MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

(Directorate General of Anti-Dumping and Allied Duties)

NOTIFICATION

New Delhi, the 14th December, 2001

PRELIMINARY FINDINGS

Subject:—Anti-dumping Investigation concerning Imports of the Flexible Slabstock

Polyol of molecular weight 3000 to 4000 originating In or exported from

tht USA, Japan, European Union and Singapore—Preliminary findings.

No. 41/1/2001 -DGAD.— Having regard to the Customs Tariff Act, 1975

as amended in i995 and the Customs Tariff (Identification,

Assessment and Collection of Anti Dumping Duty on Dumped Articles

and for Determination of Injury) Rules, 1995, thereof;

PROCEDURE

The procedure described below has been followed:-

The Designated Authority (hereinafter referred to as Authority),

under the above Rules, received a written petition from M/s

Manali Petrochemicals Ltd. (MPL), on behalf of the domestic

industry, alleging dumping of Flexible Slabstock Polyol of

Molecular Weight 3000 to 4000 (hereinafter referred to as

subject goods or FSP) originating in and exported from USA,

Japan, Singapore and territory of European Union (hereinafter

referred to as subject countries);

ii)

The Authority notified the Embassies/Representative of the

subject countries in India about the receipt of dumping

application made by the petitioner before proceeding to initiate

the investigation in accordance with sub-rule (5) of Rule 5

supra;

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART I—SEC. 1]

iii)

The Authority issued a Public Notice dated 21^st September,

2001 published in the Gazette of India, Extraordinary, initiating

anti dumping proceedings concerning imports of Flexible

Slabstock Polyol falling under Chapter Heading 39.07 of the

Customs Tariff Act.

iv)

The Authority forwarded copy of the said public notice to the

known exporters, importers, users, industry associations and to

the complainants and gave them an opportunity to make their

views known in writing.

According to sub-rule (3) of Rule 6 supra, the Authority

provided a copy of the petition to all the known exporters and

Embassies of subject countries in India.

vi)

The Authority sent questionnaires, to elicit relevant information,

to the following exporters from the subject countries:

M/s. SHELL EASTERN PETROLEUM (PTE) LTD.,

SINGAPORE - 239 920

M/s. BAYER POLYURETHANE ASIA (PTE) LTD,

SINGAPORE -189 721.

M/s. SANYO CHEMICALS, JAPAN.

M/s. BAYER POLYURETHANE ASIA (PTE) LTD,

GERMANY.

M/s. REPSOL QUIMICA S.A., SPAIN.

M/s. THE DOW CHEMICAL COMPANY,

TEXAS -

77541, USA.

M/s. THE DOW CHEMICAL COMPANY, TEXAS -

775720-585, USA.

vii)

The Embassies/representative of subject countries in New

Delhi were also informed about the initiation of investigation

and were requested to advise the exporters/producers from

their countries to respond to the questionnaire within the

prescribed time;

viii)

The questionnaire was sent to the following users/importers of

subject goods:

M/s Aagosh Polystyrene Foam Pvt. Ltd., Chandigarh.

M/s Arvind International Ltd., Calcutta.

M/s Banmore Foam Pvt. Ltd., Banmore, Distt: Morena (M.P.)

M/s Cozy Foams Pvt. Ltd, Chantupada, Palghar Thana

M/s D P Foam Pvt. Ltd., Pondicherry - 605 101

M/s Dura Foam Inds Pvt. Ltd., DADRA NAGAR, HAVELI

M/s Diana Foams Pvt. Ltd., ORISSA - 757 043

M/s Devi Polyurethane Pvt. Ltd., Tondedumala, Taligatpu

DIST-NASIK

M/s Inkay Foam Pvt.Ltd., Village Khekra, Tehsil Baghpat

Distt. MERRUT (UP)

10.

M/s Feather Foam Enterprises Pvt. Ltd., NOIDA - 201 30

11.

M/s Foam House (India) Pvt. Ltd., MIDC Talao

MAHARASHTRA

12.

M/s Feather Foam Enterprises Pvt. Ltd.,

SILVASSA

13.

M/s Joy Foam Pvt. Ltd., Ranipet.

14.

M/s Juhi Foam Pvt. Ltd., KHARAR (P.B.) - 140 031

15.

M/s Kurlon Ltd., Bhubaneshwar - 751 031

16.

M/s Kamal Foam, Pondicherry - 605 009

17.

M/s M R Foams, Hyderabad

18.

M/s Multiwyn Foams Pvt. Ltd., Calcutta - 700 016

19.

M/s Modern Foam Udyog, VillageKakka, Ludhiana

20.

M/s N L Foam Industries, Ahmedabad

21.

M/s Natson Foam Mfg. Pvt. Ltd., Village - Nandoli

District Mehsana

22.

M/s Panama Polystyrene Products Pvt. Ltd., Ghaziabad

23.

M/s Pallivi Foam Inds. Pvt. Ltd., Noida-Dadri Road (U.P)

Distt: Ghaziabad

24.

M/s Poly Foam, Chantupada, Distt: Thana

3844 OT/2001—4

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART I—SEC. 1]

25.

M/s Prabhat Polyurethane P. Ltd., Pondicherry.

26.

M/s Pratap Polyurethane P. Ltd., Calcutta-700 001.

27.

M/s P.U. Foam Pvt. Ltd., Calcutta - 700 007.

28.

M/s Raj Leather Cloth Inds. Pvt. Ltd., Distt; Sonepat.

29.

M/s Sheela Foam Pvt. Ltd., Ghaziabad, U.P. - 201 101.

30.

M/s'SSF Industries Ltd., Patna - 800 004.

31.

M/s Sheela Foam Pvt. Ltd., Kalol Talukakadi, Noida (UP).

32.

M/s Tirupati Foam Ltd., Distt. Mehsana

33.

M/s Tirupati Foam Ltd., Taluk Kalol

34.

M/s U. Foam Pvt. Ltd., Hyderabad-500 018.

35.

M/s Surya Foam, Pondicherry

36.

M/s Aparna Polyproducts Ltd., Jaipur - 302 001 (Rajasthan).

37.

M/s Soft Foam Industries Pvt. Ltd., Medchol Ind. Area, RR

District 501 401 (AP).

38.

M/s Madras Polymoulds, Mylapore, Chennai-4.

39.

M/s J.J. Foams Pvt. Ltd., Distt; Ghaziabad (UP).

40.

M/s M H Polymers Pvt. Ltd., Dadri, Distt. Ghaziabad, U.P.

ix)

A number of importers/users have filed response to the

Initiation Notification. M/s Shell Eastern Petroleum (Pte.) Ltd.,

Singapore, M/s Bayer Polyurethanes Asia Pte. Ltd., Singapore

and M/s The Dow Chemical Co., USA among the exporters

have responded to the Initiation Notification .

The Authority kept available non-confidential version of the

evidence presented by various interested parties in the form of

a public file maintained by the Authority and kept open for

inspection by the interested parties;

xi)

***** in this notification represents information furnished by the

interested parties on confidential basis and so considered by

the Authority under the Rules;

xii)

The investigation covered the period from 1^8t October, 2000 to

30^th June, 2001;

xiii)

Copies of initiation notice was also sent to FICCI, CM,

ASSOCHAM etc., for wider circulation.

PETITIONER'S VIEWS

The petitioners have made the following major points in their

submissions:

They are the only producers of the subject goods.

Therefore, they have the standing to file the application

on behalf of the domestic industry. Further, the

petitioners are not related to any importer/exporter of the

subject product.

ii.

There is no known difference in Flexible Slabstock

Polyol produced by the Indian industry and Flexible

Slabstock Polyol exported from Subject countries.

Flexible Slabstock Polyol produced by the Indian

industry and imported from subject countries are

comparable in terms of physical as well as chemical

characteristics, manufacturing process & technology,

functions

uses,

product

specifications,

pricing,

distribution & marketing and tariff classification of the

goods. The two are technically and commercially

substitutable. The consumers are using the two

interchangeably. Flexible Slabstock Polyol produced by

the petitioners and imported from subject countries

should be treated as like article in accordance with the

anti-dumping Rules.

iii.

The exporters from subject countries have booked

orders for significant quantity through their Indian

agents. Significant material has already landed at the

Indian ports and substantial material is understood to be

in transit. The domestic industry is incurring huge losses

and should the present trend of imports at dumped

prices continue, the domestic industry may have to close

their facilities.

iv.

The landed price of the imported material is significantly

below the selling prices of the domestic industry.

Further, should the exporters from the subject countries

continue to offer the material at the present prices, the

domestic industry would be compelled to reduce their

prices further and lose significantly. Already, the

domestic industry is being forced to reduce the price due

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART I—SEC. 1]

to dumped imports and offers made by the imports from

the subject countries.

The producers in the subject countries are understood to

be holding significant capacities for the subject goods.

Thus, large-scale imports are imminent, should the

dumping not be checked at this stage.

vi.

The dumped imports of Flexible Slabstock Polyol are

causing injury to the domestic industry who is also facing

a threat of further injury from large imports likely to come

in near future.

IMPORTERS' AND USERS' VIEWS

The submission have been made on behalf of M/s Sheela Foam Pvt.

Ltd., M/s Feather Foam Pvt. Ltd., M/s Soft Foam Pvt. Ltd., M/s Bharat Foam

Udyog Pvt. Ltd., M/s Multivyn Foam Pvt. Ltd., M/s J.J.Foams Pvt. Ltd., M/s

MH Polymers Pvt. Ltd., M/s Welbros Foam Pvt. Ltd., M/s Arvind International

Limited, M/s Kansaf Foam Pvt. Ltd., M/s Fylfor Comforts Pvt. Ltd., M/s

Tirupati Foam Ltd., M/s SSF Industries Ltd and M/s Joy Foam Private Ltd.,

which are as under: -

(a) That it is the considered opinion of various technical experts that the

viable size of i> Polyol Plant is in the region of 80000 MTPA. The

standard tec' ;.v"tyy is the Styrene Monomer/Propylene oxide (SMPO

Route). Only with ichis technology and the aforesaid capacity can a Polyol

Plant be commercully viable. Any reduction in the capacity or change in

technology, would automatically lead to very high costs of production.

However, the Petitioner's plant has capacity of only 14000 MTPA and

does not employ SMPO Route technology. That the Petitioner's

production process and the utilities are technologically obsolete and are

not commercially viable and as a consequence the price of the product

manufactured by the Petitioner are unrealistically high.

(b) That due to the inferior technology used by the Petitioner, the quality of

Flexible Slabstock Polyol is materially and adversely affected and the

same in turn affects the manufacture and quality the downstream

products using Flexible Slabstock Polyol as raw material.

Safeguards had imposed safeguard duty in respect of Flexible Slabstock

Polyol. That in the present case the domestic industry is deliberately

attempting to abuse the machinery of the Hon'ble Designated Authority to

derive an undue advantage and unwarranted protection to itself. The

domestic industry has failed to make such necessary commercial and

operational measures as were required for it to become commercially

viable. That the Petitioner was granted a period of 18 months for positive

adjustments. That the domestic industry should not be allowed to take

undue advantage of their own inefficiency especially when the alleged

injury is entirely due to its own inefficiencies and does not have any

relation whatsoever to the import of Flexible Slabstock Polyol.

(d) That the Petitioner is a multi-product company and manufacture

Propylene Oxide, Propylene Glycol, Di Propylene Glycol, Tri Propylene

Glycol and DCP and DCIPE apart from various categories of Polyol. In

the circumstances, it is extremely difficult to ascertain the fixed costs

allocation to the Flexible Slabstock Polyol. The Petitioner must clearly set

forth the apportionment of fixed costs and overheads proportionate to and

in respect of the manufacturer of Flexible Slabstock Polyol. That the

Petitioner has failed to demonstrate the same.

(e) That the production of Flexible Slabstock Polyol by the Petitioner is not

regular and is seasonal i.e. Flexible Slabstock Polyol is not manufactured

throughout the year but is manufactured in trenches.

In the

circumstances, the Petitioner should not be allowed to allocate fixed costs

component spread over the whole year while the article is manufactured

for a limited period. That the Petitioner*, has deliberately failed to disclose

the said facts and is seeking to take undue advantage by apportioning a

higher costs of production in respect of Flexible Slabstock Polyol. That

the Hon'ble Designated Authority should direct the petitioner to provide all

necessary and detailed data with respect to its cost allocations.

(f) That the Petitioner is the only manufacturer of the product in India. That

the Petitioner has filed the present petition to consolidate its monopoly in

India and to avoid any competition from technologically superior and

commercially viable imports despite its operational and commercial

inefficiencies. The total capacity of the Petitioner is woefully short of the

demand of Flexible Slabstock Polyol in India, The demand for Flexible

Slabstock Polyol in India is around 35000 MTPA and is currently growing

at the rate of 10%-15% p.a.

(g) That the prices of almost all chemicals and plastics have exhibited a

downward trend during the past year including the period under review.

However, the Petitioner has deliberately omitted the mention of the same.

It is further submitted that the normal value claimed by the Petitioner is

high while the international prices are much lower and is evidently highly

imaginary and unsupported while also being factually wrong. It is in fact

the prices of the product manufactured by the Petitioner that have

remained unrealistically high and unviable.

Out of these importers, M/s Sheela Foam Pvt. Ltd. and M/s Joy Foam Pvt.

Ltd. have submitted information in the prescribed Importer's Questionnaire.

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART 1—SEC. 1]

The information is incomplete as both these firms have not submitted the

requisite annexures to the Importer's Questionnaire.

M/s Tirupati Foam Ltd. submissions are as under-

That they have been using a special grade of heteropolyol voranol

3010 from one of the reputed multi-national manufacturers and the

said product is imported by them directly. This special grade polyol is

presently not manufactured by the domestic producer. That they have

sophisticated manufacturing facility which demand special technical

requirements which they are not able to get from the domestic

manufacturers. The domestic producers has protection of customs

duty and special additional duty and any further levy of duty would be

detrimental to their business.

The company has submitted some information under the Importers'

Questionnaire but have not submitted all requisite annexures as

required under the Importer's Questionnaire

M/s DP Foam Pvt. Ltd. submissions are as under:-

That the domestic polyol industry seeking protection against anti

dumping should be asked to maintain quality at par with international

standards and should also be cost effective. The domestic industry is

not doing any cost analysis and are fixing their price compared to

international price. The quality of their material varies from batch to

batch. The domestic industry should maintain quality and have a

pricing policy according to their cost of production.

M/s U-Foam Pvt.. Ltd submissions are as under: -

That the issue of a local industry being placed at disadvantage due to

low prices from imports is not particularly applicable to this Product but

practically all goods being imported into the country.

It would

therefore not be a good idea to give protection to the Petitioner. All

small scale industries who are hard pressed for liquidity would

continue to patronise the products of the Petitioner even though their

cost could be slighjtly higher in view of the fact that the small

enterprise is in a position to order in small lots rather than invest for

container loads. It would be wise for both local industry as well as the

Petitioner to work out on suitable / mutually beneficial cooperation.

EXPORTERS' VIEWS

Responses have been received from M/s Shell Eastern Petroleum

(Pte) Ltd., Singapore, M/s The Dow Chemical Co. USA, and M/s Bayer

Polyurethanes Asia Pte. Ltd., Singapore.

(I)

The submissions of M/s Shell Eastern Petroleum (Pte) Ltd.,

Singapore, are as follows:-

That M/s Shell Eastern Petroleum (Pte) Ltd., Singapore

made only marginal sales in Singapore which are

minimal compared to the exports and therefore, normal

value of the said products can be determined on the

basis of the cost of production.

ii.

That the producer in Singapore has several advantages

with regard to the cost of production and they share

common facilities and logistics with other products.

iii.

That their company exports the majority of the said

product in the Asic Pacific and other regions including

India and sells only a minimal amount of its total

production in the domestic market at Singapore, the cost

of production of the said product in Singapore with

addition of SA&G overheads and profit be considered as

the basis for determining the normal value.

iv.

That the market of the said product in India is greater

than the total installed capacity of the Petitioner hence

import of the said product is absolutely imperative and

necessary.

That the petitioner's case is based on extrapolated

information which cannot be considered sufficient to

meet the requirements of an anti dumping investigation.

vi.

That the information submitted by the petitioner cannot

be considered as accurate as the same has been

obtained

from

secondary

sources

and

are

unsubstantiated.

vii.

That the primary impact on the profitability of the

petitioner js due to the cost associated with the

production plant and the cost of the raw materials. It has

further been argued that deterioration in just one or two

indices cannot be considered sufficient to substantiate

the allegation of material injury.

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART I—SEC. 1]

viii.

The description used in the definition of the product under

consideration is too broad.

ix)

There are several methods of producing Polyol Oxide

which is the feedstock for the subject goods. Each

method has a different set of production and economic

dynamics. The process used by the exporter has an

advantage over the Chlorohydrin process used by the

petitioner as the process adopted by the exporter

converts the major raw material i.e., Propylene into the

finished product more efficiently and has less waste.

(II)

The submissions of M/s Dow Chemical Co., USA are as follows:-

That the applicants M/s MPL are the sole producers of

this product in India and the sole reason of their taking

over erstwhile Spic Organics Ltd. is to establish

monopoly to enable them to dictate terms to the users,

all of whom belong to small scale sector.

ii)

The market demand for Flexible Slabstock Polyol is

16200 MTPA and growing @ 10%-12% p.a. The

Petitioners have plants of small capacities and also

manufactures different grades of Polyols for different

applications.

The Petitioner being the sole domestic

producer does not have the capacity to fulfill the demand

and the balance demand needs to be supplemented by

imports.

iii)

The Petitioner has an approved / licenced capacity of

37,000 MT of Polyol, however, in order to continue with

its monopolistic activity have done nothing constructive

to increase their capacity utilisation so as to discourage

new entrants in the field.

iv)

That the product of Dow is different from manufactured

by the Petitioners.

The said product is used in

manufacture of Flexible PL) Foam. This PL) Foam is

manufactured by two methods in India viz. Continuous

foaming and box foaming. Although the raw material

used for both these methods are similar, the continuous

foaming method requires high product quality and more

importantly consistency in specification from batch to

batch.

The Petitioner's claim that its product and the imported

product are identical is not the full truth. In Flexible

Slabstock Polyol, depending upon the use of Propylene

Oxide (PO) or a combination of the same with Ethylene

Oxide functional group (EO), Homo Polymers (Only PO)

or Hetero Polymers (combination of EO and PO) are

made. It is pertinent to note that majority of the Dow

Polyol or FSP being imported from US is Hetero Polyol,

whereas the majority of that being produced by MPL is

Homo Polyol.

vi)

That the volume of imports have decreased significantly

from the subject countries during the last three financial

years. That the data collected by the Petitioners is only

for seven months which is then extrapolated. The sale

of the product being cyclical with the month of April, May

and June typically being the slump period, the

extrapolated figures are highly inaccurate and cannot be

relied upon.

Moreover, even accepting Petitioner's

extrapolation method, subject imports have decreased

both in terms of absolute quantity and in market share.

During each period, subject imports have decreased.

Secondly, the data submitted by the Petitioner is

collected from secondary sources, which may not fit with

actual, or data from primary sources.

vii)

That the subject imports from USA have not affected

prices adversely. The CFR price for imports for the POI

into India is in line with the prices in the neighbouring

countries.

viii)

That the Petitioner have proceeded on a totally

erroneous basis for arriving at the normal value.

The

inability of the Petitioner to collect price data of the

exporting countries which is available with many

agencies makes their exercise of constructing cost of

product in the exporting countries an exercise in

imagination.

The Petitioner's claim of unavailability of

price data is absolutely baseless.

ix)

That the PO manufacturing facility of the Petitioner is of

a size that does not allow for production of PO at an

economically viable cost. It should be noted that world

scale plants for PO are typically in excess of 1 50,000

MTPA.

That the Petitioner has been able to realise a healthy

price increase of 15% over the last three years despite

the product prices remaining relatively flat in the

international market.

3X44 Cll/2001—5

THE GAZETTE OF INDIA: EXTRAORDINARY

IPART I—SEC. 11

xi)

That the Petitioner appears to have compared the

inventory of pre-merger entity with post-merger entity

and the increase in inventory is primarily due to

comparison with peek and slump seasons rather than a

sign of Injury due to imports.

xii)

That there is no justification/justifiable evidence that the

profitability of the Petitioner has been affected by the

import of FSP.

xiii)

That because of their in-house problems, the Petitioner

can

neither

increase its share nor improve its

profitability, even in the absence of alleged dumping.

(Ill)

The submissions of M/s Bayer Polyurethanese Asia Pte. Ltd.,

Singapore as follows:

That they are regular suppliers of the said product in

India for the last 25 years backed by their most reliable

technical support.

ii)

Their products are backed by well known and

established technology and have a consistent demand in

the Indian market and are well accepted in the slabstock

foam market in India.

iii)

That they never had intention to cause injury to the

Indian Slabstock Polyol market.

iv)

That the current Indian Flexible Slabstock Polyol Market

size is around 16,000 MTs p.a which has been growing

at a double figure growth rate of about 11-12% for the

past three years. The domestic production capacity is

not enough to meet the growth demand, therefore the

shortfall has to be met via imports.

That the domestic producer, M/s Manali Petrochemicals

Ltd., has been seeking protection continuously. The

economic viability of their operations depends on

efficient production process and a larger economic

production capacity. But unfortunately they have not

been able to achieve either in the last three years

despite of the fact that a safeguard was imposed to their

favour.

vi)

That there is a general global slowdown of the economy

and prices of almost all polymers in general are* under

pressure.

The trend of pricing of Flexible Slabstock

Polyol for India has been consistently at par or higher

than prices prevailing in the Asia Pacific region and as

such cannot be reflected as specific case of dumping

into India.

vii)

That the Indian market already has the highest

protection duty in the Asia Pacific region i.e. , 35% basic

custom duty which actually cascades upto over 42% with

the addition of other duties. Whereas, the per capita

consumption of Flexible Slabstock Polyol in India is

lowest in the region being almost 1/20^th in comparison to

China and other developing countries.

Any further •

protection will increase costs to the consumer and

hamper consumption growth / industrial growth of the

segment.

viii)

That the imports into India have also been effected by

the escalating exchange rates that have an additional

impact of about 5% in the last one-year.

ix)

That Manali Petrochemicals Ltd., and Spic Organics

have merged to form one company and have adopted a

monopolistic attitude. The respondents presence in the

market

restricts

monopolist

practice

and

protects

consumer by encouraging fair pricing

EXAMINATION AND FINDINGS BY AUTHORITY

The submission made by the importers, exporters, users, domestic

industry and other interested parties have been examined and considered

while arriving at these findings and wherever appropriate have been dealt

hereinafter.

10.

The cases of new exporters or those stated to be willing to give price

undertaking shall be considered, on request, by the Authority in accordance

with the Rules supra.

PRODUCT UNDER CONSIDERATION AND LIKE ARTICLE

11.

The product under consideration in these investigations has been

considered as "Flexible Slabstock Polyol of Molecular Weight 3000 to 4000".

These products are classified under Chapter Heading 3907.20 of the

Customs Tariff Act but the same have also been cleared under Chapter

Headings 3907.91 and 3907.99. The exporters have claimed that the product

description is too broad. However, no substantive arguments have been

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART I—SEC. 1]

advanced to indicate that this description covers any products more than

what had been intended by the petitioner and thereafter accepted by the

Authority for the scope of investigation. The Authority therefore considers

that the description of the product under consideration is precise and

accurate. It may be mentioned that the customs classifications are indicative

only and are in no way binding on the scope of the present investigation.

12.

The petitioners have claimed that the goods produced by them are like

articles to the goods originating in or exported from the subject countries. An

issue has been raised that the product produced by the petitioners and the

imported products cannot be considered as like articles. It has been

contended that in Flexible Slabstock Polyol, depending

upon the use of

Propylene Oxide or a combination of the same with Ethylene Oxide

functional group, Homo Polymers or Hetero Polymers are made. They have

further argued that it is pertinent to note that majority of the Polyol being

imported from US is Hetero Polyol, whereas the majority of that being

produced by MPL is Homo Polyol.

The issue has been examined by the Authority. The basic objection of

the exporter's is that the Polyol Oxide, which is the main feedstock for the

production of the subject goods, is obtained by different methods and,

therefore, the^resultant Flexible Slabstock Polyol cannot be considered as

like article?

ray be mentioned here that the tests of determining whether

any two products are like articles or not, inter alia include the determination

of whether the two products are technically and commercially substitutable or

not. No arguments have been advanced nor has any evidence been

forwarded to substantiate their argument that the goods produced by the

domestic industry and those imported into India are not like articles. The

Authority, therefore, has determined that the goods being imported are like

article to the product under consideration.

DOMESTIC INDUSTRY

13.

The petition has been filed by M/s Manali Petrochemicals Ltd. (MPL),

who are the only producers of the subject goods in the country. Therefore,

they have the standing to file the application on behalf of the domestic

industry. Further, the petitioners have neither imported the subject goods nor

are they related to any importer/exporter of the subject product. The

petitioners, therefore, satisfy the criteria of standing to file the petition on

behalf of the Domestic Industry in terms of Rule 5(3) (a) of the Rules supra.

_J7

NORMAL VALUE, EXPORT PRICES & DUMPING MARGINS

14.

The Authority sent questionnaires to all the known exporters for the

purpose of determination of normal value in accordance with Section

9A(1)(c). However, none of the exporters from European Union and Japan

responded to the Authority nor have they furnished any information. The

Authority, therefore, holds that none of the exporters from European Union

and Japan have cooperated with the Authority as envisaged under the Rules

and Rule 6(8) is attracted in their case.

15.

The Authority observes that the exporter from USA viz. M/s The Dow

Chemical Co., who has sent their comments, has not sent its reply in the

prescribed proforma of this Directorate. Further, they have not submitted any

information which can be made use of in the investigations. The exporter has

merely submitted some reports without giving any information with regard to

either the normal value, export prices or the cost of production. For the

purpose of determination of individual dumping margin, the said exporter is

considered as non-cooperative and the Authority shall proceed on the basis

of the best information available to it as per Rule 6(8) supra for this exporter

as well as for other exporters from USA.

16. From Singapore two exporters have responded to the initiation

notification viz. M/s Bayer Polyurethanes Asia Pte. Ltd. and M/s Shell

Eastern Petrochemicals Pte. Ltd. As regards M/s Bayer, no details regarding

export price, domestic sales price, cost of production, adjustments regarding

freight, insurance, credit sales, discounts, etc. have been given in the

prescribed format. As regards M/s Shell Petrochemicals Pte. Ltd., Singapore

who has filed the response, it is observed that the said exporter has failed to

provide any non-confidential version of the appendices to the Exporter's

Questionnaire. Further, the Exporter has not provided any details of their

sales/credit arrangement, installed capacity and production of other goods,

the allocation of plant and machinery for the product, incidence of interest

with regard to their cost of production/export sales, etc.. There is no

indication of any kind of finance charges in the cost of production whereas

the balance sheet shows that the Company has incurred expenses on this

account. The reconciliation in respect of sales of the product under

consideration and other products as required for Appendices 3 and 7 have

not been provided.

The information in respect of related companies

specifically relating to trading/manufacturing companies

have not been

provided.

It is therefore observed

that the response submitted by the

exporter cannot be considered as a complete response. For the purpose of

preliminary findings, therefore the Authority has decided to use the best

information available in terms of Rule 6(8) Supra in case of all the exporters

from Singapore.

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART I—SEC, 1 ]

17.

It has been argued by the exporters/importers that the information

supplied by the domestic industry with regard to imports cannot be relied

upon as accurate since the same has been obtained from secondary

sources. In the absence of availability of data from DGCI&S, the Designated

Authority has been consistently relying upon the information made available

to it from other sources also. This practice is entirely consistent with the legal

position. However, as a part of the detailed investigation, the Authority is

making

use

the

information

received

from

the

participating

exporters/importers to arrive at the export volumes and values for the

determination of dumping margin as well as for injury assessment. Further

adjustments has been given on account of freight, marine insurance,

commission, port handling etc., to arrive at net export price on the basis of

information available.

18.

The principles governing the determination of normal value, export

price and the dumping margin as laid down in the Custom Tariff Act and the

Anti Dumping Rules are elaborated in Annexure I to the Rules. The dumping

margins arrived at for the purpose of preliminary findings are as follows:

Country/Territory

USA

Japan

Singapore

Exporters/

Manufacturers

All exporters

Dumping Margin

(%)

46.01

42.19

38.60

32.27

INJURY

19.

Rule 11 of Anti Dumping Rules reads as follows:

"Determination of Injury:

In the case of imports from specified countries, the

designated authority shall record a further finding that import of

such article into India causes or threatens material injury to any

established industry or materially retards the establishment of

any industry in India;

ii.

The designated authority shall determine the injury to

domestic industry, threat of injury to domestic industry, material

retardation to establishment of domestic industry and a causal

link between dumped imports and injury, taking into account all

relevant facts, including the volume of dumped imports, their

effect on price in the domestic market for like articles and the

consequent effect of such imports on domestic producers of

such articles and in accordance with the principles set out in

Annexure II to these rules."

20.

In considering the effect of the dumped imports on prices, it is

considered necessary to examine whether there has been a significant price

undercutting by the dumped imports as compared with the price of the like

product in India, or whether the effect of such imports is otherwise to depress

prices to a significant degree. For the examination of the impact on the

domestic industry in India, the Authority considered such further indices

having a bearing on the state of industry as production, sales, stock,

profitability, net sales realization etc.

Cumulative Assessment of Injury

21.

It is observed from the facts available on record that the margins of

dumping from each of the subject countries are more than the 2% limit

expressed as % of export price. Also the volumes of imports from each of

the country are more than de minimis. Cumulative assessment of the effects

of imports would be appropriate since the exports from the subject countries

directly compete with each other and with the goods offered by the domestic

industry in the Indian Market. The Authority, therefore, proposes to assess

injury to the domestic industry from the subject countries cumulatively.

Market share of the imports from Subject countries

22.

It can be seen from the following table that the market share of the

imports from the subject countries as a percent of the total imports has

increased from 83.72% in the year 1999-2000 to 91.73% during the period of

investigation. Since all the importers or exporters have not provided the

information in the prescribed format, it is quite likely that the actual quantum

of imports may be much higher if the imports from the ICDs particularly at

Delhi and bulk shipments at Kandla are taken into account, the information

on which is yet to come and shall be taken into account in the final findings.

Market Share of Imports from Subject Countries (% of Total Imports)

Year

1998-99

1999-2000

Oct 2000-June 2001

Imports from the

subject countries (MT)

2350.12

1983.15

1631.97

Total Imports

2383.72

2368.65

1779.07

% share

98.59%

83.72%

91.73%

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART I—SEC. 1]

Market Share of Imports from Subject Countries (% of Total Demand)

23.

As would be revealed from the following table, the market share of

imports from the subject countries as a proportion of total demand has also

sharply risen from 19.43% during 1999-2000 to 22.08% during the period of

investigation.

Year

1998-1999

1999-2000

Oct 2000-June 2001

Imports (MT)

2350.12

1983.15

1631.97

Total Demand

8900.58

10207,21

7390.16

% share

26.40%

19.43%

22.08%

Production & Capacity Utilization

24.

It has been observed that despite the marginal increase in the

production and the capacity utilization of the domestic industry during the

period of investigation, the domestic industry has incurred losses due to poor

price realization. It is therefore clear that the domestic industry could retain

its customers and market share at the cost of suffering on the financial

parameters. Thus, the apparent increase in production as well as capacity

utilization has to be seen in the context of the price effect of the dumped

imports.

Year

1998-1999

1999-2000

Oct. 2000-June 2001

Capacity (MT)

***

*+*

***

Production (MT)

***

Capacity Utilization

(%)

***

Sales Volume & Value of the Domestic Industry

25.

As regards the sales price, there is some marginal improvement over

the last year but it has been claimed by the domestic industry that the

increase in price is due to fall of Rs. as compared to the $ and the increase in

the cost of the major raw materials and fuel. This is also reflected in the fact

that the losses have gone up despite marginal increase in the sales prices.

At the same time, it is the claim of the domestic industry that it is not feasible

for the domestic industry to increase their prices despite increase in the raw

material prices precisely because of dumping.

Thus, there is enough

evidence of price suppression on account of dumping by the subject

countries.

Year

1998-1999

1999-2000

Oct. 2000-June 2001

Sales Volume

(MT)

+**

* * *

Sales Value (Rs. In

lakhs)

***

**#

***

Unit Price (Rs./MT)

***

Profitability

26.

An examination of the records of the domestic industry indicates that

the domestic industry has suffered serious injury in the form of direct losses

per unit of sale. Thus, it is apparent that it is the price factor alone which can

be considered to have led to injury to the domestic industry resulting in

losses despite improvement in capacity utilization as well as production.

Year

1998-1999

1999-2000

Oct 2000-June 2001

Sales Value (Rs. In

lakhs)

***

Cost of Sales (in

lakhs)

***

**#

Profit/Unit

***

Price Undercutting

27.

It has been claimed that dumping by the subject countries has had a

significant impact on the net sales realization by the domestic industry for the

subject goods. To hold on to its market share, the petitioners had to compete

with low priced and dumped imports of subject goods from the subject

countries. The landed values of the dumped imports also indicate that there

is price under-cutting taking place.

Price Underselling

28.

The Authority has also examined the claim of the domestic industry

that the domestic industry is suffering on account of direct losses. The

Authority notes that price underselling is an important indicator to make an

assessment of injury. The Authority has worked out a fair selling price and

compared the same to the landed value to arrive at the extent of price

underselling.

Employment

29.

The employment figures also show the effect of injury as there is a

drop in the employment level despite the fact that it is usually not feasible to

reduce manpower due to the existing labour laws.

S '

<•'/

;

—

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART I—SEC, 1]

Increase in Inventories

30.

The domestic industry has claimed that it was not able to sell its

products in the market due to massive dumping. This is also revealed from

the fact that the inventory in one of the two plants had increased from *** as

on *** MT as on 31.3.2000 to *** MT at the end of June 2001, an increase of

over three times. Further, they have been already forced to cut down their

production due to the huge pile up of inventories. The inventories in the

second plant are also at a very high level of *** MT. The overall increase in

inventories taking both plants together show an increase of 61% during POI

as compared to year 1999-2000.

31.

On examination of the evidence, it has been found that there is

marginal increase in production, sales, and capacity utilization of the

domestic industry. However, the domestic industry is suffering losses on

account of low priced and dumped imports from the subject countries. The

most significant parameter evidencing injury is the price undercutting and

price underselling as per the evidence available with the Authority.

The volume of imports in relative as well as absolute terms has gone

up. Market share in the total demand also shows an increase. The above

factors clearly show the injury being suffered by the domestic industry. On

the basis of the evidence available before the Authority, it is determined that

the domestic industry has suffered injury and is suffering further threat of

injury during the period of investigation.

CAUSAL LINK

32.

In determining whether material injury to the domestic industry was

caused by the dumped imports, the Authority took into account the following

facts :-

Substantial imports of subject goods from Subject countries at

dumped prices has resulted in losses to the domestic industry.

The authority also observes that there is a single market for the

subject goods where dumped imports compete directly with the goods

produced by the domestic industry.

Demand for subject Flexible

Polyol is showing a healthy growth. Decline in demand is hence not a

factor causing injury to the domestic injury. The imported product is

sold to meet the similar

commercial grades and standard

specifications, as domestically produced Flexible Polyol. The imported

subject article and the domestically produced goods are like articles

and are used for the same applications/end uses. Thus, pricing

becomes the most important factor determining purchase of the article

from either imported sources or domestic sources.

_43

The imports from Subject countries suppressed the prices of

the product in the Indian market to such an extent that the domestic

industry was prevented from recovering its full cost of production and

earn a reasonable profit from the sale of subject goods in India.

INDIAN INDUSTRY'S INTEREST

33.

The purpose of anti dumping duties is to eliminate dumping which is

causing injury to the domestic industry and to re-establish a situation of open

and fair competition in the Indian market which is in the general interest of

the country.

34.

The Authority recognizes that the imposition of anti dumping duties

might affect the price levels of the products manufactured using subject

goods

and

consequently

might

have some

influence

relative

competitiveness of these products. However, fair competition on the Indian

market will not be reduced by the anti dumping measures. On the contrary,

imposition of anti dumping measures would remove the unfair advantages

gained by dumping practices, would prevent the decline of the domestic

industry and help maintain availability of wider choice to the consumers of

subject goods. The Authority notes that the imposition of anti dumping

measures would not restrict imports from Subject countries in any way, and

therefore, would not affect the availability of the product to the consumers.

The consumers could still maintain two or even more sources of supply.

OTHER ISSUES

35.

It has been claimed by the importers, exporters and some interested

parties that the petitioner, i.e., MPL, is the only producer of the subject goods

in the country, and therefore, the present petition has been filed by them to

consolidate their position as a monopoly producer in India and to avoid any

competition. Further, the total capacity of the petitioner is woefully short of

the demand of FSP in the country and the size of the plants is uneconomical.

It has also been argued that the technology used by the domestic industry is

obsolete and inferior. Issues have also been raised regarding the poor quality

of the goods produced by the domestic industry as well as the methodology

adopted for apportionment of fixed costs and overheads to the production of

FSP. It has also been stated that the international prices of almost all

chemicals and plastics including FSP have exhibited downward trend during

the last couple of years and that the prices of exports to India are at the

prices prevailing in international market. It has also been brought out in the

submissions by the importers and the users that safeguard duty was

imposed on the subject goods vide Final Findings dated 17.9.1998 and that

the domestic industry is deliberately attempting to abuse the machinery of

the Designated Authority to derive an undue advantage.

.1X44 CiI'2001-^|

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART I—SEC, 1 ]

36.

The above issues have been examined by the Authority. The purpose

of anti dumping duty is to ensure that any injury caused to the domestic

industry due to dumping is addressed adequately. The fact that there is a

single producer of the subject goods in the country does not, in any way,

restrict the right of the domestic producers to claim relief from the Designated

Authority against the dumped imports under the Anti Dumping Rules. It has

been the accepted position that anti dumping duty is in the nature and form

of providing a remedy against the trade distorting practice of dumping.

Further, anti dumping duties do not propose to restrict or block imports from

any sources and therefore, the issue of the domestic supply being short of

the total consumption in the country, has no relevance.

Also since

alternative sources of supply are available to the Indian industrial users, the

apprehension of the petitioner company exercising monopoly position to

exploit the customers, is misplaced. Adequate care has been taken by the

Authority while apportioning the fixed cost and other overheads to the

product under consideration. As regards the issue of safeguard duty having

been imposed on the subject goods in the past, the Authority is of the view

that there is no bar on the domestic industry to seek protection against

dumped imports only because the said goods had safeguard duties in the

past. Regarding the issue of the export prices to India being at par with the

prevailing international prices, the Authority notes that dumping is linked to

the normal valu' in the exporting country and export prices of the subject

goods to lr> -iv and while determining the normal value, it has to be

established that ihe sales are in the ordinary course of trade.

CONCLUSIONS

37.

The Authority has, after considering the foregoing, come to the

conclusion that:

(i)

Flexible Slabstock Polyol as defined above in the para relating

to Product under consideration has been exported to India from

Subject countries below its normal value;

(ii)

the Indian industry has suffered material injury;

(iii)

the injury has been caused by the dumped imports from subject

countries;

38.

The Authority considers it necessary to impose an anti dumping duty

provisionally, pending final determination, on all imports of Flexible Slabstock

Polyol from subject countries in order to remove the injury to the domestic

industry. The margin of dumping determined by the Authority is indicated in

the paragraphs above. The Authority proposes to recommend the amount of

anti dumping duty equal to the margin of dumping or less, which if levied,

would remove the injury to the domestic industry. For the purpose of

determining injury, the landed value of imports is proposed to be compared

with the non-injurious selling price of the petitioner companies determined for

the period of investigation.

39.

Accordingly, the Authority recommends that the provisional anti

dumping duties be imposed from the date of notification to be issued in this

regard by the Central Government on all imports of Product under

consideration originating in or exported from subject countries pending final

determination. The anti-dumping duty shall be the difference between the

prices indicated in Column 3 of the following table and the landed value of

the concerned imports:

Country/Territory

USA

Japan

Singapore

Exporters/

Manufacturers

All exporters

Amount

US D per MT

1804

40.

Landed value of imports for the purpose shall be the assessable value

as determined by the Customs under the Customs Act, 1962 and all duties of

customs except duties under sections 3, 3A, 8B, 9 and 9A of the Customs

Tariff Act, 1975.

FURTHER PROCEDURE

41.

The following procedure would be followed subsequent to notifying the

preliminary findings:

The Authority invites comments on these findings from all

interested parties and the same would be considered in the

final findings;

Exporters, importers, petitioner and other interested parties

known to be concerned are being addressed separately by the

Authority, who may make known their views, within forty days

from the date of preliminary findings. Any other interested party

may also make known its views within forty days from the date

of publication of these findings;

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART I—SEC. 1]

The Authority would provide opportunity to all the interested

parties for making oral submissions which have to be rendered

thereafter in writing;

The Authority would conduct further verification to the extent

deemed necessary;

The Authority would disclose essential facts before announcing

final findings.

L.V. SAPTHARISHI, Designated Authority

Printed by the Manager, Govt, of India Press, Ring Road, Mayapuri, New Dclhi-110064

and Published by the Controller of Publications, Delhi-110054.