DUMPING AND COUNTERVAILING DUTIES ACT 1988 DUMPING APPLICATION NON-CONFIDENTIAL
FINAL REPORT REFRIGERATOR-FREEZERS AND REFRIGERATORS FROM KOREA

PROCEEDINGS

1.1 1.2 1.3 1.4 1.5 1.6 1.7 PROCEEDINGS INTERESTED PARTIES IMPORTED GOODS INVESTIGATION DETAILS EXCHANGE RATES DISCLOSURE OF INFORMATION INVESTIGATION PROCESSES

NEW ZEALAND INDUSTRY

2.1 2.2 2.3 2.4 LIKE GOODS NEW ZEALAND INDUSTRY IMPORTS OF REFRIGERATORS NEW ZEALAND MARKET

DUMPING INVESTIGATION

3.1 3.2 3.3 3.4 3.5 INTRODUCTION EXPORT PRICES NORMAL VALUES COMPARISON OF EXPORT PRICE AND NORMAL VALUE. CONCLUSIONS RELATING TO DUMPING

INJURY INVESTIGATION

4.1 4.2 4.3 4.4 4.5 4.6 MATERIAL INJURY CAUSED BY DUMPING IMPORT VOLUMES PRICE EFFECTS ECONOMIC IMPACT OTHER CAUSES OF INJURY CONCLUSIONS RELATING TO INJURY
CONCLUSIONS ANTI-DUMPING DUTIES
6.1 6.2 6.3 LEVEL OF DUTY METHOD OF IMPOSING DUTY AMOUNT OF ANTI-DUMPING DUTY

RECOMMENDATIONS

Trade Remedies Group Ministry of Economic Development June 2001 ISBN 0-478-242409

ABBREVIATIONS

The following abbreviations are used in this Report: Act (the) Amendment Act (the) Anti-Dumping Agreement AUD Casmor Chen Palmer Chief Executive CIF Daewoo Davenports EBIT ef&c EIAK Electrolux Email F&P FIS FOB LDC LG LLDC LM Rankine Ministry (the) NIP NZCS OEM Pac PRG R&D Radiola Samsung VFD Whirlpool WTO YEM ____ Dumping and Countervailing Duties Act 1988 Dumping and Countervailing Duties Amendment Act 1994 WTO Agreement on Implementation of Article VI of the GATT 1994 Australian Dollars Casmor International Ltd Chen Palmer and Partners Chief Executive of the Ministry of Economic Development Cost, Insurance and Freight Daewoo Electronics Co. Ltd Davenports West Earnings Before Interest and Tax Essential Facts and Conclusions Electronic Industries Association of Korea Electrolux Home Products (NZ) Ltd Email Appliances (NZ) Ltd Fisher & Paykel Ltd Free Into Store Free on Board Less Developed Countries LG Electronics Inc. Least Developed Countries LM Rankine Trading Co Ltd Ministry of Economic Development Non-Injurious Price New Zealand Customs Service Original Equipment Manufacturer Forum Island Members of the South Pacific Regional Trade and Economic Co-operation Agreement Pacific Retail Group Research and Development Radiola Corporation Ltd Samsung Electronics Co. Ltd Value for Duty Whirlpool (Australia) Pty Ltd World Trade Organisation Year Ended March Confidential Information

1.1 1.1.1

PROCEEDINGS On 12 December 2000, the Chief Executive of the Ministry of Economic Development (the Chief Executive), acting pursuant to section 10 of the Dumping and Countervailing Duties Act 1988 (hereinafter also referred to as the Act) formally initiated an investigation into the dumping of household refrigerator-freezers and refrigerators, on being satisfied that sufficient evidence had been provided that: (a) The goods imported or intended to be imported into New Zealand are being dumped; and By reason thereof material injury to an industry has been or is being caused or is threatened or the establishment of an industry has been or is being materially retarded.
In accordance with section 10 of the Act the purpose of the Ministrys investigation is to determine both the existence and effect of the alleged dumping of the subject goods. On 15 March 2001 the Minister of Commerce gave a provisional direction under section 16(1) of the Act that payment of duty in respect of the goods should be secured in accordance with sections 156 and 157 of the Customs and Excise Act 1996, on the grounds that the Minister had reasonable cause to believe that the subject goods were being dumped and by reason thereof causing material injury to an industry, and was satisfied that action under section 16 was necessary to prevent material injury being caused during the period of investigation. Grounds for Application

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Section 3A provides the definition of industry:
3A. Meaning of industryFor the purposes of this Act, the term industry, in relation to any goods, means (a) The New Zealand producers of like goods; or (b) Such New Zealand producers of like goods whose collective output constitutes a major proportion of the New Zealand production of like goods.
Like goods is defined in section 3 of the Act:
Like goods, in relation to any goods, means (a) Other goods that are like those goods in all respects; or (b) In the absence of goods referred to in paragraph (a) of this definition, goods which have characteristics closely resembling those goods:

2.1 2.1.1

LIKE GOODS In order to establish the existence and extent of the New Zealand industry for the purposes of an investigation into injury, and having identified the subject goods, it is necessary to determine whether there are New Zealand producers of goods which are like those goods in all respects, and if not, whether there are New Zealand producers of other goods which have characteristics closely resembling the subject goods. The subject goods have been identified in section 1.3 of this Report as: Household type combined refrigerator-freezers fitted with separate top and bottom external doors or drawers up to and including a total gross volume of 500 litres and single door refrigerators with a total gross volume of not less than 60 litres, the capacities determined by standard AS/NZS4474.1997 New Zealand Production
F&P advises it produces refrigerator-freezers and refrigerators in a range of sizes commencing with the single door P120 model with a capacity of 115 litres up to the E411T and E415H models that have a capacity of 411 litres. The range includes top and bottom mounted freezers, and features such as frost free, intelligent electronics, butter conditioner, and humidity controlled fruit and vegetable bin.
Imported Goods 2.1.4 The importers have provided details of all of the models of refrigerator they import falling within the description of the subject goods. An outline of the range of models imported from each Korean supplier and a summary of any submissions concerning like goods, are shown below. Radiola Corporation Ltd 2.1.5 Radiola has imported 9 different models of refrigerator (falling within the definition of the subject goods) from Samsung over the period of investigation. All of the refrigerators imported by Radiola are refrigeratorfreezers with a top mounted freezer and range in size from 260 litres to 495 litres. The range imported includes features such as frost free, chiller compartment, crisper humidity control and intelligent electronics. Radiola has noted that there are differences in the features between the Samsung models it imports and F&P models, which need to be taken into account when comparing prices for price undercutting purposes (see introduction to the section on price undercutting below). Radiola has not, however, submitted that the refrigerators produced by F&P are not like goods to the subject goods. Whirlpool Australia Pty Ltd 2.1.7 Whirlpool has imported 6 different models of refrigerator (falling within the definition of the subject goods) from Samsung over the period of investigation. All of the refrigerators imported by Whirlpool are refrigeratorfreezers with a top mounted freezer and range in size from 256 litres to 486 litres. The range imported includes features such as frost free, and crisper bin (but not humidity controlled). No submissions were made by Whirlpool on the issue of like goods. LM Rankine Trading Co Ltd 2.1.9 LM Rankine has imported 8 different models of refrigerator (falling within the definition of the subject goods) from LG over the period of investigation consisting of one model of bar refrigerator, 5 models of refrigerator-freezers with a top mounted freezer, and 2 models of refrigerator-freezer with a bottom mounted freezer. The sizes imported range from 94 litres to 400 litres. The range imported includes such features as frost free, dual temperature, fresh meat compartment, and a lamp that prolongs the shelf life of protein (a FIR lamp). LM Rankine has submitted that there are substantial differences between a number of its products and those produced by F&P relating to capacity and technological innovation. In particular LM Rankine has pointed to the following differences: F&P does not make a small bar refrigerator similar to the 94 litre model it imports, the smallest refrigerator produced by F&P being 120 litres [F&Ps information records this refrigerator as 115 litres].

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employment, wages, growth, ability to raise capital and investment. Davenports said that the Ministry did not give any explanation of its own analysis of these factors [in the Provisional Measures Report]. 4.1.15 Davenports referred to the WTO panel reports on European Communities Anti-dumping Duties on Imports of Cotton Type Bed Linen from India, and Mexico High Fructose Corn Syrup. Davenports quoted from parts of the panel report on each case that found that the investigating authorities are required to consider all of the injury factors listed in Article 3.4 of the Agreement. Submission by Korean Government 4.1.16 In commenting on the Provisional Measures Report, the Korean Government submitted that an administering authority must consider all of the injury factors specified in Article 3.4 of the Agreement for any dumping duty determination, including a preliminary determination. The Korean Government said that the Ministry had not met this standard in its preliminary determination. Ministrys Consideration of the Issues 4.1.17 The significance that can be attached to any particular injury factor will depend on the circumstances of each case and the responses made by domestic producers to meet competition from dumped imports. In an industry with high fixed costs that is dependent on high throughput, it would not be unusual for such an industry to respond to competition from dumped imports by either not increasing prices or lowering prices and attempting to maintain market share. In those circumstances the investigating team would not necessarily expect to see injury manifest itself in loss of sales volume and market share. In some cases there could be an impact on sales revenue, if there has been price depression rather than just price suppression, and some impact on sales volume and market share, depending on the extent to which the industrys strategy has been successful. In the circumstances outlined, the major injurious impact would be expected to be on profits. In any particular case the investigating team therefore does not consider that the absence of evidence of injury relating to sales volume and revenue and market share as necessarily being fatal to a finding of material injury. The financial information used by the investigating team in its analysis of injury relates only to refrigerators manufactured by F&P in New Zealand and sold on the New Zealand domestic market. This was verified by the investigating team in the course of its verification visit to F&P. The whiteware operation results referred to by Davenports from F&Ps 2000 annual report relates to the whole of F&Ps whiteware operation, which includes dishwashers and freezers, its Australian operation and any exports from its New Zealand operation. In addition the injurious impact of the dumped imports found in the ef&c was most significant from April 2000, i.e. after the period covered by the annual report. For the reasons outlined above, the investigating team does not believe that any inference relating to refrigerators sold in the New Zealand market can be drawn from the 2000 annual report. The investigating team agrees that all of the injury factors listed in section 8 must be considered in a final determination and this has been done in this

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size ranges and the variations within each size range where the refrigerators are considered by F&P to be comparable. Models (Litres) Range (Litres) +/4.3.1.23 < - 500 90
At a very late stage in the completion of the ef&c report, LM Rankine provided a further submission. LM Rankine said that it is false to proceed on the basis of an argument that a refrigerator is a refrigerator and ignore the practical and commercial reality that, within a general category of goods such as cars or computers or refrigerators or washing machines, there are significant differences which must be recognised if a fair and lawful application of the Act is to take place. LM Rankine said that size is a factor in determining appropriate distinctions between products and therefore needs to be considered. LM Rankine argues 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 under Like Goods, LM Rankine provided a comparison of 2 LG models (the GR131 of 94 litres and the GR151 of 129 litres) with the F&P model P120 of 120 litres [F&P record this as 115 litres]. LM Rankine has submitted that the Ministry should be comparing the GR151 with the P120, not the GR131. LM Rankine said that F&P does not manufacture any form of refrigeration under 120 litres and have always imported smaller sizes. LM Rankine submits therefore that anything under 100 litres should be excluded from the investigation. This submission was reiterated in response to the ef&c, as noted under Like Goods above. LM Rankine said that size is not the only, or even predominant difference between models. For example, LM Rankine said that distinctions between computers can only be made on the basis of technical specifications. LM Rankine has submitted that in the case of modern whiteware, technology is a critical factor that must be taken into account. LM Rankine said that as cost and price comparisons must be made, it is essential to recognise that a product with higher levels of technology, even if it is exactly the same size, inevitably includes in its price higher R&D costs and often involves much higher cost componentry. LM Rankine has provided a comparison of 2 LG models (the GR242 of 215 litres and the GR 282 of 245 litres) with the F&P model N249 of 248 litres. LM Rankine has submitted, on the basis of this comparison, that the GR282 should be compared with the N249, not the GR242. This submission was also reiterated in response to the ef&c, as noted under Like Goods above. LM Rankine has provided a further comparison of the LG model GR372 of 339 litres with the F&P model E331 of 329 litres and the LG model GR432 of 392 litres with the F&P model E381 of 380 litres. LM Rankine said that both of the LG models in this comparison have manual temperature controls whereas the F&P models have a much more costly electronic temperature control. This was also reiterated in response to the ef&c as noted above under Like Goods.

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features indicating that factors other than size and features will also influence prices. 4.3.1.35 The investigating team notes that while there are differences in the detail of the features available, the investigating team considers that the comparisons provided by F&P nevertheless show that the models are broadly similar and are therefore generally comparable. Given the broadly similar nature of the features of the models being compared, and F&Ps contention that variations in features do not affect selling prices (although they may affect consumer decisions to purchase) the investigating team considers it reasonable to compare models where there are variations in features between the models being compared. The investigating team also considers F&Ps submission reasonable that some variation in size will not affect the selling price, provided the models are generally of a similar size. The investigating team considers that the table above provided by F&P gives a reasonable indication of the differences in capacity within which models are still comparable for price undercutting purposes. In relation to the points made by LM Rankine in its submission concerning the comparison of specific models, the investigating team notes that the GR151 model was not imported over the period of investigation and consequently the investigating team does not have information relating to its price. The pricing comparisons below include a comparison of the LG GR282 with the F&P N249. The information available indicates that there are F&P models with similar electronic temperature controls to those found in the LG models GR349 and GR389 (see Like Goods above). Differences in Credit Terms 4.3.1.38 There are differences between the length of credit extended to customers by F&P and the importers. None of the importers has advised if their credit terms affect their selling prices, except that LM Rankine has stated that if its _____________________________________________________. F&P has submitted that if its average length of credit increased from its current __ days then its costs would increase. F&P said that its current credit costs are reflected in a lower ex-warehouse selling price which would increase if its credit terms were extended from the current terms. On the basis of the submission made by F&P, LM Rankines advice that _ _______________________________________________, and the common commercial practice of giving discounts for cash or early payment, the investigating team considers it reasonable to assume that credit terms do affect the price. Adjustments have therefore been made to selling prices to take account of differences in length of credit. Details of credit terms and the basis on which adjustments have been made, are shown below under each company. Other Matters 4.3.1.40 F&P has provided details of the Samsung and LG models which it considers are comparable to each of its models for price undercutting purposes (this information was not provided for Daewoo models). This information has been used to select the Samsung and LG model for comparison against the

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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 ________________________________________

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WRN32RWGlitres F-F, ff WRN38RWGlitres F-F, ff WRN42RWGlitres F-F, ff WRN52HWGlitres F-F, ff WRN57HWGlitres F-F, ff 4.3.1.66
N249T 248 litres F-F, ff E372B 373 litres F-F, ff E381T 380 litres F-F, ff E411T 411 litres F-F, ff E411T 411 litres F-F, ff
The table above shows the Samsung models are undercutting the noninjurious price of the equivalent F&P model except in one case. In the case where there is no undercutting, the F&P model is undercut by another Samsung model. LG Electronics Ltd LM Rankine Trading Co Ltd

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LM Rankine advised that it markets direct to retailers and a small number of non-retail customers (including Telebingo and the hospitality trade). LM Rankine said that distribution is carried out by _________________________ ______________________________________________________________ The investigating team considers the point of comparison is F&P exwarehouse versus LM Rankine ex-warehouse. LM Rankine has provided cost build up to selling price information at November 1999, April 2000 and October 2000. LM Rankine advised that because it is a small importer, there was no single month during the period of investigation that an accurate breakdown of all the price elements could be produced. LM Rankine noted that in some months no imports were made. LM Rankine considered that if it had attempted to reconstruct a single buildup for the entire period of investigation, the figures would be distorted. LM Rankine said that in the interests of providing the Ministry with a clear and balanced picture it has provided cost build up information for 3 typical months evenly spread over the period of investigation. For the purposes of comparing prices with F&P models, the investigating team has calculated weighted average prices, weighting each price by the volume of imports in November 1999, December 1999 April 2000, and May October 2000. The costs after store include distribution and freight costs, so these costs have been deducted from the invoice price to customer to establish an ex-warehouse price. LM Rankine has advised that its credit terms are _______________________ _____________________ On the basis that sales are spread evenly through the month, the investigating team has calculated the average length of credit at __ days. LM Rankine advised that its average cost of working capital is __ percent.

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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 _____ ____ __

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F&P said that CM Research data showed that __ percent of New Zealanders have a preference for the F&P brand, but only approximately __ percent actually buy the F&P product (this data was sighted by the investigating team). F&P said that research indicates the gap is _________________, not because of the restricted availability of F&P product. F&P said that about 60 percent of all whiteware retail outlets in New Zealand sell brands other than F&P, the remaining 40 percent being F&P EDA dealers, showing that there are ample outlets for other brands. To show the robustness of its EDA, F&P provided copies of the whiteware marketing division general managers report for May, June and July 1997 in which comments are made concerning the ___________________________ _____________________. For example, the report for May 1997 states: __ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ____________________________________________________________. F&P also provided CM research market share data for the period July 1996 to November 2000 to demonstrate the _________________________________ _______________________. F&P has provided further submissions in response to submissions made by other interested parties (as shown below) on the EDA and these are summarised below. F&P has noted that Prior to the effects of the dumped imports, F&P was not losing volume sales to imports from Korea and other countries. F&P has submitted that there are many instances with other products where this type of distribution has been and continues to be successful. F&P has noted that there are no indications that Radiola will be distributing Samsung whiteware other than through the Pacific Retail Group. F&P has stated that There are probably good reasons for this approach as there are good reasons for F&Ps method of distribution. F&P has submitted that the EDA does not impose costs on it. F&P has observed that it is a voluntary agreement between an independent retailer and F&P and has submitted that distribution costs are not higher because of the EDA and more likely to be lower. F&P said that Radiolas comments that prices are competitive between F&P retailers indicates that the EDA is far from non-competitive and the retailer is able to offer the consumer a choice in both price and service. F&P has submitted that it is not the EDA or the competition between F&P retailers that is driving down prices, it is the price of dumped imports. In response to Radiolas claim that F&Ps involvement with its retailers has adversely affected its whiteware operation, F&P has noted that its manufacturing accounts __________________________________________ ______________________________________________________________ _______________. [The investigating team is satisfied that this is the case]. F&P has pointed to Radiolas statement that it had to set retail prices lower than it wanted in order to win floor space off Email in PRG shops, as confirming that material injury was caused by dumping and clearly shows that Australian product has not been the cause of material injury to F&P.

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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.

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Radiola has stated that: In essence the High Court concluded that F&P was entitled to rely on its brand strength, and that the EDA was a valid means of protecting its brand. We suggest that the passage of time has confirmed that this was simply wrong, and that F&Ps brand has been protected to a substantial degree by its market share cemented in place by the EDA regime. LM Rankine said that even though the High Court has upheld F&Ps EDA, it wishes to draw attention to the negative implications for the market of the EDA which it considers has distorted the market for many years. LM Rankine has submitted that the EDA has unfairly discriminated against new entrants,

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from 1998. Therefore, even if F&Ps R&D expenditure on a per unit basis is high by world standards, it is unlikely to have contributed to the injury evident in April December 2000. Other Matters 4.5.74 In its late submission, LM Rankine referred to the findings on other causes of injury in the Provisional Measures Report. LM Rankine said that the Provisional Measures Report implies that the explanations provided by importers lack credibility because the impacts are unlikely to have occurred in the timeframes related to the onset of injury. LM Rankine consider that, while none of the factors raised by them in earlier submissions on their own can be correlated directly to 1999/00, seen together there is a clear convergence of factors which created a critical mass of market factors which have negatively influenced F&P products. LM Rankine said if there was any one single factor which brought all of these factors together at one time it was the emergence as a powerful force of multi-brand stores in New Zealand consisting of Bond & Bond and Noel Leeming to form the Pacific Retail Group, and the Appliance Network Group Trading as Betta Electrical. LM Rankine said these are 2 very high profile retail groups with strong public awareness through their heavy active marketing. LM Rankine believe this had a catalytic effect on the market and precipitated a significant trend against F&P. LM Rankine has submitted It would be a mistake and essentially protectionist approach to infer as the Provisional Measures Reports do that pricing factors from Korean imports have caused this situation. LM Rankine reiterated this submission in its response to the ef&c. In response to the LM Rankine submission outlined above, F&P has submitted that there is no evidence to support LM Rankines claims. F&P said that if LM Rankine has evidence to support this view, then this should be presented to the Ministry to allow both the Ministry and F&P to meaningfully respond. The late submission by LM Rankine is couched in very general terms and the investigating team does not find it convincing. The investigating team also notes that the Pacific Retail Group was in existence for several years before the onset of injury, and is therefore unlikely to have been a major contributing factor to the injury evident from April 2000. Conclusion On Other Causes of Injury 4.5.78 On the basis of the information available and analysis carried out, it is concluded that factors other than dumping have not materially contributed to the decline in F&Ps performance in April December 2000. CONCLUSIONS RELATING TO INJURY The following is a summary of the conclusions reached on injury: (a) Import volumes of the dumped goods have increased significantly in absolute terms and relative to production and consumption in New Zealand.

6.1 6.1.1

LEVEL OF DUTY In accordance with section 14(4)(a) of the Act, the rate or amount of antidumping duty which may be applied cannot exceed the margin of dumping that has been found, while under section 14(5) the Minister is required to consider the level of duty necessary to prevent material injury. The price undercutting analysis in section 4.3.1 above has found that when F&Ps actual or non-injurious prices are compared with the margin of dumping added to the prices of the imported goods, there is still price undercutting by the majority (74 percent) of the subject goods, indicating that anti-dumping duty for the majority of exports should be imposed at the full margin of dumping. The method by which this should be done and the amount of antidumping duty, is discussed below.

6.2 6.2.1

METHOD OF IMPOSING DUTY Anti-dumping duties can be applied in a number of ways and can be imposed as a rate or amount, including any rate or amount established by a formula. The basic approaches are: a specific amount per unit of product; an ad valorem rate; and a reference price approach under which the duty payable is the difference between the transaction price and a reference price. The reference price would normally be based on the normal value or the noninjurious price. The main objective of an anti-dumping duty is to remove the injurious impact of dumping. In deciding on the form of duty, considerations relating to ease of administration, ability to ensure the dumping margin is not exceeded, fairness between parties, and predictability all need to be taken into account. The objective of the anti-dumping duty is to remove injury attributable to dumping, and is not to punish the exporter or to provide protection to an industry beyond the impact of the dumping. Section 14(4) of the Act provides that the Minister must not impose a duty that exceeds the margin of dumping for the dumped goods. The Solicitor-General has advised that the references to "export price" and "normal value" in this section are to be read as references to the export prices and normal values established in the investigation or to the values at the time the goods subjected to the duty are imported. Given this, the Ministry's approach is to adopt a form of duty that minimizes the possibility of exceeding the margin of dumping on shipments subsequent to the imposition of the duty by the Minister. A specific duty, based on the monetary value of a margin of dumping, has the advantages of being convenient to apply and impossible to evade by incorrectly stating the value for duty. A specific rate clearly indicates to the importer the amount of duty payable. However, difficulties can arise where there is a wide range of goods involved, where exchange rates fluctuate to the extent that the margin of dumping will be exceeded without constant reassessments of the specific amount, or where the exporter otherwise changes prices so that the duty is either greater than the margin of dumping or less than the margin of dumping previously established. A specific duty expressed as a monetary amount can really operate only when prices and exchange rates are consistent and stable and where the transaction-to-transaction comparison does not result in a range of different dumping margins. An alternative approach to deal with this problem is to express a specific duty as a formula, being the difference between equivalent prices to the normal value and the export price of a particular shipment, with the values for the normal value and export price being fixed. When those elements of the formula are expressed in terms of the currency of each transaction, the problem of exchange rate movements can be dealt with. However, such an approach does not deal with the problem of changes in export prices for reasons other than exchange rate movements or movements in normal values. An ad valorem duty, based on the dumping margin expressed as a percentage of the export price, and itself expressed as a percentage of the dutiable value is convenient to apply and is not so affected by exchange rate movements. However, collusion between exporters and importers can lead to the manipulation of the invoice value of the goods concerned. Ad valorem rates are often appropriate where there is a large range of goods or where new

Table 6.3: Price Undercutting: LG Exports to NZ Category Ex-Warehouse ExPrice ($NZ) + warehouse DM F&P NIP($NZ) 5 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ Undercutting ($NZ) % F&P Price
_______ _______ _______ _______ _______
Table 6.4: Price Undercutting: Samsung Exports to NZ Category Ex-Warehouse ExPrice ($NZ) + warehouse DM F&P NIP($NZ) 5 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ Undercutting ($NZ) % F&P Price
______ ______ ______ ______ ______
Table 6.5: Price Undercutting: Daewoo Exports to NZ Category Ex-Warehouse F&P FIS UnderPrice ($NZ) + NIP($NZ) cutting DM ($NZ) 5 6.3.7 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ % F&P Price ______ ______ ______ ______ ______
The above tables show that the LG ex-warehouse prices in category 3 and 4 and Samsung and Daewoo ex-warehouse prices in category 4 are undercutting the F&P NIP in those categories, indicating that the anti-dumping duty should be set at the full margin of dumping. The investigating team considers that this should be by way of a normal value (value for duty equivalent) NV (VFDE). Normal values for this investigation has been established under section 4 of this report. In order to calculate the weighted average NV (VFDE), the weighted average normal value was calculated for the categories over the period of investigation. Any cost incurred after the exporters ex-factory to the FOB level is added to the weighted average normal value. In this case the weighted average inland freight cost and port
services charges were added to the weighted average normal value amount to arrive at the NV (VFDE) figure for the 5 categories. 6.3.8 There was no price undercutting in LG category 1 and Samsung category 3 and 5, indicating that anti-dumping duty should be imposed at less than the margin of dumping as such a lesser duty will remove the injury attributable to dumping. A NIFOB, rather than a full margin of dumping would be appropriate for these categories. A NIFOB is calculated by establishing a NIP and deducting from the NIP those costs and profit margin that the importers incur or are properly entitled to an allowance for, after FOB to the point in the market at which the imported goods compete with the F&P NIP. The purpose of a NIFOB is to ensure that the price of imported product, when considered at the FOB level, is such that when the refrigerators are sold at either the ex-warehouse or FIS level (depending on the level of trade), its sale price equates to the NIP. If a NIFOB was to be established in Korean Won, the level of the NIFOB when converted to NZ dollars would vary every time there was a movement in the New Zealand dollar to Korean Won exchange rate. The effect of a variable NIFOB, when converted into NZ dollars, would be to change the consequent ex-warehouse price (assuming the same profit margin is taken). For example, if the NZ dollar depreciated against the Korean Won, then the NIFOB in NZ dollars would increase and result in a ex-warehouse price higher than the NIP, and the dumping margin could also be exceeded. The reverse would result if the NZ dollar appreciated against the Korean Won. If a NIFOB is set in NZ dollars and the transaction price is below the NIFOB amount, then the anti-dumping duty collected will be such that the exwarehouse or FIS price (assuming the allowable profit margin is taken) will always equate to the NIP, provided there are no significant changes in the costs between FOB and ex-warehouse from those used to establish the NIFOB amount. With the exception of sea freight, all significant costs between FOB and ex-warehouse are incurred in NZ dollars, are not directly affected by exchange rate movements. However, if these costs and the cost of sea freight do change significantly, this can be addressed by way of reassessment. A NIFOB fixed in NZ dollars will ensure that the duty collected does not exceed the margin of dumping and is administratively simple to operate. All importers provided information on cost build up to selling price of refrigerators imported from Korea for the year ended 31 October 2000, including selling and administration expenses. ________________________ ______________________________________________________________ all of their sales of the subject goods over the period of investigation. The investigating team considers that where anti-dumping duty is imposed at a full margin of dumping, and is therefore based on the normal value, it is appropriate it should be established in Korean Won as that is the currency in which the normal value is set. The Ministry is of the view that where a Korean producer did not export refrigerators in a particular category, that a NIFOB be calculated for that category, as this will ensure that any imports in these categories will not sell below F&Ps NIP. In those cases the costs used were based on the weighted

6.3.45

6.3.47

6.3.48

It is recommended on the basis of the information obtained during the course of the investigation into the dumping of refrigerators from Korea: 1. That the Minister determine pursuant to section.13 of the Dumping and Countervailing Duties Act 1988 that in relation to the importation or intended importation of refrigerators from Korea: (a) (b) the goods are being dumped; and by reason thereof material injury to an industry has been or is being caused.
That the Minister, having made a determination under s.13 of the Act, give notice pursuant to s. 14(1) of the rate or amount of duty determined under s.14 (4) of the Act to be imposed in respect of those refrigerators from Korea that are dumped. It should also be noted that in accordance with s.14(1) and s.17 of the Act, such duty shall be payable from the day after the date of the Ministers decision to give notice of the provisional direction. That the Minister require that, where the amount of anti-dumping duty provisionally imposed exceeds the amount of duty finally determined, the amount of the excess be remitted by the Collector of Customs. That the Minister sign the attached Gazette Notice, and give notice of the final determination and imposition of duties to interested parties in accordance with ss.9, 13 and 14 of the Act.
. Investigating Team Trade Remedies Group