|
| |
REPORT OF FINDINGS
ON THE ANTI-DUMPING PROTEST AGAINST THE IMPORTATION
OF COLD-ROLLED STEEL COILS (CRC) AND SHEETS FROM MALAYSIA
(HS HDG. NO. 7209.18 90) UNDER SECTION 301
OF THE TARIFF AND CUSTOMS CODE, AS AMENDED
(ANTI-DUMPING INV. 99-05)
1. EXECUTIVE SUMMARY OF FINDINGS AND CONCLUSIONS
1.1 SUMMARY
On 28 June 1999, National Steel
Corporation (NSC) filed with the Department of Finance (DOF) an anti-dumping protest
against the importation of cold rolled steel coils (CRC) and sheets from Malaysia
(Ornasteel Enterprise Corporation-Ornasteel) on the ground that said products were
imported at dumped prices and were causing injury to the domestic industry.
The protest was endorsed by the DOF to the
Bureau of Import Services (BIS) of the Department of Trade and Industry (DTI) on 09 July
1999 for initial investigation. The DTI-BIS, in its initiation report, found the
information supporting the petition of NSC as constituting a prima facie case of
dumping and in view thereof decided to initiate the conduct of preliminary determination
for purposes of imposition of provisional measures (anti-dumping bond). Notice of
initiation of investigation was published in the Philippine Star and Today
on 5 October 1999.
On 14 December 1999, the DTI-BIS issued the
results of its preliminary determination:
 | CRCs from Malaysia were dumped into the Philippines at a margin ranging from US$
73.78 - US$ 95.37/MT or 25.51% to 35.26% of the export price. Said margins were above the
2% de minimis requirement. |
| Volume of dumped imports was 8.75% of total Philippine imports of the like
product. Said volume satisfied the 3% de minimis volume requirement. |
| Dumping of Malaysian CRC materially injured the local industry. |
The elements of dumping having been
established, the DTI-BIS required the posting of anti-dumping bond amounting to US$
88.51/MT or 32.08% of the export price. Implementation of the imposition of dumping bond
was however suspended in light of NSC’s production shutdown.
Pursuant to Section 301 of the Tariff and
Customs Code of the Philippines (TCCP), as amended, the DTI-BIS on 14 December 1999
endorsed the protest together with its findings to the Tariff Commission (Commission) for
formal investigation.
In compliance with procedural requirements,
notice of the conduct of formal investigation by the Commission was published in the Philippine
Star and Today on 30 December 1999. Individual notifications were sent to the
government of Malaysia, through its Embassy in Makati City, the Philippine Commercial
Attache in Kuala Lumpur, Malaysia, protestant - NSC, exporter-protestee (Ornasteel),
importers-protestees, and other interested parties. Notice of public consultations/
hearings was published in the Philippine Star and Today on 10 February 2000. All known
interested parties and concerned government agencies were also sent individual notices.
For dumping determination, the Commission followed the POI adopted by the DTI-BIS covering
the arrival of allegedly dumped imports of CRC from Malaysia i.e, the 6-month period from
01 December 1998 to May 31, 1999. With respect to injury, the period covered were the
years 1996 to 1999.
1.2 PERIOD OF INVESTIGATION (POI)
For dumping determination, the Commission followed the POI adopted
by the DTI-BIS covering the arrival of allegedly dumped imports of CRC from Malaysia
during the 6-month period from 01 December 1998 to May 31, 1999. With respect to injury,
the period covered were the years 1996 to 1999 (January – May).
1.3 CONCLUSIONS
1.3.1 On the Determination of Like Product
The domestically produced CRC constitutes a
"like product" to the product under consideration, i.e., cold-rolled steel coils
conforming to JIS G 3141-SPCC, of nominal thickness of 0.40 mm and nominal width
of 914 mm (915 mm) and falling under subheading 7209.18 90.
1.3.2 On Domestic Industry Support
NSC was the sole manufacturer of CRC in the
Philippines during the POI. As such, the applicant satisfied the requirement of domestic
industry support.
1.3.3 On Price Difference
Export Price
Estimates of the export price were based
on the import entries submitted by the protestant - NSC and protestee/ exporter -
Ornasteel and on file with the Commission that were validated with the Clean Report of
Findings (CRF) issued by Societe Generale de Surveillance (SGS).
Export prices were adjusted to ex-factory
level, (i.e., net of ocean freight, inland freight, storage and handling charges, and
forwarding and documentation fee).
Ornasteel's CRC export prices at the FOB
level ranged from US$273.29 to US$292.81 per MT. After deducting the adjustment factors
from the unadjusted export price, the resulting adjusted export prices ranged from US$
268.39 to US$278.36/MT.
Normal Value
During the POI, Ornasteel sold its CRC
exclusively to its associate company, Group Steel Corporation (M) SDN BHD, which the
latter used in the manufacture of galvanized coated steel and pre-painted galvanized
coated steel sheet. Notwithstanding the existing relationship between the two companies,
transactions were found to be at arms' length, i.e. in the ordinary course of trade where
the domestic selling prices were higher than the cost of production. Hence, the Commission
adopted the domestic selling prices as the basis of normal value of Ornasteel.
Estimated normal value during the POI ranged
from US$342.37/MT to US$408.16 /MT.
Dumping Margin
Adjusted export prices and normal values
yielded a weighted average price difference of US$ 86.14 /MT, or a dumping margin of
31.62%.
The computed dumping margins for all
importations during the POI were all above de minimis, i.e. above 2%.
1.3.4 On Negligible Volume of Dumped Imports
Dumped CRC imports from Malaysia accounted
for 21.87% of the total Philippine imports. The volume of dumped imports, being above 3%,
was not negligible, and therefore for purposes of Article 5.8 of the WTO Agreement on
Anti-Dumping Practices, there was no cause for termination of the dumping investigation
against Malaysia.
1.3.5 On the Determination of Material Injury and Causal
Linkage
Volume of Dumped Imports
Total Philippine imports of CRC from Malaysia during the POI
aggregated to 10,662 MT that were all at dumped prices. Dumped imports constituted 21.87%
of total Philippine CRC imports (48,761 MT) and 9.47% of the domestic consumption (112,550
MT).
Dumping was significant in the first five months of 1999
(January-May), accounting for 92.44% of total dumped imports. Noted also was the big share
of dumped imports to total Philippine CRC imports during the month of December 1998 and
May 1999 at 82.58% and 91.37%, respectively.
Price Effect
Price Undercutting
The incidence or extent of
price undercutting was estimated using the monthly landed cost of dumped CRC from Malaysia
against the monthly domestic selling price of local CRC. Undercutting was evident in
December 1998 and January 1999 as NSC’s CRC was sold, vis-à-vis the imported
counterpart, at prices higher by 11.45% and 14.93%, respectively. For the succeeding
months (February-May) of 1999, however, no evidence of price undercutting was established
as Malaysia's CRC was priced higher than NSC's.
Price Depression
On a per 6-month period basis (December -
May), NSC's average selling prices displayed an erratic trend. Average selling price
increased by 24.03% from December 1996 - May 1997 to in December 1997 - May 1998. The
incidence of price depression was evident during the POI (December 1998 - May 1999) when
the domestic selling price dropped by 22.11% vis-à-vis the price in December 1997 - May
1998. For the same period, the 22.11% drop was greater than the 12.46% decline in the cost
of production. NSC’s adoption of a pricing strategy of selling below cost, if only to
maintain its market presence, resulted in a loss during the POI.
Price Suppression
There was no evidence of price suppression during the POI.
Market Share
On a per 6-month period basis, NSC's
market share slightly declined from 56.70% in December 1996 - May 1997 to 55.03% in
December 1997 - May 1998. In contrast, other countries' and normal imports' share in the
market rose from 43.30% to 44.96%. During the POI (December 1998 - May 1999), NSC's share
went up from 55.03% in December 1997 - May 1998 to 56.68 % or by 3%. On the other hand,
other countries' and normal imports' share declined by 24.71% from 44.96 % in December
1997 - May 1998 to 33.85% in December 1998 to May 1999. It was noted that the domestic
industry was able to maintain its market share despite the occurrence of dumped imports
during the POI, only because of its adoption of the pricing strategy of selling below
cost. On the other hand, the sharp drop in the other countries’ and normal
imports’ share could be attributed partly to the dumped imports from Malaysia and to
the discouraged sourcing of CRC primarily from Russia and Taiwan following the imposition
of anti-dumping bond in the CRC-Russia case and the filing of anti- dumping protest
against Taiwan.
Production, Sales and Inventory
On a per 6-month period basis, there was
a constant decline in NSC’s production from December 1996 to May 1999. Sales dropped
from 86,720 MT December 1996 - May 1997 to 55,580 MT in December 1997- May 1998 but the
same rebounded in December 1998 - May 1999 at volumes lower than those in December 1996 -
May 1997. Evident was the significant slide of the volume of production and sales in
December 1997 - May 1998 by 55.56% and 35.91%, respectively.
The reduction in production volumes led to a
corresponding decline in inventory levels from 11,639 MT in the 6-month period covering
December 1997 - May 1998 to 4,841 MT during the POI.
Reduction in production, sales and inventory
could be attributed mainly to the market contraction and partly to the presence of dumped
imports.
Capacity Utilization
NSC's cold mill had an annual rated
capacity of 700,000 MT. The specific sizes .35/.38/.40 x 914/915 mm cold rolled were
earmarked for direct sales and not for conversion to tinplates. On a per 6-month period
basis, NSC's actual capacity utilization constantly declined from 58.29% in December 1996
- May 1997 to 37% in December 1997 - May 1998 to 29.14% during the POI. Likewise, actual
production slid from 204,000 MT in December 1996 - May 1997 to 129,498 MT in December 1997
- May 1998 or by 36.52%. It further declined to 102,000 MT or by 21.23% during the POI.
The decline in capacity utilization could be attributed to the effect of the contraction
of the Philippine market as well as to the entry of imports at dumped prices.
Cost of Production
The average cost of producing a metric
ton of CRC in 1998 was 45.78% higher than the 1997 level. The rise in cost was
attributable to the 48.48% and 37.41% increase in direct materials (slabs) and conversion
cost, respectively. In 1999, however, the average cost of production was lower by 24.92%
compared to the previous years. The decline was brought about by the drop of cost of
direct materials and conversion cost except direct labor which expanded by 36.88%. Evident
was the rise in the cost of production in 1998 and 1999 when compared with that in 1997.
This was mainly due to the weakening of the peso which started in the 3rd quarter of 1997.
Profitability
On a per 6-month period basis, NSC's
audited financial statements disclosed that sales revenue declined from the period
covering December 1997 - May 1998 to December 1998 - May 1999. Noted was NSC's gross loss
amounting to P 37 million during the period December 1997 - May 1998 resulting from the
adoption of the pricing strategy of selling below cost if only to retain market presence.
Sales below cost persisted till the POI resulting to a gross loss of P172 million, or a
further decline in gross loss by 565%.
In December 1997 - May 1998, NSC’s loss
from operations already reached P150 million which further dipped to P288 million during
the POI attributable to the increased operating expenses. NSC incurred a net deficit
amounting to P 524 million during the period (December 1997 - May 1998) which further
worsened to P791 million during the POI as a result of the continued selling below cost
and the increased operating expenses. The hefty interest and other charges related to the
total CRC operations exacerbated NSC’s financial performance as early as the pre-POI.
The unfavorable result of operating and
financial performance was mainly due to the rise in operating expenses and the huge
interest expenses and other charges related to the CRC operation.
Return on Sales
NSC’s income from CRC operation in
relation to its sales prior to the occurrence of the alleged dumping, i.e., December 1997
- May 1998, was unfavorable at –9.26%, which worsened during the POI at –19.61%
resulting from the reduced sales, selling below cost and increased operating expenses.
Cash Flow
The drop in actual sales revenue, attributable to the
contraction of the market, dumped imports from Malaysia and the entry of other countries'
CRC exports during the POI, contributed to the liquidity problem of NSC. The revenue
foregone could have generated internal cash to fund working capital requirements.
Investment and Ability to Raise Capital
NSC’s inability to generate
investment and raise capital was traced to the fact that the company was saddled with
internal problems including enormous debt, high interest cost, foreign exchange losses,
high slab cost, high operating costs, and a shortage of working capital.
NSC’s interest expense in 1998
ballooned to P2.23 billion or an increase of 80% from P1.23 billion in 1997. The high
interest expense of P2.23 billion represents 26% total net sales of P8.58 billion, against
10% interest expense in 1997. This heavy debt servicing depleted NSC’s financial
resources, causing difficulty in sustaining operations and eventually led to a shutdown in
November 1999.
In July 1998, NSC entered into a debt
restructuring agreement with its creditor banks. Despite its debt restructuring, it failed
to service its loans, a consequence of its poor cash flow and high working capital
requirement.
Employment and Wages
Labor complement exhibited a steady
downtrend, dwindling by 7.43% from 1996 to 1997, 10.60% from 1997 to 1998 and by 7.05%
from 1998 to the first five (5) months of 1999. This was as a result of the slump in
production brought about by the declining sales leading to serious operating and cash flow
problems. Consequently, wages in 1998 dropped continuously till 1999 (May).
Factors Other Than Dumping Which Caused Injury
a. Competition From Normal (Undumped) Imports
Normal CRC imports posed stiff competition to
the domestic industry as evidenced by their market performance during the POI. Despite the
market slump, non-dumped imports from other countries managed to capture a 44.96% during
the period covering December 1997 - May 1998 and 33.85% share of the total Philippine
market during the POI as against dumped imports’ share at 9.47%.
b. Market Contraction
Contraction in the market in 1996 up to 1999 depressed market
prices resulting from a marked decline in steel demand. A slowdown in construction
activities took place beginning 1996. Practically, all countries in Asia had to reckon
with the economic storm that resulted in a drastic reduction in steel consumption. Prices
of world steel products fell. Philippine steel market was no exception from that global
market contraction.
c. High Cost to Produce
NSC's average cost to produce CRC was
higher in 1998 and 1999 compared to the cost of production in 1997. The high cost of slabs
at an average price of US$ 257/MT put the company at a cost disadvantage.
d. Financial Performance
The slow-down in the Philippine economy had
significantly affected the company in terms of higher financing costs and reduced sales
and production volume. These factors led to the company's declining financial and
operating performance since 1997 to 1999.
During the POI, the protestant incurred a loss of P2.9 billion
from operation that was much bigger than the deficit of P 687 million in December 1997 -
May 1998. Poor operational performance resulted from sales below cost abetted by
competitive pressures from dumped imports and increased operating expenses during the POI.
The hefty interest expenses in 1998 and 1999 exacerbated NSC's financial performance,
leaving the company with a net deficit in the amount of P1.6 billion in December 1997 -
May 1998 and P5.2 billion in December 1998- May 1999.
The percentage return on net sales, total assets and
stockholders' equity was unfavorable for the company in December 1997 - May 1998 at
–20.29%, –5.48% and –10.89% as a result of the loss incurred from
operations. Negative returns worsened during the POI as the company suffered heavier
losses as evidenced by a bigger negative return on sales from –20.29% in 1998 to
–68.47%. The very bad performance during the POI resulted from lower sales revenue
and sales below cost that could be attributable to the competitive pressures both from
normal imports and imports at dumped prices.
e. Foreign Currency Losses
As of 31 December 1997, the company had a
total foreign currency losses of about P2.5 billion which went down to P154.9 million in
1998. Though the 1998 figure was much lower, still the high cost of money for the
servicing of NSC's dollar- denominated loans as a result of the peso devaluation had major
adverse impact on the company's financial position.
1.4 APPLICATION OF PROCEDURAL MATTERS UNDER RA 8752
(ANTI-DUMPING ACT OF 1999)
On 12 August 1999, RA 8752 was signed by
the President amending Section 301 of the TCCP. The aforesaid law became effective on 04
September 1999, i.e., after fifteen (15) days following its publication on 19 August 1999
in Malaya and 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, January 24, 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)
1.5 FINAL DETERMINATION
The Commission finds that:
- price differences existed between the normal values and export prices of CRC
falling under HS Heading No. 7209.18 90 originating in or exported from Malaysia during
the POI (December 1998 - May 1999) in the amount of US$ 86.14 /MT, or a dumping margin of
31.62%;
dumping of CRC imports from Malaysia during the POI (21.87% of
the total Philippine CRC imports) was a contributory factor to the injury suffered by the
domestic industry as evidenced by the decline in sales and consequently in income due to
NSC's depressed and undercut prices.
A host of factors other than dumping, i.e., competition from
normal imports, market contraction, high cost of production, foreign exchange losses and
high interest cost on its loan obligations did exacerbate NSC's injury to the point of a
significant overall impairment in the position of the domestic industry.
In view of the foregoing, the elements
constituting dumping having been established, it is hereby ordered that the dumping duty
in the amount of US$ 86.14/MT or a dumping margin of 31.62% be imposed on cold rolled
coils and sheets of HS Heading No. 7209.18 90, with specification of 0.40 mm (nominal) x
914mm originating from Malaysia (Ornasteel Enterprise Corporation).
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
which shall be initiated by the Commission and carried out on an accelerated basis,
provided that said exporters or producers can show that they are not related to the
exporter (Ornasteel) who is subject to the anti-dumping duties on the product. No
anti-dumping duties shall be levied on imports from such exporters or producers while the
review is being carried out.
2. ABBREVIATIONS/LEGENDS
| ASTM |
American Standard |
| BIA |
Best information available |
| BIS |
Bureau of Import Services |
| BPS |
Bureau of Product Standard |
| CA |
Court of Appeals |
| Commission |
Tariff Commission |
| Core Steel |
Core Steel Pilipinas |
| CQ |
Commercial Quality |
| CRC |
Cold-Rolled Steel Coil |
| DO |
Department Order |
| DOF |
Department of Finance |
| DTI |
Department of Trade and Industry |
| EBIT |
Earnings Before Interest and Taxes |
| EO |
Executive Order |
| ETP |
Electrolytic Tinplate |
| FH |
Full Hard |
| FOB |
Freight on Board |
| GATT |
General Agreement on Tariff and Trade |
| HRC |
Hot-Rolled Steel Coil |
| HS |
Harmonized System |
| TCCP |
Tariff and Customs Code of the Philippines |
| ISR |
Internal Steel Review |
| JISSCOR |
Jacinto Iron and Steel Sheets Corp. |
| JIS |
Japanese Industrial Standard |
| NSC |
National Steel Corporation |
| NSO |
National Statistics Office |
| PNS |
Philippine National Standard |
| POI |
Period of Investigation |
| RA |
Republic Act |
| SFAS |
Statement of Financial Accounting Standard |
| SGS |
Societe General de Surveillance |
| Steel Corp |
Steel Corp. of the Phils. |
| TCCP |
Tariff and Customs Code of the Philippines |
| TMBP |
Tin Mill Black Plate |
3. INTRODUCTION
3.1 THE ANTI-DUMPING PROTEST
On 28 June 1999, National Steel
Corporation (NSC) filed with the Department of Finance (DOF) an anti-dumping protest
against the importation of cold rolled steel coils (CRC) and sheets from Malaysia
(Ornasteel Enterprise Corporation-Ornasteel) on the ground that said products were
imported at dumped prices and were causing injury to the domestic industry.
The protest was endorsed by the DOF to the
Bureau of Import Services (BIS) of the Department of Trade and Industry (DTI) on 09 July
1999 for initial investigation. The DTI-BIS, in its initiation report, found the
information supporting the petition of NSC as constituting a prima facie case of dumping
and in view thereof decided to initiate the conduct of preliminary determination for
purposes of imposition of provisional measures (anti-dumping bond). Notice of initiation
of investigation was published in the Philippine Star and Today on 5 October
1999.
On 14 December 1999, the DTI-BIS issued the
results of its preliminary determination:
 | CRCs from Malaysia were dumped into the Philippines at a margin ranging from
US$ 73.78 – US$ 95.37/MT or 25.51% to 35.26% of the export price. Said margins were
above the 2% de minimis requirement. |
| Volume of dumped imports was 8.75% of total Philippine imports of the like
product. Said volume satisfied the 3% de minimis volume requirement. |
| Dumping of Malaysian CRC materially injured the local industry. |
The elements of dumping having been
established, the DTI-BIS required the posting of anti-dumping bond amounting to US$
88.51/MT or 32.08% of the export price. Implementation of the imposition of dumping bond
was however suspended in light of NSC’s production shutdown.
Pursuant to Section 301 of the Tariff and
Customs Code of the Philippines (TCCP), as amended, the DTI-BIS on 14 December 1999
endorsed the protest together with its findings to the Tariff Commission (Commission) for
formal investigation.
3.2 ROLE OF THE COMMISSION
Pursuant to Section 301 (b) of the
TCCP, as amended by RA No. 7843, and further amended by RA 8752, otherwise known as
Anti-Dumping Act of 1999 and in accordance with Article VI of General Agreement on Tariff
and Trade (GATT) 1994, the Commission, upon receipt of the endorsement of the case,
conducted the formal investigation to determine the merits of imposing a definitive
anti-dumping duty by:
- 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 a domestic industry in the Philippines.
3.3 THE COMMISSION’S APPROACH TO THE ANTI-DUMPING CASE
The Commission’s investigation included the following
courses of action:
| identification of all parties concerned;
|
| notification of Malaysia through the Malaysian Embassy in
Makati City and sending of questionnaires to all parties, both domestic and foreign;
|
| conduct of consultation, pre-hearing conferences and public
hearings;
|
| gathering of economic and financial data such as production,
sales, inventory, employment, etc.;
|
| conduct of ocular inspection and/or verification of
information submitted by parties concerned;
|
| acceptance of memoranda and counter-memoranda of the parties;
|
| evaluation and analysis of all information submitted/gathered to determine the
existence of dumping, material injury and causal link; |
| disclosure to all interested parties of the essential facts which form the basis
for the decision whether or not to apply definitive measures; and |
| preparation of report of final determination and submission
thereof to the DTI for the issuance of a Department Order for the imposition of the
definitive anti-dumping duty, if warranted.
|
4. THE COMMISSION’S INQUIRY
4.1 PRODUCT UNDER CONSIDERATION
In its anti-dumping complaint, NSC
protested the arrival of CRC from Malaysia and identified the following subheadings:
7209.16 00, 7209.17 00, 7209.18 90, 7209.26 00, and 7209.28 00.
The same complaint described the protested CRC from Malaysia to be like products in terms
of specification (JIS G 3141 SPCC 1B and JIS G 3141 SPCC SD) and
size (0.35 and 0.38 mm for thickness and 914 mm width). The protested CRC from
Malaysia during the POI are of 0.35 and 0.38 mm thickness and 914 (915) mm
width.
The DTI-BIS’ Preliminary Report
identified the protested CRC from Malaysia as falling under subheading 7209.18 90 of
the HS TCCP. HS subheading No. 7209.18 90 covers flat-rolled products of iron or non-alloy
steel, cold-rolled (cold-reduced), not clad, plated or coated, in coils and of a thickness
of less than 0.5 mm.
The typical applications of CRC are:
galvanized sheets for roofing, pre-painted sheets, drums, tubes, household appliances,
automotive bodies and general fabrication. The product under consideration was imported by
galvanizers
4.2 PERIOD OF INVESTIGATION (POI)
For dumping determination, the Commission followed the POI
adopted by the DTI-BIS covering the arrival of allegedly dumped imports of CRC from
Malaysia during the 6-month period from 01 December 1998 to May 31, 1999. With respect to
injury, the period covered were the years 1996 to 1999 (January – May)
4.3 NOTIFICATION
4.3.1 Formal Investigation/Questionnaire
In compliance with procedural
requirements, notice of the conduct of formal investigation by the Commission was
published in the Philippine Star (Annex "A-1") and Today (Annex
"A-2") on 30 December 1999. Individual notifications were sent to the government
of Malaysia, through its Embassy in Makati City, the Philippine Commercial Attaché in
Kuala Lumpur, Malaysia, protestant – NSC, exporter-protestee (Ornasteel),
importers-protestees, and other interested parties.
4.3.2 Consultations
Consultations were held on 18 January
2000 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.
For the expeditious resolution of the case,
the Commission required the opposing parties to designate alternate counsels who would
take over in the absence of the lead counsel.
4.3.3 Public Hearing
In its order dated 14 January 2000,
the Commission set the case for marathon hearings on 06 March 2000 to 10 March 2000.
Notice of the public hearings was published
on 10 February 2000 in The Philippine Star (Annex "B-1") and Today (Annex
"B-2"). All known interested parties and concerned government agencies were also
sent individual notices.
On 06 March 2000, NSC filed a motion to
suspend the public hearings for a period of thirty (30) days in view of the withdrawal of
their counsel, Castillo and Poblador, effective 15 February 2000.
On 07 March 2000, the Commission granted
NSC’s motion to suspend proceedings from March 8 to March 10, 2000. The schedule of
hearings was reset on April 11 to 13, 2000 to give NSC ample time to engage the services
of a new counsel.
On 11 April 2000, only NSC appeared
and requested postponement of April 11 to 13 hearings due to its preoccupation with the
drawing up of its rehabilitation plan. Ornasteel, the manufacturer – protestee was
not represented by counsel or by anybody despite notice of public hearing, thus signifying
non-interest in presenting witnesses or evidence to support its case. On the other hand,
importer-protestee Towersteel, Inc. manifested waiver of its right to be present during
the formal investigation.
In view of the lack of interest of the
concerned parties, the Commission terminated the public hearing of the case on 12 April
2000. Parties were given up to 05 May 2000 to submit their respective memorandum. The
parties were likewise given seven (7) days after receipt of the principal memorandum to
submit their respective counter memorandum. Thereafter, the case was then deemed submitted
for resolution by the Commission.
4.3.4 Ocular Inspection and Verification of Information
Request was made to all concerned
importers-protestees for the conduct of ocular inspection, examination of books of
accounts and verification of information. No grant of such request was heard. On the other
hand, the Commission’s investigator was granted access to the company facilities of
the exporter-protestee Ornasteel but was not allowed to look into the books of accounts.
With respect to NSC, the Commission relied on the findings of its ocular inspection
previously conducted in the CRC-Russia case.
4.4 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".
Parties who failed to submit answers to the questionnaire
were governed by the provisions of Section 6.8 of the Agreement, to wit:
"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 . . ."
4.5 DOMESTIC PRODUCERS
4.5.1 NSC
Company Profile
NSC is an ISO 9002-certified
manufacturer of CRC in the country. NSC’s plant facilities are located at Camp
Overton, Suarez, Iligan City with a total land area of 450 hectares. Its head office is
located at NSC Bldg. 377 Gen. Gil Puyat Ave., Makati City. Hottick Investment Ltd. is the
major owner holding 82% shares, followed by National Development Co. with 12% and Marubeni
Co., 6% shares.
Positions/Issues
| CRCs and sheets imported from Malaysia are similar or identical in sizes and
specifications to those locally produced. Sheets are identical to coils in terms of
thickness and width and all other physical properties except length. Sheets are coils that
are slit to desired lengths. |
| NSC can produce CRC under specifications of Japanese International Standard (JIS)
3141 SPCC sub-classified into annealed or full hard, JIS G 3141 SPCD which is of drawing
quality, American Standard (ASTM) A 366, and tailor-made CRC according to the
customer’s specifications. |
| Dumping of CRC has caused and continues to cause material injury to the domestic
industry as evidenced by the following: |
| significant increase of imported CRC from Malaysia in absolute terms of 913
metric tons from 1997 to 1998. Share of imports from Malaysia in terms of total imports
increased from 8.91% in 1997 to 14.64% in 1998. While the first five months of 1999
registered an increase of 23,933 metric tons from 16,609 metric tons in 1998 which
accounts for 8.14% of the total Philippine imports from January to May of 1999. |
| significant drop in the market share from 56.26% in 1996 to
49.23% in 1997 and further to 47.45% in 1998. Despite of the reduction in the total
Philippine market, demand for CRC in 1998, share of imports from Malaysia increased from
4.52% in 1997 to 7.57% in 1998.
|
| production output reduced by 12.44% in 1997 and further to 21.23% for January to
May in 1999. |
| continuous decline in the domestic sales from 357,490 MT in 1996 and further
180,000 MT in 1998. |
| capacity utilization reduced to 58% in 1997 to as low as 12% registered in May
1999. |
| decrease in production output by 12.44% in 1997 and further to 21.23% for the
first five months of 1999, and capacity utilization declined by 58% in 1997 to as low as
12% registered as of May 1999. |
| decline of profit by P 1.3billion or a decline of 394.98% from the 1997 net
income. |
| retrenchment of at least 600 employees, 4% of whom were from the cold mill
operation. |
Answers to Questionnaire
The protestant provided
production, financial, import, export, sales, pricing and market information, as well as
other information related to CRC production and material injury.
Ocular Inspection
The Commission conducted ocular
inspection of NSC’s plant facilities in Iligan City on 04 and 05 March 1999 to
confirm the reported shutdown of NSC’s production. NSC shut off its operations
effective November of 1999.
| NSC has four (4) major operating facilities, namely: a
hot-mill which produces HRCs and plates from slabs; a cold-mill for the production of CRC
and TMBP; an electrolytic tinning line to produce tinplates; and a plant for the
production of billets from steel scraps. Eighty per cent (80%) of hot mill’s output
is consumed by the cold mill for the production of CRC.
|
| The cold-mill facilities consist of two (2) pickling lines,
two (2) coil preparation lines, high current density cleaning line, alkali cleaning line,
recoiler line, 1-stand temper mill, 2-stand temper mill, 4-stand tandem mill, 5-stand
tandem mill, batch annealing furnace, and dehumidifier. Production capacity is 700,000 MT
a year.
|
| NSC produces CRC in coil form, of nominal sizes ranging from 0.2 to 1.6 mm
(thickness) and 915 and 1,220 mm (width). NSC’s CRC is of commercial quality and
categorized into unannealed (full hard) and annealed for roofing, appliances, drumstock,
tinplates, fabrication including welded pipes. |
Price Undertaking
On 03 February 2000, NSC
manifested that Ornasteel had proposed a voluntary undertaking in consideration of the
protestant’s withdrawal of the anti-dumping protest. Ornasteel undertook to limit its
sale of the like article into the Philippine market to an average of 2,000 MT per month to
be made effective upon the dropping of the anti-dumping case. (Apparently, the protestant
NSC was not amenable to Ornasteel’s proposal because no acceptance of the offer was
made and reported to the Commission.)
4.5.2 Other Domestic Producers
There were two (2) other domestic
producers of CRC identified, namely, Steel Corp. of the Philippines (Steel Corp) and Core
Steel Pilipinas (Core Steel). No reply to the questionnaire was received from the two
companies who simply manifested that they started commercial operation only in the early
months of the POI.
4.6 MALAYSIAN MANUFACTURER/EXPORTER
4.6.1 Ornasteel
Company Profile
Ornasteel was put up in 14
November 1991 in Ayer, Keroh, Melaka Malaysia. The company’s major product lines
consist of the pipe lines , cold/hot rolled steel coil, steel sheets and strips;
galvanized steel coil/sheet, prepainted steel coil/sheet and stainless steel sheet.
Positions/Issues
In response to the BIS report, Ornasteel raised the
following arguments:
| Methodologies used on the derivation of profit margin were erroneous since
net profit , not gross profit , should have been used leading to a 0.40% to 2.9% profit
margin instead of 20% to 23% figure. |
| Ornasteel’s computation, based on net profit, resulted to a dumping margin
of 2.32% instead of 32.08% as computed by BIS. |
| Comparing the export price with the normal value, there were no traces of dumping
of cold rolled coils coming from Malaysia to the Philippines. |
Answers to Questionnaire
Submitted to the DTI-BIS and forwarded to
the Commission, Ornasteel’s answers to the questionnaire included transactional
documents, e.g., commercial invoices, financial statements, cost of production etc.
Ocular Inspection
The Commission conducted ocular
inspection and verification of Ornasteel’s plant facilities in Ayer, Keroh, Melaka
Malaysia on 27 January 2000.
| Ornasteel Enterprises Corporation produced cold rolled steel coils (full hard
and annealed) and welded tubes of different cross sections. |
| Other companies manufacturing cold rolled coils in Malaysia are Nittetsu Shoji
(Malaysia) Sdn. Bhd., Pacific-Alliance Sdn. Bhd., Sandvik (Malaysia) Sdn. Bhd. and Cold
Rolling Industry (Malaysia) Sdn. Bhd. |
| Ornasteel has an annual rated capacity of 350,000 MT. It presently operates 24
hours all year round at the rate of 30,000 MT/mo. |
| Ornasteel manufactures CRC with thickness of 0.3 to 1.6 mm. The most saleable
full hard CRC in the domestic market are those with thickness of 0.5 to 1.66 mm. Export of
subject article to the Philippines has a thickness of 0.35 and 0.38 only. |
| Manufacturing process being utilized to produce CRC is a batch type process using
Japanese Technology which includes pickling of HRC with caustic soda, oiling of pickled
HRC for rust prevention, rolling, electrolytic cleaning which will then be recoiled as
full hard CRC for galvanizing or as annealed in a bell type annealing furnace, annealed
CRC undergoes cooling in a kathabar, temper milled to increase toughness and eliminate
warping and cracking, application of anti-rust oil or DOS oil and recoiling of annealed
CRC. |
| HRC used by the company is locally sourced from Megasteel Corporation with a zero
percent (0%) tariff rate. |
| Only full hard CRC is exported to the Philippines during the period of
investigation. |
| There was a contest on profit margin established by BIS, Ornasteel’s profit
margin range only from 2% to 5%. |
| Group Steel Corporation (Malaysia) Sdn. Bhd. is a sister company of Ornasteel and
a major user of CRC with thickness of 0.3 to 1.6 mm. |
| Full hard CRC for export to the Philippines is packed with galvanized sheets
while those for Group steel do not have the same export packaging. |
4.7 IMPORTERS
4.7.1 Steel Corporation of the Philippines (Steel Corp)
Company Profile
Steel Corporation of the
Philippines (Steel Corp.) is a company of Philsteel Holdings Corporation. It has sister
companies namely, PhilSteel Coating Corporation, PhilMetal Corporation and SteelFrame
Corporation. PhilSteel Holdings Corporation is a member of FGI, an umbrella organization
of galvanizing companies.
Registered with the Board of Investments
(BOI) under RA 7103 otherwise known as the Iron and Steel Industry Act and EO 226 known as
the Omnibus Incentives Act., SteelCorp put up a steel-manufacturing project in Balayan
Batangas. The project was conceptualized in response to the Philippine government’s
call for the local industry to gear up to the global competition under the continuous
liberalized trade environment. The cold rolling mill was completed and put into commercial
operation on 01 January of 1999.
Ocular Inspection
An ocular inspection of
SteelCorp’s plant located at Brgy. Munting Tubig, Balayan, Batangas was conducted on
13 January 2000. The following information were gathered:
| SteelCorp’s plant is situated on a 20-hectare lot and engaged specifically
in the manufacture of Galvalume/G.I. Sheets and Pre-Painted Galvalume/G.I. Sheets. The
company imports its raw material (dry and mill-edged hot rolled coil) from Taiwan and
Japan ranging from 14,000 to 15,000 MT a month. |
| Capital investment amounted to P6.5 billion. |
| Cold rolled coils (CRC) were first produced on 24 December 1997. Pure zinc coil
was first manufactured on 18 October 1998 while the first "Galvalume 55" coil
was produced on 26 October 1998. Commercial operations started in March 1999.
|
| SteelCorp is already an ISO 9002 certified.
|
| The plant houses the following state-of-the-art lines: push pull line,
cold-rolling line, continuous galvanizing lines, and continuous coating lines. The Push
Pull Line’s end product is called pickled and oiled hot-rolled coil; the Cold Rolling
Line’s finished product is oiled cold-rolled coil; the Continuous Galvanizing Line
produces galvalume coil (with 55% aluminum) and galvanized coil; and the Continuous
Coating Line’s end product is pre-painted sheets. These lines operate (3) three
shifts per day, (7) seven days a week.
|
| The company employs a total of 400 employees.
|
| Annual production capacity is 320,000 MT for cold-rolling mill; 250,000 MT for
galvanizing line and 250,000 MT for paint line.
|
| The company has a power plant linked with the National Power Corporation (NPC); a
3-unit cooling tower; a plant water and environmental laboratory to ensure water safety;
and a wastewater treatment plant. It also maintains a 50,000 gallon LPG supply. |
4.7.2 Other major importers
Other major importers such as Tower
Steel Corporation, LUVISMIN Industrial Marketing Corp. and Sugarsteel Industries, Inc. did
not allow the Commission to undertake plant inspection and verification of their books of
accounts. Moreover, said importers also failed to submit their answers to the
questionnaire. Hence, the Commission calculated their dumping margins on the basis of the
best information available (BIA).
4.8 CONSIDERATION OF INFORMATION/EVIDENCE SUBMITTED
The Commission, in its appreciation
of evidence submitted, exercised due diligence in the determination of the existence of
dumping, material injury, and causal link.
5. INDUSTRY AND MARKET
5.1 LIKE PRODUCT
Article 2.6 of the Agreement, defines the term "like
product" as:
"A product which is identical, i.e., alike in all
respect to the product under consideration, or in the absence of such a product, another
product which, although not alike in all respects, has characteristics closely resembling
those of the product under consideration."
5.1.1 Domestic Product
The domestic product is CRC in coil form,
of nominal thickness of 0.20 to 1.60 mm inclusive, in widths of 915 and 1220 mm and
conforms to the Philippine National Standard (PNS) 127 (Specification for Cold-Rolled
Steel Sheets and Strips), Class 1 (for general use application).
The domestic industry produces both
unannealed and annealed CRC for various applications such as drums, appliances,
fabrication and for the production of galvanized or prepainted sheets.
Based on the product under
consideration as described in Section 4.1, the nominal gauge of 0.4 mm is
determined as the appropriate class of domestic product for "like product"
determination.
5.1.2 Factors Considered in Determining Like Product
a. Physical Characteristics
1. Chemical Composition
The product under
consideration conforms to the Japanese Industrial Standard,
JIS G 3141 SPCC (Cold- Rolled Carbon Steel Sheets and Strips) Class 1
– SPCC (for general use).
The domestic industry, on the other hand,
produces CRC conforming to PNS 127 Class 1. PNS 127 (1988) was adopted by
the Bureau of Product Standards (BPS) using the Japanese standard JIS G3141-77, ASTM
A109/M-77 (Specification for Steel Strip, Carbon, Cold-Rolled (Metric)) and the ISO
3574-76 (Specification for Cold-reduced Carbon Steel Sheet of Commercial and Drawing
Qualities).
The requirements of PNS 127 were mostly
adopted from JIS G3141-77. Under PNS 127 Class 1, the chemical composition specification
is practically identical to JIS G3141.
Table 1 – Element, %
C |
Mn |
P |
S |
0.12 max |
0.50 max |
0.04 max |
0.045 max |
Source: PNS 127 (1988)
The Commission determines that the
domestic product, in terms of chemical composition, is comparable to the product under
consideration.
2. Mechanical Properties
The minimum tensile strength in both the
Japanese and the Philippine standard for Class 1 (unannealed) full hard CRC is
549 MPa while in terms of hardness the minimum limits are identical in both
standards..
The Commission determines that the domestic
CRC, in terms of mechanical properties, is comparable to the product under consideration.
3. Sizes
Thickness
The thickness of CRC imported from
Malaysia during the POI is 0.35 mm and 0.38 mm. These gauges were imported for the
production of galvanized and prepainted sheets and are covered by the mandatory standard
PNS 127. The 0.35 and 0.38 mm thickness fall within the +0.05 mm tolerance for
0.40 mm nominal thickness set by PNS 27.
Width
The width of CRC imported from Malaysia
during the POI is 914 mm. NSC produces CRC in widths of either 915 (3’) or
1220 mm (4’). The standard commercial widths of 915 mm and 1220 mm are
based on domestic industry practice of specifying steel sheets as 3’ or 4’ wide.
The apparent discrepancy in indicating nominal width is the result of the conversion of 3
feet (English unit) to the SI system.
The Commission determines that in terms of
size, the CRC produced by NSC is like product to the product under consideration.
b. Manufacturing Methods and Technology
CRCs are produced by cold rolling
(cold reduction) HRC into desired thickness. The general process involves cleaning of HRC
by passing through pickling tanks, rinsing with water and drying before subjecting the
material through a 4- or 5-high stand cold mill, to produce the CRC of desired thickness.
Further heat-treatment (annealing), if
required, is done by passing the CRC to an annealing furnace (batch or continuous type).
In the instant investigation, however, all the protested importations were unannealed
(full hard).
The Commission determines that the domestic
product, based on manufacturing process and technology, is comparable to the product under
consideration.
c. Functions and Uses
The domestic like product and the
imported CRC are intended for the galvanizing or prepainting applications. The Commission
is therefore satisfied with the interchangeability of usage of the domestic like product
and the product under consideration.
d. Industry Specifications
The mandatory domestic industry
standard (PNS 127) is mostly based on the Japanese standard JIS G3141. The product under
consideration conforms to JIS G 3141 - SPCC. The Commission
determines that in terms of specifications, the domestic product is comparable to the
product under consideration.
e. Quality
Quality was not raised as an issue in
the instant protest. The Commission already noted in previous anti-dumping investigations
that the domestic standard for CRC, whether for galvanizing or prepainting application is
PNS 127. There is no separate standard for prepainting application (Inv. No. 97-01,
CRC from Taiwan).
The Commission determines that in
terms of quality the domestic product is comparable to the imported product.
f. Tariff Classification
Both the protested importations
and the domestic like product fall under subheading 7209.18 90 of the TCCP. During the
POI, the tariff rate was 7%.
Presented below is the historical development
of the tariff rates for the product under consideration.
Table 2 – Historical Development of the Tariff Rates for
CRC
E.O. 470* |
E.O. 264** |
E.O. 465*** |
1991 |
1992 |
1993 |
1994 |
1995 |
1996 |
1997 |
1998 - 2000 |
20 |
20 |
20 |
15 |
10 |
10 |
10 |
7 |
* Effective 24 August 1991
** Effective 28 August 1995
*** Effective 22 January 1998
5.1.3 Conclusion
The Commission determines that the
domestically produced CRC constitutes a "like product" to the product under
consideration, i.e., cold-rolled steel coils conforming to JIS G 3141-SPCC, of
nominal thickness of 0.40 mm and nominal width of 914 mm (915 mm) and falling under
subheading 7209.18 90.
5.2 THE DOMESTIC INDUSTRY
Article 4.1 of the Agreement defines domestic industry
as:
"Domestic producers as a whole of the like product or to
those whose collective output of the products constitutes a major proportion of the total
domestic production of those products…"
Article 5.4 of the Agreement states that an
investigation shall not be initiated unless the application has been made by or on behalf
of the domestic industry:
"The application shall be considered to have
been made "by or on behalf of the domestic industry" if it is supported by those
domestic producers whose collective output constitutes more than 50 per cent of the total
production of the like product produced by that portion of the domestic industry
expressing either support for or opposition to the application. However, no investigation
shall be initiated when domestic producers expressly supporting the application account
for less than 25 per cent of total production of the like product produced by the domestic
industry."
During the POI,
NSC was the sole manufacturer of CRC in the Philippines. As such, the protestant satisfied
the requirement of domestic industry support.
5.3 THE PHILIPPINE MARKET
NSC supplied more than half of
the total domestic CRC requirements of industrial users (galvanizers, drum makers and
fabricators) at 368,000 MT in 1995, 358,000 MT in 1996 and 309,000 MT in 1997.
The domestic requirement for CRC was
augmented by imports from such countries as Korea, Russia, Taiwan, and Ukraine. For
purposes of the instant case, three (3) importer-users were identified to have sourced
their CRC from Malaysia during the POI.
6. DUMPING
Dumping occurs when any specific kind
or class of foreign article is imported or brought into the Philippines at a price, i.e.,
export price, less than normal value.
6.1 EXPORT PRICE
Export price is the price paid or the
selling price to an importer in the Philippines of articles purchased at arms length
transaction, excluding any post exportation charges, such as, ocean freight and overseas
insurance.
Estimates of the export price were based on
the import entries submitted by the protestant - NSC and protestee/ exporter - Ornasteel
and on file with the Commission that were validated with the Clean Report of Findings
(CRF) issued by Societe Generale de Surveillance (SGS).
Export prices were adjusted to ex-factory
level, (i.e., net of ocean freight, inland freight, storage and handling charges, and
forwarding and documentation fee).
Ornasteel's CRC export prices at the FOB
level ranged from US$273.29 to US$292.81 per MT. After deducting the adjustment factors
from the unadjusted export price, the resulting adjusted export prices ranged from US$
268.39 to US$278.36/MT.
6.2 NORMAL VALUE
Article 2.1 of the Agreement states:
"Normal value shall be the comparable price, in the
ordinary course of trade, for the like product when destined for consumption in the
exporting country".
During the POI, Ornasteel sold its CRC
exclusively to its associate company, Group Steel Corporation (M) SDN BHD, which the
latter used in the manufacture of galvanized coated steel and pre-painted galvanized
coated steel sheet. Notwithstanding the existing relationship between the two companies,
transactions were found to be at arms' length, i.e. in the ordinary course of trade where
the domestic selling prices were higher than the cost of production. Hence, the Commission
adopted the domestic selling prices as the basis of normal value of Ornasteel.
Estimated normal value during the POI ranged from US$342.37/MT to US$408.16 /MT.
6.3 DETERMINATION OF DUMPING
Article 2.4 of the Agreement sets the
terms for comparing normal value and export price:
"A fair comparison shall be made between the export
price and normal value. This comparison shall be made at the same level of trade, normally
at the ex-factory level, and in respect of sales made at as nearly as possible the same
time. Due allowance shall be made in each case, on its merits, for differences which
affect price comparability, including differences in conditions and terms of sale,
taxation, levels of trade, quantities, physical characteristics, and any other differences
which are also demonstrated to affect price comparability..."
Adjusted export prices and normal values
yielded a weighted average price difference of US$ 86.14 /MT, or a dumping margin of
31.62%.
6.4 DE MINIMIS MARGIN OF DUMPING
Article 5.8 of the Agreement states:
"There shall be immediate termination if the
margin of dumping is de minimis. The margin of dumping shall be considered de minimis if
the margin is less than 2 per cent, expressed as a percentage of the export price."
The computed dumping margins
for all importations during the POI were all above de minimis, i.e. above 2%. (See Annex
"C" for the detailed computations.)
7.0 THE ECONOMIC CONDITION OF THE INDUSTRY
7.1 DETERMINATION OF INJURY
Article 3 of the Agreement sets
out the injury factors that must be examined by the investigating authority. These are:
1. volume of dumped imports;
2. effect of the dumped imports on prices in the domestic market
for like products; and
3. consequent impact of the dumped imports on domestic producers
of such products.
7.1.1 Volume of Dumped Imports
Negligible Volume of Dumped Imports
Article 5.8 of the Agreement provides
for the immediate termination of dumping cases where volume of dumped imports is found to
be negligible:
"There shall be immediate termination in
cases where the authorities determine that . . . the volume of dumped imports, actual or
potential . . . is negligible . . . The volume of dumped imports shall normally be
regarded as negligible if the volume of dumped imports from a particular country is found
to account for less than 3 per cent of imports of like product in the importing Member,
unless countries which individually account for less than 3 per cent of the imports of
like product in the importing Member collectively account for more than 7 per cent of
imports of like product in the importing member."
Table 3- Volume of Dumped Imports
(POI) |
Imports
from Malaysia1/
(In MT) |
Imports
from Other Countries
(In MT) |
| |
