On 30 April 1998, 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 Commonwealth Independent States (CIS)/Russia and Taiwan.

The protest was endorsed by the DOF to the Bureau of Import Services (BIS) of the Department of Trade and Industry (DTI) on 21 July 1998 for initial investigation. The DTI-BIS, in its report dated 20 August 1998, 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 Manila Bulletin and Philippine Daily Inquirer on 14 and 25 September 1998.

On 25 November 1998, the DTI-BIS, in its report of preliminary determination, found that the volume of dumped imports from Taiwan and Ukraine (another CIS state identified) were negligible at 2.79% and 2.18%, respectively, of the total Philippine CRC imports and, therefore did not warrant the imposition of an anti-dumping bond. With respect to Russia, the DTI-BIS came up with a preliminary affirmative finding against seven (7) exporters with the recommendation for the imposition of provisional measures (anti-dumping bond) ranging from 3.64% to 6.00% of the export price. Pursuant to Section 301 of the Tariff and Customs Code of the Philippines (TCCP), as amended, the DTI-BIS on 22 December 1998 endorsed the case against Taiwan to the Tariff Commission (Commission) for formal investigation.

In compliance with procedural requirements, notice was sent to the governments of the exporting countries concerned and all interested parties. In the case against Taiwan, notice was sent to the Taipei Economic and Cultural Office in Makati, Philippines, informing that the Commission had assumed jurisdiction over the case for formal investigation. Individual notifications with attached questionnaire were sent to the protestant, Taiwanese manufacturers/exporters, Philippine importers and other interested parties. Invitations to consultations and pre-hearing conferences were likewise sent to all interested parties. Notice of public hearing was published in two (2) newspapers of general circulation on 03 March 1999. All known interested parties and concerned government agencies were also sent individual notices.

On 25 January 1999, Taiwanese exporters/protestees Chinese Steel Corporation, Yieh Phui Enterprise Co. Ltd. Sheng Yu Steel Corporation, and Ton-Yi Industrial Corporation, through counsel, filed a Motion to Dismiss the anti-dumping protest against the importation of CRC from Taiwan on the basis of the BIS’ preliminary findings that the volume of dumped imports from Taiwan was negligible at 2.79%.

On 16 March 1999, the Commission, having found that the volume of dumped imports from Taiwan was not negligible at 3.48% of the total Philippine CRC imports, issued an Order denying the Motion to Dismiss. With respect to Ukraine, the Commission dismissed the anti-dumping protest against imports from that country on the ground of negligible volume of imports of CRC and sheets at 1.04%.

On 22 March 1999, the Taiwanese protestees filed a Petition for Certiorari and Prohibition (With Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction) before the Court of Appeals (CA) entitled "China Steel Corporation, et al., vs. Tariff Commission and National Steel Corporation" docketed as CA-G. R. SP. No. 52407. The petition sought the nullification of the 16 March 1999 Commission Order, alleging grave abuse of discretion amounting to lack of or in excess of jurisdiction.

On 11 May 1999, the CA issued a temporary restraining order (TRO) enjoining the Commission from proceeding with the investigation into the alleged dumping of CRC from Taiwan. In compliance with the TRO, the Commission suspended its investigation against Taiwan. With respect to the anti-dumping protest against imports from Russia, the Commission continued its investigation.

On 16 September 1999, the proceedings against the Taiwanese protestees resumed following NSC’s motion on the ground that the TRO had lapsed.

On 26 November 1999, the Court of Appeals promulgated its Decision in CA-G.R. SP No. 52047 denying Taiwan’s petition for certiorari for lack of merit.

The Commission’s investigation covered imports of CRC from Taiwan for the 12-month period from 01 January to December 31, 1997.

1.3.1 On the Determination of Like Product

Having examined the product under consideration and the locally manufactured product, the Commission is satisfied that the domestically produced CRC, of widths of 915 and 1220 mm and nominal thickness of 0.2 mm up to 1.6 mm, not clad, plated or coated, whether annealed or unannealed, and conforming to PNS 127 (Class 1) constitutes a "like product" to the product under consideration, i.e., cold-rolled low carbon (0.12% max.) steel coils and sheets conforming to JIS G 3141-SPCC, of widths of up to 1220 mm, thickness of up to 0.7 mm and classified under HS subheading Nos. 7209.16 00, 7209.17 00, 7209.18 90, 7209.26 00, 7209.27 00, 7209.28 00 and 7209.90 00.

1.3.2 On Domestic Industry Support

NSC was the sole manufacturer of CRC in the Philippines during the period of investigation (POI). As such, the applicant satisfied the requirement of domestic industry support.

Export Price

Estimates of export price were based on the import entries submitted by the protestant and on file with the Commission.

Export prices were adjusted to ex-factory level (net of sea freight, inland freight, harbor construction cost, commission, customs brokerage fees and other related fees, trade promotion cost, packing cost, etc.).

Normal Value

Taiwanese manufacturers/exporters, namely, China Steel, Ton Yi, Sheng Yu and Yieh Phui, provided sufficient evidence to permit the determination of normal value.

Except for Sheng Yu and Ton Yi’s CRC with specification 0.18mm x 914 mm whereby constructed value (i.e., cost to produce and sell plus profit margin) was used as basis for its normal value, normal values were based on their individual domestic selling prices adjusted to ex-factory level (net of inland freight, warranty, expenses, packing cost, etc.).

Dumping Margin

Except for Yieh Phui whose estimated dumping margin was de minimis at 1% and Bichain Trading and Hillman Ltd. whose dumping margin is negative, the computed dumping margin per individual exporter and trader was above de minimis, ranging from 3.66% to 50.84% of export price.

1.3.4 On Negligible Volume of Dumped Imports

Dumped imports accounted for 3.48% of the total Philippine imports. The volume of dumped imports being above 3% is 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 investigation against Taiwan.

1.3.5 On the Determination of Material Injury and Causal Linkage

Volume of Dumped Imports

CRC imports from Taiwan in 1997 gradually declined from 21,000 MT in 1996 (23,000 MT in 1995) to 19,745 MT, of which dumped imports totaled 10,531 MT or 1.63% of the domestic market.

Dumped CRC imports exhibited diminishing trend from 5.04% in the 1^st quarter to 1.27% and 0.53% in the 2^nd and 3^rd quarters, respectively. In the 4^th quarter, there were no dumped imports from Taiwan.

Price Effect

NSC’s selling prices showed a steady decrease from the 2^nd quarter of 1996 up to the 2^nd quarter of 1997. This price reduction was due to the decrease in production cost during the period. In the 3^rd and 4^th quarters of 1997, domestic selling price however increased by 2.68% and 13.68%, respectively, as a result of increase in production cost.

Taiwan’s dumped CRC undercut domestic CRC by 5.13% in the 1^st quarter and negligibly at 0.28% in the 2^nd quarter of 1997. In the 3^rd and 4^th quarters, however, price undercutting was not established as Taiwan’s landed cost of dumped CRC came in higher than NSC’s domestic selling price. The higher cost was attributed to the peso devaluation that started July 1997. The weakening of the Philippine peso by 36% (more than double the depreciation of the New Taiwan Dollar at 16%) vis-a- vis the US dollar caused the dumped CRC from Taiwan to be costlier than the local counterpart during the last two quarters of 1997. Such higher cost of money to import served as a built-in protection to the locally-produced CRC.

On the average, Taiwan’s dumped CRC was higher by 4.65% than the local CRC during the POI.

Price depression/suppression occurred in the 1^st and 2^nd quarters of 1997. They were NSC’s price strategies employed to counteract competitive pressure from other countries’ CRC exports. CRC imports from Russia during the same period totaled 31,390 MT, of which 18,901 MT were dumped.

Market Share

NSC’s market share declined from 56.02% in 1996 to 50.49% in 1997 while other countries’ CRC exports increased market presence at 47.88% in 1997 from 40.69% level in 1996.

Dumped imports from Taiwan totaled 10,531MT or 1.63% of the domestic market in 1997.

Production, Sales and Inventory

Production and sales figures in 1996 and 1997 were relatively on target as the company was able to dispose almost all of its production during the period. Production volume was reduced to avoid build-up of CRC inventories.

Decline in NSC’s sales volume by 14% from 1996 to 1997. This was mainly attributed to the entry of other countries’ CRC exports which retained their market dominance during the same year as well as to the contraction of market size.

Capacity Utilization

NSC’s capacity utilization dropped to 66.54% in 1996 and to 60% in 1997 from the 73.29% capacity utilization in 1995. This was mainly attributed to the entry of CRC imports from other countries and to the contraction of the Philippine steel market in 1997.

Cost of Production

The cost of producing a metric ton of CRC in 1997 was 3.20% higher than the 1996 level. This was attributed to the 2.70% increase in the cost of the wholly-imported slabs, NSC’s direct material in the production of HRC that were subsequently channeled to CRC production.

Increase in production cost was clearly evident in the 3^rd and 4^th quarters of 1997. This was attributable mainly to the peso devaluation which started mid-1997.

Profitability

Income from CRC operation declined by 39.40% from 1995 to 1996 and further by 56.98% in 1997. The decrease in profitability was due to the decline in the actual volume of sales combined with the increase in the company’s cost to produce and sell as well as NSC’s depressed prices in response to the entry of other countries’ CRC exports at cheaper prices, notably from Russia.

Return on Sales

NSC’s income from CRC operation in relation to its sales had been declining from 18.88% in 1995 to 7.81% in 1996 and to 3.99% in 1997. The decline was due both to the decline in the actual volume of sales and NSC’s depressed prices.

Cash Flow

The drop in actual sales revenue resulted from decline in sales arising from market contraction as well as NSC’s depressed prices.

Investment and Ability to Raise Capital

NSC’s inability to generate investment and raise capital was due 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 shortage in working capital and excess manpower.

Employment and Wages

Total workforce in CRC operations numbered 513 in 1997 as against 532 in 1996. The retrenchment of nineteen (19) employees from CRC division was prompted by the reduction in market share and production load.

Factors Other Than Dumping Which Caused Injury

a. Competition from Normal (Undumped)/Dumped Imports

Normal CRC imports from Taiwan and other countries and dumped imports from Russia posed stiff competition to the domestic industry as evidenced by their market performance from 1995 to 1997.

Prices of undumped imports from Russia which were slightly above the price of dumped imports were way below NSC’s price. Undumped CRC from Malaysia also showed a price advantage over NSC’s. CRC imports from Taiwan were higher than NSC’s.

b. Market Contraction

Contraction in the market during the years 1996 to 1997 depressed market prices resulting from a marked decline in steel demand. The Philippine market for CRC contracted by 6.30% from 1995 to 1996 and by 4.23% from 1996 to 1997.

c. High Cost of Production

NSC’s cost to produce CRC was relatively higher than its imported counterpart because it had to import its slab requirements. The high cost of slab at an average price of US$257/MT put the company at a cost disadvantage.

d. Financial Performance

NSC’s income from operations (EBIT) amounted to P1.852 billion in 1995. In 1996, a loss was incurred due to revaluation of assets as required by the incoming investor Hottick, resulting to a negative return on sales, assets and stockholders’ equity.

In 1997, a positive EBIT was recorded. This is 58% below the level of income earned in 1995. The factors which led to the company’s declining financial and operating performance in 1997 were: high financing costs, reduced sales and production volume partly due to the contraction in the market demand of steel products, and increase in cost of production due to peso devaluation which started mid-1997.

e. Foreign Currency Losses

As of 31 December 1997, the company had a total foreign currency losses of about P2.5 billion, of which about P1.2 billion were capitalized and included as part of the construction costs of the company’s plant and plant facilities and installation of machinery and equipment and about P861 million were directly charged to the deficit account.

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).

The Commission finds that:

1. price differences existed between the normal values and export prices of CRC originating in or exported from Taiwan in the 1^st, 2^nd and 3^rd quarters of 1997. No price difference was established in the 4^th quarter; and
2. dumping of CRC imports from Taiwan during the POI did not cause injury to the domestic industry, the average landed cost being higher than the average domestic selling price of CRC.

In view of the foregoing, the element of material injury resulting from dumped imports from Taiwan not having been established, it is hereby ordered that the anti-dumping case against Taiwan be dismissed for lack of merit.

On 30 April 1998, 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 Commonwealth Independent States (CIS)/Russia and Taiwan 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 21 July 1998 for initial investigation. The DTI-BIS, in its report dated 20 August 1998, 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 Manila Bulletin and Philippine Daily Inquirer on 14 and 25 September 1998.

On 25 November 1998, the DTI-BIS issued the results of its preliminary determination:

Taiwan

· CRCs from Taiwan were dumped into the Philippines at a margin ranging from 3.83% to 32.12%;

· Volume of dumped imports was negligible at 2.79% of the total Philippine CRC imports; and

· Posting of anti-dumping bond was not warranted.

Russia

· Seven (7) exporters of CRCs and sheets were found to be dumping; and

· Posting of anti-dumping bond, ranging from 3.64% to 6.00% of the export price.

Ukraine (The other CIS country identified by DTI-BIS as source of allegedly dumped CRC imports)

· Volume of dumped imports was negligible at 2.18%; and

· Posting of anti-dumping bond was not warranted.

Pursuant to Section 301 of the Tariff and Customs Code of the Philippines TCCP), as amended, the DTI-BIS on 22 December 1998 endorsed the protest

together with its findings to the Tariff Commission (Commission) for formal investigation.

On 25 January 1999, Taiwanese exporters/protestees Chinese Steel Corporation, Yieh Phui Enterprise Co. Ltd. Sheng Yu Steel Corporation, and Ton Yi Industrial Corporation, through counsel, filed a Motion to Dismiss the anti-dumping protest against the importation of CRC from Taiwan on the basis of the BIS’ preliminary findings that the volume of dumped imports from Taiwan was negligible at 2.79%.

On 16 March 1999, the Commission, having found that the volume of dumped imports from Taiwan was not negligible at 3.48% of the total Philippine CRC imports, issued an Order denying the Motion to Dismiss. The volume of dumped imports was arrived at by using the normal value based on the cost of production plus selling, general and administrative expenses plus a margin of profit . In the preliminary determination conducted by DTI-BIS, the margin of profit was not factored in the computation of normal value.

With respect to Ukraine, the Commission dismissed the anti-dumping protest against imports from that country on the ground of negligible volume of imports of CRC and sheets at 1.04%.

On 22 March 1999, the Taiwanese protestees filed a Petition for Certiorari and Prohibition (With Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction) before the Court of Appeals (CA) entitled "China Steel Corporation, et al., vs. Tariff Commission and National Steel Corporation" docketed as CA-G. R. SP. No. 52407. The petition sought the nullification of the 16 March 1999 Commission Order, alleging grave abuse of discretion amounting to lack of or in excess of jurisdiction.

On 11 May 1999, the CA issued a temporary restraining order (TRO) enjoining the Commission from proceeding with the investigation into the alleged dumping of CRC from Taiwan. In compliance with the TRO, the Commission suspended its investigation against Taiwan. With respect to the anti-dumping protest against imports from Russia, the Commission continued its investigation.

On 16 September 1999, the proceedings against the Taiwanese protestees resumed following NSC’s motion on the ground that the TRO had lapsed.

On 26 November 1999, the Court of Appeals promulgated its Decision in CA-G.R. SP No. 52047 denying Taiwan’s petition for certiorari for lack of merit .

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:

1. 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;

2. ascertaining the difference, if any, between the export price and the normal value of the article; and

3. 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.

In its anti-dumping protest, NSC identified all subheadings of Harmonized System (HS) heading No. 72.09 as applying to the allegedly dumped products. (Heading 72.09 is described in the HS Tariff and Customs Code as "flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, cold-rolled (cold-reduced), not clad, plated or coated".) In the context of its protest, NSC included CRCs in sheet form.

The DTI-BIS, in its preliminary findings, included all shipments of CRCs and sheets from Taiwan falling under HS heading No. 72.09. (HS heading No. 72.09 covers all cold-rolled non-alloy steel coils and sheets, of widths of 600 mm or more, regardless of thickness, carbon content and mechanical properties.) In its formal investigation, the Commission limited the coverage to Class 1-SPCC (for general use application).

The typical applications of CRC are: galvanized sheets for roofing, pre-painted sheets, drums, tubes, household appliances, automotive bodies and general fabrication.

4.2 PERIOD OF INVESTIGATION

For dumping determination, the Commission’s investigation covered imports of CRC for the 12-month period from 01 January to December 31, 1997. With respect to injury, the period covered were the years 1995 to 1997.

4.3.1 Formal Investigation/Questionnaire

On 23 December 1998, notification was sent to Mr. Jin Yih Lee, director, Taipei Economic and Cultural Office in Makati City and the Philippine Commercial Attache to Taiwan, Mr. Leonardo R. Basug, informing them that the Commission had assumed jurisdiction over the anti-dumping protest of NSC for formal investigation.

Individual notifications with attached questionnaire were likewise sent to three (3) local manufacturers, fourteen (14) foreign manufacturers/exporters and fifteen (15) importers. Parties were given thirty (30) days from receipt of the questionnaire to accomplish and return the same to the Commission.

4.3.2 Consultations

The Commission sent out invitations to consultations on 23 December 1998.

Consultations were held on 12 January 1999 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 Pre-Hearing Conference

Invitations to pre-hearing conferences were sent out on 11 and 18 February 1999.

Pre-hearing conferences were conducted on 16 February and 09 March 1999 and were attended by representatives and/or counsels for the domestic manufacturers, importers/protestees and exporters/protestees.

The parties agreed on the following hearing dates: 17, 19, 22, 23, 25 to 26 March and 06, 07 to 08 April 1999. The presentation of NSC’s witnesses was set on 17, 19 and 22 March 1999. It was the protestees’ turn on 23, 25 and 26 March 1999.

4.3.4 Public Hearing

Notice of public hearing was published in two (2) newspapers of general circulation, namely, The Manila Times and Today on 03 March 1999. All known interested parties and concerned government agencies were also sent individual notices.

The Commission conducted a total of seventeen (17) hearings commencing on 17 March 1999. The protestant and the Taiwanese protestees/manufacturers and the protestees/importers were represented at the hearings. On 01 December 1999, the Commission terminated the public hearings and required the parties to submit their respective memoranda and reply memoranda. The memoranda of the protestees and the protestant were received by the Commission on 10 January and 19 January 2000, respectively. The reply memoranda of the protestant and protestees were filed on 18 January and 03 February 2000, respectively.

4.3.5 Ocular Inspection and Verification of Information

Request was made to all concerned domestic parties for the conduct of ocular inspection, examination of books of accounts and verification of information. Only NSC, Jacinto Iron and Steel Sheets Corp. (JISSCOR), Bacnotan Steel Corp. (Bacnotan Steel) and Puyat Steel Corp. (Puyat Steel) granted the request.

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 . . ."

4.5.1 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