PP

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REPORT OF FINDINGS ON THE ANTI-DUMPING PROTEST AGAINST THE IMPORTATION OF POLYPROPYLENE RESINS
(H.S. HEADING NO. 3902-10 00) FROM KOREA UNDER SECTION 301 OF THE TARIFF AND CUSTOMS CODE,
AS AMENDED BY R.A. 8752 (ANTI-DUMPING INV. NO. 99-04)

1. EXECUTIVE SUMMARY AND CONCLUSION

BACKGROUND

On 08 February 1999, Petrochemical Corporation of Asia-Pacific (Petrocorp) and JG Summit Petrochemical Corporation (JG Summit) jointly filed with the Department of Trade and Industry (DTI) an Anti-Dumping case against the importation of Polypropylene (PP) Resins (HS subheading 3902.10 00) from South Korea.

The protest was endorsed by the DOF to the Bureau of Import Services (BIS) of the Department of Trade and Industry (DTI) on 12 April 1999 for initial investigation. The DTI-BIS in its report dated 10 November 1999, found the information supporting the petition of Petrocorp and JG Summit 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 Manila Bulletin and Philippine Star on 16 August 1999.

The DTI-BIS issued its report of positive preliminary findings on the case against seven (7) exporters of fourteen (14) grades of PP resins from South Korea with the recommendation for the imposition of a provisional measure (Anti-dumping bond) ranging from 4.20% to 40.53% of the export price. Pursuant to Section 301 of the Tariff and Customs Code of the Philippines, as amended by RA 7843, and further amended by RA 8752, BIS endorsed the case on 10 November 1999 to the Tariff Commission (Commission) for formal investigation.

In compliance with procedural requirements, notices were sent to the Philippine Embassy in South Korea and South Korean Embassy in Makati, Philippines, informing them that the Commission had assumed jurisdiction over the case for formal investigation. Individual notifications were likewise sent to the Protestants, Korean exporters, Philippine importers, other importers, and other interested parties. Invitations to consultations and pre-hearing conferences were also sent to all interested parties. A notice of public hearing was published in two (2) newspapers of general circulation on 19 January 2000. All known identified interested parties and concerned government agencies were likewise sent individual notices.

1.2 PERIOD OF INVESTIGATION

The Commission’s investigation covered imports of PP resins for the 12-month period, 01 January to 31 December 1998.

1.3 CONCLUSION

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 local and the imported PP resins classified under HS subheading 3902.10 00 are similar as to their manufacturing process, chemical composition, physical characteristics, and tariff classification but different however with respect to the additive package, the sole determinant of the properties of the finished products.

Convinced that there were PP grades with no locally produced equivalents in terms of additive contents during the POI, the Commission excluded the resins listed hereunder.

GRADES

Company

Code

Injection Grade Daelim PP137T

Fiber Honam FR160

Yuhwa 5016H

Hyosung S700

Film

BOPP Hyosung F300 series

Hyundai H2220

SK/Yukong H229

Yuhwa 5014L

Honam FO120A

Hyundai H2210

SK/Yukong H221P

IPP Yuhwa 1088B

Honam FI-160P

Masterbatch STC SL137H

STC SL116T

Yuhwa 5014L(AB605)

Yuhwa 5014L(AB405)

Yuhwa 5014L (MAT)

STC AS237H

STC M/B1779

STC PA20H

1.3.2        On Domestic Industry Support

Petrocorp and JG Summit were the only manufacturers of PP resins in the Philippines during the POI. As such, the applicants satisfied the requirement of domestic industry support.

1.3.3      On Price Difference

Export Price

      The Commission based its estimates of export price on import entries submitted by the protestants, the protestees and those on file with the Commission that were validated with Societe Generale de Surveillance's (SGS) furnished summary of Clean Report of Findings (CRF).

     Export prices were adjusted to ex-works level (net of ocean freight, insurance, inland freight, handling cost, container tax, wharfage, duty drawback, brokerage fee, documentation fee, trader’s compensation and commission, if any).

Normal Value

Hyundai, Daelim, Honam, SK Corp., Hanwha and Samsung provided sufficient evidence to permit the determination of Normal Value.

Domestic selling prices were adjusted to ex-factory level (net of inland freight, packing cost, pollution tax, warranty expenses, loading and storage expenses, trader’s commission, inventory cost, overhead cost and credit interest, if any). For PP grades sold below cost to produce and sell, normal values were constructed based on cost of production plus selling, administrative and general expenses, and margin of profit.

For other exporters and traders, the normal values of the respective manufacturers were used.

With regard to traders whose exports could not be traced as originating from any of the identified manufacturers, best information available was used.

Dumping Margin

Dumping margins for each exporter were calculated on the basis of comparing the calculated weighted average export price against the computed weighted average normal value.

The estimated dumping margins of specific grades of PP resins per individual exporter and trader above de minimis ranged from 2.09% to 39.42%.

1.3.4   On Negligible Volume of Dumped Imports

Dumped imports accounted for 9.41% of the total Philippine PP importation. The volume of dumped imports being above three percent (3%) is not negligible and therefore, for the purpose of Article 5.8 of the WTO Agreement on Anti-Dumping Practices, there was no cause for termination of the investigation against Korea.

1.3.5   On Determination of Material Injury and Causal Linkage

Volume Effect

The share of Korean imports to total PP imports was 48% in 1995, 38% in 1996 and 41% in 1997. The volume of dumped imports constituted 4.09% of domestic consumption during the POI. Quarterly figures show a surge in dumped imports by 4,891 Mt or 2,037% in the 2^nd quarter, before declining in last two quarters.

Price Effect

A comparison between the landed cost of dumped PP resins and the average ex-factory domestic selling price of local PP show no occurrence of price undercutting during the POI. The prices of dumped imports were higher by an average 10.41%, 6.81% and 10.72% on injection, yarn and film grade, respectively. No occurrence of price undercutting was observed because the protestants, from the start of their operation, were already selling below cost in order to gain market share and remain viable in the business.

Despite the decreasing trend in the average quarterly selling prices of the three PP grades, there was no evidence of price depression during the POI. While selling prices remained below cost, the gap between the average selling price and the average cost became narrower from the 1^st to the 3^rd quarters, and in the 4^th quarter, average selling price rose above average cost. Thus, average selling prices were increasing relative to cost.

Price suppression occurred in all quarters of 1998. While the gap narrowed from the 1^st to the 3^rd quarters, and average selling price was above average cost in the 4^th quarter, figures show that average prices consistently fell below the landed costs of dumped PP.

Market Share

Despite market growth in 1998 and 1999, imports from Korea were decreasing, while imports from other countries remained relatively constant. The entry of local producers in 1998, caused a reduction in Korean PP's share to 28%, and further to 13% in the succeeding year. The substantial portion of domestic PP requirements were already sourced locally, as evidenced by favorable market shares of domestic sales, which accounted for 56.53% and 71.10% of domestic consumption in 1998 and 1999, respectively.

Apart from market recovery in 1998, the strong market entry and share movements of local PP were tied with the pricing strategy of the industry. Local selling prices were pegged at or below landed cost of imports, particularly dumped imports, and more often resulting in levels which were below production cost.

An analysis of pricing strategy and market shares showed the domestic industry capturing the highest share in the 3^rd quarter of 1998 when price suppression was at its peak. Similarly, narrower gaps between the landed cost of dumped PP and local selling prices, which can be observed in the 1^st and 2^nd quarters of the POI, resulted in smaller market shares.

Price suppression, which is dumping related, contributed significantly to the domestic industry's market dominance in 1998.

Production, Sales and Inventory

Production supported sales. The increase in inventory in the 4^th quarter of 1999 was in anticipation of increase in demand in the succeeding quarter.

Capacity Utilization (CU)

During the POI, Petrocorp and JG Summit utilized 52% and 22% of their capacities, respectively . Their Combined CU within the POI was 36%. Petrocorp and JG Summit were able to increase their respective capacity utilization to 64% and 45% in 1999. By then, their combined CU was registered at 54%.

Cost of Production

The cost of propylene monomer, the basic raw material, was decreasing, despite the fluctuation in the exchange rate during the POI. Production cost at the end of the year was cheaper by 23.83% compared with the 1^st quarter.

Declining material cost could have presented the opportunity for the industry to increase selling prices. The industry achieved this in part, as the gap between quarterly average selling prices vis-�-vis cost narrowed from the 1^st to the 3^rd quarter, resulting in declining negative EBITs. In the 4^th quarter, selling price overtook cost thus posting positive EBIT. The pressure of dumped imports however tempered the domestic industry’s ability to raise its prices significantly. Industry opted to maintain selling prices below landed cost of dumped imports in order to defend its market share.
Profitability and Return on Sales

The negative impact of price suppression on profitability was more apparent for Petrocorp than for JG Summit, since the former entered the market in the first quarter of 1998, selling its products at a loss for the first three quarters of the year. Income statements from the start of commercial operations, May for Petrocorp and August for JG Summit, showed a 14.6% operating loss for the former and a 5.8% operating income for the latter. JG Summit benefited more from low monomer prices, with cost of sales representing 80.1% of sales. With respect to Petrocorp, cost of sales was 107.2% of sales.

Financial Performance

Both companies suffered losses in operation, primarily due to the selling of PP resin at prices below cost. Selling below cost affected their ability to support interest and financing charges contributing to larger net losses.

Dumping, through price suppression, impacted negatively on the profitability and financial performance of the industry.
Cash Flow

The company’s ability to raise prices because of declining production cost was tempered by the presence of dumped imports. Had prices been reflective of cost, sufficient revenue from sales would have been generated to fund industry’s working capital requirements.

Investment and Ability to Raise Capital

Combined total assets of JG Summit and Petrocorp in 1998 were P16.5 billion, a 34.08% increase from the previous year. Both JG Summit and Petrocorp had an authorized capital stock of P3 billion.
Foreign Currency Losses

The high cost of money for the servicing of foreign currency denominated loans, as a result of the peso devaluation, had a negative impact on the industry's financial position. However, the impact could have been mitigated had the industry been able to generate revenues from operations.

Employment and Wages

Total workforce for both Petrocorp and JG Summit in the PP operations grew from 334 in 1998 to 361 in 1999. Salaries and employees benefits improved in both firms from 1998 to 1999.
Factors Other Than Dumping Which Caused Injury

a.Competition From Normal (Undumped) Imports

During the POI, domestic industry had a price advantage over that of dumped and undumped imports from Korea, and from other countries . The industry was forced however to lower its price in order to defend its market share, resulting in operating losses.

b. High Cost of Production

JG Summit and Petrocorp's cost to produce PP resin was relatively higher than the imported counterpart’s. The industry had to import its propylene monomer requirements. High manufacturing cost in 1998 was attributed to huge start-up expenses.

On the other hand, Korean PP manufacturers enjoyed a comparative advantage since they had a naphtha cracker which produced their propylene monomer requirements.

During the first two quarters of 1998, domestic industry’s cost to produce and sell was higher than the price of undumped imports. On the other hand, when propylene prices and conversion cost decreased further in the 3^rd and 4^th quarters, the industry's cost to produce and sell fell below the price of undumped imports by 11.08% and 17.6%, for yarn, and 22.56% and 21.78% for film.

On Determination of Threat of Material Injury

Significant Rate of Increase of Dumped Imports

There was no significant increase in the volume of dumped and undumped PP imports from Korea. In absolute terms, import volume for the period of 1995-1997 was recorded within the 70,000 MT level. With the presence of local PP manufacturers from 1998, Korean imports decreased.

As a percentage of total imports, Korean imports in 1998 and 1999 remained constant at about 50%.

Exporters Production Capacity

Data shows that South Korea’s actual production output was increasing, averaging at 17.04% annual growth rate. Exports accounted for about 46% of production while domestic sales had an average share of 40%. These figures indicate the export orientation of the manufacturers and the exporters flexibility to divert excess production to other countries including the Philippines.

During the POI domestic demand of PP resins in South Korea was only 737,000 MT. With an actual production of 2.3 million MT of which 1.2 million MT were exported, the estimated freely disposable volume amounted to 411,000 MT .

As of 1999, the combined rated capacity of Korean PP manufacturers was recorded at 2.5 million metric tons per year, which was projected to expand to 2.8 million metric tons per annum.

Price Effect

A comparison between the landed cost of dumped PP resins and the average ex-factory domestic selling price of local PP showed no occurrence of price undercutting during the POI. The prices of dumped imports were higher by an average 10.41%, 6.81% and 10.72% on injection, yarn and film grade, respectively. No occurrence of price undercutting was observed because the protestants, from the start of their operation, were already selling below cost in order to gain market share and remain viable in the business.

Despite the decreasing trend in the average quarterly selling prices of the three PP grades, there was no evidence of price depression during the POI. While selling prices remained below cost, the gap between the average selling price and the average cost became narrower from the 1^st to the 3^rd quarters, and in the 4^th quarter, average selling price rose above average cost. Thus, average selling prices were increasing relative to cost.

Price suppression occurred in all quarters of 1998. While the gap narrowed from the 1^st to the 3^rd quarters, and average selling price was above average cost in the 4^th quarter, figures show that average prices consistently fell below the landed costs of dumped PP.

Inventories

As a percentage of production, quarterly inventory levels were relatively higher during the 1^st and 4^th quarters of 1998 and 1999.

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 Tariff and Customs Code of the Philippines. The aforesaid law became effective on 04 September 1999 following its publication in Malaya and Philippine Standard on 19 August 1999.

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 that 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 positive evidence of price differences and is satisfied that dumping per se has caused material injury and threatens to cause more material injury to the domestic industry.

It is therefore ordered that definitive anti-dumping duties be imposed on the following exporters of polypropylene resins originating from South Korea.

Exporter(s)	PP Grade	Dumping Margin
Exporter(s)	PP Grade	(US$/MT)	(% of Export Price)

Daelim Corp.	PP101	14.63	3.90
	PA164V	7.91	2.09
	PP164	0	0
	PP137V	0	0

Hanwha Corp.	PH630	34.17	8.46
	PH460	23.38	5.49

Kolon Int’l	SFC150B	71.82	18.83

Hyundai Corp.	H3400	28.93	6.73
	H5300	10.48	2.51
	H4540	8.78	2.11
	H1500	0	0
	H4500	0	0
Samsung Gen. Chemicals	HY300	0	0

SK Global	H150F	84.96	20.89
	H150N	80.89	18.30
	H235W	44.58	11.07
	H360F	35.61	8.89
	H730F	27.19	6.85
	H380F	0	0
	H870F	0	0

Do-One Marketing	H5300	0	0

Jinwon Trading	H5300	12.75	3.16

LG International	H550	148.62	39.42

Sekitoku	H550	128.15	32.19

Sewon Corp.	Note 1	28.94	9.32

STC Corp.	H150F	0	0
	H320L	0	0
	FC150B	0	0
	SFC150B	0	0

Hyosung T & C	J700	73.67	18.03
	J600P	46.52	10.51
	F600H	46.14	11.51
	F600	39.33	9.24
	F501	29.16	6.77

Note 1 – grade not determined

During the POI, it was established that there were no locally produced equivalents for the PP resin grades listed below. Hence, the following were excluded from the dumping protest:

GRADES	Company	Code
Injection Grade	Daelim	PP137T
Fiber	Honam	FR160
	Yuhwa	5016H
	Hyosung	S700
Film
BOPP	Hyosung	F300 series
	Hyundai	H2220
Film	SK/Yukong	H229
BOPP	Yuhwa	5014L
	Honam	FO120A
	Hyundai	H2210
	SK/Yukong	H221P
IPP	Yuhwa	1088B
	Honam	FI-160P
Masterbatch	STC	SL137H
	STC	SL116T
	Yuhwa	5014L(AB605)
	Yuhwa	5014L(AB405)
	Yuhwa	5014L (MAT)
	STC	AS237H
	STC	M/B1779
	STC	PA20H

Should the Protestants be able to produce the equivalents of the aforementioned PP resin grades during the effectivity of the dumping decision, the Commission will conduct the corresponding review upon formal notification.

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 and carried out on an accelerated basis, provided that said exporters or producers 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 exporters or producers while the review is being carried out.

1.6 REVIEW OF THE ANTI-DUMPING DUTY

Paragraph (O), Section 301 of the TCCP, as amended by RA 8752, states:

"However, the need for the continued imposition of the anti-dumping duty may be reviewed by the Commission when warranted ‘motu propio’, or upon the direction of the Secretary, taking into consideration the need to protect the domestic industry against dumping."

"If the Commission determine 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."

2. LEGENDS AND ABBREVIATIONS

Bestchem	Best Chemicals & Plastics Inc.
BIS	Bureau of Import Services
BOC	Bureau of Customs
BOPP	Bi-axially Oriented Polypropylene
Commission	Tariff Commission
CPP	Cast Polypropylene
CRF	Clean Report of Findings
DAECO	Daelim Corporation
DIC	Daelim Industrial Co. Ltd.
DO	Department Order
DOF	Department of Finance
DTI	Department of Trade and Industry
EG	Ethylene Glycol
EVA	Ethylene Vinyl Acetate
GATT / Agreement	General Agreement on Tariffs and Trade
HDPE	High Density Polyethylene
Honam	Honam Petroleum Corp.
HPC	Hyundai Petrochemical Co. Ltd.
IPP	Inflated Polypropylene
ISO	International Organization for Standards
JG Summit / JG	JG Summit Petrochemical Corp.
LC	Letter of Credit
LDPE	Low Density Polyethylene
LLDPE	Low Linear Density Polyethylene
NCC	Naphtha Cracking Center
NSO	National Statistics Office
PE	Polyethylene
PetroCorp / Petro	Petrochemical Corp. of Asia Pacific
POI	Period of Investigation
PP	Polypropylene
PPIA	Phil. Plastic Industry Association
PVC	Polyvinyl Chloride
RA 7843	Anti-Dumping Act of 1994
RA 8752	Anti-Dumping Act of 1999
SGS	Societe Generale de Surveillance
SM	Styrene Monomer
TCCP	Tariff and Customs Code of the Phils.
VC	Vinyl Chloride Monomer

3. INTRODUCTION

3.1 THE ANTI-DUMPING PROTEST

On 8 February 1999, Petrochemical Corporation of Asia-Pacific (Petrocorp) and JG Summit Petrochemical Corporation (JG Summit) jointly filed with the Department of Finance (DOF) an anti-dumping protest against the importation of Polypropylene (PP) resins from South Korea on the ground that said products were imported at dumped prices and were causing material injury to the domestic industry.

On 16 August 1999, the BIS sent notices of initiation of investigation to all identified parties involved such as Korean exporters, manufacturers and Philippine importers. Likewise, they were requested to submit responses to the BIS questionnaires, to afford them the opportunity to present their positions. Notice of initiation of investigation was published in Manila Bulletin and Philippine Star on 16 August 1999.

On 10 November 1999, the BIS issued its report of positive preliminary findings. Based on the documents submitted, the total volume of dumped goods from South Korea constituted 11.09% of the total Philippine imports, hence, not negligible. Margin of dumping was calculated to range from 4.20% to 40.53% 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 (Commission) for formal investigation on 10 November 1999.

On 01 December 1999, the Bureau of Customs issued Customs Memorandum Circular No 504-99, subjecting specific PP resin grades from South Korea to dumping bonds as calculated by the BIS.

3.2 ROLE OF THE COMMISSION

Pursuant to Section 301 (b) of the Tariff and Customs Code of the Philippines (TCCP), as amended by Republic Act (RA) No. 7843 as implemented by Department Order (DO) No. 150-95 of the DOF, 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 formal investigation to determine the merits of imposing a definitive anti-dumping duty by:

verifying if the kind or class of the 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 the domestic industry producing like articles suffered or was threatened with material injury, or if the alleged dumping caused 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 the government of South Korea, through its Embassy in Makati city; trading firms that exported PP resins from South Korea; and all other interested parties, both domestic and foreign;

conduct of consultation, pre-hearing conferences and public hearings;

acceptance of memoranda and counter-memoranda of the parties;

gathering of economic and financial data such as production, sales, inventory, employment, etc.;

conduct of ocular inspection and verification of information submitted by parties concerned;

conduct of on-the –spot investigation in the territory of the exporting country;

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 to apply definitive measures; and

Preparation of report of final determination and submission to the DTI for the issuance of a Department Order for the imposition of the definitive anti-dumping duty, if affirmative, or the release of cash bond, if negative.

3.4 INTERLOCUTORY MATTERS

On 08 February 2000, importer-protestee Dart Philippines, Inc. through counsel, filed a motion to dismiss the anti-dumping case against its importation of PP resins from South Korea, on the following grounds: i) negligible volume of importation i.e. 0.024% of the total PP imports; ii) type of resin imported is of different quality and grade than that of the subject of the instant protest; and iii) protestant’s application of an unstable pricing scheme which is inefficient in the long term.

In an Order issued on 14 February 2000, the Commission denied Dart’s motion ruling that the Commission only allows dismissal of an anti-dumping case at any stage of its formal investigation on three grounds de minimis dumping margin (estimated margin of dumping is less than two percent (2%) of export price); volume of dumped imports is negligible (i.e., dumped imports account for less than three percent (3%) of the total imports); and the protestant lacks standing.

The reasons cited by Dart, not being any of the three (3) grounds for the termination of the anti-dumping investigation against importation of PP resins from South Korea and the exclusion of its imported product from the anti-dumping case can be best established in a full-blown investigation. (AnnexA)

3.5 SCOPE OF THE ANTI-DUMPING INVESTIGATION

The investigation covered the importation of polypropylene resin from South Korea, the importation or sale of which might have caused material injury or is likely to cause material injury, or retard the establishment of an industry producing like product in the Philippines.

4. THE COMMISSION'S INQUIRY

4.1 PRODUCT UNDER CONSIDERATION

In the anti-dumping protest, Petrocorp and JG Summit identified the alleged dumped products as PP resin classified under HS subheading No. 3902.10 00 of the Tariff and Customs Code. Said subheading is described in the Code to cover PP in primary forms.

The DTI-BIS, in its preliminary findings, included all shipments of PP resins from South Korea falling under HS subheading No. 3902.10 00.

PP resins are used to produce films and sheets for packaging, woven sacks, filaments, ropes, and molded products such as household articles and appliance parts.

4.2 PERIOD OF INVESTIGATION (POI)

For dumping determination, the Commission’s investigation covered imports of PP resins for the 12-month period from 01 January to 31 December 1998. With respect to injury, the period considered were 1995 to 1999.

4.3 NOTIFICATION

4.3.1 Formal Investigation

On 12 November 1999, notification was sent to Ambassador Sung Du Shin of the South Korean Embassy at 10^th Floor, The Pacific Star Bldg., Makati Ave., Makati City (Annex B-1) and to the Philippine Ambassador to South Korea, Hon. Juanito P. Jarasa, at the 9^th Floor, Diplomatic Center 1376-1 Seocho-Dong, Seocho-Ku, Seoul, South Korea (Annex B-2), informing them that the Commission had assumed jurisdiction over the anti-dumping protest for formal investigation. Also notified, through their embassies in Manila, were governments of the trading firms who exported PP from South Korea.

Individual notifications were likewise sent to the two (2) local manufacturers/protestants, sixteen (16) foreign manufacturers/exporters and seventy-one (71) importers. Parties were given thirty (30) days from receipt to submit their respective positions and the required information to the Commission.

    4.3.2    Consultations/ Pre-Hearing Conference

The Commission conducted consultations and pre-hearing conference on 18 November 1999 for the purpose of exploring the possibility of amicable settlement/price undertaking, and to apprise the parties on the procedures of investigation and other related matters necessary for the speedy disposition of the case.

Attendees included representatives and/or counsels for the domestic manufacturers/protestants, importers/protestees and exporters/ protestees.

The parties agreed on the schedule of the marathon hearings set on 7- 11 February 2000.

    4.3.3    Public Hearing

Notice of public hearing was published in the Philippine Star and Today on 19 January 2000. All known interested parties and concerned government agencies were also sent individual notices.

The Commission conducted a total of four (4) hearings commencing on 7 February 2000. The protestants, one (1) Korean protestee/manufacturer (Daelim) and the protestees/importers were represented at the hearings.

The hearings were terminated on 10 February 2000. The protestants and the protestees submitted their memoranda and counter-memoranda within the period of 18 to 27 February 2000.

    4.3.4    Ocular Inspection and/or On-the-Spot Investigation and Verification of Information

Agreement to conduct ocular inspections, examination of books of accounts and verification of information was requested from all concerned domestic parties. Both protestants, Petrocorp and JG Summit granted the request. Calypso, Jason Manufacturing, Robton, Dart Phils., Filipinas Polypropylene, Millers Packaging, BestChem, Manila Cordage, Union Industries and Uni-Ipel were among the protestees/importers that were visited for inspection and verification.

Request for the conduct of an on-the-spot investigation and verification of information in South Korea, was granted by only four (4) Korean manufacturers/exporters, namely: Honam, SK, Daelim and Hyundai.

4.4 INQUIRY

For purposes of final determination, the Commission limited its investigation according to the provisions of Section 6.10 of the WTO 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 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 the facts available . . . "

4.5 DOMESTIC PRODUCERS

4.5.1 PROTESTANTS

Company Profile

Petrocorp, with office address at Chemphil Bldg., Arnaiz St., Legaspi Village, Makati City, is a duly registered manufacturer of polypropylene homopolymer resin with a rated capacity of 160,000 metric tons per year. Its manufacturing plant which employs the BASF Novolen process is located in Mariveles, Bataan.

JG Summit with office address in E. Rodriguez Jr. Ave., Bagong Ilog, Pasig City. It produces PE and PP resins at its plant in Bo. Simlong, Batangas City, Batangas. The rated capacity for its PP plant, using the Unipol process of Union Carbide is 180,000 metric tons per year.

Petrocorp and JG Summit started commercial operations in May 1998 and in August 1998, respectively. However, their respective plants had already been producing PP resins since July 1997 and June 1998 (commissioning period).
Ocular Inspection

The Commission conducted ocular inspections of Petrocorp and JG Summit manufacturing facilities in Bataan and Batangas on 06 January 2000 and 17 January 2000, respectively.
Verification of Information

Verification of Petrocorp and JG Summit records were conducted on February 1,3-4,17-18 and March 6 and 9, 2000, respectively.

4.6 SOUTH KOREAN MANUFACTURERS

4.6.1 SK GROUP

SK Corporation

Company Profile

SK Corporation, formerly Yukong Limited, a subsidiary of SK Group, was established as Korea’s first petroleum refinery on 13 October 1962. The company’s naphtha cracking center was put in full operation in March 1973. In December 1996, the company opened its second PE/PP plant with the capability of producing 690,000 MT of LDPE, HDPE and PP a year. The company uses spheripol process in the production of PP.

Production Capacity

Table 1. Production Capacity on Polypropylene

Year

Rated
Capacity
("000 MT)

Actual Production
Inc(Dec) From
Previous year (%)

Production Capacity Utilization
(%)

1996

170

-

100

1997

335

97.06

100

1998

335

(8.09)

91

1999

335

12.13

102

Source: SK Corp

The company’s rated PP production capacity in 1997 increased by 97% from previous year’s level. In 1996 and 1997, the company utilized 100% of its capacity. But in 1998, its operating rate declined by 9%. In 1999, however, the company was able to maximize its production, exceeding by 2% of the nameplate capacity of the plant.
SK Global Co., Ltd.

Company Profile

SK Global (formerly Sunkyong Limited), another subsidiary of SK Group, is Korea’s fourth largest general trading company. It is a leading international trader in the chemicals and petrochemical fields from upstream products like crude oil, coal, naphtha, propylene and styrene monomers, benzene, toluene, and xylene, to downstream products like plastics, urethane materials, PET chip, organic materials, and synthetic materials. The company is also involved in exports and trilateral trade of hot- and cold-rolled steel, pipe, stainless and aluminum sheet, bar and shapes, and steel wire products, and an international supplier of raw fibers, polyester, silk, cotton, rayon, and other fabrics.

The company is the sole distributor of SK Corporation to the Philippines.

Sales and Inventory

Sale transactions in Korea were done either through direct selling to customers or through unrelated distributors. During the POI, all sale transactions were done through unrelated domestic customers. While SK Corporation did not offer any quantity discount, it nevertheless extended credit to customers.

SK Global charges 2% commission on C & F price of PP exports to the Philippines. Hantex Trading, a Philippine trader of SK Global, charges an additional US$10 per metric ton of PP exports to the Philippines. Records show that all transactions were made through Hantex during the first half of 1998.

Table 2. Export & Domestic Sales, & Inventory

Percentage (%) Increase (Decrease) From Previous Year

Year

Export Sales
Volume

Domestic Sales
Volume

Total Sales
Volume

Inventory
Volume

1996

-

-

-

-

1997

188.41

35.07

97.13

(6.55)

1998

(3.51)

(16.34)

(8.74)

(11.17)

1999

(3.65)

33.39

10.21

25.57

Source: SK Corp.

The increased production capacity in 1997 enabled the company to expand its market. As a result, its sales volume almost doubled the 1996 volume. In 1998, the company suffered a decline in sales of 8.74% relative to its volume of production.

4.6.2 HYUNDAI PETROCHEMICAL CO. LTD. (HPC)

Company Profile and Production Capacity

HPC, a subsidiary of Hyundai Group, was established in 1988. It is located on a 3.9 million square meter site in the western seaboard of Daesan, Nan-Do province. The Daesan petrochemical complex consists of two main production plants and 24 satellite facilities that produce various monomers, polymers and synthetic rubber. Production of its PP resins employs the Spheripol process of Montell. With its two independent production lines, HPC can produce PP variants using catalysts for specific application.

Table 3. Products and Rated Capacity (1,000 MT/Year)

Product	N.C.C. #1	N.C.C. #2	Total
Ethylene	450	550	1,000
Propylene	225	275	500
Mixed C4	130	120	250
Benzene	140	170	310
VCM	-	200	200
EG	125	250	375
LDPE	135	70	205
EVA	-	70	70
LLDPE	80	-	80
HDPE	140	-	140
LLDPE/HDPE	-	160	160
PVC	-	200	200
PP	250	200	450

N.C.C. –Naphtha Cracking Center
Source: Hyundai

HPC plant and head office is located at 679 Daejook-ri, Daesan-eup, Seosansi, Choong Chung Nma-do, Korea. Its Seoul office is located at 10F Hyundai Bldg., 140-2 Kye-dong, Chung-ku. HPC has 12 overseas offices outside Korea. In Manila, its office is located at Unit 26E, Easton Place, Valero St., Cr. Herrera. Makati City.

Production Capacity

Table 4. Rated and Actual Capacity on Polypropylene

Year	Production Capacity (‘000 MT)	Production Output % Inc(Dec) From Previous Year	Capacity Utilization (%)
1997	450	-	60
1998	450	17.11	86
1999	450	17.85	102

Source: Hyundai

With the completion of the second phase of the Daesan petrochemical complex, PP production capacity of HPC increased to 450,000MT in 1997, from 250,000MT the previous year. Production utilization was 60%, 86% and 102% in 1997, 1998 and 1999, respectively.

Sales and Inventory

Exportation of PP to the Philippines is made through its sole distributor Hyundai Corporation, a subsidiary of Hyundai Group. During the POI, Hyundai Corp. charged Hyundai Petrochemical a 2.5% commission on FOB price.

PP sales in the Korean market were made through its respective agents who were paid 5% commission.

Table 5. Sales and Inventory (in ‘000MT)

Year	Percentage (%) Increase (Dec) From Previous Year
Year	Export Sales	Domestic Sales	Total Sales	Inventory Volume
1996	-	-	-	-
1997	7.59	(3.03)	3.52	(12.93)
1998	76.14	(7.29)	46.20	29
1999	14.17	29.21	17.59	18.42
Growth Rate	32.63	6.30	22.44

Source: Hyundai

Export sales exhibited an increasing trend with an average growth rate of 32.63%. On the other hand, domestic sales contracted by 10% in 1998 from 1996 level but registered an increase by 29% in 1999. Export sales shared 62%, 64%, 77% and 75% of the total sales in 1996 to 1999, respectively. Overall, total sales showed an increasing trend with an average growth rate of 22.44%.

PP grades exported to the Philippines during the POI were H1500, H3400, H4540 and H5300. Inventory dropped by 12.93% in 1997 from the 1996 level. In 1998 and 1999, however, an increase of 29% and 18.43%, respectively, was observed.

4.6.4 DAELIM CORPORATION (DAECO)

Company Profile and Capacity

Established in 1939, DAECO was originally engaged in domestic and international construction projects. In 1994, DAECO was reborn as a trading company particularly focused to import and export petrochemicals and petroleum products.

Today, DAECO engages in the trading of various monomer and polymer products manufactured by Daelim Industrial Co. Ltd. (DIC) Petrochemical Division. It extends its trading activities to industrial-purpose petroleum products, including naphtha, gas oil, fuel oil and LPG. It is a major exporter of various plastic products, supplies highly refined construction materials and exports motorcycles produced by Daelim Motors Co., Ltd.

Table 6. Monomer Products and Capacity of DIC

Product	Rated Capacity (MT/Year)
Ethylene	730,000
Propylene	420,000
Mixed C4	290,000
Benzene	180,000
Toluene	110,000
Xylene	60,000
Styrene Monomer	140,000
Butadiene	100,000
MTBE	130,000
Butene-1	30,000
Iso-Butylene	60,000

Source: Daelim

Table 7. Polymer Products and Capacity of DIC

Product	Rated Capacity (MT/Year)
High Density PE	220,000
Low DensityPE	120,000
Linear-Low Density PE	260,000
Polypropylene (PP)	330,000
KResin	40,000
PE/PP Compound	71,000
Polybutene	20,000

Source: Daelim

DAECO’s head office is located at Samdo Bldg., 1-170, Soonwha-dong, Choong-ku, Seoul, Korea. There are five overseas branches, one in Singapore, three in China and one in Vietnam.

Manufacturing process

The technology used by DIC in the production of PP is called Himont Spheripol Process from Italy. According to Daelim, this process uses liquid C3 (monomer) polymerized into powder form in two (2) loop reactors. In a mixing vessel, additives are mixed with the powdered resin. Part of this mixture is extracted and sold as addiform and the rest is remelted, extruded and then cut to produce PP pellets.

Export Performance

Of the company’s total PP exports (203,380MT) during the POI, 41% and 10% were shipped to China and Vietnam, respectively. Export sales in 1999 dropped by 25% to 153,520 MT.

PP grades exported to the Philippines during the POI, totaling of 9,479 MT, were PA-137V, PA-164V, PP-137T, PA-164, PP-101 and PP-141. In 1999, exports to Philippines dropped to 6,380MT.

On the Spot Investigation and Verification of Information

On 10 April 2000, the Commission conducted verification of the information submitted by Daelim Corporation.

4.6.5 Honam Petrochemical Corporation (Honam)

Company Profile

Honam was established on 16 March 1976 but it was only in December 1979 when it started to commercially produce various petrochemical products from monomers to polymers

Honam utilizes spheripol process developed by Himont Co. of America and Mitsui Tiatsu Chemical Co. of Japan .

Its head office is located at LOTTE Kwanak Tower Bldg., 395-67, Shindaebang, Dongjak-Ku, Seoul, Korea. Its plant site is at Yechun Petrochemical Comple, Yeosu, Chollamdo, Korea.

Products and Capacity

Table 8. Rated Capacity in 1999 (in MT/year)

Product	Rated Capacity
Ethylene	460,000
Propylene	236,000
Benzene	95,000
Toluene	45,000
Xylene	33,000
HDPE	337,000
EO	240,000
Ethylene Glycol	400,000
PET	65,000
EOD	30,000
Polypropylene	278,000
Compound Resin	30,000

Source: Honam

Production Capacity

Table 9. Rated and Actual Production Capacity on PP

Year	Rated Capacity (in ‘000 MT)	Production Output Inc(Dec) From Previous Year (%)	Capacity Utilization (%)
1996	240	-	88
1997	240	(2.54)	86
1998	278	9.11	81
1999	278	(10.27)	73

Source: Honam

The company’s rated capacity for PP production increased from 240,000MT in 1997 to 278,200MT/year starting 1998. This resulted to increased production output in 1998 by 9.11%. It was noticed that despite increased in rated capacity by 15.91%, capacity utilization dropped to 81% from 86% in 1997. Company’s overall capacity utilization displayed a decreasing trend.

Sales and Inventory

Exportation of PP to the Philippines during the POI was done through its Korean company-distributor/trader, Kolon International. Kolon added a mark-up of US$25 per metric ton. Term of payment was L/C at sight.

On the other hand, domestic sales were done either through direct selling to companies or through dealers. During the POI, the company did not offer any quantity discount but sold its product on credit.

Table 10. Polypropylene: Export & Domestic Sales, & Inventory

Year	Percentage Increase (Dec) From Previous Year
Year	Export Sales	Domestic Sales	Total Sales	Inventory
1996	-	-	-	25.12
1997	(6.54)	1.93	(1.12)	(5.45)
1998	44.47	(14.90)	5.54	(11.20)
1999	(36.18)	19.60	(3.70)	14.22
Growth Rate	0.88	2.21	0.24

Source: Honam

In 1998, domestic sales decreased by 14.90%, while export sales increased by 44.47%. Increased total sales could have resulted from the increased production output for the year (Table 9).

PP grade FI-160P was developed eight (8) years ago and was especially formulated and intended for Philippine market, denominated by the letter "P". It was discovered however, that this grade was also exported to other countries and sold to its domestic market. During the POI, 207.26 MT of PP grade FI-160P was sold to the local market.

4.6.5 Other Exporters

Exporters who did not participate in the Commission’s investigation but submitted responses to the BIS questionnaire were: Daewoo Corp., Do-One Marketing Co., Itochu Plastic, Samsung Chemicals and Hanwa Corp.

4.7 IMPORTERS

4.7.1 Philippine Plastic Industry Association (PPIA)

Company Profile / Position

PPIA is an association of about 300 plastic product manufacturers.

In behalf of some of its members, particularly those who imported PP resin from South Korea in 1998, the Association submitted that their importations did not injure the local industry because the equivalent of these resins are not manufactured locally, particularly Hopelen FI-160P and Yuhwa 1088B, which two of PPIA members, Jason Plastics and Calypso Manufacturing are using in their thin film production. It was further claimed that their exporters use the international pricing scheme known as PLATTS, therefore their PP imports cannot possibly be dumped. It was alleged further, that the certification on prices issued by the Commercial Attach� was based on hearsay and was not realistic.

4.7.2 Dart Philippines Inc.

Company Profile / Position

Dart Philippines, a subsidiary of Tupperware Asia Pacific Holdings, Pte. Ltd., is engaged in the manufacture and sale of various plastic household articles.

The company alleged that its 48 tons of PP137T importation in 1998 from Daelim Corporation could not have possibly injured the protestant since there was no equivalent local grade and the volume of its imports was negligible.

4.7.3 Manila Cordage

Company Profile / Position

A 75- year old company engaged in the manufacture of twines and ropes made from abaca and other vegetable fibers or synthetic resins such as PP, Manila Cordage submitted that imported Addiform PP is not locally produced.

4.7.4 Union Industries

Company Profile / Position

A manufacturer of household appliances, such as electric fans, Union Industries alleged that the imported PH460 PP resin, which it molds into fan blades, had no locally manufactured equivalent during the time of importation.

4.7.5 Bestchem Inc.

Company Profile

Bestchem, Inc. whose plant is located in Cavite, is engaged in the production of BOPP films used primarily as packaging materials.

The company claimed that their importation of PP resins could not have injured the local industry considering that their resin requirements was procured and supplied by its mother company (STC) without additional charges or commission. It was further claimed that no locally produced equivalent of such resins were available during the POI. In fact, Petrocorp started offering its resins to Bestchem only in December 1999.

4.7.6 Other Importers

The following importers submitted position papers that were considered by the Commission: East Indies Mercantile, Miller Packaging, Prima Plastics, Philippine Synthetic Products Manufacturing, Uniplastic, Promenade Distributor, Titan Rubber Industrial Manufacturing, Polyson, Robton and Topway.

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 polypropylene homopolymer resin in pellet and powder forms with a melt index ranging from 1.8 to 15 g/10 minutes, measured at a temperature of 230^oC and a shot weight of 2.16 kg. PP resins are grouped into three grades based on the application or product to which they are intended to be used. Presented below are the three groups of locally produced grades of PP resins:

Grade		MFR	JG Summit	Petrocorp
Grade		MFR	Evalene	Petrolene
Injection Molding		5	PHJ0501 PHJ0501N	1100L
		8	PHJ 0801	1100M
		12	PHJ 1201 PHJ1201N PHJ 1202	1100N
		15	PHJ 1502	1100P
Yarn		1.7	PHY0171 PHY0171N
		1.8		1102H
		2	PHY0201 PHY0201N PHY0202
		2.5		1102J
		3.5	PHY0351 PHY0351N	1102K
		5		1102L
Film	BOPP	2		1104H
		2.2	PHF0221 PHF0221N
		3	PHF0301
		3.2		1104K
Film	CPP	7	PHF0701
	CPP	8		1104M
	IPP	10	PHF1001 PHF1002 PHF1003
	IPP	11		1126N

5.1.2 Factors Considered in Determining Like Product

Characteristics

a. Chemical Composition

Polypropylene homopolymer resin, both local and imported, contains more than 95% or more by weight of propylene monomer in the polymer chain and the rest is comonomer. Generally, PP resins contain various chemicals known as additives which are proportionately added to make them suitable for a particular use.

b. Additive Package Component

The additive package of different PP grades defines the suitability for various end-use applications. PP resins having the same melt flow rate but different additive packages may not be used for the same application.

The additives mixed with PP homopolymer determine the essential character of the resulting plastic product. Different PP grades contain different additive packages. The right combination of these additives (e.g. anti-static, anti-block and anti-slip agents) will impart the necessary properties required from the resins and the finished products, like moldability, clarity, strength, elasticity and openability.

The formulation of additives is proprietary such that no two resins of the same grade/application will have exactly the same additive contents, hence, there are differences in the properties of finished product between grades of local and imported PP despite having the same MFR and application.

c. Physical Characteristics

The locally produced PP resin is supplied in the form of white translucent pellets and white powder, and has the following physical properties:

Properties	JG Summit	Petrocorp
Melt Index, g/10min	2.0 - 15	1.8 - 15
Melting temperature, ^oC	163	163
Vicat Softening temperature, ^oC	-	154
Izod Impact Strength, kg-cm/cm	27 - 45 J/m	3 - 3.5
Tensile strength, kg/cm²	347 - 378	358
Manufacturing technology	Unipol	BASF

Imported PP resin also comes in white translucent pellets and white hygroscopic powder. The following are its physical characteristics:

Properties	Imported PP
Melt Index, g/10min	1.2 - 25
Melting temperature	162 - 166
Vicat Softening temperature, ^oC	150 – 155
Izod Impact Strength, kg-cm/cm	1.0 – 7
Tensile strength, kg/cm²	240 - 400
Manufacturing technology	Spheripol, Hypol, Unipol

Characteristics of both local and imported resins are within the same range. Manufacturing technologies differ only in the catalyst used but the main process is polymerization.

The range of melt index for imported PP is wider at 1.2 to 25 compared to that of local PP which is from 1.8 to 15. Therefore, some of the imported resins do not have no local equivalents.

d. Uses

Local and imported PP resins both have grades for the three main applications, i.e. injection molding, yarn and film.

e. Manufacturing Method and Technology

Locally produced PP resins are manufactured by polymerization of propylene monomer utilizing two different technologies: BASF(German) technology for Petrocorp, and Union Carbide (US) technology for JG Summit. Both processes require feed of propylene monomers in gas phase. They differ, however, in their respective use of catalysts.

The imported PP resins are manufactured using the Spheripol, Hypol, and Unipol processes, and also Italian and Japanese technologies.

Manufacturing technologies differ only in the catalyst used and the physical state of the monomer during the processing, but produce the resin through polymerization.

f. Tariff Classification

Protested and locally produced PP resins are homopolymers. Regardless of the form and the manufacturing process by which they are produced, these resins are properly classified under HS subheading 3902.10 00 of the Harmonized System (HS) Tariff and Customs Code, with a present rate of duty of 15% ad valorem.

g. History of Tariff Rates

Table 11. Historical Development of Tariff Rates: 1991 to 2000

Republic Act/ Executive Order / Effectivity Date	R.A. 6647 (02/11/88)	E.O. 470 (07/20/91)						E.O. 486 (07/10/98)
Year	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000
Tariff Rate (%)	20 or P3.00/kg.	10	10	10	10	10	10	15	15	15

5.1.3 Conclusion

Local and imported resins are similar as to their manufacturing process, chemical composition, physical characteristics, and tariff classification. However, they differ as to the additive package, which is the sole determinant of the properties of the finished products, such as clarity and openability.

Dart Philippines has established coordination with Daelim for a grade that will exhibit the specifications required for their products. Daelim PP137T is a grade specifically formulated for Dart for their production of various kitchenwares. For about a year, Dart has been giving samples of the PP resins that they use to JG Summit, but the latter has not come up with a resin with the required specifications to date. Local resin, when used to produce plastic articles, exhibit migration of additives, thus causing cloudiness on the surface.

Local thin film manufacturers, producing films with thickness of 10 microns and below require properties such as openability, elasticity and clarity for packaging purposes. Petrocorp’s resins can not produce films thinner that 10 microns. JG Summit’s resins can produce thin film with clarity required but the film cannot be opened. PP resins from South Korea have additives that impart the properties required by the local film makers.

Imported fiber grade resins have an MFR of 15. Locally produced PP has MFR of up to 15. Despite same MFR, local resin producers cannot provide the local market with fiber grade resins, which is attainable with the correct additive package.

Local BOPP grades, although already available, has not passed the quality standard required by the user. Local resins when used results to high percentage of breakage, and emits a jackfruit smell which is not acceptable for food packaging.

Masterbatches although classifiable under the same HS heading having polypropylene as the basic constituent is not produced by the protestants. These are colorants which are mixed with PP resins during conversion to plastic products.

During the POI, it was established that there were no locally produced equivalents for the PP resin grades listed below. Hence, the following were excluded from the dumping protest:

Table 12. Product Exclusions

GRADES	Company	Code
Injection Grade	Daelim	PP137T
Fiber	Honam	FR160
	Yuhwa	5016H
	Hyosung	S700
Film
BOPP	Hyosung	F300 series
	Hyundai	H2220
	SK/Yukong	H229
	Yuhwa	5014L
	Honam	FO120A
	Hyundai	H2210
	SK/Yukong	H221P
IPP	Yuhwa	1088B
	Honam	FI-160P
Masterbatch	STC	SL137H
	STC	SL116T
	Yuhwa	5014L(AB605)
	Yuhwa	5014L(AB405)
	Yuhwa	5014L (MAT)
	STC	AS237H
	STC	M/B1779
	STC	PA20H

The Commission did recognize that, in the context of industrial selling, getting the acceptance of the prospective customers of the product offered, a long drawn process, necessitates close cooperation between parties. It may entail a lot of submissions, testing and trials until the desired product /grade is obtained.

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, Petrocorp and JG Summit were the only producers of PP resin in the Philippines. As such, the applicants satisfied the requirement of domestic industry support.

5.3 THE PHILIPPINE MARKET

Prior to the POI, the domestic requirement for PP resin was supplied by imports coming mostly from Korea, Singapore, Thailand and Japan. By May 1998, PP produced by Petrocorp entered the local market. Sales from JG Summit followed in June 1998.

The domestic industry supplied more than half of the total domestic PP requirements in 1998 and 1999.

The PP market contracted by 26.04% in 1997 due to the Asian currency crisis, but demand recovered in 1998 onwards, increasing by 12% and 22%, in 1998 and 1999, respectively.

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 arm’s length transaction, excluding any post exportation charges, such as, ocean freight and overseas insurance.

The Commission based its estimates of export price on the data submitted by exporters, and import entries submitted by the protestants, protestees, and on file with the Commission, which were validated with the summary of Clean Report of Findings (CRF) furnished by Societe Generale de Surviellance (SGS).

Export prices were adjusted to ex-factory level (net of ocean freight, insurance, inland freight, handling cost, container tax, wharfage, duty drawback, brokerage fee, documentation fee, trader’s compensation and commission, if any). Adjustments varied depending upon the manufacturer and its exporter-trader. Of the thirteen (13) exporters subjected to dumping margin computation, only six (6) South Korea-based exporters -- Hyundai Corporation, Daelim Corporation, Hanwha Corporation, SK Global, Samsung General Chemicals, and Kolon International -- furnished data on adjustments.

With respect to other exporters, adjustments on their export prices were based on best information available (i.e., adjustments applied to Kolon International).

Below is the summary of the specific exporter’s export prices during the POI:

Table 13. 1998 Specific Exporter’s Export Prices

Exporter(s)	FOB Export Value (US$/MT)	Adjusted Export Prices (US$/MT)
Daelim Corp.	510-350	504-354
Hanwha Corp.	503-420	471-390
Kolon Int’l	500-405	454-358
Hyundai Corp.	531-411	511-390
Samsung General Chemicals	481	454
SK Global	766-396	717-374
Do-One Marketing	510	474-470
Jinwon Trading	465-430	424-389
LG International	450-416	403-371
Sekitoku	443	398
Sewon Corp.	553-538	508-490
STC Corp.	590-505	573-486
Hyosung T & C	546-420	501-374
Korea Petrochemical Ind.	494-450	463-419

Source: 1998 Import Entries, Protestees’ answer to questionnaire

6.2 NORMAL VALUE

Article 2.1 of the Agreement states:

"Normal values shall be the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country".

6.2.1 NORMAL VALUE OF FOUR KOREAN PRODUCERS AND TWO
PRODUCER-EXPORTERS

Six PP manufacturers -- HPC, Daelim Industrial Corporation (DIC), Honam Petrochemical Corporation, SK Corporation (SKC), Hanwha Corporation and Samsung General Chemicals -- submitted data on domestic sales and cost of production on all PP grades sold in the Korean market during the POI. Said data were used as bases for the computation of normal value.

Domestic selling prices were adjusted to ex-factory level (net of inland freight, packing cost, pollution tax, warranty expenses, loading and storage expenses, trader’s commission, inventory cost, overhead cost and credit interest, if any). For PP grades sold below cost to produce and sell, normal values were constructed based on cost of production plus selling, administrative and general expenses, and margin of profit. (Annex A)

6.2.2 NORMAL VALUE FOR OTHER TRADER-EXPORTERS

Normal value used on exports of Hyundai Corporation, sister company of HPC, was the latter's weighted average normal value. The same treatment was applied to Jinwon Trading and Do-One Marketing since both traded HPC’s PP resins.

On exports of Daelim Corporation, normal value of DIC was applied. For Kolon International, distributor of Honam, normal value of the latter was used. SK Corporation's normal value was applied for SK Global exports. For STC’s exports, PP grades FC150B and SFC150B originated from Honam, while H150F and H320L originated from SK Corp. Hence, normal values of the respective manufacturers were used.

With regard to traders whose exports cannot be traced as originating from any of the identified manufacturers, best information available was used. Thus, normal values of exports of Hyosung T & C were based on the highest normal value computed for the corresponding grade. On Sewon Corp., Sekitoku Int’l Corp and LG International Corp, whose types of PP grade could not be determined, the highest normal value computed, i.e., of SK Corporation’s PP grade H150F, was used.

6.3 DETERMINATION OF DUMPING MARGIN

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".

Dumping margins for each exporter were calculated by comparing the calculated weighted average export price against the computed weighted average normal value. Except for SK Global, comparison of normal values and export price were on a monthly weighted average. For SK Corp., on the other hand, comparison were made on a quarterly basis because domestic sales data submitted by SK Corp. was summarized on a per quarter transaction.

Below are the estimated dumping margins of specific grades of PP resins traded by particular exporters:

Table 14. Dumping Margin of Specific PP Grades per Exporter

Exporter(s)	PP Grade	Dumping Margin
Exporter(s)	PP Grade	(US$/MT)	(% of Export Price)

Daelim Corp.	PP101	14.63	3.90
	PA164V	7.91	2.09
	PP164	0.37	0.01
	PP137V	0	0

Hanwha Corp.	PH630	34.17	8.46
	PH460	23.38	5.49

Kolon Int’l	SFC150B	71.82	18.83

Hyundai Corp.	H3400	28.93	6.73
	H5300	10.48	2.51
	H4540	8.78	2.11
	H1500	5.36	1.17
	H4500	0	0

Samsung Gen. Chemicals	HY300	0	0

SK Global	H150F	84.96	20.89
	H150N	80.89	18.30
	H235W	44.58	11.07
	H360F	35.61	8.89
	H730F	27.19	6.85
	H380F	8.43	1.91
	H870F	0	0

Do-One Marketing	H5300	0	0

Jinwon Trading	H5300	12.75	3.16

LG International	H550	148.62	39.42

Sekitoku	H550	128.15	32.19

Sewon Corp.	Note 1	28.94	9.32

STC Corp.	H150F	0	0
	H320L	0	0
	FC150B	0	0
	SFC150B	0	0

Hyosung T & C	J700	73.67	18.03
	J600P	46.52	10.51
	F600H	46.14	11.51
	F600	39.33	9.24
	F501	29.16	6.77

Note 1 – grade not determined

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 percent, expressed as a percentage of the export price".

The specific PP grades produced by herein exporters with de minimis margin are as follows:

Table 15. De Minimis Dumping Margin of Specific PP Grades per Exporter

Exporter(s)	PP Grade	Dumping Margin
Exporter(s)	PP Grade	(US$/MT)	(% of Export Price)

Daelim Corp.	PA164	0.37	0.01
	PP137V	0	0

Hyundai Corp.	H1500	5.36	1.17
	H4500	0	0

Samsung Gen. Chemicals	HY300	0	0

SK Global	H380F	8.43	1.91
	H870F	0	0

Do-One Marketing	H5300	0	0

STC Corp.	H150F	0	0
	H320L	0	0
	FC150B	0	0
	SFC150B	0	0

7. THE ECONOMIC CONDITION OF THE INDUSTRY

7.1 DETERMINATION OF ACTUAL MATERIAL 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.

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 16. Volume of Dumped Imports

POI (1998)	Imports from Korea (‘000 MT)			Imports from Other Countries (‘000 MT) ^2/	Total Phil. Imports (‘000 MT) ^2/	Share of Dumped Imports to Total Phil. Imports (%)
POI (1998)	Dumped^1/	Undumped	Total^2/
Q1	0.24	13.11	13.35	12.22	25.57	0.94
Q2	5.13	12.41	17.54	13.82	31.35	16.36
Q3	1.81	8.07	9.88	9.18	19.06	9.50
Q4	1.57	9.75	11.32	5.64	16.97	9.25
Total	8.75	43.35	52.10	40.86	92.95	9.41

Source: ^1/verified submissions from Korean exporters

^2/NSO Foreign Trade Statistics

Total PP imports from Korea within the POI aggregated to 52,096 MT. Imports at dumped prices totaled 8,752 MT, accounting for 16.80% of PP imports from Korea, and 9.41% of the Philippine PP importation.

The volume of dumped imports being above 3%, i.e., not negligible, there was no cause for termination of the investigation against Korea.

Volume Effect

Article 3.2 of the Agreement states:

"With regard to the volume of dumped imports, the investigating authorities shall consider whether there has been a significant increase in dumped imports, either in absolute terms or relative to production or consumption in the importing Member."

The volume of dumped imports constituted 4.09% of domestic consumption during the POI. Quarterly figures show a surge in dumped imports by 4,891 Mt or 2,037% in the 2^nd quarter, before declining in last two quarters.

The surge in the volume of dumped imports in the 2^nd quarter was not sustained despite a partial recovery of Korean imports in the 4^th quarter. Thus, it can be concluded that there was no significant increase in the volume of dumped imports, both in absolute terms and relative to domestic consumption, as these were kept below 3% of domestic consumption for the rest of the POI, or averaging 4.49%.

It should be noted that PP imports from Korea, from 1995 to 1997, were recorded within the 70,000 MT level. But after the case was filed in 1998, subject imports were steadily decreasing at an annual average rate of 34%.

The share of Korean imports to total imports was 48% in 1995, 38% in 1996 and 41% in 1997. The entry of domestically produced PP in the local market in 1998 not only affected the market share of Korean PP, which fell to 28% and further to 13% in 1999, but the share of imports from other countries as well. The domestic industry made a strong entry into the local market in 1998 and maintained its dominance in the succeeding year.

Price Effect

Article 3.2 of the Agreement further states that:

"With regard to effect of the dumped imports on prices, the investigating authorities shall consider whether there has been a significant price undercutting by the dumped imports as compared with the price of a like product of the importing Member, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which otherwise would have occurred, to a significant degree".

Price undercutting exists when prices of dumped imports are significantly lower than the price of the like product.

A comparison between the landed cost of dumped PP resins and the average ex-factory domestic selling price of local PP showed no occurrence of price undercutting during the POI. The prices of dumped imports were higher by an average 10.41%, 6.81% and 10.72% on injection, yarn and film grade, respectively. No occurrence of price undercutting was observed because the protestants, from the start of their operation, were already selling below cost in order to gain market share and remain viable in the business.

Price depression occurs when the price of dumped imports forces down the price of like product.

Average quarterly selling prices of the three PP grades showed steady decrease from the 1^st until the 3^rd quarters of 1998, following a parallel movement in average cost. This price reduction was attributed to decreasing production cost, due mainly to cheaper monomer and increasing production output.

Despite trends posted, there was no evidence of price depression during the POI. While selling prices remained below cost, the gap became narrower from the 1^st to the 3^rd quarters, and in the 4^th quarter, average selling price rose above average cost. Thus, average selling prices were increasing relative to cost.

Price suppression occurs when the price of dumped imports prevent increases in the price of like products that would otherwise have occurred.

Price suppression occurred in all quarters of 1998. While the gap between quarterly average selling prices and costs narrowed from the 1^st to the 3^rd quarters, and average selling price was above average cost in the 4^th quarter, figures show that average prices consistently fell below the landed costs of dumped PP. It can be observed that the difference in selling price and landed cost was greatest in the 3^rd quarter -- 16.51%, 15.89% and 20.52% on injection, yarn and film grade, respectively.

7.1.2 Injury Factors

Market Share

Table 17. PP Domestic Consumption and Market Share

Year/ Qtr.	Market Share (%)
Year/ Qtr.	Domestic Industry	Dumped Imports	Non-Dumped & Other Countries
1997
Q1
Q2
Q3
Q4
Total
1998
Q1	44.63	0.52	54.85
Q2	33.97	10.80	55.23
Q3	70.75	2.78	26.47
Q4	69.15	2.85	28.00
Total	56.53	4.09	39.38
1999
Q1	75.46
Q2	74.55
Q3	70.28
Q4	61.47
Total	71.10

Source: Petro and JG

NSO Foreign Trade Statistics

Note that had there been no product exclusion, the level of dumped imports would have been higher since the volume of excluded PP accounts for almost half of Korean imports, and said products were mostly sold at dumped prices.

Korea supplied 41% of demand for PP in 1997. Despite market growth in 1998 and 1999, imports from Korea were decreasing, while imports from other countries remained relatively constant. The entry of local producers in 1998, caused a reduction in Korean PP's share to 28%, and further to 13% in the succeeding year. The substantial portion of domestic PP requirements were already sourced locally, as evidenced by favorable market shares of domestic sales, which accounted for 56.53% and 71.10% of domestic consumption in 1998 and 1999, respectively.

Apart from market recovery in 1998, the strong market entry and share movements of local PP were tied with the pricing strategy of the industry. Local selling prices were pegged at or below landed cost of imports, particularly dumped imports, and more often resulting in levels which were below production cost.

An analysis of pricing strategy and market shares show the domestic industry capturing the highest share in the 3^rd quarter of 1998 when price suppression was at its peak. Similarly, narrower gaps between the landed cost of dumped PP and local selling prices, which can be observed in the 1^st and 2^nd quarters of the POI, resulted in smaller market shares. (Note that by volume, the most saleable grade is injection molding because it is most adaptable to a wide range of melt temperature and holding pressure. Following injection grade is yarn and finally, film.)

Thus, it can be concluded that price suppression, which is dumping related, contributed significantly to the domestic industry's market dominance in 1998.

Production, Sales and Inventory

Table 18. PP Domestic Production, Sales and Ending Inventory

	Percentage (%) Increase (Decrease) From Previous Quarter
Year	Production			Sales			Inventory
1998	Petro	JG	Total	Petro	JG	Total	Petro	JG	Total
Q1
Q2	24.71	-	65.75	3.44	-	7.96	(38.99)	-	(3.76)
Q3	144.33	278.16	177.46	57.83	1,649.43	120.25	71.35	82.38	75.30
Q4	(44.53)	(10.15)	(31.82)	(23.31)	0.26	(13.94)	(32.86)	37.01	(6.22)
1999
Q1	33.35	28.23	28.90	23.58	36.83	28.72	(35.12)	20.56	(4.14)
Q2	(18.58)	(7.45)	(13.68)	(14.87)	26.92	2.35	(65.07)	(56.10)	(58.73)
Q3	45.82	(14.98)	17.04	25.02	(21.70)	1.14	17.58	(37.34)	(23.46)
Q4	(33.58)	35.24	(9.89)	(54.25)	(21.59)	(41.31)	376.17	268.86	310.77
%Inc(Dec) fr
Prev. yr.	22.30	101.17	47.18	7.01	169.34	47.43	26.90	22.34	24.36

Source: Petrocorp./JG Summit

Production was increasing in the first three quarters of 1998, before it stabilized to an average quarterly level of 46,000 metric tons until the end of 1999.

Production supported sales. The increase in inventory in the 4^th quarter of 1999 is in anticipation of increase in demand in the succeeding quarter.

Capacity Utilization (CU)

JG Summit has a rated capacity of 180,000 MT per year. Petrocorp had an initial capacity of 160,000 MT annually. With new machinery and equipment already installed, its capacity is expected to expand to 225,000 MT per year starting year 2000.

In 1998, Petrocorp and JG Summit utilized 52% and 22% of their capacities, respectively . Their Combined CU within the POI was 36%. Gaining more steam in 1999, Petrocorp and JG Summit were able to increase their respective capacity utilization to 64% and 45%. By then, their combined CU was registered at 54%.

Cost of Production

The breakdown of the domestic industry’s production cost per metric ton of PP is shown below:

Table 19. PP Production Cost

Factors of Production	Percentage (%) Share to Total
Factors of Production	Q1	Q2	Q3	Q4
Direct Materials	85.17	81.91	79.63	76.99
Conversion Cost:
Direct Labor	0.44	0.52	0.44	0.82
Factory Overhead:
Variable	1.14	1.95	2.79	4.79
Fixed-cash	8.92	10.52	11.54	11.72
Fixed-non-cash	4.33	5.10	5.60	5.68
Total	100.00	100.00	100.00	100.00
% inc (dec)		(15.16)	(8.87)	(1.49)

Source: Petrocorp./JG Summit

Raw material costs in the production of polypropylene in 1998 comprised an average 81% of total manufacturing cost. The cost of propylene monomer, the basic raw material, was decreasing, despite the fluctuation in the exchange rate during the year (Annex J). Consequently, reduction in production cost was reflected at the rate of 15.16%, 8.87% and 1.49% in the2nd, 3^rd and 4^th quarter, respectively. Production cost at the end of the year was lower by 23.83%, compared with that of the1^st quarter.

Declining material cost could have been the opportunity for the industry to increase selling prices. It achieved this in part, as the gap between quarterly average selling prices vis-�-vis cost narrowed from the 1^st to the 3^rd quarters, resulting in declining negative EBITs, and as selling price overtook cost in the 4^th quarter, posting positive EBIT. But the pressure of dumped imports tempered domestic industry’s ability to raise its prices significantly. Industry opted to maintain selling prices below landed cost of dumped imports in order to defend its market share.

Profitability and Return on Sales

Table 20. 1998 Income Statement From

Polypropylene Production

	Percentage(%) to Sales
	Petrocorp	JG Summit	Total
	(May-Dec)	(Aug-Dec)
Sales	100.00	100.00	100.00
Cost of Sales	107.24	80.06	99.01
Gross Profit	(7.24)	19.94	0.99
Operating Expenses	7.38	14.18	9.31
Operating Income	(14.61)	5.77	(8.32)

Source: Petrocorp/JG Summit

The negative impact of price suppression on profitability is more apparent for Petrocorp than JG Summit, since the former entered the market in the first quarter of 1998, selling its products at a loss for the first three quarters of the year. Income statements from the start of commercial operations (May for Petrocorp and August for JG Summit) showed a 14.6% operating loss for the former and a 5.8% operating income for the latter. JG Summit benefited more from low monomer prices, with cost of sales representing 80.1% of sales. With respect to Petrocorp, cost of sales represented 107.2% of sales.

Financial Performance

The economic developments in the Asian region from July 1997 up to around the first quarter of 1999 adversely affected the Philippines due to volatile foreign currency exchange rates, unstable interest rates and tight financial credit.

Both companies suffered losses in operation, primarily due to the selling of PP resin at prices below cost. This affected their ability to support interest and financing charges of P62.9 million and P207.10, for JG Summit and Petrocorp respectively, contributing to larger net losses.

Thus, dumping, through price suppression, impacted negatively on the profitability and financial performance of the industry.

Cash Flow

The bulk of cash generated by both companies in 1998 were derived from its financing activities. As of Sept. 30, 1998, JG Summit long-term debt increased by P2.73 billion compared to 1997 level. Petrocorp’s loan draw down in 1998 totaled P390 million.

The company’s ability to raise prices because of declining production cost (Table 19) was tempered by the presence of dumped imports. Had prices been reflective of cost, sufficient revenue from sales would have been generated to fund industry’s working capital requirements.

Investment and Ability to Raise Capital

Combined total assets of JG Summit and Petrocorp in 1998 was P16.5 billion, a 34.08% increase from the previous year. Their combined authorized capital stock totaled to P6 billion.

The domestic companies have the abilities to generate investments and raise capital. Petrocorp was able to acquire loan of that financed the cost of its PP plant expansion. JG Summit's total cost of property, plant and equipment increased by 40.31% from 1997.

Foreign Currency Losses

As of 31 December 1998, Petrocorp’s borrowing costs and net foreign exchange adjustments, capitalized to property, plant and equipment, totaled P566 million. JG Summit, on the other hand, had a total loss of P2.47 million on its foreign currency borrowings.

The high cost of money for the servicing of foreign currency denominated loans, as a result of the peso devaluation, had a negative impact on industry's financial position. However, this could have been mitigated had industry been able to generate revenues from operations.

Employment and Wages

Total workforce for both Petrocorp and JG Summit in the PP operations grew from 334 in 1998 to 361 in 1999. Salaries and employees benefits improved for both firms from 1998 to 1999.

7.1.3 Factors Other Than Dumping

The Commission evaluated factors other than dumping which could have caused injury to the domestic industry during the POI.

Competition From Normal (Undumped) Imports

During the 1^st and 2^nd quarters of the POI, normal PP imports including undumped imports from Korea, captured an average market share of 54%.

During the POI, domestic industry had a price advantage over that of dumped and undumped imports from Korea, and from other countries . It should be noted that the industry was forced to lower its price in order to defend its market share, resulting in operating losses.

High Cost of Production

JG Summit and Petrocorp's cost to produce PP resin was relatively higher than the imported counterpart’s. The industry had to import its propylene monomer requirements. High manufacturing cost in 1998 was attributed to huge start-up expenses.

On the other hand, Korean PP manufacturers enjoyed a comparative advantage since they had a naphtha cracker which produced their propylene monomer requirements.

During the first two quarters of 1998, domestic industry’s cost to produce and sell was higher than the price of undumped imports. On the other hand, when propylene prices and conversion cost decreased further in the 3^rd and 4^th quarters, the industry's cost to produce and sell fell below the price of undumped imports by 11.08% and 17.6%, for yarn, and 22.56% and 21.78% for film.

7.2 DETERMINATION OF THREAT OF INJURY

Article 3.7 of the Agreement sets out the injury factors that must be examined by the investigating authority. These are:

significant rate of increase of importations of dumped imports into the domestic market

sufficient freely disposable, or an imminent, substantial increase in, capacity of the exporter

effect of prices of dumped imports on domestic prices of like products

inventories

7.2.1 Significant Rate Of Increase Of Dumped Imports

Table 21. Rate of Increase of Dumped Imports vis-avis Other Imports

Year	Growth Rate (%)
Year	Korea	Other Countries	Total	Dumped
1995
1996	(4.33)	21.76	13.25
1997	10.16	(39.82)	(26.04)
1998	(33.55)	(63.69)	(51.31)
Q1
Q2	31.39	13.09	22.60	2,037.50
Q3	(43.67)	(33.57)	(39.20)	(64.72)
Q4	14.57	(38.56)	(10.97)	(13.26)
1999	(34.81)	0.76	(19.17)

Source: NSO Trade Data

There was no significant increase in the volume of dumped and undumped PP imports from Korea. In absolute terms, import volume for the period of 1995-1997 was recorded within the 70,000 MT level. With the presence of local PP manufacturers from 1998, Korean imports decreased. This can be attributed to the filing of the anti-dumping case which persuaded importers to source their PP requirements elsewhere, to avoid possible repercussions.

As a percentage of total imports, Korean imports in 1998 and 1999 remained constant at about 50%.

7.2.2 Exporters Production Capacity

As of 1999, the combined rated capacity of Korean PP manufacturers was recorded at 2.5 million metric tons per year. These manufacturers had been operating above 90% of their capacities since 1992 except for 1996 and 1997, when CU was registered at 83% and 85%, respectively.

Data shows that South Korea’s actual production output was increasing, averaging at 17.04% annual growth rate. Exports account for about 46% of production while domestic sales had an average share of 40%. These figures indicate the export orientation of the manufacturers and the exporters’ flexibility to divert excess production to other countries including the Philippines.

During the POI domestic demand of PP resins in South Korea was only 737,000 MT. With an actual production of 2.3 million MT of which 1.2 million MT were exported, the estimated freely disposable volume amounted to 411,000 MT

Based on a 1999 report on the Petrochemical Industry in Korea prepared by the Korea Petrochemical Industry Association, PP production in Korea was projected to expand to 2.8 million metric tons per annum.

7.2.3 Price Effects

A comparison between the landed cost of dumped PP resins and the average ex-factory domestic selling price of local PP showed no occurrence of price undercutting during the POI. The prices of dumped imports were higher by an average 10.41%, 6.81% and 10.72% on injection, yarn and film grade, respectively. No occurrence of price undercutting was observed because the protestants, from the start of their operation, were already selling below cost in order to gain market share and remain viable in the business.

7.2.4 Inventories

As a percentage of production, quarterly inventory levels were relatively higher during the 1^st and 4^th quarters of 1998 and 1999 (Table 18).

8. FINAL DETERMINATION

8.1 RA 8752 (ANTI-DUMPING ACT OF 1999)

On 12 August 1999, RA 8752 was signed by the President amending Section 301 of the Tariff and Customs Code of the Philippines. 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.

8.2 APPLICATION OF PROCEDURAL MATTERS UNDER RA 8752 (Anti-Dumping Act of 1999)

Procedural provisions of RA 8752 are applicable to the instant anti-dumping case. In Republic vs. Court of Appeals, G.R. No. 92326, 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 their enactment although, with respect to such pending proceedings, they affect only procedural steps taken after their enactment" (205 SCRA 356)

8.3 CONCLUSION

The Commission finds that:

Price differences exist between the normal values and export prices of PP resins originating in or exported from South Korea.
Dumping per se of PP resins from South Korea during the POI (9.41% of total Philippine PP imports), caused material injury to the domestic industry as evidenced by negative return on sales and limited ability to fund the industry’s working capital requirements and to service accountabilities from operations. Prices of dumped PP from Korea forced the domestic industry to sell below cost for the first three quarters of 1998. Consequently, the industry was able to defend its market share, but at the expense of profitability.
Although importation of PP from South Korea dropped due to the filing of an anti-dumping case, the industry continues to be threatened with more material injury based on the existing conditions in Korea such as excess PP production, imminent additional production capacity and a weak home market. Furthermore, the potential of the subject imports to enter at prices that are likely to have a significant suppressing effect on domestic prices at a time when the domestic industry is suffering from poor financial condition makes the threat of more material injury even more real.
The retardation of growth and development as alleged in the anti-dumping protest is not within the context of retardation of the establishment of an industry as contemplated in the domestic anti-dumping law and the WTO Agreement on Anti-Dumping Practices. Nonetheless, the latter element did not merit determination since the local industry was already established and operational when the protest was filed.

In view of the foregoing, the elements constituting dumping having been established, it is hereby ordered that the anti-dumping duties be imposed on PP resins of H.S. subheading No. 3902.10 00 originating from Korea. The corresponding anti-dumping duty on specific PP grade shall be imposed on the herein-named exporters as follows:

Exporter(s)	PP Grade	Dumping Margin
Exporter(s)	PP Grade	(US$/MT)	(% of Export Price)

Daelim Corp.	PP101	14.63	3.90
	PA164V	7.91	2.09
	PP164	0	0
	PP137V	0	0

Hanwha Corp.	PH630	34.17	8.46
	PH460	23.38	5.49

Kolon Int’l	SFC150B	71.82	18.83

Hyundai Corp.	H3400	28.93	6.73
	H5300	10.48	2.51
	H4540	8.78	2.11
	H1500	0	0
	H4500	0	0

Samsung Gen. Chemicals	HY300	0	0

SK Global	H150F	84.96	20.89
	H150N	80.89	18.30
	H235W	44.58	11.07
	H360F	35.61	8.89
	H730F	27.19	6.85
	H380F	0	0
	H870F	0	0

Do-One Marketing	H5300	0	0

Jinwon Trading	H5300	12.75	3.16

LG International	H550	148.62	39.42
Sekitoku	H550	128.15	32.19

Sewon Corp.	Note 1	28.94	9.32

STC Corp.	H150F	0	0
	H320L	0	0
	FC150B	0	0
	SFC150B	0	0

Hyosung T & C	J700	73.67	18.03
	J600P	46.52	10.51
	F600H	46.14	11.51
	F600	39.33	9.24
	F501	29.16	6.77

Note 1 – grade not determined

During the POI, it was established that there were no locally produced equivalents for the PP resin grades listed below. Hence, the following were excluded from the dumping protest:

GRADES	Company	Code
Injection Grade	Daelim	PP137T
Fiber	Honam	FR160
	Yuhwa	5016H
	Hyosung	S700
Film
BOPP	Hyosung	F300 series
	Hyundai	H2220
	SK/Yukong	H229
	Yuhwa	5014L
	Honam	FO120A
	Hyundai	H2210
	SK/Yukong	H221P
IPP	Yuhwa	1088B
	Honam	FI-160P
Masterbatch	STC	SL137H
	STC	SL116T
	Yuhwa	5014L(AB605)
	Yuhwa	5014L(AB405)
	Yuhwa	5014L (MAT)
	STC	AS237H
	STC	M/B1779
	STC	PA20H

8.4 ISSUANCE OF DEPARTMENT ORDER

Paragraph (l), Section 301 of TCCP, as amended of RA 8752 (otherwise known as the Anti-Dumping Act of 1999) provides:

"The Secretary shall, within ten (10) days from receipt of the affirmative final determination by the Commission, issue a Department Order imposing an anti-dumping duty on the imported product, commodity, or article, unless he has earlier accepted a price undertaking from the exporter or foreign producer. He shall furnish the Secretary of Finance with the copy of the Order and request the latter to direct the Commissioner of Customs to collect within three (3) days from receipt thereof the definitive anti-dumping duty".

Let copy of the decision be furnished the Protestant, the Protestee and the Embassy of Korea. The Secretary of the Department of Trade and Industry shall, within ten (10) days from receipt of this decision, issue a Department Order imposing an anti-dumping duty on the aforementioned product.

Let copy of the dispositive portion of the decision be published immediately in two (2) newspapers of general circulation.

SO ORDERED.

30 August 2000.

EMMANUEL T. VELASCO, Ph. D.
Chairman

ANTHONY R. A. ABAD EDGARDO B. ABON
Commissioner Commissioner

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Year	Rated Capacity ("000 MT)	Actual Production Inc(Dec) From Previous year (%)	Production Capacity Utilization (%)
1996	170	-	100
1997	335	97.06	100
1998	335	(8.09)	91
1999	335	12.13	102

	Percentage (%) Increase (Decrease) From Previous Year
Year	Export Sales Volume	Domestic Sales Volume	Total Sales Volume	Inventory Volume
1996	-	-	-	-
1997	188.41	35.07	97.13	(6.55)
1998	(3.51)	(16.34)	(8.74)	(11.17)
1999	(3.65)	33.39	10.21	25.57