F&P produces top loading washing machines for the New Zealand market in 5.5kg and 7.5kg sizes. F&P does not produce front loading models. F&P considers that its top loading models are like goods to both top loading and front loading models imported from Korea and presents the following information: Imported Washing Machines
F&P advises that Radiola imports top loading Samsung brand machines from Samsung and Rankine imports top loading and front loading LG brand machines from LG. F&P understands that Baigent imports Advanced brand washing machines from LG and that Email imports Westinghouse brand machines from LG.
Like Goods Considerations 2.1.5 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. 2.1.6 This framework will be used to consider what goods produced in New Zealand are like goods to the allegedly dumped imports. Physical Characteristics 2.1.7 Apart from some styling differences, New Zealand and Korean top loading washing machines present the same basic appearance. Front loading machines differ significantly in appearance from New Zealand top loading machines in terms of placement of access door and controls. F&P notes that the external dimensions of the locally produced and imported washing machines differ slightly. Machines from both sources are offered in a range of capacities. F&P states that the production methods used for top loading and front loading machines are similar as the machines use similar components (motors, tubs (a drum on its side) and cabinets. New Zealand washing machines contain a central agitator. F&P states that most top loading machines do have some type of central agitator or in its absence a pump [or punch] to force water up from the bottom of the bowl. F&P notes that some Korean models do not have a central agitator and that in some models with central agitators, the agitator is not full size. F&P comments that some top loading machines have a rotating device at the bottom of the bowl to provide the means to move the water to aid the cleaning of articles. F&P notes that front loading machines do not have a central agitator. Controls on New Zealand and Korean washing machines allow wash cycle selections and some models of both top loading and front loading machines have an option for a fast wash.

2.1.10

2.1.11
Function and Usage 2.1.12 F&Ps top loading machines have the same end-use, namely washing of clothes for households, as the imported top loading and front loading machines. F&P considers that front loading machines are substitutable with its top loading machines. The company is preparing to release a top loading machine which replicates the features of a front loading machines and F&P considers this development is a strong indication of the substitutability of these machines. F&P identifies no differences between consumer perceptions of New Zealand and Korean washing machines. F&P states that consumer preferences indicate that top loading machines are more flexible [than front loading machines] because items can be added to the machine once the washing cycle has commenced. Top loading machines have a shorter washing cycle than front loading machines. F&P considers that front loading machines may use less water, depending on user behaviour, and less laundry powder than top loading machines. F&P explains that clothes are immersed in water in top loading machines whereas in a front loading machines the clothes are rotated through the water as the drum revolves. F&P states that there is a consumer perception that front loading machines have a gentle washing action, consume less water and are more eco-friendly. However, F&P points to Consumers Institute testing which shows that top loading machines have wash programmes that are as gentle as front loading machines. Pricing Structures 2.1.16 F&P notes that there is a perception that front loading machines are more expensive than top loading machines. F&P considers that this perception may be due European machines being distributed through specialist outlets for many years prior to The Warehouse securing distribution of the AEG brand. F&P provided retail price comparisons for a number of machines, including for LG machines which are sold in both front loading and top loading versions. LGs 6.5kg and 8kg top loading machines are sold at the same prices respectively as LGs lower and higher-priced 7kg models. F&P observes that the retail pricing of imported Korean front loading machines is similar to retail prices of F&P top loading machines. F&P considers that the proximity of the retail pricing demonstrates that price is not a barrier to substitutability. Marketing Issues 2.1.18 F&P observes that top loading machines and front loading washing machines are sold through the same retail outlets and are often placed together on the retail floor. F&P provided copies of Consumers Institute tests in which both front loading and top loading machines feature. F&P imports front loading machines from Italy and distributes them through the same retail outlets as its top loading models. F&P also states that promotional material from retailers includes both types of machines which is

2.1.13

2.1.14

2.1.15

2.1.17

2.1.19

a strong indication that the retailer views a potential buyer of a washing machine making a choice between a top loading machine and a front loading machine. F&P refers to the growth in imports of front loading washing machines (see discussion under Other Causes of Injury), as indicative of the substitutability of the machines. 2.1.20 F&P notes that both types of machines are sometimes advertised together. Other Relevant Matters 2.1.21 F&P notes that claimed capacities in Korea are not the same as those used on the New Zealand market due to the use of different standards in each market. F&P states that F&P model sizes 5.5kg, 6.5kg and 7.5kg, easily rate as 10kg under the Korean standard. Both front loading and top loading washing machines are classified under the same tariff item, but under different statistical keys. F&P considers that:
The imposition of a remedy against a top loading machine and not a front loading machine would result in the remedy failing to address the material injury caused by dumping because the prices of front loading machines from Korea would continue to depress the prices of top loading machines manufactured by F&P. This would only occur if top loading machines were not seen as like goods to front loading machines.

2.1.22 2.1.23

Conclusions Relating to Like Goods 2.1.24 2.1.25 The washing machines produced by F&P are not identical to the washing machines imported from Korea. F&P produces only top loading washing machines which, after weighing up similarities and differences in terms of physical characteristics, function and usage, pricing structures, marketing and distribution and tariff classification, have characteristics closely resembling top loading washing machines imported from Korea. F&Ps top loading machines possess similarities with imported Korean front loading machines in terms of production methods, many components, function and usage, pricing structures, marketing and distribution, and tariff classification. F&Ps top loading machines differ from imported Korean front loading machines in terms of appearance, some internal components and some aspects of consumer operation and perception. After weighing up these similarities and differences, the Ministry considers that F&Ps top loading machines have characteristics closely resembling front loading washing machines imported from Korea. On the basis of the information available, for initiation purposes, the Ministry considers that the washing machines produced by F&P, while not identical to the subject goods, have characteristics closely resembling the subject goods and are therefore like goods to the subject goods.

cases where the authorities determine that the margin of dumping is de minimis, or that the volume of dumped imports, actual or potential, or the injury, is negligible. The margin of dumping shall be considered to be de minimis if this margin is less than 2 per cent, expressed as a percentage of the export price. The volume of dumped imports shall normally be regarded as negligible if the volume of dumped imports from a particular country is found to account for less than 3per cent of imports of the like product in the importing Member, unless countries which individually account for less than 3 per cent of the imports of the like product in the importing Member collectively account for more than 7 per cent of imports of the like product in the importing Member.
The import volume figures in Table 2.1 above show that imports from Korea represented 11 percent of all imports in the year ended March 2000 and 28 percent of all imports in the 4 months to July 2000. On the basis of this information, imports of the subject goods from Korea are not negligible. NEW ZEALAND MARKET The following table shows the New Zealand market for washing machines and was prepared from Statistics New Zealand INFOS data provided by F&P. Figures for NZ industry sales are for only those washing machines produced in New Zealand. Table 2.2: New Zealand Market (Units) 2000 Korean Imports Other Imports Total Imports NZ Industry Sales NZ Market 6 42,174 42,39,749 40,437 5,729 48,054 53,783

2.4 2.4.1

4 Months to July 2000 5,813 15,134 20,947
Section 3(1) of the Act states:
Dumping, in relation to goods, means the situation where the export price of goods imported into New Zealand or intended to be imported into New Zealand is less than the normal value of the goods as determined in accordance with the provisions of this Act, and dumped has a corresponding meaning:

3.1 3.1.1 3.1.2

EXPORT PRICES Export prices are determined in accordance with section 4 of the Act. F&P advises that it does not have access to actual export prices and has therefore constructed export prices by starting with retail selling prices in New Zealand and making deductions to obtain estimated Korean ex-factory prices. F&P has provided constructed export prices for two Samsung top loading models (5.5kg and 6.5kg), three LG top loading models (4.5kg, 6.5kg, and 8.5kg), and two LG front loading models (both 7kg). F&P states that it has not endeavoured to calculate export prices for all models of washing machines imported from Korea as it has included only information for purposes of initiation which is reasonably available and is sufficient evidence of dumping. Retail Prices

F&P has provided recent advertised retail prices in New Zealand for each of the washer models. Copies of various retailers catalogues have been provided in support of Samsung 5.5kg prices in August and October 2000 and in support of Samsung 6.5kg prices in October 2000. Goods and services tax has been deducted from the retail selling prices. Samsung models have increased in price throughout the year. For purposes of initiation, calculations for Samsung models are based on October prices provided by F&P, which are significantly higher than earlier in the year and which, therefore, result in lower dumping margins and a more conservative approach to assessing whether there is sufficient evidence of dumping. Since it application, F&P has provided information showing that the retail price of the Samsung 5.5kg model increased in November 2000. An export price for this latest known price increase has also been calculated by the Ministry. F&P states that it has extensive knowledge of the costs of distributing imported product in New Zealand. F&P has made deductions from retail selling prices in New Zealand as described below. Retailers Margin
A retailers margin of ____ percent has been allowed for both Samsung and LG. F&P advises that this margin is based on an analysis of the margins taken by __________________________________________, on a sample
of washing machine models sold by ______ in June and October 2000. F&P provided details of this margin analysis in its application. Distributors Warranty 3.1.8 An amount of __ percent for distributors warranty costs has been allowed for both Samsung and LG. F&P states that this is the accepted figure for warranty provision in the whiteware business. Freight from Distributor to Retailer 3.1.9 Amounts of _____ percent and ____ percent have been allowed for Samsung and LG respectively. F&P has allowed a nominal amount for Samsung, for freight from wharf to distributor, as it states that the Samsung distributor, Noel Leeming, warehouses and ships to its own stores and the cost of freight is therefore covered by the retailers margin. F&P states that the freight cost for LG is based on its freight costs in Australia, ________________________ ______________________________________________________. F&P has deducted more for freight for goods distributed by Rankine as Rankine appears to have a more expensive overhead and distribution structure. Distributors Advertising 3.1.11 An amount of ___ percent has been allowed for advertising for both Samsung and LG. F&P states that it is an industry norm for distributors to contribute ___________ percent towards retail advertising. In addition, F&P states that distributors also advertise the brand generally and support retail promotions which makes up the remainder. F&P considers the amount allowed is probably conservative given the low volume of sales and the need for a certain dollar spend to have an impact. Distributors Selling and Administration Overhead 3.1.12 Amounts of _____ percent and ____ percent have been allowed for Samsung and LG respectively. F&P states that this cost is to cover local (New Zealand) sales representation and administration costs. F&P has made a lower deduction for Samsung as product is received directly by the retailer. F&P states that the figures are based on a conservative view of its known costs. Distributors Net Profit 3.1.13 An amount of _____ percent has been allowed for both Samsung and LG models. F&P states that This is a conservative estimate of the net profit that a distributor would expect to make for their role in the transaction. In support of this estimate, F&P has provided a copy of a report _________________ ____________________________________________________. Sea Freight Korea to New Zealand 3.1.14 F&P states that this is based on known costs for shipment of 40 foot, cube containers from Korea to New Zealand of US$______. F&P calculated the cost per washing machine on the basis of the number of equivalent models that are able to be fitted into this type of container. high has F&P The

258,353

287,059

3.2.15

The calculation of normal values for LG on the basis set out above is shown in the table below. Table 3.5: Normal Values LG
Top Loading Capacity (kg) Korean Model No. NZ Model No. 4.5 WFJ55N WFT452 6.5 WF-J85B WFT652 8.5 WF-WS133G WFT852
Retail Price (Won) Less Discount (__) Net Retail Price (VAT incl) Less VAT (10%) Net Retail Price (VAT excl) Less Retailer's Margin Price to Retailer Less Inland Freight (__) Less Warranty (__) Ex-factory Normal Value Front Loading Models 3.2.16

308,271

410,000

552,000

200,208

266,276

358,499
F&P states that a selling price in Korea for the two front loading LG models was not reasonably available. The two front loading models each have a 7kg capacity. For those two models, after discussion with the Ministry, F&P has used the normal value established for a Korean top loading domestic LG model, and, to obtain an estimated normal value for the higher specification model, has adjusted that value by the difference in New Zealand retail prices between lower and higher specification models. The retail selling price in New Zealand of LGs top loading 6.5kg model, $1,099, is the same as the retail price of the lower-specification 7kg front loading machine. It would seem reasonable, therefore, to use the normal value established for the LG top loading 6.5kg model for comparison with the lower specification 7kg front loading model. To assess a normal value for the higher-priced 7kg front loading model, it would also seem reasonable, given the limited information reasonably available to the applicant, to adjust the normal value of the lower-priced 7kg model by the relativity between the retail pricing of the two models in New Zealand. The calculation of normal values for LG, on the basis set out above, is shown in the table below. Table 3.6: Normal Values LG Top Loading Capacity (kg) 7.0 7.0 Korean Model No. WF-J85B WFWS133G NZ Model No. WD8050FH WD1021W Retail Price (Won) 266,276 302,620 Conclusion on Normal Values

3.2.17

3.2.18

3.2.19

The Ministry considers that, for purposes of initiation, the information provided by F&P is sufficient evidence of normal values for the subject goods.

3.3 3.3.1

COMPARISON OF EXPORT PRICE AND NORMAL VALUE F&P notes that it has calculated dumping margins on the basis of information reasonably available and states that information on other brands has not been available and estimates have not been made for all brands because sufficient evidence of dumping has been shown for initiation. F&P notes that its research indicates that models exported to New Zealand are not identical to models manufactured for the Korean market. In particular, F&P notes that claimed capacities in Korea are not the same as those used on the New Zealand market due to the use of different standards in each market. F&P states that the Korean standard (KS C9608-96) is based on the Japanese standard JISC 9606. F&P notes that this standard is based on an old wringer machine as the standard and is rather primitive. Capacity claims under this standard need to meet an electrical safety benchmark and the standard does not have a wash performance requirement. F&P states that F&P model sizes 5.5kg, 6.5kg and 7.5kg, easily rate as 10kg under the Korean standard. At the same time, F&P has attempted to take a conservative approach to the calculation of comparative normal values. For example, in calculating LG top loading normal values, F&P states The lowest domestic price has been used so that the normal value calculation is conservative. For example, a 10kg domestic model could be compared with the 6.5kg export model but this would result in a substantially higher dumping margin. F&P has compared New Zealand models of specific capacities with Korean domestic models with claimed capacities as follows: Table 3.7: Comparison of Capacities Capacity (kg) Samsung LG Models Model exported to NZ 6.5 4.5 6.5 Model sold in Korea 8.0 5.5 8.5

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.
F&P has provided Statistics New Zealand import volume figures for the March years 1998 to 2000, and the year-to-July 2000. Statistical keys for imports were amended in 1998 and comparative statistical keys are not available for 1997. The following table shows the volume of imports of the subject goods into New Zealand over the period 1998 to 2000 and for the four months to July 2000, and compares them with the New Zealand industrys production and consumption in the New Zealand market. Table 4.1: Import Volumes (Units) Korean Imports Other Imports Total Imports NZ Industry Sales NZ Market Change on Previous Year: Korean Imports Other Imports Total Imports NZ Industry Sales NZ Market Percentage Change: Korean Imports 6 42,174 42,39,749 40,437

2000 5,729 48,054 53,783

682 -2,425 -1,743

5,041 8,305 13,346

11367%
Other Imports Total Imports NZ Industry Sales NZ Market Korean Imports as % of: - NZ Industry Sales - Market 4.1.3

-6% -4%

21% 33%
Based on figures from April to July 2000, the applicant has estimated that, for the year ending March 2001 import volumes from Korea will reach 17,439 units. F&P transferred manufacture of its 6.5kg model to Australia in February 1999. The New Zealand market has been supplied by F&P from Australia with its 6.5kg machine since March 1999. A small volume of Australian-made 6.5kg machines is included in the NZ industry sales figures for 1999. The figures in the table show that in the year to 31 March 2000, and in the four months to 31 July 2000, imports of the subject goods increased significantly in absolute terms and relative to production and consumption in New Zealand. F&P also provided separate figures for imports of top loading and front loading washing machines and notes that, while imports of both types of washing machine increased, the main effect of the dumped imports has been driven by top loading imports. There is evidence that import volumes of the subject goods have increased significantly in absolute terms and relative to production and consumption in New Zealand. PRICE EFFECTS Price Undercutting Section 8(2)(b) of the Act provides that the Chief Executive shall have regard to the extent to which the prices of the dumped or subsidised goods represent significant price undercutting in relation to prices in New Zealand (at the relevant level of trade) for like goods of New Zealand producers.

Sales Volume 4.3.1.4 F&P states that its strategy in meeting price undercutting by the dumped goods "is to protect volume sales as much as possible". The following table shows volumes of units sold by the New Zealand industry. Table 4.7: Volume of Sales (Units) Months to July 2000 F&P 4.3.1.5 The New Zealand market has been supplied by F&P from Australia with its 6.5kg machine since March 1999. A small volume of Australian-made 6.5kg machines is included in the NZ industry sales figures for 1999. Interpretation of trends in the above table is difficult because it is not possible from the table figures to identify the extent to which the decline in sales in 1999 is due to F&P ceasing production in New Zealand of its 6.5kg model. F&P provided sales figures, therefore, that exclude 6.5kg washing machines and these are included in the following table. Table 4.8: Volume of Sales (Units - Excluding 6.5kg) Months to July 2000 F&P 4.3.1.7 The table shows that sales increased significantly in 1999 and returned to the 1998 level in 2000. If the figure for four months is annualised, the annual figure shows that sales for 2001 are static. F&P has estimated its sales for the year ended March 2001 on the basis of the expectation that some volume loss is inevitable given the extent of price undercutting. F&P has estimated sales of _____ for 2001, which represents a significant decline from the sales volume in 2000. F&P states that This forecast of the threat of loss of sales has taken into account the provisions of Article 3.7 of the Agreement: - A significant rate of increase of dumped imports into the domestic market indicating the likelihood of substantially increased importation. - Increased demand through the price depressing and suppressing effect of the imports. 4.3.1.9 F&Ps forecast sales volume is based on sales of ________________ ______________________________________________________________ ______________________________________________________________ _____________________________________. F&P notes that the forecast effect of the loss of volume due to dumping is understated ___________ ______________________________________________________________ _____________. F&P states that the volume impact of the dumping ___________________ _______________________________ in particular are forcing prices in the market to where F&Ps forecast sales revenue is no longer sufficient to

4.3.1.6

4.3.1.8

4.3.1.10

generate an acceptable EBIT. F&P provided sales volume figures for each washing machine capacity. These show that sales of _____ machines have declined significantly since 1998. Annualisation of the figures for the four months to July 2000, indicates that sales of _____ machines will decline slightly, sales of _____ machines will increase and sales of _____________ machines will remain relatively static. 4.3.1.11 There is no evidence of an overall actual decline in the industrys sales volume. F&P has forecast a sales volume decline for the year 2001 but detailed calculations have not been provided in support of that forecast. Sales Revenue 4.3.1.12 4.3.1.13 F&P advises that, as a result of the imports, it has been regularly discounting prices to dealers _________________________________________. To overcome the problem of interpretation of trends caused by inclusion of 6.5kg washing machines, F&P has provided the sales revenue figures for washing machines excluding 6.5kg machines. The following table shows that sales revenue has remained relatively steady from 1998 to July 2000. Table 4.9: Sales Revenue (Units - Excluding 6.5kg) 2000 F&P 4.3.1.14 F&P has estimated sales revenue for the year ended March 2001 to be _____________________________________________. This represents a significant decline in sales revenue. F&P states that _______________ ______________________________________________________________ ______________________________________________________________ ______. The Ministry has also examined figures provided by F&P in respect of each capacity of washing machine. These show that sales revenue from _____ machines has declined significantly since 1998. Annualisation of the figures for the four months to July 2000, indicate that sales revenue from _____ machines will decline slightly, sales revenue from _____ machines will increase slightly and sales revenue from ____________ machines will increase slightly. There is no evidence of an overall actual decline in the industrys sales revenue. F&P has forecast a sales revenue decline for the year 2001 but detailed calculations have not been provided in support of that forecast. Market Share The analysis of market share must take account of changes in the growth of the market as a whole. A decline in the share of the market held by the domestic industry in a situation where the market as a whole is growing will not necessarily indicate that injury is being caused to the domestic industry, particularly if the domestic industrys sales are also growing. The table below shows actual market share and changes in market share.

4 Months to July 2000

4.3.1.15

4.3.1.16

4.3.2 4.3.2.1

4.3.2.2

Table 4.10: Market Share (Units) NZ Market NZ Industry Sales Korean Imports Other Imports % Share Held By: NZ Industry Sales Korean Imports Other Imports 4.3.3

Months to July 2000

6 42,174

688 39,749

5,729 48,054

5,813 15,134

The figures in the table show that market share held by the New Zealand industry fell significantly in the year ended March 2000, and has declined further in the four months to July 2000. The Ministry notes that F&P transferred manufacture of its 6.5kg washing machines from New Zealand to Australia in February 1999, and a decline in New Zealand industry sales and market share in the year ended March 2000 is to be expected. F&Ps market share for machines other than 6.5kg is shown in the following table. Table 4.11: Market Share (F&P Units - Excluding 6.5kg) Months to July 2000 F&P Sales F&P Market Share
The table shows that F&Ps market share increased slightly in 1999, decreased slightly in 2000 and declined in the first four months of 2001. There is evidence of a slight decline in market share in 2000 and a decline in the first four months of this year. On the basis of F&Ps forecast sales volume in 2001, market share would fall significantly to __ percent. However, as noted above in considering sales volume, detailed evidence has not been provided in support of the forecast sales. Nor has detailed evidence been provided in support of a growth in the size of the market. F&P states that in the absence of dumping F&P would be in a position to share in the growth of the market through maximising and enhancing its very strong brand. There is sufficient evidence that the New Zealand industry has experienced some decline in market share. 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.

4.3.8 4.3.9 4.3.9.1

4.3.9.2
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. The table below shows an analysis of the earnings before interest and tax achieved for washing machines. Table 4.12: Earnings Before Interest and Tax (Units NZ$) Months to July 2000 EBIT on all NZ Sales - Per Unit - As % of Revenue EBIT (Excluding 6.5kg) - Per Unit - As % of Revenue

4.3.15 4.3.15.1 4.3.16 4.3.16.1

4.3.16.2

4.3.17 4.3.17.1

4.3.17.2 4.3.17.3

4.3.18 4.3.18.1

4.3.18.2

4.3.18.3
F&P advises that it employs ___________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ _______________.

4.3.18.4

The Ministry notes that F&P announced in November 2000 that its whiteware division was being reorganised from a divisional to a centralised structure involving a staff reduction of 200. Any investigation will need to examine the extent to which such employment reductions are due to dumped imports. 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
F&P notes that prior to the alleged dumping, imports from Australia provided F&P with the level of competition normally expected between suppliers but price undercutting by the dumped goods has caused Australian suppliers to reduce their prices to meet the dumped Korean price. F&P notes that automatic washing machines are also imported into New Zealand from Australia, Germany, Italy, Sweden and the United States. Import volumes of imports from countries other than Korea are shown above in Table 4.10 which shows that imports from other countries declined in 1999, increased significantly in 2000 and in the four months to July 2000 appear to have declined. Market share held by imports from other countries declined in 1999, increased significantly in 2000 and declined in the four months to July 2000 towards the 1998 level. The decline in market share held by imports from other countries in the latest four months coincides with an increase in market share for imports from Korea. F&P commenced manufacture of its 6.5kg model in Australia in 1999 and, consequently, the increase in imports from other countries in 2000 is due mainly to F&P imports from Australia. Removal of F&Ps imports from Australia show that imports from other countries declined from _____ units in 1998 to _______ units in 1999 and _______ units in 2000. The evidence indicates that imports from other countries have not had an impact on the industry in volume terms. Changes in Demand or Patterns of Consumption

F&P is nevertheless significantly constrained by its competitors. It has lost significant share of the market as a result of tariff and import barriers being removed; it is facing fierce competition in the marketplace because normal barriers to entry are low and there are now no longer any artificial barriers to entry, at least for Australian imports. In the absence of unofficial barriers to entry, EDC (exclusive dealing clause) can have positive pro-competitive effects on a market.

4.4.14

4.4.15
F&P notes that _________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________. Any investigation should examine whether F&Ps exclusive dealer policy has been a cause of injury to F&P. Forward Exchange Rate Cover

4.4.16

4.4.17
The Ministry is aware of comment by various parties reported in the media, that F&P has suffered injury through not obtaining forward exchange rate cover for the cost of imported materials used in manufacturing process. Any investigation should examine whether exchange rate cover issues have been a cause of injury to F&P. CONCLUSIONS RELATING TO INJURY There is evidence that import volumes of the subject goods have increased significantly in absolute terms and relative to production and consumption in New Zealand.

4.4.18

4.5 4.5.1

4.5.2 4.5.3 4.5.4 4.5.5

There is sufficient evidence that prices are being undercut, and that prices are being suppressed. There is insufficient evidence of price depression. There is sufficient evidence that there has been a consequent economic impact in the form of a decline in profits. There is no evidence of an overall actual decline in the industrys sales volume and revenue. The industry considers there is no evidence that factors other than dumping have contributed to the injury suffered by F&P but other parties have commented in the media that F&Ps exclusive dealer arrangement and forward exchange contracts (or lack of forward exchange contracts on import costs) have had an adverse impact on F&P.

CONCLUSIONS

On the basis of the information available, it is concluded that, for the purposes of initiation, there is sufficient evidence that: (a) (b) Automatic washing machines from Korea are being dumped; and By reason thereof material injury to the New Zealand 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 automatic washing machines from Korea are being dumped and are causing or threatening to cause material injury to the New Zealand industry producing like goods; that the Chief Executive sign the attached Gazette notice, and give notice to interested parties in accordance with section 9 of the Act.
... Investigating Team Trade Remedies Group

F&P stated in its application that the material injury resulting from the importation of the allegedly dumped washing machines commenced in the April July 2000 period.

Final Report

Non-Confidential
It should be noted that the Ministry approaches investigations on the basis that injury and threat of injury are alternatives, i.e. an industry is either injured or threatened with injury, but both cannot apply at the same time. INTERESTED PARTIES New Zealand Industry
The application was lodged by F&P, the only producer of household automatic washing machines in New Zealand. F&P is a wholly owned subsidiary of the listed company Fisher & Paykel Industries Ltd. Exporters
Due to the number of companies identified from New Zealand Customs Service (NZCS) information as exporting the subject goods over the period of investigation (the year ending 31 October 2000), and in accordance with Article 6.10 of the WTO Agreement on the Implementation of Article VI of the GATT 1994 (the Agreement) the investigation has been limited to those exporters representing the top 99 percent of imports by volume over the period of investigation. These exporters are: Samsung Electronics Co Limited (Samsung), LG Electronics Inc (LG), and Daewoo Electronics Co Limited (Daewoo) All other exporters of the subject goods from Korea during the period of investigation had the opportunity to provide submissions but these were not directly solicited.
None of the exporters identified above has provided the investigating team with a response to its questionnaire. A joint submission was received from Davenports West (Davenports) an Auckland based firm of solicitors acting on behalf of all three exporters, in which various matters of interpretation and process are addressed. The submission made by Davenports is also on behalf of the Electronic Industries Association of Korea (EIAK). No further information regarding this organisation has been provided. The tenor of the submission by Davenports is that, due to the factors they have identified, the investigation itself is invalid and should be immediately terminated. Where relevant, these matters are discussed in this report. Importers
The companies identified from the NZCS information as importing the subject goods from the above 3 exporters over the period of investigation are: LM Rankine Trading Co Ltd (LM Rankine) Email Appliances (NZ) Ltd (Email) Radiola Corporation Ltd (Radiola) Eurolife Ltd (Eurolife)
Washing Machines from Korea
Submissions have been received from each of these importers and their content is, as appropriate, reflected in this report. L M Rankine Trading Co Ltd
LM Rankine is a 100 percent New Zealand-owned importer and wholesaler of whiteware. The company is located in Wellington and sales are made by a __________________________________________________________. LM Rankine sources its Korean produced washing machines from LG. LM Rankines major customer is ________________________________ and it also supplies _________ and ________________________. ___________ ______________________________________________________________ __________________________________________________. LM Rankine provided a full submission in response to the importers questionnaire and is represented in this investigation by Chen Palmer and Partners (Chen Palmer) a Wellington based firm of barristers and solicitors. In addition to the questionnaire response, the LM Rankine submission raises a number of queries regarding aspects of the initiation of this investigation and of the information contained in the F&P application. Where they are germane, these matters are addressed in this report. LM Rankine also provided a further submission just prior to the issuing of the ef&c that covered a wide range of issues. The issuing of the ef&c was delayed in order to take this submission into account. This submission is also addressed in this report. Email Appliances (NZ) Ltd

1.6.44

1.6.45

1.6.46

1.6.47

1.6.48

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 fully automatic washing machines with a dry linen capacity not exceeding 10kg, the capacity determined by standard AS/NZS2040.
At the time the ef&c was provided to interested parties, the consideration of like goods was the subject of a separate report that was also provided to all interested parties. Submissions in relation to like goods in response to the ef&c have been received from Davenports and LM Rankine. In order to place those submissions in the context of the separate report, that report has now been incorporated in this final report. F&P produces the following washing machines in New Zealand: GW509 Smart drive 5.5kg, top loader with stainless steel bowl and delay start time. GW709 Smart drive 7.5kg, top loader with stainless steel bowl and delay start time.

2.1.5 2.1.6

MW059 Pride 5.5kg, top loader with stainless steel bowl. Intuitive IWL10 8kg top loader with stainless steel bowl, delay start time and fabric sensing Intuitive 7.5kg, top loader with stainless steel bowl, delay start time and fabric sensing. Intuitive 5.5kg, top loader with stainless steel bowl, delay start time, fabric sensing.
F&P imports its 6.5kg washing machine from its Cleveland plant in Australia where it has been manufactured since February 1999. Over the period of investigation, washing machines of the following sizes falling within the definition of the subject goods have been imported into New Zealand. Top Loaders (in kg): 4.5, 5.5, 6.5, 7.0 and 8.5 Front Loaders: (in kg): 5.0 and 7.0

3.1.2 3.2 3.2.1

Base Prices 3.2.2 The actual transaction values for all shipments made by LG, Samsung and Daewoo over the period of investigation were used as the base price for export price calculations. This information was provided by the importers in their respective submissions. Samsungs sales to its importer Radiola were invoiced in ____________ __________ on a Free On Board (FOB) basis. ________, Daewoo invoiced its sales to Eurolife in US dollars on a FOB basis. LGs sales to LM Rankine and Electrolux were invoiced in US dollars on an _________ and in ________ ___________________ basis respectively. The exchange rates used are the
interbank rates at the date of the invoice as listed by the OANDA currency conversion site on the internet (http://www.oanda.com/converter/classic). Adjustments Ocean Freight 3.2.4 LGs sales to Electrolux were in ___________________. Electrolux provided information on its combined _________________________ charges but did not separately identify the cost of __________. To establish the cost of ____ ______, an amount for _______, based on information provided by F&P, was deducted from the combined _______________ cost. Inland Freight 3.2.5 A deduction of ___ percent, based on information provided by F&P in its application, was made to the base price to account for cost of inland freight from factory to wharf. Port Services Charge 3.2.6 F&P did not provide any information relating to port services charges in Korea and this information is not known to the New Zealand importers. An adjustment of _ percent was therefore made based on verified information obtained from Korean suppliers in the recently completed Lead Acid Batteries review. The port services charge includes wharfage, brokerage, fumigation and terminal handling charges. Total Adjustments 3.2.7 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 adjustment noted above for ocean freight, inland freight and port services charge have been deducted from the ___ base prices established for LG. NORMAL VALUES Introduction 3.3.1 3.3.2 Normal values are determined in accordance with section 5 of the Act, which provides, inter alia, as follows: Section 5 provides, inter alia:
(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

4.1.17

4.1.18

4.1.19

The following table shows the volume of dumped imports into New Zealand and compares them with the New Zealand industrys sales and the total New Zealand market. Imports from Australia are separately identified for reference purposes in later discussion. Dumping was established for imports of the subject goods from Korea for the year ended 31 October 2000. As recorded in section 3 above, 100 percent of imports from Korea were found to be dumped over this period. For the purposes of the table below, for periods outside of the year ended 31 October 2000, it has been assumed that the same proportion of imports from Korea were dumped. Table 4.1: Import Volumes (March Years) Dumped Imports Imports from Australia Other Imports Total Imports NZ Industry Sales NZ Market Change in: - Dumped Imports - Imports from Australia - Other Imports - Total Imports - NZ Industry Sales - NZ Market Dumped Imports as % of: - NZ Industry Sales - NZ Market 9 29,416 13,063 42,488 ______ ______ 698 32,261 6,862 39,821 ______ ______ 689 2,845 -6,201 -2,667 ______ ______ ______ ______ ______ ______
2000 5,731 38,841 9,198 53,770 ______ ______ 5,033 6,580 2,336 13,949 ______ ______ ______ ______

______ ______

This analysis shows that imports of the subject goods increased significantly in absolute terms in 2000 and April December 2000. Imports in April December 2000 were significantly greater than the volume of imports for all of 2000. Relative to the New Zealand industrys sales and the total New Zealand market, imports of the subject goods also increased significantly in 2000 and April December 2000, the subject goods more than doubling their proportion of New Zealand industry sales and the total market from 2000 to April December 2000. Since the ef&c was completed, F&P has provided an update of its financial data to 31 March 2001. For the full year ended 31 March 2001, dumped imports totalled 11,574 units and represented __ percent of the New Zealand industrys sales and __ percent of the total New Zealand market.
Conclusion 4.2.6 Import volumes of the dumped goods from Korea increased significantly in absolute terms and relative to production and consumption in New Zealand in YEM 2000, April December 2000 and in the YEM 2001. PRICE EFFECTS Price Undercutting Section 8(2)(b) of the Act provides that the Chief Executive shall have regard to the extent to which the prices of the dumped or subsidised goods represent significant price undercutting in relation to prices in New Zealand (at the relevant level of trade) for like goods of New Zealand producers. Introduction 4.3.1.1 In considering price undercutting, the Ministry will normally seek to compare prices at the ex-factory and ex-importers store levels, to ensure that differences in distribution costs and margins do not confuse the impact of dumping. The present investigation is somewhat different from a normal situation in that sales are generally on an ex-warehouse basis. Details of the distribution systems and the basis on which sales are made are described below for F&P and each of the importers. The point at which prices are compared, resulting from the distribution and sales process is also recorded below for each importer. Non-Injurious Price 4.3.1.3 In carrying out a comparison of prices to establish the extent of any price undercutting, it is necessary to establish the unsuppressed price at which the New Zealand industry can sell its product. The unsuppressed selling price refers to the price achievable in the absence of dumped product in the New Zealand market. The New Zealand industrys unsuppressed selling price is normally referred to as its non-injurious price (NIP). Establishing the level of the NIP is significant because any remedy at less than the margin of dumping would be set at a level designed to ensure that the imported product does not undercut the New Zealand industrys NIP. F&P has submitted that its average selling prices over the year ended 31 October 2000 have been suppressed and therefore any price undercutting comparison using these prices will understate the level of price undercutting. F&P has noted that while it increased its prices in October 2000 only a small part of this increase (one month) will be reflected in the average prices for the year ended October 2000. The investigating team agrees there has been price suppression (see below) and therefore considers the calculation of a NIP is appropriate in this case. F&P has provided a submission relating to the calculation of its unsuppressed selling prices and this is summarised below. F&P said that __________________________________________________ ______________________________________________________________

4.3.1.10

4.3.1.11

4.3.1.12

should adjust the EBIT from YEM 1998 to account for subsequent cost savings so that a more representative EBIT is obtained. F&P said it chose YEM 2000 as the benchmark year as _______________________________ _____________________________________________________. F&P said ____________________________________________ despite the increased volumes of dumped washing machines which did have some impact on its business. 4.3.1.13 F&P said that by taking an average EBIT the Ministry is wrongly assuming that the business is unable to repeat the YEM 2000 result, which F&P claims was understated following the substantial increase in imports that year. F&P said that this is not to say that the Ministry should ignore YEM 2000 as a benchmark because of the effects of dumping. F&P said it had referred to the growth in imports to identify the constraints on its EBIT in YEM 2000 so that the YEM 2000 result is not seen as an _____________ result that needs to be _______________ by averaging. F&P said that by ignoring YEM 2000 as the benchmark year [in the ef&c] the Ministry has failed to answer the obvious question: "What reasons, apart from the dumping, would prevent F&P from continuing with the YEM 2000 EBIT ratios?. Ministrys Consideration of the Issues 4.3.1.14 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 recent periods not affected by dumping are the YEM 1998, 1999 and 2000 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. F&P does not have available its average selling prices on a model by model basis for the YEM 1998, 1999 and 2000 (although this information is available on size of machine basis). 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. The investigating team notes that F&Ps profits have fluctuated over YEM 1998, 1999 and 2000 (as have its average selling prices). F&P has claimed that YEM 2000 should serve as a benchmark year particularly because that year reflects _______________________________ ____. In response to the ef&c F&P has pointed out that the ______________ _____________________________ 1999 although the _________________ _____________________ YEM 2000. F&P has also argued that by taking an average across 3 years, the investigating team is wrongly assuming that its business is unable to repeat the YEM 2000 result and has asked what

4.3.1.33

4.3.1.34

4.3.1.35

4.3.1.36
outside dimensions of the machine to remain the same size and the volume of washing to be increased by 2kg due to the absence of the agitator. Eurolife said this allowed a normal 5kg model to become a 7kg machine without any change in external size. Eurolife said that this immediately gave it an advantage in the market place as at the same price it takes to produce a 5kg machine it now has a 7kg machine. Eurolife said through technology it has a price advantage over an outdated machine. Eurolife submitted that the Ministry could not therefore compare a 7kg F&P machine with a 7kg Daewoo machine, as through its older technology the F&P machine needs to be bigger in outside dimensions to achieve a 7kg capacity and is more expensive to manufacture. Eurolife said that its Advanced 7kg machine is the same externally as a F&P 5kg machine and should be compared as such. 4.3.1.37 F&P has provided a submission in response to the Eurolife submission outlined above. F&P has submitted that Eurolifes argument is not valid. F&P has provided a comparison of the external dimensions of the Advance 7kg machine with those of F&Ps 5.5, 6.5, 7.5 and 8kg machines. This comparison shows that the Advance 7kg machine is larger than the F&P 5.5kg machine and is between the F&P 6.5kg and 7.5kg machines in size. F&P provided exerts from the instruction manual of the Advanced washer which show the dimensions of the Advanced washer used in the comparison. F&P said that factors other than size (e.g. soil removal) determine the rated capacity of washers in New Zealand. F&P also said it strongly refutes Eurolifes claim that its washers use old technology and said its washers were state-of-the-art. F&P said that impellers are not a recent development and noted that they were used in Hoover twin tub machines, which were on the New Zealand market over 25 years ago. Ministrys Consideration of the Issues 4.3.1.39 The comparison of features between the F&P and imported washing machines 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 is uncertain if quantifying differences in production costs would have been a practical proposition. LM Rankine, in response to the ef&c 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.

4.3.1.67

Table 4.3: Price Undercutting: Samsung Imports by Radiola ExF&P Warehouse Model Price MW059 SW55APP _____ 5.5kg 5.5kg Top loader Top loader GW5091 SW65ASP _____ 6.5kg 5.5kg Top loader Top loader _____ GW509 SWFP10 5kg 5.5kg Front loader Top loader
ExUnder- % F&P Warehouse cutting Price NIP _____ _____ _____

4.3.1.68

The table shows the same pattern of undercutting as that found using F&Ps actual average prices, i.e., the Samsung models are undercutting the equivalent F&P model in 2 out of 3 cases. LG Electronics Ltd LM Rankine Trading Co Ltd

4.3.1.69

LM Rankine advised that it markets direct to retailers and that distribution is carried out by __________________________________________________ _________________________________. The investigating team considers the point of comparison is between F&P ex-warehouse and LM Rankine exwarehouse prices. 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 and noted that in some months no imports were made. LM Rankine considered that if it had attempted to reconstruct a single build-up 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.

4.3.1.70

4.3.1.71

4.3.1.72

4.3.1.73
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 it ______________ 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 4.4: Price Undercutting: LG Imports by LM Rankine ExF&P Model Warehouse Price MW0591 WF-T 452 _____ 4.5kg 5.5kg Top loader Top loader GW5092 WF-T 652 _____ 6.5kg 5.5kg Top loader Top loader IWL10 WF-T 852 _____ 8.5kg 8kg Top loader Top loader WD 1021W _____ GW709 7kg 7.5kg Front loader Top loader GW709 WD 8050FH _____ 7kg 7.5kg Front loader Top loader

4.4.29

4.4.30
Davenports, in response to the ef&c, said that the Ministry did not sufficiently examine the impact on F&Ps profit for April December 2000 caused by the depreciation of the NZ dollar against the US dollar. Davenports said that the NZ dollar depreciated almost 20 percent against the US dollar from 1 April to 31 December 2000. Davenports submitted that the Ministry approached this depreciation only in terms of F&Ps exporting business and no consideration was given to the relationship between the depreciation of the NZ dollar and F&Ps profits. Davenports said that F&P imports a significant number of parts from other countries for the purpose of assembling its finished products. Davenports said that F&Ps business is therefore very vulnerable to exchange rate fluctuations. Davenports said that as the NZ dollar depreciates its costs increase and consequently its profits decline. Davenports said that F&Ps comments on its results for the 6 months ended September 2000 recognised that the erosion of earnings was attributable to a continued fall in the value of both the NZ and Australian dollars that increased the cost of overseas sourced materials. Davenports said that F&P reported that its EBIT margin for the whiteware segment reduced from 5.3 to 3 percent. Davenports submitted that considering the cost increase of overseas sourced materials owing to a 20 percent NZ dollar depreciation against the US dollar, this accounts for the 2.2 percent reduction in EBIT margin, without attributing it to other sources. It is unclear to the investigating team why an improvement in EBIT in the YEM 2000 should mean that there was no decline in EBIT over the period under review. As noted above, the improvement in EBIT in the YEM 2000 can be attributed to efficiency gains and could serve as a new benchmark profit rate against which subsequent performance could be measured. When the EBIT for April December 2000 and the YEM 2001 is measured against the result achieved in the YEM 2000 the decline in EBIT is particularly marked. Even if the EBIT recorded in all 3 previous years is used as a benchmark, the EBIT for the YEM 2001, in total, per unit and relative to sales, is significantly below that achieved in the 3 previous years. The investigating team has examined movements in the NZ dollar to US dollar exchange rate. The following is the NZ to US dollar inter-bank exchange rate taken from the OANDA internet currency converter (www.oanda.com/converter/classic) at 3 monthly intervals over the period under review: 1 April July October January April July October January April July October January April July October 2000 0.6970 0.6797 0.6424 0.5810 0.5499 0.5212 0.5034 0.5265 0.5356 0.5356 0.5174 0.5242 0.4970 0.4696 0.4133

4.5.37

4.5.38

4.5.39

The investigating team has _________________ based on a profit of ___ percent, on the basis of the cost data provided by Radiola for each of the 3 quarters for which information was provided, for the 2 models examined. The ______________________________________________________________ ____________________________________. On this basis the __ ______________________________________________________________ _________. Both of these _______________________________________ _____. On this basis it is still possible to attribute injury through the dumping of the goods. Even if the ________________________________________________ of the equivalent F&P models, the investigating team doubts if this would form a basis on which to attribute injury to factors other than dumping. The price at which Radiola purchased the goods was a dumped price (the dumping margins being significant) and would have contributed to the decision to purchase those goods, even if those goods were then to be ______________ ___________________. It is also difficult to draw any firm conclusions on the basis of _____________________________________. To allow evidence on this basis would be an invitation to parties to endlessly postulate what _____ __________ would have been had circumstances been different. The investigating team notes that there is no evidence to suggest that Radiola ______________________________________________________________ _____________________________________________________________. The investigating team does not therefore consider that the purchase of the goods by Radiola should be _______________________________________ _____________________. Exclusive Dealer Arrangements Submissions by F&P

4.5.40

4.5.41

4.5.42

In its application F&P stated that it operates Exclusive Dealer Arrangements (EDA) with 259 of the 625 retail outlets known to F&P in New Zealand. In its application for the investigation F&P noted that in 1990 it appealed against a Commerce Commission decision that ruled against the EDA and was successful in demonstrating that the EDA did have positive competitive effects. F&P cited the following from the High Court judgement:
F&P is nevertheless significantly constrained by its competitors. It has lost significant share of the market as a result of tariff and import barriers being removed; it is facing fierce competition in the marketplace because normal barriers to entry are low and there are now no longer any artificial barriers to entry, at least for Australian imports. In the absence of unofficial barriers to entry, EDC (exclusive dealing clause) can have positive pro-competitive effects on the market.

4.5.60

4.5.61

4.5.62

4.5.63

4.5.64

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.

4.5.65

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, has discriminated against consumers and constrained their opportunity to purchase on the basis of free choice and diversity of product, and has acted as a barrier to innovation. LM Rankine has submitted that these negative consequences have produced a significant counter response by retailers, with the formation of multi-brand stores that have marketed very aggressively. LM Rankine has stated: This aggressive response has, in its own right, now bounced back on Fisher & Paykel and is a major explanation for the pressures they are now encountering. LM Rankine said that only a small number of multi-branded stores are able to offer a wide range of washing machines. LM Rankine provided a list of its estimate of the number of retail outlets stocking F&P washing machines and those stocking washing machine brands imported from Korea. The list shows ___ outlets for F&P washing machines and ___ for brands imported from Korea. LM Rankine considers that this estimate more fairly reflects the comparative number of outlets than the numbers provided by F&P. LM Rankine said that to its knowledge New Zealand is the only country in the world where a substantial portion of the market is controlled under an exclusive dealing arrangement such as that operated by F&P. LM Rankine

14. ANTI-DUMPING AND COUNTERVAILING DUTIES (1) At any time after the Minister makes a final determination under section 13 (1) of this Act in relation to goods, the Minister may give notice of the rate or amount of duty determined under subsection (4) of this section (which notice may be given simultaneously with, or at any time after, the notice given under section 13 (2) of this Act) and there shall, with effect on and from the applicable date referred to in section 17 of this Act, be imposed, (a) In respect of those goods that are dumped, a duty to be known as antidumping duty: (b) In respect of those goods that are subsidised, a duty to be known as countervailing duty. (2) Anti-dumping duty or countervailing duty, as the case may be, imposed under subsection (1) of this section, shall be collected and paid on the demand of the Customs on and from the day after the date on which the notice under subsection (1) of this section is published in the Gazette. (4) The anti-dumping duty or countervailing duty in the case of goods to which this section applies shall be a rate or amount determined by the Minister, (a) In the case of dumped goods, not exceeding the difference between the export price of the goods and their normal value; and (b) In the case of subsidised goods, not exceeding the amount of the subsidy on the goods. (5) In exercising the discretion under subsection (4) of this section, the Minister shall have regard to the desirability of ensuring that the amount of anti-dumping or countervailing duty in respect of those goods is not greater than is necessary to prevent the material injury or a recurrence of the material injury or to remove the threat of material injury to an industry or the material retardation to the establishment of an industry, as the case may require.

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 no price undercutting by any of the subject goods, indicating that anti-dumping duty at less than the margin of dumping should be imposed. The method by which this should be done and the amount of anti-dumping duty, is discussed below. 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.

373.64

The Samsung category 2 and 3 NIFOB was based on annual cost information provided by ___________________________________________________ ______________________________________________________________ ______________________________________________________________ _______. Table 6.9: NIFOB for Samsung - Category 2 (4.6 - 5.5kg) F&P ex-factory NIP Less costs and Margin after FOB to Ex-Warehouse _____ - Overseas Freight - Overseas Insurance _____ _____ - Customs Duty - Port Clearance Fees _____ - Cartage to Store _____ _____ - Devanning Fees - Other Import Costs (Bank Fees) _____ _____ - Selling and Admin Costs - Store Costs _____ _____ - Reasonable Profit Margin Category 2 NIFOB NZ$/Unit _____ _____

503.36

Table 6.10: NIFOB for Samsung - Category 3 (5.6 - 6.5kg) NZ$/Unit F&P ex-factory NIP _____ _____ Less costs and Margin after FOB to Ex-Warehouse - Overseas Freight _____ _____ - Overseas Insurance - Customs Duty _____ - Port Clearance Fees _____ _____ - Cartage to Store - Devanning Fees _____ _____ - Other Import Costs (Bank Fees)
- Selling and Admin Costs - Store Costs - Reasonable Profit Margin Category 3 NIFOB 6.3.21

_____ _____ _____ 616.98

Samsung did not export washing machines in category 4 over the period of investigation. The Samsung category 4 NIFOB was based on the weighted average category 4 NIFOBs for LG and Daewoo, weighted on the volume of exports by the two companies in category 4. The following table shows the Samsung category 4 NIFOB calculation. Table 6.11: NIFOB for Samsung - Category 4 (6.6 - 7.5kg) $NZ LG Category 4 NIFOB _____ Daewoo Category 4 NIFOB _____ Samsung Category 4 NIFOB 604.62

6.3.22

As Samsung does not export washing machines to New Zealand in category 5, the annual cost information used to calculate the LG category 5 NIFOB was used to calculate the Samsung category 5 NIFOB. The reasonable weighted average profit margin of __ percent was added to the annual cost figure. The following table shows the calculation of Samsung category 5 NIFOB. Table 6.12: NIFOB for Samsung - Category 5 (7.6 - 10kg) NZ$/Unit _____ F&P ex-factory NIP Less costs and Margin after FOB to Ex-Warehouse _____ _____ - Overseas Freight _____ - Overseas Insurance _____ - Customs Duty _____ - Port Clearance Fees - Cartage to Store _____ - Devanning Fees _____ _____ - Other Import Costs (Bank Fees) - Selling and Admin Costs _____ _____ - Store Costs - Customs Clearance Fees _____ - Documentation Fee _____ _____ - Reasonable Profit Margin Category 5 NIFOB Daewoo Electronics 764.19

6.3.34

6.3.36

6.3.37

It is recommended on the basis of the information obtained during the course of the investigation into dumping of washing machines from Korea: 1. That the Minister determine pursuant to s.13 of the Dumping and Countervailing Duties Act 1988 that in relation to the importation or intended importation of washing machines from Korea into New Zealand: (a) (b) 2. the goods are being dumped; and by reason thereof material injury to an industry has been 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 washing machines 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 Minster 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 Minster sign the attached Gazette Notice, and give notice of the final determination and imposition of duties to interested parties in accordance with sections 9, 13 and 14 of the Act.
. Investigating Team Trade Remedies Group