LM Rankine Trading Corporation Ltd Email New Zealand Ltd 1.2.5 Customs data for the year ended 31 October 2000 shows the following as importers of refrigerators and refrigerator-freezers originating from Korea: Casmor International Ltd Cavit & Co Ltd Email Appliances (NZ) Ltd Fisher & Paykel Ltd Ho Ban Restaurant LM Rankine Trading Co Ltd NEC Australia Pty Ltd Pacific Providers Ltd Radiola Corporation Ltd Sung IL Timber Corporation NZ Ltd Whirlpool Australia Ltd 1.2.6 Due to the number of suppliers and importers identified, should an investigation be initiated it is intended to specifically investigate those suppliers (and their associated importers) representing the top 98 percent of imports (by volume) of the subject goods over the year ended October 2000. In making this calculation the various Samsung, LG and Daewoo companies listed in the NZCS data have been treated as one entity. All other suppliers and importers will have the opportunity to provide submissions but these will not be directly solicited. Suppliers and importers falling into the above category are as follows: Exporters Samsung LG Daewoo Importers LM Rankine Trading Co Ltd Email Appliances (NZ) Ltd Radiola Corporation Ltd Whirlpool Australia Ltd Fisher & Paykel Ltd Casmor International Ltd 1.2.8 Any investigation will need to establish the extent to which the parties listed are importing the goods subject to this application. In addition, the investigation will need to establish whether such goods have any degree of manufacture in the country of export, or whether they are merely transshipped. IMPORTED GOODS The goods which are the subject of the application, hereinafter referred to as or subject goods, are:

1.3 1.3.1

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 1.3.2 The New Zealand Customs Service (NZCS) has stated that the subject goods enter under the following tariff classifications: 8418 Refrigerators, freezers and other refrigerating or freezing equipment, electric or other: heat pumps other than air conditioning machines of heading No. 84.15 Combined refrigerator-freezers, fitted with separate external doors

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 model P120 model with a capacity of 115 litres up to the active smart E415H model, which has a capacity of 411 litres. F&P provided catalogues showing details of the full range of refrigerator-freezers and refrigerators it manufactures. The following models are listed in the catalogues:
Model Number C240B/C24 0BSS N169T N249T/N24 9TSS C270/C270 SS P120/P120 SS E331T, E381T, E411T, E440T, E415H E372B, E402B, E442B, E406B C365H C370 C450
Type Fridge-freezer with top mounted refrigerator Fridge-freezer with bottom mounted refrigerator Fridge-freezer with bottom mounted refrigerator Single door refrigerator Single door refrigerator Fridge-freezer with bottom mounted refrigerator

Capacity (litres) 115

Significant Features Automatic defrost, stainless steel option Frost free, wider door shelves Frost free, wider door shelves, stainless steel option Automatic cyclic defrost, wider door shelves, stainless steel option Push button defrost, wider door shelves, stainless steel option Frost free, intelligent electronics, butter conditioner (not all models) Frost free, intelligent electronics, butter conditioner (not all models) Automatic defrost, roll out fruit and vegetable drawer Automatic defrost, humidity controlled fruit and vegetable bin Frost free, humidity controlled fruit and vegetable bin

329, 380, 411, 404, 411

Fridge-freezer with top mounted refrigerator Fridge-freezer with top mounted refrigerator Single door refrigerator Single door refrigerator

373, 403, 442, 367 450

Imported Goods 2.1.4 F&P has also provided catalogues produced for the New Zealand market showing details of LG and Samsung refrigerator-freezers and refrigerators. These catalogues list the following models: LG Models Model Type Number GR293 Fridge-freezer with TBF bottom mount refrigerator

Capacity Significant Features (litres) 303 No frost, soft touch drawers in freezer
GR 349SQF GR 389SQF GR 403S
GR 432S GR 372S GR 282S GR 242S

GR 182S GR 131S GR 151S

Fridge-freezer with bottom mount refrigerator Fridge-freezer with bottom mount refrigerator 3 door fridge-freezer with top mount refrigerator Fridge-freezer with bottom mounted refrigerator Fridge-freezer with bottom mounted refrigerator Fridge-freezer with bottom mounted refrigerator Fridge-freezer with bottom mounted refrigerator Fridge-freezer with bottom mounted refrigerator Single door refrigerator Single door refrigerator

245 215

No frost, neuro fuzzy control system, bottle holder No frost, neuro fuzzy control system, bottle holder No frost, automatic defrost, 4 in 1 compartment No frost, automatic defrost, quick freezing compartment No frost, automatic defrost, quick freezing compartment No frost, automatic defrost No frost, automatic defrost No frost, automatic defrost Separate freezer compartment Separate freezer compartment Fuzzy logic climate control, 2 fans & evaporators, frost free, chilled water dispenser Frost free, large vegetable drawer with moisture control Frost free, large vegetable drawer with moisture control Frost free, large vegetable drawer with moisture control Frost free, large vegetable drawer with moisture control Separate freezer compartment
Samsung Models SRFridge-freezer with top L628EV mounted refrigerator Cool tech SRG V43 Cool tech SRG V33 Cool tech SRG V39 Cool tech SRG V29 SRG 118 2.1.5 Fridge-freezer with bottom mounted refrigerator Fridge-freezer with bottom mounted refrigerator Fridge-freezer with bottom mounted refrigerator Fridge-freezer with bottom mounted refrigerator Single door refrigerator

Not shown 390

260 96
It is unclear if the LG and Samsung models represent the entire range imported into New Zealand, but for the purposes of initiation the models listed above give a reasonable picture of the types of product available.
Like Goods Considerations 2.1.6 In deciding like goods issues the Ministry takes into account the following considerations: a. Physical characteristics, which covers appearance, size and dimensions, components, production methods and technology. b. Function/usage. This covers consumer perceptions/expectations, end uses, and will lead to any conclusions on the issue of substitutability where relevant. c. Pricing structures. d. Marketing issues such as distribution channels and customers advertising. e. Other. This can include tariff classification if applicable, and any other matters which could be applicable in the circumstances. 2.1.7 This framework will be used to consider what goods produced in New Zealand are like goods to the allegedly dumped imports. Physical Characteristics 2.1.8 The models detailed in the catalogues have the same general appearance as those produced by F&P. The capacity of the imported models range from 95 to 400 litres. The capacity of the F&P models range from 115 to 450 litres. F&P has not provided any detailed information on the production methods of either the subject goods or its own goods, but is considered unlikely, given the physical similarities, that there are any significant differences in production methods. Any investigation should examine whether there are any significant differences in production methods. Technology features such as frost free, automatic defrost, humidity controlled fruit and vegetable bins and computer climate control appear to be present in both the subject goods and the F&P models. Any investigation should, however, examine whether there are any significant differences in the technology used in the subject goods and the F&P models. Function and Usage 2.1.10 No information is available on consumer perceptions or expectations. The end use of the subject goods and the F&P models is obviously the same and it is clear that the F&P models are readily substitutable for the subject goods. Pricing Structures 2.1.11 While F&P are claiming that the subject goods are undercutting its product (see below), the difference in prices is not such as to indicate that the subject goods are a distinctly different product.

Import Duty 3.1.14 An amount for import duty has been allowed at the current rate for imports of the subject goods from Korea of 5.5 percent. Freight from Factory to Wharf in Korea 3.1.15 An amount of ___ percent has been allowed for both Samsung and LG. Exchange Rates 3.1.16 In its application F&P converted the NZ dollar FOB price to Korean won at the Customs exchange rate effective on 18 September 2000 of 1NZ$ = 470.07 Korean won. Since then the won has appreciated against the NZ dollar which would have the effect of further reducing the export price in won. For the purposes of initiation the exchange rate at 18 September has been used. Calculation of Constructed Export Prices 3.1.17 The calculation of constructed export prices on the basis set out above is shown in the tables below.
Table 3.1: Constructed Export Prices Samsung Refrigerator-Freezer Models Capacity Range (litres) Actual Capacity (litres) Korean Model No. Equivalent NZ Model No. Advertised discounted price Less: GST (12.5%) Less: Retailer's margin (___%) Invoice price ex-distributor to retailer Less: Warranty (_%) Less: Freight (__%) Less: Advertising (_%) Less: Selling & admin. Overhead (_%) Less: Profit (_%) Landed cost Less: Freight to NZ Less: Port Service Charges Less: Customs charges Less: Insurance (___%) Less: Import duty (5.5%) Less: Freight to wharf (__%) Ex-Factory Export Price (NZ$) Convert @ NZ$ = 470.07 won (Customs rate @ 18/9/00) 446.28 209,781 437.14 205,487 484.65 227,819 537.03 252,444 563.88 265,063 200-300 200-300 300-400 300-400 300-400
401 SR-2316D SR-2719D SR-3219D SR-3619D SR-3619D SRGV29 SR30RMC SR37RMC SRGV43 SR44RMB 899.95 99.99 799.96 899.95 99.99 799.96 999.95 111.11 888.84 1099.95 122.22 977.73 1149.95 127.77 1022.18
Table 3.2: Constructed Export Price Samsung Single Door Refrigerator Capacity (litres) 88 Korean Model No. Equivalent SR-A0909 NZ Model No. SRG118 Advertised discounted price 399.95 Less: GST (12.5%) 44.44 355.51 Less: Retailer's margin (___%) Invoice price ex-distributor to retailer Less: Warranty (_%) Less: Freight (__%) Less: Advertising (_%) Less: Selling & admin. Overhead (_%) Less: Profit (_%) Landed cost Less: Freight to NZ Less: Port Service Charges Less: Customs charges Less: Insurance (__%) Less: Import duty (5.5%) Less: Freight to wharf (__%) Ex-Factory Export Price (NZ$) Convert @ NZ$ = 470.07 won (Customs rate @ 18/9/00)

179.95 84,588

Table 3.3: Constructed Export Prices LG Refrigerator-Freezer Models Capacity Range (litres) 200-300 300-400 300-400 Actual Capacity (litres) 392 Korean Model No. Equivalent R-B23DD R-B31DD R-B36DD NZ Model No. GR242MF GR372S GR432S Advertised discounted price 799.00 1099.00 1199.00 Less: GST (12.5%) 88.78 122.11 133.22 710.22 976.89 1065.78 Less: Retailer's margin (__%) Invoice price ex-distributor to retailer Less: Warranty (_%) Less: Freight (_%) Less: Advertising (_%) Less: Selling & admin. Overhead (_%) Less: Profit (_%) Landed cost

Table 3.5: Estimated Normal Values Samsung Refrigerator-Freezer Models Capacity Range (litres) 200-300L 200-300L 300-400L 300-400L Actual Capacity (litres) 260L 290L 365L 390L Korea Model No SR-2319D SRSR-3219D SR2719D 3619D New Zealand Model No SRGV29 SR30RM SR37RM SRGV43 C C Catalogue price 398,000 458,000 548,000 638,000 Retail price 320,000 370,000 440,000 512,000 Less discount (_%) Less VAT (10%) Less retailer's margin (__%) Invoice price ex-factory to retailer Less: Freight (_%) Less: Warranty (_%) Ex-factory price

207,825

240,298

285,760

332,521
Table 3.6: Estimated Normal Value Samsung Single Door Refrigerator Capacity (litres) 96L Korea Model No SR-A0909 New Zealand Model No SRG118 Catalogue price 209,000 Retail price 183,000 Less discount (_%) Less VAT (10%) Less retailer's margin (__%) Invoice price ex-factory to retailer Less: Freight (_%) Less: Warranty (_%) Ex-factory price

118,850

Table 3.7: Estimated Normal Values LG Refrigerator-Freezer Models Capacity Range (litres) 200-300L 300-400L 300-400L Actual Capacity (litres) 215L 339L 392L Korea Model No R-B23DD R-B31DD R-B36DD New Zealand Model No GR242MF GR372S GR432S Catalogue price 388,000 538,000 628,000 Retail price 315,000 435,000 510,000 Less discount (_%) Less: VAT (10%)
Less: retailer's margin (__%) Invoice price ex-factory to retailer Less: Freight (_%) Less: Warranty (_%) Ex-factory price 3.2.14

204,578

282,513

331,222

F&P states it was unable to obtain a retail price for an LG single door refrigerator. F&P states that to calculate a normal value for an LG single door refrigerator it has based it on the catalogue price of an LG single door refrigerator of 218,000 won and discounted this by 14 percent. F&P states that the 14 percent discount is the percentage difference between Samsung single door refrigerator catalogue price and the retail price. The Ministry notes that the difference between the relevant Samsung catalogue price and retail price is 12.4 percent (when expressed as a percentage of the catalogue price). However, as a deduction of 12.4 percent would increase the dumping margin, for initiation purposes the adjustment has been left at 14 percent. Table 3.8: Estimated Normal Value LG Single Door Refrigerator Capacity (litres) Korea Model No New Zealand Model No Catalogue price Retail price (less 14% of catalogue price) Less discount (_%) Less VAT (10%) Less retailer's margin (__%) Invoice price ex-factory to retailer Less: Freight (_%) Less: Warranty (_%) Ex-factory price

96L R-A10DD GR131S 218,000 187,480

121,760

3.2.15
The Ministry considers that the information on normal values provided by F&P is sufficient for the purposes of initiation. COMPARISON OF EXPORT PRICE AND NORMAL VALUE The following table summarises the information provided on export prices and normal values and shows the margins of dumping.

3.3 3.3.1

Table 3.9: Dumping Margins (won) NZ Model Capacity Normal Export Dumping DM as % (litres) Value Price Margin EP Samsung SRG118 <200 118,850 84,588 34,262 41% SRGV29 200-300 207,825 209,781 Not Not Dumped Dumped SR30RMC 200-300 240,298 205,487 34,811 17% SR37RMC 300-400 285,760 227,819 57,941 25% SRGV43 300-400 332,521 252,444 80,077 32% SR44RMB 400-500 332,521 265,063 67,457 25% LG GR-131S <200 121,760 87,244 34,516 40% GR242MF 200-300 204,578 166,818 37,760 23% GR372S 300-400 282,513 231,673 50,840 22% GR432S 300-400 331,222 251,205 80,017 32% 3.3.2 The evidence provided shows that the alleged margins of dumping, except for Samsung model SRGV29, are not de minimis in terms of Article 5.8 of the Agreement as set out above. The Ministry is satisfied on the basis of the information provided that the comparison of export prices and normal values provides sufficient evidence of dumping for the purposes of initiation in respect of the importation of the subject goods from Korea. Any investigation will need to give consideration to the provisions of section 4 (export price) and section 5 (normal value) of the Act as they should apply, and in particular to the application of the appropriate adjustments required by section 4(1)(a)(i) and (ii) and section 5(3).
The basis for considering material injury is set out in section 8(1) of the Act:
8. Material injury to industry(1) In determining for the purposes of this Act whether or not any material injury to an industry has been or is being caused or is threatened or whether or not the establishment of an industry has been or is being materially retarded by means of the dumping or subsidisation of goods imported or intended to be imported into New Zealand from another country, the [Chief Executive] shall examine (a) The volume of imports of the dumped or subsidised goods; and (b) The effect of the dumped or subsidised goods on prices in New Zealand for like goods; and (c) The consequent impact of the dumped or subsidised goods on the relevant New Zealand industry.
IMPORT VOLUMES Section 8(2)(a) of the Act provides that the Chief Executive shall have regard to the extent to which there has been or is likely to be a significant increase in the volume of imports of dumped or subsidised goods either in absolute terms or in relation to production or consumption in New Zealand.

4.2.1.3

4.2.1.4
Samsung Model Capacity (litres) Price to Dealer F&P Model Capacity (litres) Price to Dealer Undercutting % F&P Price 4.2.1.5
F&P considers that the extent of price undercutting has been understated because it has substantially reduced the selling price of some models since the subject goods began taking market share. F&P gives as an example the drop in price to ________ from September 1999 to June 2000 of its C250T model from ______ to ______ LG

4.2.1.6

F&P states it has taken the same approach as that taken with the Samsung models, and notes that the same comments above relating to its model C250T also apply to its price comparison with LG. Details of the price comparison with LG models are shown in the table below.
Table 4.3: Price Undercutting LG LG Model GR242MF GR242MF GR372S GR432S Capacity (litres) Price to Dealer F&P Model N249T C250T E331T E381T Capacity (litres) Price to Dealer Undercutting % F&P Price 4.2.1.7 There is evidence that the prices of the allegedly dumped Samsung imports in the _____ sizes (______ litres) are significantly undercutting the prices of the New Zealand industry. In the ______ sizes (_______ litres), there is either no evidence of price undercutting or evidence of only negligible price undercutting by the allegedly dumped Samsung imports. There is evidence that the prices of the allegedly dumped LG imports are significantly undercutting the prices of the New Zealand industry. The Ministry notes the comment by F&P that it has significantly reduced its prices for some models in response to the allegedly dumped imports and therefore price undercutting is understated. Any investigation will need to consider the extent to which F&Ps selling prices have been suppressed by the allegedly dumped imports and if so, consider whether a price comparison should be made using F&Ps unsuppressed selling prices. Any investigation will also need to consider obtaining information on F&Ps overall average selling prices (rather than prices to one customer) either on a per model or group of similar models basis. Price Depression Section 8(2)(c) of the Act provides that the Chief Executive shall have regard to the extent to which the effect of the dumped or subsidised goods is or is likely significantly to depress prices for like goods of New Zealand producers. 4.2.2.1 4.2.2.2 Price depression occurs when prices are lower than those in a market unaffected by dumping, usually in a previous period. F&P states that imports of the allegedly dumped goods increased substantially in the four months to July 2000 compared with the same period in the previous year. F&P estimates that in the year ended March 2001, imports of the allegedly dumped goods will be more than 20,000 units, which it states will be an increase of nearly 34 percent. F&P states that to offset the loss of volume arising from price undercutting it has reduced its prices to ensure that sufficient volumes are manufactured in its Auckland plant. F&P has provided its average selling prices per unit, excluding stainless steel models, for the four months ended July 1999 and July 2000 to illustrate the depression of its prices which it attributes to the allegedly dumped imports. These prices are shown in the table below.

4.2.1.8 4.2.1.9

4.2.1.10

4.2.2.3

Table 4.4: Price Depression: Average Selling Prices (Excluding Stainless Steel Models) April - July 1999 April - July 2000 Change

4.2.2.4

F&P states that if stainless steel models were included then there would be an increase in the average price. F&P considers that including stainless steel models would not provide a like comparison as stainless steel models were not available in the first four months of 1999. F&P states that the price of its stainless steel models has also been depressed. F&P states that the average price for these models in the year ended March 2000 was ________ but by the end of July 2000 this average had reduced to _________, a fall of __ percent. F&P states, however, This average price reduction is because _________________________________ _______ the revenue lost because of the dumped imports. The Ministry has prepared a table comparing the average price, including stainless steel, for the four months ended July 1999 and July 2000, using information provided by F&P and this is shown in the table below. Table 4.5: Price Depression: Average Selling Prices (Including Stainless Steel Models) April - July 1999 April - July 2000 Change

4.2.2.5

4.2.2.6

4.2.2.7

F&P states it introduced a price increase in early October 2000, but notes _ ______________________________________________________________ ________________________ F&P has prepared a forecast with the full impact of the price increase taking effect and with a nil effect. This forecast is shown in the table below. Table 4.6: Price Depression: Average and Forecast Selling Prices (March Years) Variant 1999 Actual 2000 Actual 2001 Forecast 2001 Forecast No Price Increase With Price Increase White Stainless Total

4.2.2.8

F&P states that Had it not been for the effects of dumping in April 1999 March 2000 then F&P would have expected to obtain a higher average selling price. F&P further states that If the price increase (prompted by the adverse currency movement) announced in October 2000 ______________________ ______________________________________________________________ __________________________________________ for white refrigerators, reducing the overall profit of the refrigerator business (white and stainless) from _______ in YEM [year ended March] 2000 to just under _________ in the forecast for 2001. The Ministry is of the view that price depression must be demonstrated taking into account all production of like goods. It is not sufficient to show that the price of only certain models has been depressed, if that price depression is

4.2.2.9

more than offset by increases in prices in other models. When the overall results are considered, i.e., including both white and stainless models, there is no evidence of price depression, whether whole year March figures or four month to July figures are considered. The Ministry notes that F&P claim that there has a recent decline in the average price of stainless models, but it appears from the statement made by F&P that this results from ___________ ________________________________________ Any investigation should examine whether changes in product mix have affected the average per unit selling price. 4.2.3 Price Suppression Section 8(2)(c) of the Act also provides that the Chief Executive shall have regard to the extent to which the effect of the dumped or subsidised goods is or is likely significantly to prevent price increases for those goods that otherwise would have been likely to have occurred. 4.2.3.1 The Ministry generally bases its assessment of price suppression on positive evidence, in particular the extent to which cost increases have not been recovered in prices. Cost increases not able to be recovered by price increases will be reflected by an increased ratio of costs to sales revenue. Where cost savings have been made, the lack of any price increase will not normally be regarded as price suppression. While the inability to recover cost increases in prices is the main indicator of price suppression, the Ministry will consider any other factors raised as positive evidence of price suppression. F&P states that prior to the October 2000 price increase it had lowered its prices in order to remain competitive and to ensure that volumes were maintained in the factory. F&P has provided a table comparing prices and costs for the four months ended July 2000 with the same period in 1999. F&P states the figures exclude stainless steel models because these models were not in the market in the April July 1999 period. The figures are shown in the table below. Table 4.7: Price Supression (Excluding Stainless Steel Models) April - July 1999 April - July 2000 Average selling price Cost of production Gross margin Other costs Total costs As a % of sales - cost of production - other costs - total costs 4.2.3.3

4.2.3.2

Change
F&P provided the following table showing actual and forecast prices and costs showing separate data when stainless models are included and excluded.
1998 Actual Average selling price Cost of production Gross margin Other costs Total costs As a % of sales: - cost of production - other costs - total costs
Table 4.8: Price Suppression (Years Ended March) Actual 2001 Forecast No Price Increase Actual Excluding Including S/S S/S Excluding S/S
2001 Forecast With Price Increase
Including Excluding Including S/S S/S S/S

4.2.3.4

F&P states that in 1999 its refrigeration business incurred some difficulties with the new door styling and manufacturing problems associated with its active smart refrigerators. F&P states that this resulted in a fall in gross margin of ________ meaning the cost of production increased significantly between 1998 and 1999. F&P provided an extract from its 1999 annual report to substantiate this point, although the annual report refers to an adverse impact of $8 million before tax resulting from lost sales and additional costs. Because of this F&P considers that costs in 2000 should be compared with those in 1998 to give a true indication of the impact of dumping. ______________________________________________________________ ______________________________________________________________ ________________________ F&P further states that ___________________ ____ there will still be a significant increase in total costs relative to sales especially when compared with 1998. Total sales in 1999 were ______ The ___________ fall in gross margin amounts to ______ per unit. Assuming that the average selling price was not affected by the production problems, the impact of the production problems would be to increase the cost of production by ______ If the cost of production for 1999 is adjusted by _____, cost of production falls to __ percent of sales, and total costs fall to __ percent of sales. On this basis there has been only a small increase in costs of production as a percentage of sales from 1999 to 2000, when stainless steel models are considered. On the same basis, when total costs are considered as a percentage of sales, there has been no change from 1999 to 2000. Any investigation will need to consider whether 1999 costs figures, adjusted for the impact of the new door production problems, can be used as a base year to assess the impact of dumping, and if so, how the 1999 figures should be adjusted. When the 2000 costs in relation to sales are compared with the 1998 figures, as F&P consider they should, then there is evidence that prices have been suppressed. The forecast figures, even with the price increase staying in place, indicate there will be a significant increase in costs as a percentage of sales.

Change from prior period:

4.3.2.3

12,459 26,593

11,645 32,899

15,416 33,251

4,036 9,627

6,910 6,383
NZ Market - Excluding s/s - Including s/s Domestic Production - Excluding s/s - Stainless Total Domestic Production Imports - Net imports Korea - Other countries Total net imports
% market share (ex-s/s) held by:
Imports - Net imports Korea - Other countries Total imports Domestic Production - Excluding s/s
% market share (inc-s/s) held by:
- Net imports Korea - Other countries Total imports Total Domestic Production

4.3.2.4

As noted variously above, the Ministry considers that injury must be assessed in relation to data covering all like goods. When total domestic production is considered, the table shows that while the allegedly dumped imports have increased their market share, this has largely been at the expense of imports from other countries. The market share held by the New Zealand industry declined from 1998 to 1999. From 1999 the market share held by the New Zealand industry has been at about the same level when total production figures are considered. There is no evidence of a significant decline in the market share held by the New Zealand industry over the period since injury is claimed to have commenced. F&P has provided a market share forecast for the year ended March 2001. This forecast shows a decline in F&Ps market share, taking account of total production, to __ percent, but this decline is not apparent in the first 4 months of that year (i.e., from April to July 2000). There is not sufficient evidence that an actual decline in the New Zealand industrys market share has occurred. F&P has forecast a decline in market share for the year ended March 2001 but this forecast decline is not apparent in the first four months of that year. Profits Changes in net profits reflect changes in prices, sales volumes or costs. Dumped or subsidised imports can impact on any or all of these. If possible, the extent of any decline in profit will be measured against the level achieved in the period immediately preceding the commencement of the dumping. In an investigation, the Ministrys assessment of the impact of dumped imports is based on an examination of trends in actual profits in order to establish whether or not there is an actual or potential decline in profits. In some circumstances it may be possible to determine that injury is being caused where profits are not declining, but that would depend on the circumstances of the case, and would need to be based on positive evidence. Such an impact would also need to be attributable to the dumping of imports. F&P states that imports of the allegedly dumped goods in the four months to July 2000 have increased by more than 70 percent compared with the same four months in 1999 and this has had a dramatic effect on the profitability of its refrigeration business __________________________________________ ________ The table below shows an analysis of the actual earnings before interest and tax, showing both white and stainless steel figures separately and in total. Table 4.12: Earnings Before Interest and Tax ($000) (Years Ended March) Apr-Jul AprJul 00 EBIT ($000') - Excl s/s - Incl s/s As a % of revenue: - Excl s/s

4.3.2.5

4.3.2.6

4.3.3 4.3.3.1

4.3.3.2

4.3.3.3

4.3.3.4
- Incl s/s Per Unit: - Excl s/s - Incl s/s Change from prior period: - EBIT excl s/s - EBIT incl s/s Change from 1998 EBIT: - Excl s/s - Incl s/s 4.3.3.5
F&P states that the fall in EBIT in 1999 resulted from the production problems referred to previously (see paragraph 4.2.3.4 above under price suppression). There is evidence that profits have declined significantly in total, relative to sales revenue and per unit, in 2000 (compared to 1998) and in the 4 months ended July 2000 (compared to the same period the previous year). This decline in EBIT coincides with a significant increase in import volumes of the subject goods. F&P has forecast EBIT for the year ended March 2001, on the basis of ___ _________________________________________________ Without a price increase _________________ With a price increase a profit is forecast but is significantly lower than the profit for 2000 and 1998. There is sufficient evidence of a significant decline in profits. The Ministry also notes that in the 4 months ended July 2000, there was a ______________________________________________________________ ______________________________The forecasts for the year ended March 2001, _________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________ F&P has commented that its stainless steel models have, ________________________________ indicating that factors other than the allegedly dumped goods may be affecting F&Ps results ________________ _______, and this should be considered in any investigation. Productivity F&P states that it has not addressed the relationship between the output of goods and the inputs of resources used to produce them, as it considers it has already provided sufficient evidence for initiation of actual material injury and threat of material injury. Return on Investments A decline in return on investments will result from a decline in returns with or without a relative increase in the investment factor being used. Movements in the return on investments affect the ability of the industry to retain and attract investment.

4.3.3.6

4.3.3.7 4.3.3.8

4.3.4 4.3.4.1

4.3.5 4.3.5.1

4.3.5.2

F&P comments that it has not yet completed the apportionment of fixed assets to the refrigerator business to allow a meaningful comment at this stage. F&P states that It is evident, however, that the rapid reduction in EBIT will result in the return on investment being substantially less. Utilisation of Production Capacity The utilisation of production capacity reflects changes in the level of production, although in some cases it will arise from an increase or decrease in production capacity. In either case, a decline in the utilisation of production capacity will lead to an increase in the unit cost of production, and a consequent loss of profit. F&P states that This is not expected to change given F&Ps move to protect volume market share. Other Adverse Effects In considering other adverse effects, the Ministry considers actual and potential effects on cash flow, inventory, employment, wages, growth, ability to raise capital, and investment. F&P states that it recognises that dumped imports can have a measurable impact on the factors listed above. F&P considers for the purpose of initiation, however, there is sufficient evidence of injury for initiation without addressing all the factors referred to above. F&P comments that it employs _____________________________________ ______________________________________________________________ ______________________________________________________________ ___________________________________________ OTHER CAUSES OF INJURY Sections 8(2)(e) and (f) of the Act provide that the Chief Executive shall have regard to factors other than the dumped goods which have injured, or are injuring, the industry, including (i) The volume and prices of goods that are not sold at dumped prices; and (ii) Contraction in demand or changes in the patterns of consumption; and (iii) Restrictive trade practices of, and competition between, overseas and New Zealand producers; and (iv) Developments in technology; and (v) Export performance and productivity of the New Zealand producers; and the nature and extent of importations of dumped or subsidised goods by New Zealand producers of like goods, including the value, quantity, frequency and purpose of any such importations. Non-dumped Imports

4.3.6 4.3.6.1

4.3.6.2 4.3.7 4.3.7.1

4.3.7.2

4.3.7.3
F&P states that Prior to the dumping imports from Australia provided F&P with a level of competition normally expected between suppliers. The price
undercutting of the dumped imports has meant that Australian suppliers have had to reduce their prices to meet the dumped Korean prices and have substituted some of their models with OEM [original equipment manufacturer] branded models made in Korea (e.g. Westinghouse). 4.4.2 The market share table shows that imports from other countries increased significantly from 1998 to 1999 and from 1999 to 2000 were at about the same level. In the 4 months ended July 2000, the market share held by imports from other countries declined significantly, the decline in market share being taken up by imports from Korea. The evidence indicates that imports from other countries have not increased significantly in the period from when material injury is claimed to have to have commenced. Demand or Consumption Changes 4.4.3 F&P has made no comment on demand or consumption changes. The Ministry is not aware of any demand or consumption changes that have had an adverse impact on the New Zealand industry. Restrictive Trade Practices 4.4.4 F&P states that There is no evidence of restrictive trade practices of and competition between, overseas and New Zealand producers. The Ministry is not aware of this factor having an adverse impact on F&P. Developments in Technology 4.4.5 F&P states There is no evidence of technology developments that are relevant. The Ministry is not aware of any developments in technology that have had an adverse impact on the New Zealand industry. Export Performance 4.4.6 F&P states that The material injury analysis has excluded F&Ps export business and there is therefore no evidence of F&Ps export business impacting on the domestic business. The Ministry is aware of comment in the media by various parties that F&P has had problems with forward foreign exchange contracts on its export earnings. The significance of this should be considered in any investigation. Imports by the Industry 4.4.8 F&P states that F&P imports refrigerators from Australia. Other imports are related to sample shipments. As noted above in section 4.1 F&P also imports small single door refrigerators from Korea. Some of the refrigerators imported from Korea by F&P fall within the definition of the subject goods and some do not. The Ministry notes that the refrigerators F&P imports from Australia are not subject goods (not being from Korea). Some of F&Ps imports from Korea and Australia consequently do not fall within the scope of section 8(2)(f) of the Act. The subject goods that F&Ps imports from Korea have been excluded in considering import volume effects and economic impact in this report.

CONCLUSIONS

On the basis of the information available, it is concluded that, for the purposes of initiation, there is sufficient evidence that : (a) (b) Refrigerators and refrigerator-freezers from Korea are being dumped; and By reason thereof material injury to the industry is being caused.

RECOMMENDATIONS

It is recommended on the basis of the conclusions reached and in accordance with section 10 of the Dumping and Countervailing Duties Act 1988: (a) that the Chief Executive of the Ministry of Economic Development formally initiate an investigation to establish whether imports of refrigerators and refrigerator-freezers from Korea are being dumped and are causing or threatening to cause material injury to the New Zealand industry producing like goods; and that the Chief Executive of the Ministry of Economic Development sign the attached Gazette Notice, and give notice to interested parties in accordance with section 9 of the Act.
... Investigating Team Trade Remedies Group