7. EXPLODED VIEW

w The parts of refrigerator and the shape of each part are subject to change in different localities. w Capacitors and fuse are optional parts.

103B 281A 301A

303B 303A 411A 401A
416A 410G 125L 410H 282B 129A 410C 410J 410A 109A 304A 604E 604F 282J 120G 410B 406B
120E 110A 105A 120B 120C 317A 318A 307A 314A 308A 309A 283B 310A 106B 409B

329C 420A

106B 158C 315A 109B 120A 103C

327A 319A

315C 315B

- 18 -

405C 405A
330B 404A 329A 200A 203A 205A
205A 110B 125A 131A 125H 125J

149A 136C

136D 149B

230A 241A 233A

140A 249A 231A

149C 136A 136B

149C 136A 237A 136B 241B

241D 243A

- 19 -

1.2.10

1.2.11

1.2.13

1.2.14

1.2.15 1.2.16

Radiola Corporation Ltd 1.2.17 Radiola is headquartered in Porirua where its Consumer Appliances division acts as an importer and wholesale distributor of Samsung branded whiteware. Its customers are retail chains and independent retailers throughout New Zealand. Imports by Radiola ______________________________________ ________ during the period under investigation. Radiolas major customer for whiteware is the Pacific Retail Group. Radiola provided a full submission in response to the importers questionnaire and has provided additional information and clarification to the investigating team as required. A submission was also made on behalf of Radiola by Chapman Tripp, a Wellington based firm of barristers and solicitors. This submission deals with various aspects of the initiation of this investigation and with information contained within the F&P application. Where it is pertinent the points raised by Chapman Tripp are addressed in this report. Whirlpool (Australia) Pty Ltd 1.2.20 Whirlpool trades in New Zealand as Whirlpool New Zealand. Whirlpools parent company is Whirlpool Corporation which is listed on the New York stock exchange. Whirlpool only provided an address in Australia. Whirlpool imports products into New Zealand from its own facilities and supplements such imports with product sourced from other manufacturers. Whirlpools imports from Korea are sold under the Whirlpool brand. Whirlpool sells direct to retailers throughout New Zealand. Whirpool supplied a list of its major customers and advised that as a result of discounting within the confined market of non EDA stores it has ceased to be a supplier to the PRG and more recently to the Betta Stores Group. Whirpool provided a full response to the importers questionnaire. Fisher & Paykel Ltd 1.2.23 F&P imports small bar type refrigerators from Daewoo in Korea. F&P has advised that it primarily imports these refrigerators to supply _____________ ________________________________, in order to offer a whole package of whiteware (washing machines, dryers, dishwashers, stoves and refrigerators), but also sells to retailers. F&P said that the smallest refrigerator it makes does not fit under a bench, ____________________________________, and the volumes do not make it worthwhile to tool up and produce these refrigerators in New Zealand. F&P provided a full response to the importers questionnaire. As a result of a change in the definition of the goods under investigation (see below in section 2.1 under Like Goods), F&P is no longer considered to be an importer.

1.2.18

1.2.19

1.2.21

1.2.22

Access to Information: Requirements of Natural Justice 1.7.9 LM Rankine said that as the provisional measures report demonstrates large volumes of critical data upon which decisions were based were suppressed in the versions of the report available to it. LM Rankine said it is therefore not possible for New Zealand companies whose interests stand to be prejudiced by the investigation to analyse adequately the basis of the decision. LM Rankine noted that it is therefore extremely difficult to provide full submissions at this stage. LM Rankine said that the Act provides for confidentiality of information which would be of significant competitive advantage or which would have a significant adverse effect. LM Rankine noted, however, that the law is clear that the Secretary must determine whether good cause has been shown for such confidentiality. LM Rankine considers that, in reaching a decision as to whether good cause has been shown, the Secretary must also turn his mind to other relevant principles of law which are relevant in the circumstances. LM Rankine said that the scheme of the Act assumes there will be contestable information presented from all sides. LM Rankine said in circumstances such as the current investigation, when information is only presented by one side with a strong vested interest, it considers that the judgement reached by the Secretary must balance also the need to ensure a full and fair factual picture is available to those interests that may be affected before a decision is taken. LM Rankine has submitted that the Secretary must consider section 27 of the Bill of Rights Act 1990 in this context. LM Rankine said that natural justice would require, in these circumstances, either that the Secretary make available to all parties whose interests were likely to be affected the relevant data so that effective contestable submissions could be made, or that he should take genuine steps to secure independent information on which the decision could be based and which could be made available to affected parties for the purpose of preparing submissions prior to final decisions being made. Submission in Response to EF&C 1.7.13 LM Rankine provided a further submission in response to the ef&c. LM Rankine said that the facts on which the ef&c is based are unsound because the process used does not meet natural justice requirements under New Zealand administrative law. LM Rankine said that, moreover, the process used does not meet the requirements of the New Zealand Bill of Rights Act 1990 ("Bill of Rights Act). LM Rankine said that nor has the Crown taken the reasonable opportunities suggested as alternatives in order to ensure that the investigation was based on independent facts as opposed to facts collected and submitted by its competitor. LM Rankine submitted that the conclusions, as a result, are fundamentally flawed and must be put aside. LM Rankine said that the Ministry argued [in the ef&c] that section 4 of the Bill of Rights Act states that provisions in other enactments are not affected by reason only that the provision is inconsistent with any provision of the Bill of Rights. LM Rankine said it is not arguing that the Bill of Rights Act overrides any express provision of the Act. LM Rankine said it is relying on section 6 of the Bill of Rights Act, which requires that when interpreting any Act a meaning

2.1.47

2.1.48

2.1.49

2.1.50

2.1.51

The information available indicates that the imported refrigerators and the refrigerators produced by F&P have the same function and usage, i.e. to store food and drink in a cool or frozen condition in order to extend its useful life. The subject goods are therefore generally substitutable for F&P models.

2.1.52

No information has been provided on consumer perceptions or expectations, although LM Rankine says that technical differences are significant in the market place, but no evidence has been provided to substantiate this. LM Rankine has submitted that F&P does not make a small bar refrigerator. LM Rankine has also submitted that a small refrigerator designed for an under bench situation is a different product from a larger refrigerator not designed for that purpose. As noted above, the dimensions of the smallest F&P refrigerator (the P120) would allow it to fit under a bench. It would appear, however, that as F&P has only just discovered that its P120 model will in fact fit under a bench without a plinth, that it did not market the P120 as an under bench model and therefore did not see its end use as an under bench model. As F&P imports a smaller model (of 74 litres) from Daewoo largely for sale to _____________________________________, F&P clearly sees that such smaller models have a different end use to its own P120. Pricing Structures

2.1.53

2.1.54
The price undercutting analysis shows there is significant price undercutting by the subject goods. The investigating team considers that the difference in prices is not such, however, as to indicate that the refrigerators produced by F&P are not like goods to the subject goods. The door cooling models were not imported over the period of investigation and were therefore not included in the price undercutting comparison. LM Rankine did not provide information relating to the price of the door cooling range. Marketing Issues

2.1.55

2.1.56
Both the subject goods and the F&P models are distributed through dealers that sell directly to consumers. F&P advises that it has three warehouses from which it supplies its dealers. The importers also generally distribute through warehouses to retailers. Other Relevant Matters

2.1.57

Adjustments Ocean Freight 3.2.3 LGs sales to Electrolux were in ______________basis. Electrolux provided information on its combined __________________________ charges but did not separately identify the cost of _________. To establish the cost of _____ _____, an amount for insurance was deducted from the combined _________ ________ cost, based on information provided by F&P. Inland Freight 3.2.4 An adjustment of ___ percent was made to the base price for cost of freight from factory to wharf based on information provided by F&P in its application. Port Services Charge 3.2.5 F&P did not provide any information relating to port services charge in Korea. An adjustment for port services charges was therefore based on verified information obtained from Korean suppliers in the Lead Acid Batteries case conducted in 1999/00. The port services charge includes wharfage, brokerage, fumigation and terminal handling charges. An adjustment of __ percent of the FOB price was made on this basis. Total Adjustments 3.2.6 The adjustments noted above for inland freight and port services charges have been deducted from the ___ base prices established for Samsung, LG and Daewoo. The adjustments noted above for ocean freight, inland freight and port services charge have been deducted from the _____ base prices established for LG. NORMAL VALUES Normal values are determined in accordance with section 5 of the Act, which inter alia, provides as follows:
(1) Subject to this section, for the purposes of this Act, the normal value of any goods imported or intended to be imported into New Zealand shall be the price paid for like goods sold in the ordinary course of trade for home consumption in the country of export in sales that are arm's length transactions by the exporter or, if like goods are not so sold by the exporter, by other sellers of like goods. (3) Where the normal value of goods imported or intended to be imported into New Zealand is the price paid for like goods, in order to effect a fair comparison for the purposes of this Act, the normal value and the export price shall be compared by the [Chief Executive](a) At the same level of trade; and (b) In respect of sales made at as nearly as possible the same time; and (c) With due allowances made as appropriate for any differences in terms and conditions of sales, levels of trade, taxation, quantities, and physical characteristics, and any other differences that affect price comparability. (5) Where(a) The actual country of export of goods imported or intended to be imported into New Zealand is not the county of origin of the goods; and

4.3.1.7

4.3.1.8

4.3.1.9

4.3.1.10
Establishing a non-injurious price to measure the extent of price undercutting is not controversial in international or New Zealand trade remedy practice. The concept of a NIP is widely accepted and has been used extensively by those countries with a lesser duty rule in their domestic trade remedy legislation, most notably by Australia and the European Union. In establishing an unsuppressed selling price the investigating team is of the view that market prices in a period not affected by dumping are the best indicator of likely unsuppressed selling prices, provided that those market prices are from a period reasonably close to the period for which unsuppressed selling prices are being established. In this case the most

4.3.1.11

recent periods not affected by dumping are the YEM 1998 and 1999 which the investigating team considers are sufficiently close to the year ended October 2000 to provide a benchmark for use in establishing unsuppressed selling prices. That is, there is unlikely to have been such significant changes in the market or the economy in general since those periods as to make them unreliable for benchmarking purposes. 4.3.1.12 F&P does not have available its average selling prices on a model by model basis for the YEM 1998 and 1999. The investigating team therefore considers it reasonable to use movements in the EBIT per unit in the manner used by F&P above to measure the extent to which prices have been suppressed. F&P has submitted that YEM 1998 should be used as a benchmark because production problems distorted its results in YEM 1999. F&P has advised that its production problems contributed to an estimated ___ per unit reduction in EBIT in YEM 1999. The investigating team considers that by adjusting the EBIT for this amount, the results for YEM 1999 can be used. Because of the fluctuating nature of its results from YEM 1998 to YEM 1999, the investigating team considers that an average of the EBIT per unit for each year (adjusted for the production problems in YEM 1999) is the most reasonable approach. The average EBIT on this basis for these 2 years is _______ per unit. The difference between this EBIT and that for YEM 2001 is _______ which is ___ percent of the average selling price for YEM 2001. The investigating team considers that _______________________ provide a reasonable basis on which to calculate the proportionate increase in prices model by model in order to calculate unsuppressed selling prices. On the basis of the analysis above, however, the investigating team considers that weighted average increase in prices should be close to ____ percent rather than the _____ percent calculated by F&P. The investigating team has therefore made a proportionate adjustment to the ______________________ provided by F&P such that the weighted average increase in prices (to calculate the unsuppressed selling prices) is ___ percent (a lower percentage than that calculated by F&P). Details of the unsuppressed selling prices (NIPs) are shown in tables below under each importer. Differences in Size and Features 4.3.1.14 Radiola has submitted that differences in features between F&P refrigerators and imported refrigerators mean that the cost of manufacture differs and this cost difference should be taken into account when carrying out a price comparison for price undercutting purposes. Radiola referred to an article in issue 384 of the Consumer Magazine which indicated a number of feature differences between the F&P E381T active smart model (380 litres) and the Samsung SRGV43 (390 litres). Radiola provided a comparison of features from the article which showed that the F&P model has a number of features not found in the Samsung model such as a dairy compartment, brake, butter conditioner, door alarm and sealed vegetable crisper drawers. Radiola did not quantify the cost difference between the models compared. In view of the submissions made by Radiola, the investigating team asked F&P to look at the models that had been compared for price undercutting in the provisional measures report and to comment on the extent to which there were any differences in size and features of the models compared. The

4.3.1.24

4.3.1.25

4.3.1.26

4.3.1.27

4.3.1.28

4.3.1.29
As also noted above under Like Goods, LM Rankine has referred to the LG models GR349 and GR389. LM Rankine said that these 2 models have electronic temperature control and are slim in design. LM Rankine said there is one equivalent F&P model which is much smaller in capacity and has a cheaper retail price [the F&P model is not identified by LM Rankine]. LM Rankine stated that these two products have been penalised because of their size and F&P do not manufacture any thing like it. This was also reiterated in response to the ef&c as noted above under Like Goods. In response to the ef&c Davenports said that almost all F&P models have an active smart control sensor and a dairy conditioner, which the Korean products do not have. Davenports also said that most of F&Ps models have bottom mounted freezers while Korean products have top mounted freezers. Davenports submitted that these differences in design features account for at least 10-20 percent of the difference in price [no details were provided showing how this percentage was calculated]. The Korean Government in commenting on the Provisional Measures Report, has also pointed to the claim by the Korean exporters that differences in design features made the F&P products percent more expensive than the imports from Korea. The Korean Government said that if this claim by the Korean exporters is correct, then price undercutting did not occur. Ministrys Consideration of the Issues

4.3.1.30

4.3.1.31

4.3.1.32

The comparison of features between the F&P and imported refrigerators provided by F&P shows there are a wide variety of features found in the F&P and imported models, examples of which are referred to in this section of the report and some in the like goods section of the report. The investigating team notes that with a consumer product of this nature such a wide range of features, which are constantly changing as technology develops, is inevitable. Given this, it is likely there will always be differences in the range of features available between the F&P models and the imported models. The investigating team notes that the lack of co-operation from the Korean producers means that it is not practically possible to quantify the extent to which a multitude of variations and differences in features can be quantified in terms of the differences in the cost of production. Even if the Korean producers had co-operated, the investigating team doubts if quantifying differences in production costs would have been a practical proposition. LM Rankine, in response to the ef&c (see under Like Goods above) said that it is unsatisfactory and contrary to natural justice for the Ministry to argue that this is the case. LM Rankine referred to independent sources that the Ministry could have used to obtain a clearer picture of the impact of technological variation. The investigating team notes that LM Rankine did not specify what those independent sources were or suggest how, in a practical way differences in costs could be calculated or suggest how differences in costs might translate into differences in prices. The investigating team considers that it is likely there are some differences in the cost of production arising from the differences in features and in capacity. It is, however, difficult to establish to what extent (if at all) differences in production costs affects selling prices. The investigating team notes that there are differences in the prices of F&P models that are similar in size and

4.3.1.36

4.3.1.37

4.3.1.39

relevant F&P model. In the case of those models not shown in this list (i.e. the Daewoo models and OEM models produced by Samsung and LG for other producers), the investigating team has selected the most comparable refrigerator based on capacity and features. 4.3.1.41 In response to the ef&c, F&P said that there were some additional model comparisons it considers should have been made, as previously submitted by it. For example, F&P submitted that its model E372B should, in addition to being compared with the Samsung SRGV39, also be compared with the Samsung SRGV43 and the LG GR389SQF. F&P said that the additional comparisons would mean that the imported models are compared to both F&Ps top and bottom mounted freezer models. The investigating team does not consider that further price comparisons are necessary to demonstrate the existence of price undercutting. The additional comparisons suggested by F&P would all show price undercutting, some at greater margins and some at lesser margins than those already established. The inclusion of the additional comparisons suggested by F&P will not affect the calculation of a remedy as the remedies are based on categories which encompass the models that F&P considers should be the subject of additional comparisons. Other information provided by the importers and F&P relevant to price undercutting is summarised below, the importers being listed under the Korean producer from whom they import. Fisher & Paykel Ltd 4.3.1.44 F&P transfers finished goods from its factory at ________________________ ______________________________________________________________ ______________________________________________________________ _____ F&P operates 3 warehouses from which it supplies its customers in all parts of New Zealand. F&P has provided its average selling prices for selected models, which it considers are directly comparable to the imported goods, over the period of investigation (the year ended 31 October 2000) on a free-into-store, ex-F&P warehouse and into F&P warehouse basis. F&P has provided information showing that the average length of credit extended to its customers is __ days and its cost of credit is __ percent per annum. Samsung Electronics Ltd Radiola Corporation Ltd 4.3.1.47 Radiola advised that it purchases direct from Samsung and that __ percent of its sales are to the Pacfic Retail Group (PRG). Radiola added that approximately __ percent of all imports are cleared through the port of Auckland and _______________________________________ Radiola said that the balance of its imports are landed in Wellington and distributed to various southern North Island and South Island stores from its warehouse in Seaview (Hutt Valley). Radiola stated that Product is invoiced to Pacific Retail Group on delivery ________________________________________

4.3.1.68

4.3.1.69

4.3.1.70

4.3.1.71
The difference in the number of days credit extended by F&P and LM Rankine is __ days. At _ percent this is equivalent to an annual rate of ___ percent. Because LM Rankine has _______________________________ an adjustment has therefore been made to _____ LM Rankines prices by ___ percent. LM Rankine advised that ________________ forward exchange contracts for specific orders for any product, ____________________________________ LM Rankine noted that its selling prices are ___________________________ __________________________________ The investigating team considers, therefore that forward exchange contracts are ______________________ for price undercutting purposes in relation to LM Rankine. On the basis set out above, the following table shows a comparison of F&P prices with those of LM Rankine. Table 4.6: Price Undercutting: LM Rankine Imports from LG LG Model ExF&P Model Warehouse Price GR-131SSF _____ Plitres 115 litres Bar fridge Single door fridge _____ N249T GR-242SF 215 litres 248 litres F-F, ff F-F, ff _____ N249T GR282SF 245 litres 248 litres F-F, ff F-F, ff E331T GR349SQF _____ 305 litres 329 litres F-F, ff F-F, ff _____ E331T GR-372SF 339 litres 329 litres F-F, ff F-F, ff E381T GR389SQF _____ 346 litres 380 litres F-F, ff F-F, ff _____ E411T GR-432SF 392 litres 411 litres F-F, ff F-F, ff E411T GR403SSF _____ 400 litres 411 litres F-F, ff F-F, ff ExUnder- % F&P Warehouse cutting Price Price _____ ____ __

4.3.1.72

4.3.1.73

4.3.1.74

The table shows that the LG models are undercutting the equivalent F&P model in all cases except one, the price undercutting expressed as a percentage of the F&P price ranging from _ to __ percent. The one LG model not undercutting the equivalent F&P model accounts for __ percent of LM Rankines imports. The following table shows the extent of price undercutting in relation to the F&P NIPs calculated on the basis set out above.

4.3.1.75

Table 4.7: Price Undercutting: LM Rankine Imports from LG ExF&P Model Warehouse Price P120 GR-131SSF _____ 94 litres 115 litres Bar fridge Single door fridge _____ N249T GR-242SF 215 litres 248 litres F-F, ff F-F, ff _____ N249T GR282SF 245 litres 248 litres F-F, ff F-F, ff E331T GR349SQF _____ 305 litres 329 litres F-F, ff F-F, ff _____ E331T GR-372SF 339 litres 329 litres F-F, ff F-F, ff E381T GR389SQF _____ 346 litres 380 litres F-F, ff F-F, ff _____ E411T GR-432SF 392 litres 411 litres F-F, ff F-F, ff E411T GR403SSF _____ 400 litres 411 litres F-F, ff F-F, ff 4.3.1.76 LG Model ExUnder- % F&P Warehouse cutting Price NIP _____ ____ __
The table above shows the LG models are undercutting the non-injurious price of the equivalent F&P model in all cases. Electrolux Home Products (NZ) Ltd

4.3.1.77

Electrolux has advised that it operates as a wholesale distributor marketing its products through established retail appliance stores nation-wide. The cost build up information provided by Electrolux indicates that it distributes its product through a warehouse system. The investigating team considers the point of comparison is F&P ex-warehouse versus Electrolux ex-warehouse. Electrolux has provided cost build up to selling price information for each model imported over the year ended 31 October 2000. The information shows that its ex-store selling prices were _________ over November 1999 September 2000 and ______________ in October 2000. For the purposes of comparing prices with F&P models, the investigating team has calculated weighted average prices, weighting the 2 prices by the volume of imports in November 1999 September 2000 and in October 2000. Electrolux has advised that its credit terms are ________________ terms, i.e. payment ______________________________________________________ The investigating team has taken the average length of credit to be __ days. Electrolux did not provide its cost of credit, so the investigating team has

4.3.1.88

4.3.1.89

4.3.1.90

4.3.1.91

4.3.1.92

Table 4.10: Price Undercutting: Casmor Imports from Daewoo Daewoo Model FIS Price F&P Model FIS Price Under- % F&P cutting Price ____ __
SFF358W _____ 386 litres F-F, ff SFF3585S _____ 386 litres F-F, ff 4.3.1.93 4.3.1.94
E381T _____ 380 litres F-F, ff E381T _____ 380 litres F-F, ff
The table shows that the Daewoo models are undercutting the equivalent F&P model in all cases. The following table shows the extent of price undercutting in relation to the F&P NIPs calculated on the basis set out above. Table 4.11: Price Undercutting: Casmor Imports from Daewoo Daewoo Model FIS Price F&P Model FIS NIP Under- % F&P cutting Price ____ __
SFF358W _____ 386 litres F-F, ff SFF3585 _____ S 386 litres F-F, ff 4.3.1.95
The table above shows the Daewoo models are undercutting the noninjurious price of the equivalent F&P model in all cases. Price Undercutting and the Margin Of Dumping

4.3.1.96

The margin of price undercutting must be related to the margin of dumping in order to establish the extent to which price undercutting can be attributed to dumping. The investigating team has calculated the weighted average margin of dumping for each model exported by Samsung, LG and Daewoo. The investigating team has added the margin of dumping to the importers exwarehouse and FIS prices shown in the tables above and compared the result to F&Ps ex-warehouse and FIS NIP. The figures are shown in the tables below.
Samsung Electronics Ltd Radiola Corporation Ltd Table 4.12: Price Undercutting: Radiola Imports from Samsung Samsung Model SRGVlitres F-F, ff SR30RMC 285 litres F-F, ff SRGVlitres F-F, ff SR37RMC 334 litres F-F, ff SRGVlitres F-F, ff SRGVlitres F-F, ff SR44RMB 402 litres F-F, ff SRGVlitres F-F, ff SRGVlitres F-F, ff 4.3.1.97 ExF&P Model Warehouse Price + D/M _____ N249T 248 litres F-F, ff _____ N249T 248 litres F-F, ff _____ E331T 329 litres F-F, ff _____ E331T 329 litres F-F, ff _____ E372B 373 litres F-F, ff _____ E381T 380 litres F-F, ff _____ E402B 403 litres F-F, ff _____ E402B 403 litres F-F, ff _____ E411T 411 litres F-F, ff ExUnder- % F&P Warehouse cutting Price NIP _____ ____ __
The table shows that except for 3 models there is still price undercutting. In one other case the amount of price undercutting is negligible. Where there is still price undercutting after adding back the margin of dumping is an indication that anti-dumping duty at the full margin of dumping should be imposed. Where there is no price undercutting after adding back the margin of dumping is an indication that anti-dumping duty at less than the margin of dumping (a lesser duty) should apply. The cases where there is still price undercutting represent __ percent of Samsungs exports over the period of investigation.

4.3.1.98

Whirlpool (Australia) Pty Ltd Table 4.13: Price Undercutting: Whirlpool Imports from Samsung ExF&P Warehouse Model Price + D/M N249T WRN28RWG6 _____ 256 litres 248 litres F-F, ff F-F, ff N249T WRN32RWG6 _____ 286 ltres 248 litres F-F, ff F-F, ff E372B WRN38RWG6 _____ 362 litres 373 litres F-F, ff F-F, ff E381T WRN42RWG6 _____ 384 litres 380 litres F-F, ff F-F, ff E411T WRN52HWG6 _____ 454 litres 411 litres F-F, ff F-F, ff E411T WRN57HWG6 _____ 486 litres 411 litres F-F, ff F-F, ff Samsung Model1 4.3.1.99 ExUnder- % F&P Warehouse cutting Price NIP _____ ____ __

4.4.3.10

4.4.3.11

4.4.3.12

4.4.3.13
impact on profit, as appears to have been the case in YEM 1999, the NZ dollar has consistently depreciated over the period while profits did not. 4.4.3.14 The investigating team also notes that most of the refrigerators imported from Korea are invoiced in US dollars. Importers will also be affected by the depreciation of the NZ dollar against the US dollar. The imported component in the ex-warehouse selling price in New Zealand of a Korean refrigerator will be greater than the imported component in the ex-warehouse selling price of a F&P refrigerator which has a significant value added to the refrigerator in New Zealand. The impact of a depreciating New Zealand currency on exwarehouse selling prices is therefore likely to be greater on Korean refrigerators. The investigating team also notes that the impact on EBIT will be significant when the effects of currency depreciation cannot be recovered in prices or by improvements in efficiency, or both. Consequently, while a depreciating NZ dollar will have undoubtedly increased the cost of imported materials, that will not automatically result in a decline in profit. It is difficult for the investigating team to differentiate between the impact on profit resulting from F&P __________________________________________ __________ and the ________________________________ because of the presence of the subject goods in the market. The loss of profitability in the current year to date, particularly that in the April to December 2000 and YEM 2001 periods, is such, however, that it is considered unlikely that a major part of it could be attributed to an F&P decision to seek _________________ __________________. In response to the ef&c, Davenports said that the difficulty the investigating team referred to in attributing the decline in profit to the dumped imports means it is almost impossible to identify the cause of decline in profit. Davenports said that the Ministry nevertheless regarded the decline in profit as an important factor in material injury without examining the exact cause of the decline in profit. Davenports said that the Ministry should have considered other contributing causes, such as exchange rates, investments, change in technology, marketing strategy, management environment etc. There is no proper evidence of a causal nexus between the allegedly dumped imports and any decline in profits. In commenting on the Provisional Measures Report, the Korean Government said that an examination of the facts provided in that report lead it to the conclusion that it was the rise in the costs, due to manufacturing difficulties [in 1999] and the depreciation of the New Zealand dollar, that caused the decline in profits rather than the dumped imports. The investigating team is of the view that the attribution of a decline in profits to dumped imports needs to be considered in the light of all of the evidence. While factors other than dumped imports may have affected profits, the significant increase in the import volumes of the dumped goods since April 2000, the level of price undercutting by the dumped goods over the period of investigation, and price suppression since April 2000, indicate that the decline in profits since April 2000 is likely to be linked to the dumped imports. While the increase in import volumes has not resulted in a reduction in sales volume or market share (in a growing total market), it is considered likely that the greater volumes seeking a place in the market will have indirectly increased pressure on prices. The investigating team also notes that other causes of injury have also been examined in detail (see below) and have been found

4.5.53

4.5.54

4.5.55

4.5.56

4.5.57

Radiola provided copies of NZ Herald Online reports dated 20 December 2000 in which it is reported that Hill and Stewart has been losing around $2 million a year. The same reports state that F&P has a floating debenture over the assets of the finance division of retail chain Smiths City and quote F&P as saying that virtually all its dealers have had some sort of assistance but denying virtually owning Hill and Stewart. Radiola has submitted that the extent to which F&P is incurring overhead costs through its involvement in loss making or marginally profitable retailers needs to be assessed by the Ministry as a factor in the financial performance of F&Ps whiteware division. Radiola observed that because of the EDA it was forced to enter the market with Samsung whiteware through the Pacific Retail Group and to start with had to set retail prices lower than it wanted in order to win floor space off Email [Electrolux] in Pacific Retail Group shops. In a further submission, Radiola submitted that the EDA has adverse effects on overall consumer welfare. Radiola considers there is reason to believe that F&P is providing substantial financial support to many of the dealers within the EDA regime, which is an attempt by F&P to maintain its market share through preventing its EDA dealers from stocking competing brands alongside F&Ps own products. Radiola highlighted the findings in 1989 of the Commerce Commission which found against F&Ps EDA. Radiola has commented that F&P will obviously seek to rebut that finding by reference to the High Courts 1990 decision reversing the Commerce Commissions majority decision. In anticipation of that reliance Radiola has made the following points: The High Courts decision has left New Zealand as almost unique in its tolerance of vertical exclusive dealing arrangements involving parties with a substantial market share. The rigidity of the EDA regime was not anticipated by the High Court, but subsequent experience has shown that EDA dealers face huge practical (not legal) constraints against departing. There have been cogent criticisms of the High Courts analysis of the then prevailing Australian and US case law, and its failure to squarely confront a relevant counterfactual (e.g. Patterson (1996) 17 NZULR 160 at 172 184). Courts are influenced by the current intellectual climate and the F&P decision was given at the high watermark of local acceptance of Chicago School economics.

4.5.63

4.5.64

4.5.65

be materially attributed to factors other than dumping. Therefore, even if the EDA is operating to the disadvantage of F&P, if that disadvantage has not materially accelerated in the period when the economic indicators show a significant decline in performance, then it is unlikely that the EDA is the material cause of those declines. The analysis of injury above shows that a significant decline in performance did not commence until the period April to December 2000, although the fluctuating nature of the prior period results somewhat obscures that picture. 4.5.67 The evidence provided by F&P is that there has been no significant change in the operation of its EDA over the period under review. The extensive submissions provided by other parties on the operation of the EDA largely focus on economic efficiency of the EDA and claim that F&P is not able to maximise its sales because the EDA is denying them access to a significant number of retail outlets. None of the submissions by other parties has claimed that there have been changes in the mechanics of the EDA scheme over the period under review. Radiola has commented that without the EDA other brands would have a larger share of the market. Radiola went on to say, however, that it believes the EDA is beginning to work against F&P. Radiola attributed this to competition between major F&P dealers which has impacted on their profitability and consequently on F&P ability to improve its margins. Radiola has not identified exactly when it considers the EDA began to work against F&P. The submission by LM Rankine implies that the EDA has only recently begun to work against F&P where it states that a counter response by retailers has now bounced back on F&P. The counter response by retailers referred to by LM Rankine relates to the formation of, and aggressive marketing by, multibrand stores, and the investigating team notes that such stores have been in place for many years. The investigating team accepts that the type of change that Radiola and LM Rankine consider has taken place is not by nature something that can be precisely placed in time and is likely to be incremental. The lack of any change in the EDA over the period under review (i.e. from 1 April 1997) and the likely incremental nature of adverse effects (if any) resulting from the operation of the EDA lead the investigating team to conclude that the deterioration in performance evident in the April to December 2000 period cannot be materially attributed to the EDA. Research & Development Expenditure 4.5.72 Radiola has submitted that F&P has invested considerable funds on research and development (R&D) on developing its active smart technology including a very expensive redevelopment of its door design. Radiola referred to a NZ Herald article of June 1999 in which reference is made to F&Ps spending on R&D. Radiola has submitted that F&P must recover this investment over production volumes which are well below even its Australian rival Email, let alone world players such as Samsung, LG and Electrolux. Information provided by F&P shows that its expenditure on R&D, and the way in which R&D is accounted for, had not changed significantly over the period

____ 815.11

There were no exports by Samsung in categories 1 and 2 to New Zealand during the period of investigation. As noted above, where there were no exports in a category, the Ministry is of the view that NIFOBs for that category should be calculated using other producers information in the same category. The weighted average annual cost information used in calculating NIFOB for Samsung category 1 below is the same as the LG category 1 average annual cost incurred by LM Rankine. Daewoo category 1 information is not used, as there were no exports by Daewoo in category 1. A reasonable weighted average profit margin of __ percent was used. The following table shows the NIFOB calculation for Category 1 Samsung exports. Table 6.13: NIFOB for Samsung Category 1 (NZ$) F&P Ex-Factory NIP Less Weighted Avg. Cost and Margin after FOB to Ex-Warehouse ____ - Weighted Average Annual Cost - Reasonable Profit Margin ____ Category 1 NIFOB ____ ____

6.3.31

232.77

6.3.32

In order to calculate the Samsung category 2 NIFOB, the investigating team calculated category 3 and 4 weighted average annual cost from exwarehouse to FOB for Samsung. This weighted average annual cost was based on cost incurred by Radiola and Whirlpool in these categories. The
difference between category 3 and 4 weighted average annual cost from exwarehouse to FOB was __ percent. The category 3 weighted average annual cost from ex-warehouse to FOB was calculated on the basis of the proportionate difference between category 3 and 4, i.e. at __ percent of category 3 weighted average annual cost from ex-warehouse to FOB, which was NZ$______. A reasonable weighted average profit margin of __ percent was added to the costs to calculate the NIFOB for Samsung categories 1 and 2. The following table shows the NIFOB calculations for categories 1 and 2 Samsung exports. Table 6.14: NIFOB for Samsung - Category 2 (NZ$) F&P Ex-Factory NIP Less Weighted Avg. Cost and Margin after FOB to Ex-Warehouse ____ - Weighted Avg. Annual Cost for Category 3 ____ - Weighted Avg. Annual Costs for Category 4 ____ - Difference in Weighted Avg. Cost between Category 3 and 4 ____ - % Difference between category 3 and 4 - Weighted Avg. Annual Costs for ____ Category 2 (Samsung) ____ - Reasonable Profit Margin Category 2 NIFOB Daewoo Electronics 6.3.33 Table 6.5 above shows that the Daewoo only exported in category 4. There is price undercutting in category 4, indicating that a NV (VFDE) is appropriate for this category. The following table shows the NV (VFDE) calculation for Daewoo category 4 exports. Table 6.15: NV (VFDE) for Daewoo (Korean Won) Category Weighted Avg. NV ____ Weighted Avg. Weighted NV Inland Freight Avg. Port (VFDE) Charges ____ ____ 382,224 ____ ____