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REPORT OF FINDINGS ON THE ANTI-DUMPING PROTEST
AGAINST THE
IMPORTATION OF STEEL BILLETS FROM RUSSIA
(HS HEADING NOS. 7207.11 90 & 7207.20 90) UNDER SECTION 301 OF THE
TARIFF AND CUSTOMS CODE, AS AMENDED
(ANTI-DUMPING INV. NO. 99-01)
28 August 2000
P u b l i c V e r s i o n
TABLE OF CONTENTS
List of Tables and Annexes
Abbreviations/Legends
1. Executive Summary and Conclusions
2. Introduction
3. The Commission’s Inquiry
4. The Domestic Industry and Market Dumping
5. The Economic Condition of the Domestic Industry
6. Final Determination
LIST OF TABLES AND ANNEXES
Tables
1-A - Required Percentage Chemical Composition
1-B - Required Percentage Chemical Composition
1-C - Required Percentage Chemical Composition
2 - Specific Importations of Steel Billets from Russia
3 - Tariff Rates of Steel Billets
4 - The Philippine Market for Steel Billets
5 - Export Prices by Exporter: 1998
6 - Normal Values (FOB)
7 - Dumping Margins by Exporter
8 - Volume of Dumped Imports
9 - Volume of Dumped Imports Vis-à-vis Domestic Consumption and Production
10 - Market Shares
11 - Trends in Sales of Steel Billets
12 - Trends in Production, Capacity Utilization and Inventory
13 - Breakdown of Production Cost
Annexes
"A" - Computation of Dumping Margins by Exporter
ABBREVIATIONS/LEGENDS
| Amalgamated |
Amalgamated Iron Works, Inc. |
| APSMI |
Association of Philippine
Steel Mills, Incorporated |
| ASTM |
American Society of Testing
Materials |
| BIS |
Bureau of Import Services |
| BOC |
Bureau of Customs |
| CAPASCO |
Cathay Pacific Steel
Corporation |
| CRF |
Clean Report of Findings |
| Commission |
Tariff Commission |
| D.O. |
Department Order |
| DOF |
Department of Finance |
| DOLE |
Department of Labor and
Employment |
| DTI |
Department of Trade and
Industry |
| GATT |
General Agreement on Tariffs
and Trade |
| Hottick |
Hottick Investments Limited |
| MECHEL |
Chelyabinsk Integrated Iron
and Steel Works |
| Milwaukee |
Milwaukee Industries
Corporation |
| MT |
Metric Tons |
| NSC |
National Steel Corporation |
| NSO |
National Statistics Office |
| OSG |
Office of the Solicitor
General |
| PNS |
Philippine National
Standards |
| Pag-Asa |
Pag-Asa Steel Works, Inc. |
| POI |
Period of Investigation |
| PSRMA |
Philippine Steel Rolling
Mills Association |
| R.A. |
Republic Act |
| SKK |
SKK Steel Corporation |
| SAMC |
Steel Asia Manufacturing
Corporation |
SGS |
Societe
Generale de Surveillance |
| TCCP |
Tariff and Customs Code of
the Philippines |
1. EXECUTIVE SUMMARY AND CONCLUSIONS
1.1 SUMMARY
On 11 January 1999, National Steel Corporation
(NSC) filed with the Department of Finance (DOF) a dumping protest against the importation
of steel billets from Russia. The protest was supported by three other local
billet manufacturers, namely, SKK Steel Corporation (SKK), Milwaukee Industries
Corporation (Milwaukee) and Amalgamated Iron Works, Inc. (Amalgamated).
The protest was endorsed by the DOF to the Bureau of Import
Services (BIS) of the Department of Trade and Industry (DTI) on 30 March 1999 for initial
investigation. In its Initiation Report, the DTI-BIS found the information supporting the
petition of NSC as constituting a prima facie case and recommended the initiation
of a preliminary anti-dumping investigation. The notice of initiation of preliminary
investigation was published on 28 May 1999 in the Philippine Daily Inquirer and Manila
Bulletin.
On 2 August 1999, the DTI-BIS issued its report of positive
preliminary findings against seventeen (17) exporters of steel billets from Russia with
the recommendation for the imposition of a provisional measure (anti-dumping bond) ranging
from 5.51% to 29.91% of the export price.
Pursuant to Section 301 of the Tariff and Customs Code of the
Philippines, the DTI-BIS endorsed the protest together with its findings to the Tariff
Commission on 9 August 1999 for formal investigation to determine the merits of imposing a
definitive anti-dumping duty.
In compliance with procedural requirements, notices were sent to
the Philippine Embassy in Moscow, Russia and the Russian Embassy in Makati City,
Philippines informing the respective Ambassadors that the case is with the Commission for
formal investigation. Individual notifications with attached questionnaires were also sent
to the protestant, other domestic producers of steel billets, Philippine importers,
trader-exporters, Russian manufacturers/exporters, and other interested parties. Also
notified, through their embassies in Manila, were the governments of the trading firms
whose billet exports from Russia were subject to provisional measures. Invitations to the
consultation and pre-hearing conference were likewise sent to all interested parties. A
notice of public hearing was published in two (2) newspapers of general circulation on 22
December 1999. All known interested parties and concerned government agencies were also
sent individual notices.
The product under consideration is steel billets containing by
weight 0.01% or more but less than 0.25% of carbon falling under HS Subheading 7207.11 90
and steel billets containing by weight 0.25% or more of carbon classified under HS
Subheading 7207.20 90. Billets are generally used in the production of reinforcing bars
and wire rods.
The Commission’s investigation covered imports of steel
billets for the 12-month period from 01 January to 31 December 1998.
1.2
CONCLUSIONS
1.2.1 Domestic Industry Support
There are five (5) domestic manufacturers of steel
billets: NSC, Cathay Pacific Steel Corporation (CAPASCO), Amalgamated, Milwaukee and SKK.
Although the latter three (3) producers supported the anti-dumping protest filed by NSC,
they failed to comply with the necessary documentary and/or evidentiary requirements
necessary for the determination of dumping, material injury and causality, both during the
preliminary determination by the DTI-BIS and the formal investigation by the Commission.
The DTI-BIS, having established that NSC accounted for 26% of
total domestic production, considered the requirement for domestic industry support
satisfied. Further, the DTI-BIS considered NSC as the only company representing the
domestic steel billets industry.
In its Resolution of 04 February 2000, the Commission adopted
the aforementioned position of the DTI-BIS and ruled that only NSC’s submission would
be considered.
1.2.2 Like Product
Based on an assessment of the product under consideration and
locally-manufactured billets, the Commission is satisfied that domestically-produced steel
billets of cross-sectional dimensions of 100 mm x 100 mm, with lengths ranging from 3
meters to 6 meters, and conforming to PNS 230 (ASTM 33), PNS 275 (ASTM 40) and PNS 415
(ASTM 60) constitute like products to the imported product under consideration, i.e.,
Russian steel billets with cross-sectional dimensions of 60 mm x 60 mm up to 120 mm x 120
mm, of lengths of 4 meters up to 12 meters, and conforming to 5SP/PS GOST 380 or its
equivalent in other national standards.
The imported and locally produced products are comparable in
terms of quality, are used interchangeably in the production of Grade 230, Grade 275, and
Grade 415 reinforcing bars with 8 mm, 10 mm, 12 mm, 16 mm, 20 mm, 25 mm and 28 mm
diameters, and are classified under the same HS Subheading Nos. 7207.11 90 and 7207.20 90.
1.2.3 Price Difference
1.2.3 Price Difference
Export Price
The Commission based its estimates of export prices on
import entries submitted by NSC and on file with the Commission which were validated using
the Clean Report of Findings (CRFs) provided by the Societe Generale de Surveillance
(SGS). Adjusted to FOB level (i.e., CIF value less freight and insurance), export prices
ranged from US$109.50/MT to US$204.50/MT.
Normal Value
The Commission was unable to determine the normal value of
steel billets based on domestic selling prices and/or cost of production in Russia due to
unavailability of data. A certification from the Philippine Embassy in Russia submitted by
NSC stated that the bulk of steel billets produced by Russian steel mills are utilized for
their own or affiliated mills’ consumption.
Using the best-information-available option, the Commission
based its estimates of normal values on the FOB export prices of steel billets by Russia
as published in 1998 issues of Metal Bulletin. Based on port of origin, the estimated
normal values are: Far East Port -- US$140.00/MT to US$195.00/MT and Black/Baltic Sea
Ports -- US$145.00/MT to US$200.50/MT
Dumping Margin
Of the thirty-seven (37) identified exporters of steel
billets from Russia during the POI, eleven (11) had dumping margins that were not de
minimis. These margins ranged from US$2.19/MT to US$22.72/MT.
1.2.4 Negligible Volume of Dumped
Imports
Dumped imports accounted for 22% of total
Philippine imports of steel billets in 1998. Since the share of dumped imports is above
3%, same is not negligible.
1.2.5 Material Injury and Causal
Linkage
Volume of Dumped Imports
Total Philippine imports of steel
billets from Russia amounted to 396,000 MT in 1998. Relative to domestic consumption,
dumped imports accounted for 17% of the domestic market. With respect to domestic
production, dumped imports represented 73% of NSC’s 1998 production level.
Price Effects
A comparison of the average ex-factory domestic selling
price of steel billets produced by NSC and the average landed cost of dumped imports of
steel billets from Russia showed price undercutting by the latter in the 2nd
and 4th quarters of 1998. The average landed cost of dumped steel billets was
2.45% lower in the 2nd quarter and 11.31% lower in the final quarter. The
magnitude of undercutting in the 4th quarter was influenced by the large
devaluation of the Russian Ruble in September 1998.
NSC’s selling prices steadily
decreased from the 2nd quarter to the 4th quarter despite relatively
stable production costs in the first three quarters. Price depression, particularly
evident in the 2nd quarter when NSC’s price dropped by 8%, led to a lower
profit margin in the 2nd quarter and a loss in the 3rd quarter.
Price suppression occurred in the 3rd and 4th
quarters when NSC’s selling prices declined despite increases in the cost to produce
and sell. During these quarters, selling prices fell below cost. Suppression was
pronounced in the 4th quarter when NSC’s selling price fell by 7% despite
an increase in production cost of 11%. NSC’s loss grew during this period.
The incidence of price depression and suppression cannot be
attributed entirely to the dumping of Russian billets. Imports of billets from other
countries also exerted competitive pressure on NSC. Russia remained the price leader,
however, supplying 58% of total imports during the POI while other countries individually
accounted for only 6% or less.
Market Share
NSC’s share of the domestic market for steel billets
was 20% in 1996. This increased to 25% in 1997 then fell to 24% in 1998. The market was
contracting over the three-year period.
That its market share was reduced only slightly was made
possible through the remedial pricing strategies NSC adopted. Analysis of the quarterly
movements in market shares show that NSC was able to defend its share against non-dumped
imports but was unsuccessful against dumped imports.
Sales
In 1997, sales of NSC rose by 11% despite a 9% contraction
of the market. In 1998 when dumping occurred, sales of NSC paralleled the change in market
size. Moreover, the 36% reduction in its sales was greater than the 24% contraction of the
market.
The entry of dumped imports in the 1st quarter
reduced NSC’s sales by more than half relative to average quarterly sales in 1997. In
the 3rd and 4th quarters, the decreases in NSC’s sales were
invariably greater than the contraction of dumped imports despite the company’s
suppressed prices. This indicates that NSC’s prices remained uncompetitive vis-à-vis
dumped imports leading to a significant restrictive effect on the company’s sales.
Production, Capacity Utilization and Inventory
NSC’s production decreased by 2% in 1997 and 29% in
1998. Production in 1998 was affected by NSC’s shutdown for a total of 84 days for
inventory control and power allocation purposes. With annual rated capacity of 300,000 MT,
utilization dropped to 69% accordingly.
The reduction in production volumes led to declines in inventory
levels.
Cost of Production
The cost of producing a metric ton of steel billets in 1998
was 15.47% higher than the 1997 level. This increase was partly attributable to the
increase in the price of its direct material (scrap) and other conversion costs (i.e.,
fixed and transfer cost) which constituted 60% and 13% of total production cost,
respectively.
Despite the huge increase in production cost, NSC did not adjust
its selling prices upward. On the contrary, its prices were suppressed to defend its sales
and market share from dumped and non-dumped imports.
Profitability
NSC suffered a loss of P124 million from its billet
operations in 1996 but recovered in 1997, generating income (EBIT) of P75 million. In
1998, NSC incurred another loss which was more than triple the 1996 level. This loss is
attributable to the increase in production cost combined with depressed prices and reduced
sales. Since the dumping of Russian billets had a negative impact on sales and
significantly influenced NSC’s pricing, it was an important contributory factor to
the net loss sustained by NSC in 1998.
Cash Flow
The drop in sales revenue in 1998 by 30% contributed
markedly to NSC’s liquidity problem. The revenue lost could have been used to fund
working capital requirements (e.g., purchase of steel scrap for its billet production).
Since dumping had a significant dampening effect on NSC’s sales, it aggravated the
company’s cash flow problems.
Investment and Ability to Raise Capital
NSC’s inability to generate investment and raise
capital is traceable to internal problems which include enormous debt, high interest cost,
foreign exchange losses, high cost of scrap, high operating costs, and a shortage of
working capital.
Employment and Wages
The total workforce in billet operations was 158 as of
November 1998 as against 190 in 1997. The retrenchment of thirty-two (32) employees was
caused by the reduction in production and sales on which dumping had material influence.
Factors Other Than Dumping Which Caused Injury
a. Competition from Normal (Undumped)
Import
Normal imports of steel billets provided stiff competition to
the domestic industry as shown by their market performance. Imports of billets from other
countries gained an increasing share of the market from 1996 to 1998 although Russia
remained the dominant player. Competition was heightened by the decrease in the tariff
rate on billets and the realignment of currency values in the aftermath of the 1997 Asian
financial crisis.
b. Undumped imports of billets from Russia as well as billets
sourced from other countries were priced lower than billets from NSC.
Market Contraction
 |
Unfavorable economic conditions ensuing from the Asian financial
crisis that broke in 1997 dampened demand and depressed prices. The Philippine market for
steel billets contracted by 9% and 34% in 1997 and 1998, respectively. |
High Cost of Production
NSC has a cost disadvantage in the production of steel billets
arising from the lack of iron ore; expensive imported scrap and low-yield local scrap
(same constituting 60% of total production cost); and relatively higher electricity costs
and lower level of technology.
Financial Performance
In 1996, NSC incurred a loss of P2.032 billion due to the
revaluation of assets as required by incoming investor Hottick Investment Ltd. In 1997,
EBIT amounting to P0.780 billion was realized.
The company incurred another loss in 1998 with corresponding
negative returns on sales, assets and stockholders’ equity. This loss was due mainly
to the reduction in net sales by 29%.
The relative share of billet operations to NSC’s overall
operations was 21% in 1998.
Foreign Currency Losses
In 1997, NSC incurred total foreign currency losses of about
P2.5 billion. Of this amount, some P1.2 billion were capitalized and included as part of
construction costs of the company’s plant facilities and installation of machinery
and equipment and about P861 million were charged to the deficit account.
In 1998, a total of 154.9 million in foreign currency losses was
again capitalized and included as part of construction costs of the company’s plant
facilities and installation of machinery and equipment.
1.3 APPLICATION OF PROCEDURAL
MATTERS UNDER R.A. 8752 (ANTI-DUMPING ACT OF 1999)
R.A. 8752 which amends Section 301 of the TCCP was signed into
law by the President on 12 August 1999. The R.A. took effect on 4 September 1999, fifteen
(15) days following its publication on 19 August 1999 in Malaya and the Philippine
Standard.
Procedural provisions of RA 8752 are applicable to the instant
anti-dumping case. In Republic vs. Court of Appeals, G. R. No. 92326, 24 January 1992, the
Court held:
"Procedural matters are governed by the law in force
when they arise, and procedural statutes are generally retroactive in that they apply to
pending proceedings and are not confined to those begun after their enactment although,
with respect to such pending proceedings, they affect only procedural steps taken after
their enactment." (205 SCRA 356).
1.4 FINAL
DETERMINATION
The Commission finds positive evidence of price differences and
is satisfied that dumping per se caused material injury to the domestic industry.
It is therefore ordered that definitive anti-dumping
duties be imposed on the following exporters of steel billets originating from Russia:
| No. |
Exporter |
US$/MT |
%
of
Export Price |
| 1. |
Leman Commodities S.A. |
25.64 |
22.72 |
| 2. |
Metal Traders Stahl Handel |
18.00 |
14.75 |
| 3. |
Multi-Trade Enterprises AG |
17.50 |
13.57 |
| 4. |
SLAV-AG (Austria) |
16.17 |
12.41 |
| 5. |
Asia Industrial Co., Ltd. |
10.00 |
6.06 |
| 6. |
Balkan Steel Int’l.
Establishment (Liechtenstein) |
8.00 |
4.86 |
| 7. |
Pacific Atlantic Resources PTE,
Ltd. (Australia) |
6.76 |
5.51 |
| 8. |
Balli Steel (U.K.) |
6.11 |
3.62 |
| 9. |
Mitsui & Co., Ltd. (Hong
Kong) |
4.85 |
3.16 |
| 10. |
Duferco, SA (Switzerland) |
4.63 |
3.59 |
| 11. |
Zap-Sib Met Kombinat |
3.74 |
2.19 |
| 12. |
Lebgok AG (Switzerland) |
0.00 |
0.00 |
| 13. |
UVISCO, Ltd. (U.K.) |
0.00 |
0.00 |
| 14. |
UMS United Metal Supply, Ltd.
(Liechtenstein) |
0.00 |
0.00 |
| 15. |
Stenna Trading AB (Sweden) |
0.00 |
0.00 |
| 16. |
Crown Trade & Finance Ltd.
(Switzerland) |
0.00 |
0.00 |
| 17. |
Tse Yu Hong Metals, Ltd. (Hong
Kong) |
0.00 |
0.00 |
| 18. |
VANOMET AG (Switzerland) |
0.00 |
0.00 |
| 19. |
Noble Resources Corp., Ltd. (Hong
Kong) |
0.00 |
0.00 |
| 20. |
Angku-Taichung (Taiwan) |
0.00 |
0.00 |
| 21. |
BCD Supplies Ltd. (Russia) |
0.00 |
0.00 |
| 22. |
BCL Trading |
0.00 |
0.00 |
| 23. |
Borelia Ltd. (Liechtenstein) |
0.00 |
0.00 |
| 24. |
COMCE IMPLEX, Ltd. |
0.00 |
0.00 |
| 25. |
Daewoo Handels GMH Corp. (Korea) |
0.00 |
0.00 |
| 26. |
Glencore International AG
(Switzerland) |
0.00 |
0.00 |
| 27. |
Klockner Steel Trade GMBH
(Germany) |
0.00 |
0.00 |
| 28. |
MacSteel Int’l, Ltd. (U.K.) |
0.00 |
0.00 |
| 29. |
Metal Russia Corp., Ltd. |
0.00 |
0.00 |
| 30. |
OSKMET, Ltd. (U.K.) |
0.00 |
0.00 |
| 31. |
Preussag Handel GMBH (Germany) |
0.00 |
0.00 |
| 32. |
Reeferway, Ltd. (British Virgin
Islands) |
0.00 |
0.00 |
| 33. |
Satra Metallurgical, Inc. (USA) |
0.00 |
0.00 |
| 34. |
Taco Metal Asia, Ltd. |
0.00 |
0.00 |
| 35. |
Tenson Steel, Ltd. (Hong Kong) |
0.00 |
0.00 |
| 36. |
Trade Arbed PTE, Ltd. (Singapore) |
0.00 |
0.00 |
| 37. |
Voest Alpine Intertrading AG
(Austria) |
0.00 |
0.00 |
With regard to those exporters or producers
in the exporting country in question who have not exported the product to the Philippines
during the POI, their individual margins of dumping shall be determined following a review
to be initiated by the Commission and carried out on an accelerated basis, provided that
said producers or exporters can show that they are not related to any of the exporters or
producers in the exporting country who are subject to the anti-dumping duties on the
product. No anti-dumping duties shall be levied on imports from such producers or
exporters while the review is being carried out.
1.5 SUSPENSION OF IMPOSITION OF ANTI-DUMPING DUTY
Article 9.1 of the Agreement provides:
"The decision whether or not to impose an anti-dumping
duty in cases where all requirements for the imposition have been fulfilled, and the
decision whether the amount of the anti-dumping duty to be imposed shall be the full
margin of dumping or less, are decisions to be made by the authorities of the importing
Member. It is desirable that the imposition be permissive in the territory of all Members,
and that the duty be less than the margin if such lesser duty would be adequate to remove
the injury to the domestic industry."
Following an ocular inspection conducted on 8 November 1999
revealing the non-operation of NSC, the Commission orders the suspension of the imposition
of the prescribed definitive anti-dumping duties until such time that NSC can show proof
that its Billets Division is already on a normal operation status. With respect to the
four (4) other producers of steel billets, the elements of material injury and causality
were not established.
1.6 REVIEW OF THE ANTI-DUMPING DUTY
Paragraph (O) of Section 301 of the TCCP, as amended by R.A.
8752, states that:
"However, the need for the continued imposition of the
anti-dumping duty may be reviewed by the Commission when warranted motu proprio, or upon
the direction of the Secretary, taking into consideration the need to protect the domestic
industry against dumping."
"If the Commission determines that the anti-dumping
duty is no longer necessary or warranted, the Secretary shall, upon its recommendation
issue a Department Order immediately terminating the imposition of anti-dumping
duty."
2. INTRODUCTION
2.1
THE ANTI-DUMPING PROTEST
On 11 January 1999, National Steel Corporation (NSC)
filed with the Department of Finance (DOF) a dumping protest against the importation of
steel billets from Russia. The protest was supported by three other local billet
manufacturers, namely, SKK Steel Corporation (SKK), Milwaukee Industries Corporation
(Milwaukee) and Amalgamated Iron Works, Inc. (Amalgamated).
The protest was endorsed by the DOF to the Bureau of Import
Services (BIS) of the Department of Trade and Industry (DTI) on 30 March 1999 for initial
investigation. In its Initiation Report, the DTI-BIS found the information supporting the
petition of NSC as constituting a prima facie case and recommended the initiation
of a preliminary anti-dumping investigation. Notice of initiation of preliminary
investigation was published on 28 May 1999 in the Philippine Daily Inquirer and Manila
Bulletin.
On 12 August 1999, notice of affirmative findings of dumping and
application of provisional measures was published by the BIS in two (2) newspapers of
general circulation. As stated in the public notice, anti-dumping bonds ranging from 5.51%
to 29.91% of the export price would be imposed against seventeen (17) identified and other
exporters of Russian steel billets. Subsequently, the DOF directed the Bureau of Customs
(BOC), in its Indorsement of 13 August 1999, to collect said dumping bond.
On 9 August 1999, the Tariff Commission (Commission) received
the request from the BIS to undertake formal investigation of the case.
2.2 THE ROLE OF THE TARIFF COMMISSION
Upon endorsement of the case by the DTI-BIS, the Commission
conducted a formal investigation to determine the merits of imposing a definitive
anti-dumping duty. This investigation is pursuant to Section 301 (b) of the Tariff and
Customs Code of the Philippines (TCCP), as amended by Republic Act (R.A.) 7843 and further
amended by R.A. 8752, as implemented by DOF Department Order (D.O.) No. 150-95, and in
accordance with Article VI of the General Agreement on Tariffs and Trade (GATT) 1994. The
Commission’s investigation focused on the following:
 | verifying if the kind or class of article in question was imported into or sold
or was likely to be sold in the Philippines at a price less than its normal value; |
| ascertaining the difference, if any, between the export price and the normal
value of the article; and |
| determining if, as a result thereof, the domestic industry producing like
articles in the Philippines suffered, or was threatened with, injury or suffered material
retardation of the establishment of the domestic industry was caused. |
2.3 THE PROCESS OF INVESTIGATION
The investigation involved the following:
| identification of concerned parties, local and foreign; |
| notification of concerned foreign governments and distribution
of questionnaires to all parties; |
| conduct of consultation, pre-hearing conference and public hearings; |
| collection of relevant economic and financial data such as production, imports,
sales, pricing, inventory level, employment, etc.; |
| ocular inspection of local billet shops as well as rebar manufacturing plants; |
| verification of data and submissions of parties; |
| acceptance and evaluation of memoranda of parties; |
| determination of the existence of dumping and if the existence of such dumping
caused, or is likely to cause, material injury to the local industry; |
| disclosure to all interested parties of the essential facts which formed the
basis for the decision to apply definitive measures; and |
| preparation of report of final determination and submission of such to the
Secretary of Trade and Industry for the issuance of the necessary D.O. imposing the
definitive anti-dumping duty. |
2.4 INTERLOCUTORY MATTERS
On 15 January 2000, counsel for importers-protestees filed a
Petition for Review on Certiorari with prayer for temporary restraining order/ preliminary
injunction before the Court of Appeals against a Resolution of the Commission dated 14
December 2000. Said Resolution denied the Motion for Reconsideration dated 25 August 1999
filed by protestees with the BIS, and subsequently endorsed to the Commission, on the
affirmative finding of dumping and application of provisional measures by the BIS.
The Office of the Solicitor-General filed its Comments on 15
July 2000. The case remains pending with the Court.
2.5 SCOPE OF THE ANTI-DUMPING INVESTIGATION
The investigation covered the importation of steel billets from
Russia which might have injured, was likely to injure, or might have retarded the
establishment of, an industry producing like product in the Philippines.
3. THE COMMISSION’S INQUIRY
3.1 PRODUCT UNDER CONSIDERATION
The product subject of the anti-dumping protest is hereafter
referred to as the "product under consideration."
Steel billets are semi-finished steel products obtained by
hot-rolling puddled bars, pilings and ingots. These are nearly square in cross-section and
are used for re-rolling and drawing into bars, rods, wire rods, and arc wires. Steel
billets are used as raw materials by steel rolling mills producing steel bars and wire
rods.
The goods covered by the original protest are steel billets from
Russia which were imported in different sizes as follows: 60 mm x 60 mm x 4.0 meters to
9.0 meters; 65 mm x 65 mm x 9 meters; 80 mm x 80 mm x 9 meters to 11.7 meters; and 100 mm
x 100 mm x 1meter to 11.8 meters.
In its preliminary investigation, the BIS determined the like
product to be "steel billets with typical square section of 100 mm x 100 mm in
lengths of 3 meters to 6 meters with carbon content of 0.13% to 0.38% and are used for the
production of 8 mm, 10 mm, 12 mm, 16 mm, 20 mm, 25 mm and 28 mm rebars of Structural,
Grade 275 and Grade 415 varieties."
3.2 PERIOD OF INVESTIGATION
For the determination of dumping, the Commission’s
investigation covered imports of steel billets from Russia during the 12-month period
beginning 01 January 1998 and ending 31 December 1998. For the assessment of injury, the
period of investigation (POI) was the three-year interval from 1996 to 1998.
3.3 NOTIFICATIONS
3.3.1 Formal Investigation/Questionnaires
On 23 August 1999, notifications were sent to Ambassador Anatoli
Khmelnitski of the Embassy of Russia and Philippine Ambassador to Russia Jaime S. Bautista
informing them of the Commission’s formal investigation of the anti-dumping protest
filed by NSC. Likewise notified, through their embassies in Manila, were the governments
of the trading firms whose exports of billets from Russia were subject to provisional
measures.
Individual notifications with attached questionnaires were also
sent to NSC, four (4) domestic manufacturers, forty-eight (48) exporters, and thirty-one
(31) importers. Parties were given thirty (30) days from receipt of the questionnaire to
accomplish and return same to the Commission.
3.3.2 Consultation
Along with the notification of formal investigation on 23
August 1999, the various parties were informed of a consultation for the purpose of
exploring the possibility of amicable settlement/price undertaking and to apprise the
parties on the procedure of investigation and other related matters necessary for the
speedy disposition of the case. Held on 27 August 1999, the consultation was attended by
the legal counsels and/or representatives of both protestant (NSC) and protestees
(importers and exporters) plus a representative from the Russian Embassy.
3.3.3 Pre-Hearing Conference
Invitations to a pre-hearing conference were sent on 25 and 26
October 1999 for purposes of setting the schedule and procedures of the public hearing,
for obtaining stipulation and admission of facts and documentary evidence, and to discuss
other relevant matters necessary for the expeditious and/or otherwise orderly conduct of
the hearings. The pre-hearing conference was held on 29 October 1999 and was attended by
the legal counsels and/or representatives of protestant and protestees.
It was agreed during the conference that parties would submit
their respective evidences for assessment and evaluation by the Commission prior to the
conduct of the public hearings. The following deadlines were agreed upon: 5 November 1999
- evidence on product comparability; 19 November 1999 – evidence on normal value,
export price, and the economy of Russia; and 10 December 1999 – evidence on injury
and causality.
Ten (10) hearing dates were also set, all in the month of
January 2000. The specific dates were: 5, 7, 10, 12, 14, 17, 20, 21, 24, and 26 January
2000.
3.3.4 Public Hearing
Notice of public hearing was published on 22 December 1999 in
the Philippine Star and Today. All known interested parties and concerned
government agencies were also sent individual notices.
A total of five (5) public hearings were conducted (on 10, 14
and 17 January and on 7 and 28 February 2000) during which the legal counsels and
representatives of the protestant and protestees were in attendance. Principal memoranda
were submitted by protestant and protestees on 23 March 2000 and 24 March 2000,
respectively. No counter-memoranda were filed.
3.3.5 Ocular Inspection and Verification of
Information
Ocular inspection of manufacturing facilities and/or
verification of information submitted were conducted for these six (6) firms agreeable to
such: NSC, SKK, Milwaukee, Cathay Pacific Steel Corporation (CAPASCO), Steel Asia
Manufacturing Corporation (SAMC), and Pag-Asa Steel Works, Inc. (Pag-Asa).
3.4 BASIS OF INQUIRY
For purposes of final
determination, the Commission limited its investigation according to the provisions of
Section 6.10 of the Agreement which state:
"Authorities may limit their examination either to a
reasonable number of interested parties or products by using samples which are
statistically valid on the basis of information available to the authorities at the time
of the selection, or to the largest percentage of volume of the exports from the country
in question which can be reasonably investigated."
Furthermore, parties who failed to submit answers to the
questionnaires were governed by the provisions of Section 6.8 of the Agreement which
provide:
"In cases in which any interested party refuses access
to, or otherwise does not provide, necessary information within a reasonable period or
significantly impedes the investigation, preliminary and final determinations, affirmative
or negative, may be made on the basis of facts available…"
3.5 DOMESTIC PRODUCERS
3.5.1 National Steel Corporation
NSC is one of the country’s largest manufacturing companies
and is a pioneer in the iron and steel industry. It has four major operating facilities:
an electrolytic tinning line producing tinplates; a hot mill producing hot-rolled coils
and plates; a cold mill producing cold-rolled coils and tin mill black plates; and a
billet shop producing steel billets.
NSC’s main office is at the NSC Bldg., 377 Sen. Gil J.
Puyat Avenue, Makati City. Its plant is located along Tominobo National Highway, Camp
Overton, Suarez, Iligan City. At the time of its shutdown on 7 November 1999, NSC was
majority-owned by Malaysian firm Hottick Investments Limited (Hottick).
Major Positions/Issues
| Russia is a non-market economy. The Philippine Embassy in Russia reported that
the bulk of steel billets produced by Russian steel mills are utilized by their own
affiliated mills and are not sold in the domestic market. The Embassy has also been unable
to get reliable information on the domestic price or Home Consumption Value of steel
billets in Russia for 1998. In several anti-dumping investigations conducted by the United
States, the Russian Federation was treated as a non-market economy country. |
| The appropriate surrogate country to determine normal value is Turkey since: (a)
it is at a comparable level of economic development with Russia, (b) it is a significant
producer of steel billets similar to Russia, and (c) the United States has ruled and
chosen Turkey as the most appropriate surrogate country for Russia in its anti-dumping
investigations because of comparability in terms of overall economic development with
Russia. |
| The normal value of Russian steel billets based on the known published export
price of steel billets from Turkey in 1998 is $155/ metric ton to $235/metric ton. |
| Local producers of steel bars interchangeably utilize Russian or locally produced
billets attesting to the comparability of these products. Tests conducted on the resulting
physical properties and chemistry of steel bars produced from either Russian or local
billets give very similar results. Steel bars produced from local billets comply and
conform to Philippine National Standards. |
| The importation of Russian steel billets has adversely affected the profitability
and financial viability of NSC. NSC was forced to price its steel billets at below cost in
order to remain competitive price-wise with Russian billets, NSC’s sales volumes were
reduced, and net losses were sustained from 1996 to 1998. |
Answers to Questionnaire
|
Although NSC failed to respond to the Commission’s
questionnaire, it manifested its adoption of its earlier submission to the BIS. NSC also
submitted affidavits on normal value, product comparability, injury, causal link, and the
economy of Russia.
|
Ocular Inspection
|
Ocular inspections of NSC’s billet shop in Iligan City were
conducted on 16-17 September 1999 and 8-9 November 1999. During the initial inspection,
the Commission discovered no operation in the billet shop. The team was informed that the
shop had been temporarily closed since 7 September 1999 due to the shortage of steel
scraps used as raw material. It was expected, however, that operation would resume in
October. At the second inspection, the Commission was informed that the billet shop was
shut down on 2 November 1999. |
The information that follows was based on inspection of the
actual facilities, examination of documents/records, and discussions with NSC plant
personnel:
| NSC’s billet shop is ISO-certified. The plant has a cooling table designed
for seven (7) meter long billets and has two (2) electric arc furnaces which produce 100
mm x 100 mm x 3 meters to 6 meters steel billets (Commercial size billets). The annual
rated capacity is 300,000 metric tons (MT). |
| NSC can produce billets longer than six (6) meters but this will require a major
overhaul of the operation, substantial investments, temporary interruption of operation,
and time to change the capability design of the plant. |
| The billet manufacturing process follows modern routing wherein steel billets are
manufactured from classified and well-segregated scrap in the electric arc furnaces. NSC
used coke, iron and steel scraps, hot briquetted iron (HBI) and direct reduced iron (DRI)
as raw materials. About 40% of NSC’s steel scrap requirements were imported. |
| There were 152 personnel when the shop was shut down on 2 November 1999. |
Verification of Information
Verification of information submitted by NSC was conducted on
13, 18 and 19 January 2000, and 14 and 15 February 2000.
3.5.2 Cathay Pacific Steel Corporation
CAPASCO’s main office is located at the 25th
Floor, Galleria Corporate Center, EDSA corner Ortigas Avenue, Quezon City. Its
billet-making plant may be found at F.P. Felix Avenue, Cainta, Rizal.
Major Positions/Issues
| Being both a producer and importer of steel billets, CAPASCO manifested that
local and imported billets have comparable quality. It is the chemical composition of a
billet that is critical, i.e., whether the standard for the level of undesirable elements
present in a billet is met. |
| From the second half of 1998 up to early 1999, it was more economical to import
rather than manufacture billets. |
Answers to Questionnaire
The Commission sent two questionnaires: a Domestic
Manufacturer’s Questionnaire and an Importer’s Questionnaire. CAPASCO responded
only to the latter: its response was received by the Commission on 24 September 1999.
Ocular Inspection
An ocular inspection of CAPASCO’s billet shop in Cainta was
conducted on 6 October 1999. Below are the major findings:
| The firm is both a producer and importer of steel billets. CAPASCO consumes its
entire billet production for its rebar and wire rod production. It imports billets because
its billet output is insufficient. |
| The company has two (2) electric arc furnaces with maximum capacities of 30 tons
each. The furnace in the Cainta plant has an annual capacity of 230,000 tons. The other
furnace is located in a plant in Taguig with an annual capacity of 70,000 tons. |
| To produce billets, the firm imports hot briquetted iron (HBI) and direct reduced
iron (DRI) from China, India and Sabah while pig iron is imported from China. Domestic
scrap is also used. |
| The firm’s billets are used to produce structural (Grade 33), Grade 40 and
Grade 60 rebars. |
| The rolling mill furnace in the Cainta plant requires three (3) meter billets.
Imported billets of greater lengths are cut to meet the three (3) meter requirement. |
3.5.3 Milwaukee Steel Corporation
Milwaukee’s billet shop and rolling mill are located in its plant in
Apalit, Pampanga.
Major Positions/Issues
 | The company experienced difficulties due to the dumping of steel billets from
Russia. Daily production fell by half and around 40% of the labor force was retrenched due
to the decline in demand for local billets caused by dumping. |
| The importation of Russian steel billets caused injury to the company. Milwaukee
was unable to raise prices and was forced to sell its steel billets at the same price as
imported Russian steel billets just to maintain its sales and market share. This price was
either just enough to cover its cost of production or even below. |
Answers to Questionnaire
Milwaukee did not respond to the Commission’s questionnaire
and merely submitted an affidavit on its injury from dumping. Information the company
provided to the BIS and subsequently forwarded to the Commission was limited.
Ocular Inspection
The ocular inspection of Milwaukee’s billet shop was conducted on 7 October
1999. The following information were gathered:
| The company has both a billet shop and a rolling mill that produces rebars. |
| Locally-sourced scrap is used to manufacture billets. |
| The billet shop can produce up to 7,000 tons daily. |
| Billets are both internally used and sold to other rolling mills. |
3.5.4 SKK Steel Corporation
SKK’s billet shop is located in San Simon, Pampanga.
Major Positions/Issues
| The dumping of Russian steel billets depressed demand for local billets to the
extent that the company had to shut down the operation of one of its electric arc
furnaces. |
| The importation of Russian steel billets injured the company. To maintain its
market share and sell its billets, SKK was forced to sell its steel billets at the same
price as imported Russian steel billets. This price was either just enough to cover cost
of production or even below. As a consequence, the company sustained losses of P25
million. |
Answers to Questionnaire
SKK failed to respond to the Commission’s questionnaire.
Its only submission was an affidavit attesting to its injury from dumping. Information SKK
submitted to BIS and forwarded to the Commission was limited.
Ocular Inspection
An ocular inspection was conducted on 7 October 1999. The main
findings were:
| The plant has two (2) electric arc furnaces with capacities of 20 tons per heat.
One furnace is not operating. |
| Scrap metal procured locally serves as raw material. |
| SKK’s billets are used in the production of structural (Grade 33), Grade 40
and Grade 60 rebars. The firm has been producing billets for ten (10) years. |
| Production operates on three (3) shifts daily and the total number of workers is
300. |
3.5.5 Amalgamated Iron Works, Inc.
Amalgamated’s main office is located at the 23rd
Floor, Galleria Corporate Center, EDSA corner Ortigas Avenue, Quezon City. Its billet shop
may be found at 297 Pablo dela Cruz St., San Bartolome, Novaliches, Quezon City.
| The importation of Russian billets injured the company since it was forced to
sell its billets at a price that was either barely enough to cover cost of production or
even below in order to maintain its market share and sales. |
| The company’s inability to raise prices and its having to match the price of
Russian steel billets caused losses of P528 thousand. |
Answers to Questionnaire
| Amalgamated did not respond to the Commission’s
questionnaire. However, it submitted an affidavit on its injury from dumping. Information
the company provided to BIS and later forwarded to the Commission was limited.
|
3.5.6 Other Domestic Manufacturers
As stated in the B |
