availability of dumped material in the domestic market. It is further noted that domestic industry has alleged in their application for mid term review that ADD imposed earlier in their original investigation is inadequate to tide over the injuries being suffered by the them due to dumped imports from subject country.

Market Share

It is seen that the share of the domestic industry in demand increased significantly between 1999-2000 and 2000-01. However, thereafter, the domestic industry has been loosing market share. It is also seen that the share of the dumped imports from the subject county has increased in period under consideration in the total demand. It is also noted that import share from other than subject countries has also significantly increased. The Authority recalls that significant imports made from other countries pertain to imports from China for which a separate investigation is currently underway by the Authority.

 

Employment and Wages

28. There is no changes in employment level of the domestic industry as employees of the domestic industry remains more or less same as the company is having policy to retain its employees in tough situation with a expectations of better tomorrow. In wages, wages of the domestic industry shows positive trend due to prevailing rules and laws of the country.

Productivity:

29. Productivity of the domestic industry has been as under:

It is evident from the above that productivity of the domestic industry, which has increased between 1999-00 to 2000-01, declined after 2000-01 significantly. However, from the base year to the POI, the employee productivity shows a general increase. It is also noted that per employee productivity of the domestic industry shows positive trend due to increase in production and more or less same level of employees.

Factors affecting domestic prices

30. The imports from subject countries are resulting in significant price undercutting and price underselling in the Indian market. The landed price of imports is significantly below the non injurious price of the domestic industry. Selling prices of the domestic industry have declined as may be seen from the table below.

 

It is evident from the above that landed price form Russia is significantly below than net sales realization of the domestic industry as also cost of production. Dumped imports have significantly undercut the prices of the domestic industry in the Indian market.

31. Return on investments (profit before interest) shows the same trend as that of profits as is evident from the table below.

 

It is evident from the above that cash profit situation of the domestic industry declined significantly during the period under consideration.

Inventories:

33. Inventories with the domestic industry have been as under:

It is seen form the above that inventories of the domestic industry reduced till 2001-02. However, inventories increased thereafter in the period of investigation, which is the highest in the whole period under consideration. This increase in inventories is in spite of production curtailed by the domestic industry.

Ability to raise capital investments:

34. It is noted that company is making losses for the product therefore company does not have any plan at present to expand its capacity or to raise any capital for any further expansion.

Growth

35. Domestic industry has faced negative growth so far as operations of product under consideration is concerned as production, sales have declined and profits of the domestic industry have been eroded and now converted into losses. Following table shows that domestic industry has negative growth in many parameters.

 

 

It is seen from the above that domestic industry faced negative growth in respect of a number of parameters.

Conclusions on Injury

36. The authority notes that a significant decline in sales volumes (about 24% from the preceding year though a marginal increase from the base year), continuous financial losses over the period under consideration, decline in market share in demand (significant decline after showing increase in 2000-01), positive price undercutting in POI, negative return on capital employed , increase in stocks after significant decline show significant deterioration in the performance of the domestic industry over the injury period. Performance of the domestic industry, when compared between 1999-2000 and POI improved in terms of market share. However, this can not be considered satisfactory, given that the domestic industry had been suffering losses and facing injury in preceding period due to dumping of subject goods from Russia. On the basis of foregoing, the authority concludes that the domestic industry has suffered continued material injury from the dumped imports from the subject country.

Causal link

37. Increase in volume of imports (by more than 60%) between 1999-00 and POI has lead to an increase in share of imports in demand/consumption. Imports from subject country have increased in the total imports as well as in total demand. It has also increased as a proportion to the sales made by domestic industry during the period under consideration. As a direct consequence, share of domestic industry declined between 2000-01 and POI after recording an increase between 1999-00 and 2000-01.

38. Market share of the imports increased after declining significantly. As a direct consequence, the market share of the domestic industry first increased and thereafter declined significantly.

39. Imports from the subject country were undercutting the prices of the domestic industry. As a direct consequence, the domestic industry was prevented from selling the product at a price which would have enabled it to recover its cost of production and earn a reasonable profit. This led to deterioration in the performance of the domestic industry in terms of profits, cash profits and return on investment.

40. Even though the employment level of the domestic industry declined, the Authority notes that the decline in the employment level is an indicator of overall situation of the applicant company and is not linked to dumping of the product concerned.

41. It has been argued by other interested parties that injury to the domestic industry could be due to the reasons other than dumped imports from subject country. Reasons such as high interest burden and high cost of production have been cited as reasons for the injury to the domestic industry. The Authority has verified the data pertaining to the cost structure of the domestic industry and has also analyzed the effect of the interest component on the state of the domestic industry. The Authority notes that the Domestic Industry was referred to BIFR in April, 1994. BIFR in its Order No.507/94 dated 19.12.1996 approved the merger of Hindustan Flurocarbons Ltd (HFL) with Hindustan Organic Chemicals Ltd (HOCL). As reported in its Annual Report for the year 2002-2003, it is mentioned that the company is still in the BIFR net. HOCL (the holding company) has submitted alternative viable proposal for revival of HFL (subsidiary of HOCL and the company under consideration) and submitted the same to IDBI and BIFR in respect of rehabilitation packet. The final decision is awaited.

42. The Authority has analysed the components of cost of production for the financial year 1999-2000 with 2002-2003. The cost of production went up by 11.35% during this period. The company’s total sales turnover went down by 11.7%. The company suffered approximately 6.12% reduction in its selling price per kg for PTFE. The company could realise 26.9% higher selling price and earned profit in case of its another product CFM 22. Despite increased production and capacity utilisation of both products, its inability to realise its cost of production for PTFE coupled with 28.71% reduction in the landed cost of the product under consideration from Russia contributed to the overall loss of the company. Though there has been net losses, the company has posted gross profit from 1999-2000 onwards. As claimed vide its Annual Report for 2002-2003, improvement in working capital management and austerity drive on all expenses has helped the company to withstand the competitive environment.

43. The Authority notes that there is no contraction in the overall demand during the period under consideration. On the contrary, the demand has increased by 59% during the injury period. It is also concluded from the data/information made available to the domestic industry by various interested parties that there has not been any apparent change in the pattern of consumption of the subject goods.

44. With regard to the volume and prices of imports not sold at the dumped prices, it is noted that apart from the subject country, a considerable proportion of the imports from other countries is accounted for by China PR. The authority recalls that it has initiated an anti-dumping investigation of the subject goods from China PR on the basis of a claim filed by the same domestic industry and the investigation is currently under progress. In view of the foregoing, it is noted that imports from non-subject countries other than China PR are considered not to have an impact on the performance of the domestic industry.

45. With regard to trade restrictive practices of and competition between foreign and domestic producers, it is further noted that there is a single market of the subject goods where dumped imports from subject country competes directly with the subject goods produced by the domestic industry. On the basis of examination of transaction-wise imports from subject country and from the sales records of the domestic industry, it appears that the price determines the choice of supplier as dumped subject goods are like product to the indigenous producer. It is further noted that imported subject goods and domestically produced goods are like articles and are used for similar application/end uses. Further, there has not been any arguments from any of the interested parties with regard to the fact that possible developments in technology could have been possible a cause of material injury being caused to the domestic industry.

46. As the domestic industry is not having exports of the product, possible deterioration in the export performance may not be a possible cause for injury to the domestic industry. As regards improvement in productivity, the authority notes that during the period under consideration, the productivity measures as output per employee per year increased significantly. Thus, deterioration in the productivity has not been a cause for injury to the domestic industry.

Conclusions on Causal Link

47. Given the above analysis which has properly distinguished and separated the effects of all known factors on the situation of the domestic industry from the injurious effects of the dumped imports, it is concluded that these other factors as such did not reverse the fact that the material injury found may be attributed to the dumped imports. It is, therefore, concluded that the dumped imports originating in the subject country has caused material injury to the domestic industry within the meaning of Rule 11 of Anti Dumping rules and article 3.5 of the Agreement of Anti Dumping.

Likelihood of continuation of dumping and recurrence of injury if the duty is withdrawn

48. Data of exports of PTFE from Russia to other countries in the world made available to the Authority shows that exports of PTFE from Russia to countries other than India are also at dumped prices, considering the estimates of normal value and the price at which the goods have been exported to a number of countries. It is noted that the exporting producers are selling the material at low prices in other markets. This clearly suggests that the Indian market would be very attractive to imports from Russia should the anti dumping duties not be continued.

Vulnerability of the domestic industry

49. It is further noted that the domestic industry has suffered continued material injury from the dumped imports from subject countries. There is a greater possibility that revocation of duty will result in higher extent of injury to the domestic industry. Imports from China at lower price have shown very significant increase. This shows that the Indian Market is vulnerable to imports, should the prices offered by the exporters be lower. In view of this fact, the Authority notes that the domestic industry is vulnerable to injury, should the present anti dumping duty be revoked.

Significant price undercutting by imports with current measures

50. Imports from subject countries were undercutting the prices of domestic industry in the Indian market even after duty in force. It is noted that should the present anti dumping duty be revoked, the price undercutting by imports might increase further.

Ample production capacity of exporters

51. The producers in Russia are understood to be holding significant production capacity. Even though no Russian producers have responded to the Authority and have not cooperated in the present investigations, the information made available by the interested parties shows that the Russian producers are holding significant capacities. The global exports of the product from Russia have been as under:-

Source: World Trade Atlas

51. As against Indian demand of about 1200 MT, it is seen that not only the Russian export price to other countries appear higher, but also the Russian producers are apparently having huge capacity to meet several times of Indian demand. It is therefore noted that revocation of anti dumping duty would therefore lead to substantial importation of the material.

Significant market share of imports:

52. The market share of imports from Russia in demand of subject goods in India is quite significant even with the current measures in force. The Authority noted that should the current measures be allowed to lapse, market share of the imports from Russia would increase further.

Non participation by exporters

53. The Authority notes that none of the exporters from Russia have responded to the Authority. The Authority has been constrained to rely upon other information made available in view of non-cooperation and non-participation by the exporters from Russia.

Market conditions and circumstances of exporters:

54. There is a likelihood that import volumes would increase significantly given that the Russian exporting producers (a) are exporting at lower prices in some of the world markets and therefore would naturally like to sell higher volumes in the Indian market, should the measures be repealed; (b) have the potential to raise their production and export volume in view of their large unused production capacity; (c) domestic consumption in Russia is likely to stay at relatively low levels in the near future; (d) the exporters have not established that their market conditions and circumstances are such that the injury to the domestic industry would be unlikely should the present measures be allowed to lapse.

 

Current dumping margin

55. The dumping margin in the present review has been found to be very significant. In fact, the margin of dumping has significantly increased. If anti-dumping duties are removed it is likely that the dumping will continue at much higher volumes of imports. Further given that the Russian exports to a number of other countries are in fact at much lower prices, expiry of the measures would worsen the situation of the domestic industry, eventually putting at risk the viability of domestic production of subject goods.

Conclusions

56. After considering the foregoing the Authority concludes that -

(i) The subject goods have been exported below their Normal Value from subject country during the period under investigation.

(ii)    The domestic industry continues to suffer material injury on account of dumped imports from subject country.

(iii)    Injury has been caused to the domestic industry by the dumped imports from subject country and

(iv)    Anti dumping duties are required to be imposed in respect of imports from subject country, as withdrawal thereof would lead to continuation of dumping and injury.

58. Landed value of imports for the purpose shall be the assessable value as determined by the Customs under the Customs Act, 1962 and all duties of customs except duties levied under sections 3, 3A, 8B, 9 and 9A of the Customs Tariff Act,1975.

59. An appeal against this order shall lie before the Customs, Excise and Service Tax Appellate Tribunal in accordance with the Act, supra.

 

 

Abhijit Sengupta
Designated Authority

Back