Anti-dumping investigation concerning imports of D (-) Para Hydroxy Phenyl Glycine Base (PHPG-Base) originating in or exported from China PR and Singapore-Final Findings Having regard to the Customs Tariff Act 1975 as amended in 1995 and the Customs Tariff (Identification Assessment and Collection of Anti Dumping Duty on Dumped Articles and for Determination Of S-jury) Rules 1995 thereof

REGD NO. D.L.—33004/99 The Gazette of India

EXTRAORDINARY

PART I—Section 1

PUBLISHED BY AUTHORITY

No. 246] NEW DELHI, FRIDAY, SEPTEMBER 20, 2002/BHADRA 29, 1924

2953 GI/2002

(1)2 THE GAZETTE OF INDIA: EXTRAORDINARY [PART I—SEC. 1] 3 4 THE GAZETTE OF INDIA: EXTRAORDINARY [PART I—SEC. 1] 5 6 THE GAZETTE OF INDIA. EXTRAORDINARY [PART I—Sec. I] 7 8 THE GAZETTE OF INDIA: EXTRAORDINARY [PARI I—SEC. 1] 9

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MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 20th September, 2002

Final Findings

Subject: Anti-dumping investigation concerning imports of D (-) Para Hydroxy Phenyl Glycine Base (PHPG-Base) originating in or exported from China PR and Singapore—Final Findings.

N0.51/1/2001-DGAD.— Having regard to the Customs Tariff Act 1975 as amended in 1995 and the Customs Tariff (Identification Assessment -nr¹ Collection of Anti Dumping Duty on Dumped Articles and for Determination OT S-jury) Rules 1995 thereof

A PROCEDURE

1 The Procedure described below has been followed

(i) The Designated Authority (hereinafter also referred to as the Authority) notified preliminary findings vide Notification No 51/1/2001-DGAD dated the 1st October 2001 with regard to Anti Dumping investigations concerning imports of D (-) Para Hydroxy Phenyl Glycine Base originating in or exported from China PR and Singapore and requested the interested parties to make their views known in writing within forty days from the date of its publication

(n) The Authority forwarded a copy of the Preliminary Findings to known interested parties who were requested to furnish their views if any. on the Preliminary Findings within forty days of the date of the letter

(IN) The Authority also forwarded a copy of the Preliminary Findings to tne Embassies/High Commissions of subject countries n New Delhi with a request to furnish their views on the Preliminary Findinn

(iv) The Authority held a public hearing on 10th April 2002 to hear the interested parties orally which was attended by representatives of the domestic industry importers and exporters from Singapore The sorties attending thy28 THE GAZETTE OF INDIA: EXTRAORDINARY [PART I —SLC. 1 ] 29 dumping duty shall be reflected on to tne selling price of Amoxicillm then it is the patient who comes to bear the cost increase

(d) Amoxicillm production for domestic consumption is estimated to be around 1200-1300 MT per year and it is equivalent of around 600 MT or more per year of PHPG Base and still increasing This quantity is obviously more than the capacity of DOL which is claimed to be 500MT

(e) The exporter has claimed that their technology is the most advanced and efficient state of the art IMMOBILIZED ENZYME method utilizing gene technology ( recombinant of DNA) while their technology is conventional CHEMICAL RESOLUTION method and therefore cost structure is completely different

(f) Further the exporter has submitted that they are one of the largest producer of PHPG Base and PHPG Dane Salt in the world and regarded as one of the most reputable and reliable supplier of the products, in a sense of both quantitative and quality so that customer perception should not be the same at all in world wide basis M/s Torrent Gujarat Biotech Ltd has also submitted that

i) The quality of PHPG Base of M/s Daurala Organics Ltd (DOL) is not consistent and the product is yet to be stabilized for its quality The quality of Amoxicillm Tnhydrate is directly related to the quality of PHPG Base

n) In case of M/s DOL the quality of the product is not yet proven in trv> market as regarding its yield stability of final product etc

(g) The name of DOL is not heard in the market other than India On the other hand, we have been producing PHPG Base for more than 20 years with current capacity of around 3000 MT per year and been supplying PHPG Base and PHPG Dane Salt to the customers all over the world

(h) As stated during the oral hearing by the government that the landed value of imports determined by the government of US$24 83 is based on the production cost of DOL might mean either their production cost would be significantly higher than ours or they reserved a huge profit margin If the case would be the former one, we wonder if DOL might have had been able to launch their business even there would not have price reduction from China which started on February, 2001 (according to DOL's petition), solely due to its high cost

(i) At the time DOL filed petition total of tax and duty applicable to PHPG Base importing in to India is around 4 1% Thus US$24 8330 T HE G A Z E T TE OF F N D IA • E X T R A O R D I N A RY [ P A RT I- S EC 1] works out to be US$17 60 Kg as GIF basis This price is equivalent to the worldwide market price of around 1995-1996 period The product has been in the market since around 1970 and current market is around 8000 MT per year worldwide basis Price of the product has been determined by market with supply demand balance Our price for India is determined by such price mechanism of market and not discriminatory at all While the world wide market price has been on down trend since then if DOL regards their business can not be viable with the price under US$17 60/ Kg, regardless of whether China started lowering price from February 2001 or not DOL's business has had been not viable since 1995-96 and there is no issue of anti dumping Considering such situation if anti dumping duty would be imposed it means Indian Amoxicillin producer should buy PHPG Base at much higher level than worldwide market price and therefore it would end up with higher cost on Indian social welfare

(j) Many PHPG Base producers using chemical resolution method such as DSM- Andeno of Holland Nippon Kayaku of Japan Ward Blenkinsop U K Plotfarmaco Italy Bracco Italy etc had faded out in the past due to its higher production cost

(k) The exporter has desired to give an opportunity to continue to serve the health industry of India with their duty of supplying PHPG Base, the inevitable intermediate of Amoxicillin an essential and life saving drug for people with excellent and stable quality and stable supply based on our huge capacity

3 VIEWS OF DOMESTIC INDUSTRY

(i) Only two exporters have responded to the Authority The responses filed by these exporters were grossly insufficient and inadequate, as held by the Designated Authority in the preliminary findings also The public file does not indicate that these exporters have completed the deficiencies pointed out by the Designated Authority in the preliminary findings Therefore the responses of the exporters should be rejected for the final determination also and the Authority would be justified in proceeding with the best available information in accordance with the Rules in the absence of complete information in the form and manner prescribed M/s DOL has requested the Designated Authority to confirm the preliminary findings in this regard

(n) With regard to Singapore the petitioner has pointed out that the exporter has not filed complete questionnaire response Further the non-confidential version of the response is grossly deficient No proper non-confidential summaries have been provided by the31 exporter. They have requested the Designated Authority to direct the exporter to disclose information appropriately In absence of meaningful non-confidential submission by the exporter, Domestic Industry will not be in a position to submit proper response of the submission made by the exporter Should be exporter fail to provide proper and adequate non-confidential summaries, the response is required to be rejected

(in) The Domestic Industry has submitted that they have provided detailed information to the Designated Authority clearly establishing that the Domestic Industry has suffered injury and dumped imports are causing material retardation to the establishment of industry. The same has been taken note by the Designated Authority and the preliminary findings are quite elaborate with regard to injury to the Domestic Industry.

(iv) The Designated Authority should consider the following points while assessing the injury analysis.

a The injury to the Domestic Industry is required to be assessed cumulatively

b The imports from the subject countries have increased in absolute terms in spite of the fact that commenced commercial production of the Domestic Industry has already commenced.

c The imports from the subject countries have prevented the Domestic Industry from getting its due market share, which would have otherwise been achieved by the Domestic Industry, given that the Domestic Industry had just commenced commercial production

d The Domestic Industry was not able to achieve the level of production, which it could have otherwise achieved in the absence of dumping

e The sales of the Domestic Industry have not grown as per projections Even though the demand of the product has increased, the Domestic Industry was not able to increase its sales

f. Even though the Domestic Industry had entered the market very recently it was forced to lower its selling prices due to dumped imports undercutting its prices

g The imports from the subject countries were undercutting the prices of the Domestic Industry32 THE GAZETTE OF INDIA: EXTRAORDINARY [PART I —S E C I] h The Domestic Industry has very recently , commenced commercial production The industry was expected to increase employment in the product given that its production, sales and market share should have increased However, the Domestic Industry was not able to effectively increase its employment

i The imports were underselling the Domestic Industry Resultantly the Domestic Industry was forced to incur heavy financial losses

The Domestic Industry has submitted that all these parameters, collectively and cumulatively establish that the Domestic Industry suffered material injury and further imports were causing material retardation to its establishment The Domestic Industry thus suffered injury from the imports

(v) The Domestic Industry has submitted that the final duties may also be recommended in terms of US$ only so that erosion in the quantum of protection does not take place on account of changes in the exchange rate Further the duties may kindly be recommended in terms of benchmark pricing as was done in the Preliminary Findings

(vi) In response to the argument raised by the exporters that DOL has commenced commercial production from April 2001 whereas the dumping started in Feb 2001 M/s DOL has submitted that the present petition is against dumped imports from China and Singapore which are causing material retardation to establishment of industry Thus the exports which commenced in Feb 2001 materially retarded establishment of the company

(vn) In response to the argument that Domestic Industry would not be able to meet the demand the Domestic Industry has submitted that Hon'ble CEGAT held in the matter of EPDM Rubber that inability to meet out demand is not a pre-requisite condition for domestic industry for seeking relief under Anti dumping laws

(vin) The Domestic Industry in the instant case is an infant stage which had recently commenced commercial production While the industry is not able to produce to the extent of capacity created the industry cannot think of further enhancing the capacity

(ix) Even by their own admission we can produce to the extent of 500 MT as against the demand of 600 MT

(x) It is our understanding that there are some imports of the product against exports Since these would continue to be met out of33 imports (dUtt to benefit of duty granted to them) the demand to such an extent is not effectively available to the Domestic Industry

(xi) Not with standing above it is submitted that we are committed to meet the requirements of the customer and would take all necessary steps, in the right direction should the market remain competitive and we be allowed reasonable price for our product

(xn) In response to Exporters argument that the sales quantities of the Domestic Industry are insignificant compared to imports We agree with Kaneka and that is our entire grievance that we have not been able to sell the newly introduced produce in spite of vast market due to presence of dumped imports in the market In fact this statement of Kaneka itself establishes that the injury is caused to the Domestic Industry from the dumped imports

(xin) Kaneka has admitted that price of its product is market driven This implies that their export price to India was dependent upon the prices in India When Chinese producers lowered their prices this forced Kaneka also to review supplies

Kaneka has argued that prices are identical universally This is Inconceivable In a way Kaneka has argued that the prices of product world over are the same

4 VIEWS OF IMPORTERS:

M/S TORRENT GUJARAT BIOTECH LTD.:

M/s Torrent Gujarat Biotech Ltd one of the importers of the subject goods, has submitted that -

a D(-) Para Hydroxy Phenyl Glycine Base (PHPG Base) is an important ingredient for manufacturing Amoxycillin Tnhydrate The total consumption of PHPG Base in the country is more than 2200/2500 MT per annum

b Penicillin based Anti Biotics and in particular Amoxycillin Tnhydrate is the cheapest drug widely used in most of the developing /developed countries

c DOL has started the production of PHPG Base recently and the quality of the product is not yet proven in the market as regarding its yield stability of final product etc

d DOL is the only producer of this product in India and imposing of Anti Dumping Duty on the subject material will lead to Monopolistic situation in the domestic market and the Indian <2?fS'34 THE GAZETTE OF INDIA: EXTRAORDINARY [PART I—SEC. 1 ] manufacturers of Arnoxycillin Trihydrate will be compelled to either Import material with Anti Dumping Duty or would be required to use locally available material whose quality control related parameters v:z required minimum yield, impurities and stability of the product are yet to be established/proven e Accordingly the importer has submitted that .

(1) There is no justification for fixing of the Anti dumping duty.

(2) It is incorrect to conclude that PHPG Base has been exported to India from China PR and Singapore, below its normal value as the same product is offered at almost same price by European suppliers too.

(3N It is incorrect to conclude that the domestic Industries has suffered material injury on account of imports from China PR and Singapore.

(4) The importer has further requested that in the interest of domestic Amoxycillin manufacturers and in the national interest !h8 proposal of levying Anti Dumping Duty of PHPG Base imported from China P R and Singapore be dropped

5 VIEWS OF INTERESTED PARTIES ON DISCLOSURE STATEMENT

ISSUED BY THE DESIGNATED AUTHORITY:

(i) VIEWS OF DOMESTIC INDUSTRY

Submissions made by M/s Kanaka, Singapore^nartequate and they have not provided sfiy meaningful Non conf-dantial submission to enable us defend our interests before the Designated Authority The Authority has already pointed number of anomalies/ contradictory statements made by the exporters Once the Authority had identified the issues which are critical for determination of cost of production of the subject material. Designated Authority should have rejected the entire submission of the exporter with regard to the costing and determine the normal value under Rule 6(8) i e, best available information

(ii) VIEWS OF IMPORTERS:

M/S TORRENT GUJARAT BIOTECH LTD:

(a) The bulk drug Amoxycillin which they are manufacturing, is a life saving drug being used in several formulations as antibiotic for human consumption In the manufacture of this bulk drug D(-) Para Hydroxy Phenyl Glycine Base is an35 ingredient and any quality variation of this product will affect the final finished product

(b) For the pharmaceutical industry there are stringent quality control checks for use of raw materials which goes into thy quality of final finished product Domestic Industry's view of "no significant difference" cannot be accepted as the slight variation in the quality of raw material will affect the quality of finished product which cannot be accepted by the end user

(c) The petitioners view that unqualified quality difference does not make the product different is not correct This raw material is basically used for the life saving drug and any sort of compromise on quality cannot be considered at all

(e) The view of the petitioner that they have got repeated orders is not necessarily approval and acceptability of the quality of the product

(in) VIEWS OF EXPORTERS

M/s Kaneka Singapore one of the exporter of tne subje-t goods in response to the Disclosure Statement vide their letter dated 30 August 2002 sought clarifications with regard to the methodology adoptea for calculation of the Normal Value and Export Price before submitting their views on the Disclosure Statement Reply to the same was sent to M/s Kaneka and they were advised to furnish th^ir comments on the Disclosure Statement with in the extended period I-K wever no reply was leceived from M/s Kaneka on the same within the given time EXAMINATION BY THE AUTHORITY:

The Authority has considered all submissions made by the interested parties on merits and in accordance with the Rules

C PRODUCT UNDER CONSIDERATION

6 D (-) Para Hydroxy Phenyl Glycine Base is also known as

(a) D (-) ALPHA P A RA H Y D R O XY P H E N YL GLYCINE D (-) A' P HA P A RA H Y D R O XY P H E N YL GLYCINE B A SE D (-) P A RA H Y D RO \Y \ HENYL GLYCINE, PARA HYDROXY PHENYL GLYCINE BASE PARA HYDROXY PHENYL GLYCINE, D (-) P - HYDROXY PHENYL GLYCINE BASE D (-) P - HYDROXY PHENYL GLYCINE

(b) Petitioner has claimed that predominantly D (-) Para Hydroxy Phenyl Glycine Base' (also to be read as per above mentioned synonyms) i e the36 THE GAZETTE OF INDIA EXTRAORDINARY [PAJITI—SEC I] 'subject goods' (herein after also referred as 'PHPG) is imported into India which is converted in-situ to D (-) Para Hydroxy Phenyl Glycine Methyl Potassium Dane Salt " (herein after referred as PHPGDS) by various importers / manufacturers and used for the production of Arnoxycillin and Cefadroxyl (i e bulk drugs)

(c) All types of PHPG are classified in chapter heading 29 42 of Schedule I of the Customs Tariff Act As per ITC eight digit classification PHPG Base is classified in others category i e in 2942 0029 The investigation is against the product under consideration irrespective of the classification under which it is imported Customs classification is indicative only and is in no way binding on the scope of the present investigation The Authority to confirm the Preliminary Findings on product under consideration

7 LIKE ARTICLES:

Rule 2(d) of the Anti-Dumping Rules specifies that "Like Articles" means an Article which is identical or alike in all respects to the product under investigation or in the absence of such an Article another article having characteristics closoiy resembling those of the articles under examination (a) yigyVSjSFJIJCPORTER:

M/s Kfj^e*va ons much lower than such chemical method (b) VIEWS OF IMPORTER

M/s Torrent Gujarat Biotech Ltd one of the importers of the subject goods have submitted that the quality of PHPG Base of M/s Daurala Organics Ltd (DOL) is not consistent and the product is yet to be stabilized for its quality The quality of Amoxycillin Trihydrate is directly related to the quality of PHPG Base

Until now PHPG Base is being imported from Europe Singapore and China PR as no reliable domestic source of material is available ensuring consistent quality and quantity supply

(c) VIEWS OF DOMESTIC INDUSTRY:

(i) The petitioner has claimed that there is no significant difference in the PHPG base imported from the subject countries and the PHPG37 Base produced by the Indian Industry in terms of technology, functions and uses, marketing, pricing and customer perception. The PHPG Base produced by the Domestic Industry and the PHPG Base exported from subject countries is technically and commercially substitutable with each other PHPG Base produced by the Domestic Industry is a like article to PHPG Base imported from subject countries within the meaning of the Anti Dumping Rules (ii; In response to the submission from the exporter from Singapore that technology used by them is different from Indian and Chinese producers M/s DOL has submitted that whatever be the production technology, the subject goods are like article The exporter has argued that the difference in technology or production process implied that the two are not like articles The PHPG Base produced by the Indian industry and the PHPG Base exported from subject countries are substitutable with each other With regard to dumping, the issue of dumping does not concern differences in production technology with regard to the argument on the quality raised M/s. DOL has submitted that

(a) The Designated Authority has held in several cases that un quantified quality difference does not make the product different At the best, an allowance can be claimed for the quantified difference in quality

(b) The CEGAT has held in the matter relating to Anti dumping duty on EPDM rubber that quality is not a relevant consideration to anti dumping investigation It is not even the claim of these interested parties that the product being produced by us is not a like article to the product under consideration (which is the sole relevant consideration) (c) The claim of the exporters and importers is that the imported product is superior in quality Our claim however is that the same is being sold cheaper than not only their normal value but also below our selling price

(d) They have got repeated orders for some of the large consumers of the subject goods in India and they have found the quality of our product not only acceptable but also satisfactory

EXAMINATION BY THE AUTHORITY:

The Authority in the Preliminary Findings had determined that the D (-) Para Hydroxy Phenyl Glycine Base (PHPG Base) produced and sold by them and those imported from the subject countries are being38 THE GAZETTE OF INDIA EXTRAORDINARY [PART I—SEC 1] used inter changeably by the customers in India The Authority confirms its Preliminary findings in this regard and holds that the PHPG Base manufactured by the Domestic Industry and exported by the subject countries are like article under Rule 2 (d) supra

8 DOMESTIC INDUSTRY:

(i) As per Rule 2(b) of the Anti Dumping Rules 'domestic industry means the domestic producers as a whole engaged in the manufacture of the like article and any activity connected therewith or those whose collective output of the said article constitutes a major proportion of the total domestic production of that article except when such producers are related to the exporters or importers of the alleged dumped article or are themselves importers thereof in which case such producers shall be deemed not to form part of domestic industry

(n) The definition of Domestic Industry given above is further clarified by Rule 5 of Rules which reads as follows -

the application shall be deemed to have been made by or on behalf of the domestic'industry if it is supported by those domestic producers whose collective output constitute more than fifty percent of the total production of the like article produced by that portion of the domestic industry expressing either support for or opposition as the case may be to the application

(in) The petition has been filed by M/s Daurala Organics Limited Daurala Meerut U P The petitioner is the sole producer of the subject goods in India Accordingly the petitioner satisfies 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

D NORMAL VALUE.EXPORT PRICE AND DUMPING MARGIN-

9 Under Section 9A(1)( c) normal value in relation to an article means - (\) The comparable price in the ordinary course of trade for the like article when meant for consumption in the exporting country or territory as determined in accordance with the rules made under sub- section^) or

(n) When there are no sales of the like article in the ordinary course of trade in domestic market of the exporting country or territory or when because of the particular market situation or low volume of the sales in the domestic market of the exporting country or territory such sales do not permit a proper comparison the normal value shall be either -39 (a) Comparable representative price of the like article when exported from the exporting country or territory or an appropriate third country as determined in accordance with the rules made under sub-section (6): or

(b) The cost of production of the same article in the country of origin along with reasonable addition for administrative, selling and general costs and for profits, as determined in accordance with the rules made under sub-Section(6),

Provided that in the case of import of the article from a country other than the country of origin and where the article has been merely transhipped through the country of export or such article is not produced in the country of export or there is no comparable price in the country of export, the normal value shall be determined with reference to its price in the country of origin.

The Authority provided opportunity to the exporters from subject countries to furnish information relevant to the investigations and offer comments, if any. in accordance with the Section cited above The Authority wrote to the Embassies/High Commissions of subject countries in India also

E NORMAL VALUE:

10 SINGAPORE:

M/S KANEKA SINGAPORE CO. (PTE) LTD.:

(i) The company has no domestic sales of the product under consideration as well as there is no substantial / representative sales of PHPG Base to the representative third country The company has provided details of the cost of production of the PHPG Base. The normal value is based on the cost of production including variable and fixed costs plus selling, general & administrative expenses along with a reasonable return

(ii) Initially the company provided the cost of production for PHPG Base for the POI and previous 2 years Certain deficiencies as pointed out in the Preliminary Findings, the Authority did not accept the company's submission at that stage for the purpose of determination of normal value and adopted constructed normal value as the basis of 'Normal Value' M/s Kaneka Singapore Co (KSC) in its reply to40 THE GAZETTE OF INDIA: EXTRAORDINARY [PART I—SEC, 1] comment on the preliminary .findings submitted some additional information alongwith non-confidential summary of the submission to the Authority.

(iii) The Authority after analysing the same found it deficient and more clarification on certain issues were called. The Authority again asked Kaneka to provide some additional information / clarification specifically for the POI Data submitted by the exporter on various stages has been analyzed in detail and same is discussed as under - (a) It has been observed that during the last 2 years and POI there is a declining trend in overall production of M/s KSC as well as decline in production of the product under consideration Inspite of decline in production, the company has indicated that the consumption norms of raw material , utility has improved during the period of investigation as compared to the previous years. No satisfactory reply to- this anomaly has been furnished by the exporter

(b) In its reply to the Authority M/s Kaneka vide their letter dated 26- 7-2002 has clarified that the cost of^oods produced and cost of goods sold consists of "variable cost" and "Fixed Cost" and does not include Overheads costs such as sales cost , General and administration cost , interest expenses and Exchange Loss / gains. The exporter has further clarified that Variable cost consists of raw material cost (inclusive of packing material cost) and utility cost and fixed costs mainly consist of consumable (production), direct labour, repair and maintenance , storage charges (for raw materials) etc., The Authority has analysed the explanation as given by the exporter with regard to the cost elements considered to arrive at the cost of production are as under -

(i) The exporter has indicated that the depreciation has been taken for the "manufacturing facility only". Accordingly it implies that depreciation related to the common facilities to be apportioned on PHPG has not been taken into account, 00 Storing expenses has been taken for raw material only This implies that storing expenses for finished goods etc. has not been taken into account,

(iii) Consumable has been taken for the production only. Accordingly consumables for common facilities on PHPG has not been taken into consideration41 (iv) Though claimed that packing expenses has been included in variable cost it has been observed that the cost for drums / carton box has been indicated negligible as compared to the cost shown in th" cost statement for the year 1999-2000 and 2000-01

(v) It has been observed that in spite of decline in overall productivity the exporter has indicated an overall decrease in the per unit cost of utilities The company has however indicated that when productivity is high in order to shorten cycle time of each batch it may be necessary to use more utility cost to cool and heat the product more quickly and so the consumption of utility becomes worse An examination of the facts on record however shows contrary to the logic as given by the exporter above

(vi) The company is adopting straight line method for providing depreciation From balance sheet it has been observed that there is no considerable disposal on the existing assets rather there is substantial addition in the plant and machinery of the company In view of the reasons given above it is concluded that the total depreciation amount cannot be less than the previous year s figures This indicates that the company has not charged full depreciation to the product during the period of investigation

(vn) The Interest cost has been taken after deducting the other revenue (interest income) Interest income does not relate to operations hence cannot be reduced for the determination of cost of the product

(vm)The company has claimed no financing cost The company is a 100% holding of Kaneka Japan and Kaneka Japan has invested **** million Singapore Dollars in the company in the form of equity Apart from this Rs **** million is payable to Kaneka Japan Because of the above funding by the holding company there is no interest cost involved The exporter has indicated that in lieu of this company is paying **** profit to Kaneka Japan apart from dividend The company has shown an overall profit as **** on cost of sales during the year 2001 Accordingly for determination of Normal Value the Authority proposes to add reasonable profit to the cost of production so arrived to determine Normal Value of the product under consideration during the period of investigation

2?S£C7/62-6

(ix) The Authority has specifically asked clarification On Appendix 7 H" provided by the company as cost of SaJes in the POI and in previous years shown was lower than the cost of production The company has claimed that cost of goods sold per unit is calculated based on monthly moving average method and it happened that every month production quantity was less than the balance quantity of the previous and the total unit cost of goods reduced were happened to be alwavs higher than the total cost unit of the previous month balance except for August This happened to meet unit cost of goods sold to each month during the period always lower than the unit cost of goods produced except for Auyust and thus the average unit cost units of goods sold during the period became lower than the average unit goods produced during the period

(x) The authority has analysed the submission of the exporter in deta.l and found that not only for the period of investigation but for the previous years also cost of production was higher than cost of goods sold hence the contention of exporter that because of above reasoning the cost of production is high as compared to the cost of goods sold is not realistic

(xi) Inspite of the anomalies/ inconsistencies, discrepancies in the submissions made by the exporter 'n its reply to the questionnaire and subsequently relatino to cost of production , the Authority has determined the Noimal Value of the subject goods in Singapore considering the cost of production plus selling general and administrative expenses and reasonable return based on the cost data subnVled by the exporter (xn) Accordingly the Authority has determined the Normal Value for M/s KSC Singapore as US $*"**per kg

11 EXPORT PRICE :

(a) The exporter has provided transaction-wise details of exports to India during the period of investigation M/s KSC has sold subject goods to M/s Kaneka Corporation Japan which in tern sold to M/s Summit Asia Pte Ltd and finally sold to Indian customers Information from M/s Kaneka Corporation Japan and M/s Summit Asia Pte Ltd was obtained and duly considered for arriving at the Export Price and Landed cost of the exports made to India

(b) The exporter has claimed adjustments en accounl of discount, distributor commission commission to parent comoany packing,43 inland freight insurance storage handling overseas freight, overseas insurance and shipping charges to arrive at ex-factory export price for export to India

(c) The exporter has provided the Invoice value of each transaction on each stage The Authority has taken the Invoice value of M/s KSC which is the first hand sale from producer to an independent party and afterwards considered adjustments on account of discount packing inland freight insurance storage handing overseas freight, overseas insurance and shipping charges to arrived at ex-factory export price

(d) It has been observed that the exporter has provided credit to Indian customers ranging from 120 days to 180 days in most of the cases As detailed in the Invoices the exporter has charged interest in case of credit for a period of 180 days from the customers but in case of credit of 120 days no interest has been charged from the customers The Authority has provided for the interest Tor 120 days on the basis of interest rate calculated for 180 days at different point of time for the purpose of arriving at ex-factory export price

(e) Accordingly the Authority has determined the ex-factory export price of the subject goods as US $*****per kg

12 OTHER EXPORTERS FROM SINGAPORE:

(a) NORMAL VALUE:

None other exporter/producer in Singapore have responded to the Authority in the form and manner prescribed in the questionnaire The Authority has determined normal value on the basis of the best information available on record in respect of other exporters from Singapore

(b) EXPORT PRICE

In respect of all other exporters from Singapore the Authority has arrived at ex factory export price based on the information provided by the responding exporter (M/s Kaneka Singapore Co FTE) Ltd Singapore) This gives ex- factory export price as US $ **** per (Ylt of D (-) Para Hydroxy Phenyl Glycine Base iPHPG 3ase)from all exporters form Singapore other than M/s Kaneka 44 THE GAZETTE OF INDIA EXTRAORDINARY TPARTI—SFC. 11 13 CHINA P.R.:

(a) NORMALVALUE:

The Authority sent questionnaires to all the known exporters for the purpose of determination of Normal Value in accordance with Section 9A(1)(c) Only one of the exporters from China PR i e M/s Hengdian Group Organic Chemical Co Ltd China P R responded to the Authority It has been observed that M/s Hengdian Group Organic Chemical Co Ltd , China P R has not furnished the complete information in the prescribed format The information submitted is without any covering letter only on plain paper with unsigned rubber stamp The Authority found that information furnished is grossly inadequate and unreliable in absence of proper signature hence rejected for the purpose of preliminary findings The Authority therefore, holds that none of the exporters from China PR have cooperated with the Authority as envisaged under the Rules The domestic industry has furnished information with regard to the normal value in China PR based on the constructed cost of production In view of non-cooperation from the exporters from China PR the Authority has determined normal value in China PR on the basis Rule 6(8) i e best information available

(b) EXPORT PRICE;

As expl n

F DUMPING-COMPARISON OF NORMAL VALUE AND EXPORT PRICE:

14 The rules relating to comparison provides as follows

(a) "While arriving at the margin of dumping the DA shall make a fair comparison between the Export Price and the Normal Value The comparison shall be made at the same level of trade normally at ex-works level and in respect of sales made at as nearly possible the same time

(b) Due allowance shall be made in each case on merits for differences which affect price comparability including differences in conditions and terms of sales taxation levels of45 trade, quantities, physical characteristics and any other differences which are demonstrated to affect price comparability"

(c) The Authority has followed the consistent policy of adopting the principles governing the determination of Normal Value, Export Price and Margin of Dumping as laid down in Annexure I of the Anti Dumping Rules Based on the Normal values and Export prices as indicated above the Authority assessed the Dumping Margins in case of all exporters from the subject countries as given in the table below:-

COUNTRY-WISE EXPORTERS/ PRODUCERS

NORMAL

VALUE

($/Kg)

EXPORT PRICE ($/Kg)

DUMPING MARGIN (% OF EXPORT PRICE)

**** 10.30

** + +

Sinqapore 1. M/s Kaneka Singapore Co (PTE) Ltd.,

*•*•* 58 75

i . .—

2. All Other exporters China PR

**** 97 20 ^ AH ^ ; rt e r

The above Dumping Margins are above the de-minimus limits G INJURY AND CAUSAL LINK:

15. Rule 11 of Anti Dumping Rules reads as follows

"Determination of Injury

(i) 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

(M) The Designated Authority shall determine the injury to Domestic Industry threat of injury of Domestic Industry, material retardation to establishment of Domestic Industry and a causal link between dumped imports of injury, taking into account all relevant facts including the volume of dumped imports their effect on price in the domestic market for like46 rHE GAZETTE OF fNDIA EXTRAORDINARY [PART I - S F C. 1] 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 "

16 The principles for determination of injury set out in Annexure-H of the Anti-Dumping Rules lay down that

i A determination of injury shall involve an objective examination of both (a) the volume of dumped imports and the effect of the dumped imports on prices in the domestic market for like article and (b) the consequent impact of these imports on domestic producers of such products

n While examination the volume of dumped imports the said Authority shall consider whether there has been a significant increase in the dumped imports either in absolute terms or relative to production or consumption in India With regard to the effect of the dumped imparts on prices as referred to in sub-rule (2) of Rule 19 the Designated Authority shall consider whether there has been a significant price under-cutting by the dumped imports as compared with the price of like product in India or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increase which otherwise would have occurred to a significant degree _ H. CUMULATIVE ASSESSMENT OF l [ ^ i U B ¥-

17 (a) Annexure II (in) under Rule 11 supra further provides that "in case where imports of a product from more than one country are being simultaneously subjected to Anti Dumping investigation the Designated Authority will cumulatively assess the effect of such imports , only when it determines that the margin of dumping established in relation to the imports from each country is more than two percent expressed as percentage of export price and the volume of the imports from each country is three percent of the imports of the like article or where the export of the individual country is less than three percent the imports cumulatively accounts for more than seven percent of the imports of like article and cumulative assessment of the imports is appropriate in light of the conditions of competition between the imported article and the like domestic articles"

(b) The Authority notes that the margin of dumping and quantum of imports from subject countries are more than the limit prescribed above Cumulative assessment of the effect of the imports from Singapore and China PR is appropriate since the export prices from47 these countries were directly competing with the prices offered by the Domestic Industry in the Indian market and displacing domestic producers here

18 For the examination of the impact of the imports on the domestic industry in India, the Authority considered such indices having a bearing on the state of the industry as production capacity utilisation sales quantum, stock, profitability net sales realisation the magnitude and margin of dumping, etc in accordance with Annexure II (iv) of the Rules supra "

19 The various parameters indicating injury to the domestic industry are as follows -

(a) QUANTUM OF IMPORTS:

The information with regard to the quantum of imports of the subject goods has been based on the statistics compiled from Customs Daily Lists The Authority notes that there has been an increase of 36 77% in imports of the subject goods from the subject countries during the Period of Investigation over 1999-00

(b) EXPORT PRICE:

Further the average export price from the subject countries has also declined during the Period of Investigation against 1999-00 It has been observed that the export price has declined further within the period of investigation itself

(c) CHANGES IN MARKET SHARE HELD BY INDIAN PRODUCERS

AND IMPORTS FROM THE SUBJECT COUNTRY(IES):

The Authority observes that M/s DOL is the new entrant in manufacture of the subject goods in India and the exporters from subject countries have intensified dumping of the subject goods into India so as to ensure that domestic industry does not get its due market share This has materially retarded the establishment of the industry at its nascent stage itself

(d) PRODUCTION AND CAPACITY UTILISATION OF THE PETITIONER:

During period of investigation petitioner has achieved a utilization of 32% of its existing installed capacity only Keeping in view the demand in the country the same is far below than what could have been achieved by the Domestic Industry had the exporters not resorted to dumping48 THE GAZETTE OF INDIA EXTRAORDINARY [PART I— SFC I]

(e) INSIGNIFICANT GAIN OF MARKET SHARE:

Domestic industry is at nascent stage, hence no past trends are available but domestic industry is unable to increase its sales volume in spite of huge demand of the subject goods in the country because of dumped imports from subject countries

(f) REDUCTION IN SELLING PRICE. PRICE EROSION. PRICE

UNDERCUTTING. PRICE SUPPRESSION OR PRICE DEPRESSION:

In order to analyze the effect of dumped imports on the selling price of the Domestic Industry an analysis of the monthly sales realization of the subject goods during the period of investigation has been made The analysis is as under

Period

Qty Sold/Kg Net Sales Realization (Rs/Kg)

**** **** **** **** ****

Apnl-2001 May-2001 June-2001 July-2001 August-2001 Sepetember-2001

The indexed above indicates that the monthly average sales realisation during the Period of Investigation has declined from **** Rs/ Kg during April 2001 to **** Rs/ Kg during September 2001 showing a decrease of about 20% within the Period of Investigation itself This is mainly due to decrease in the average import price by the exporters after the starting of the commercial production by the Domestic Industry (g) EVIDENCE OF LOST CONTRACTS OR DECLINING SALES:

It has been observed that because of the sharp decrease in the export prices by the exporters the Domestic Industry could not gain contracts/orders at the prices which could recover the cost of production leave aside a fair return on capital employed The petitioner could sell the subject goods at substantial losses only

(h) EMPLOYMENT:

The domestic industry has submitted that as the industry is at its nascent stage protection from unfair trade practice is vital and necessary otherwise the manpower deployed will loose their jobs49

(i) PROFITABILITY :

It has been observed that the Domestic Industry could sell the subject goods at prices so as to match the same being offered by the exporters This has resulted in huge losses

(J) EXPANSION:

The Domestic Industry has planned to increase its production capacity, however due to dumped imports from subject countries, the Domestic Industry is unable to utilize even its existing capacity

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 realisation etc On examination of the evidence it has been found there has been a sharp price undercutting just after the domestic industry has started its trial run and further intensified during period of investigation Domestic Industry is prevented from utilising its present capacity and capacity utilisation is very low However, the most significant parameter evidencing injury and threat of further injury, is the price undercutting as per the evidence available with the Authority The rate of increase of imports during the period of investigation especially from China PR and the corresponding fall in the sales realization of the domestic industry are the parameters clearly showing 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 21 The present petition is basically regarding impact of dumped imports causing material retardation of the establishment of the industry Since the petitioner is attempting to settle its production in the Indian market and the imports from the subject countries are preventing commercialization of the production by the domestic industry the imports are causing material retardation to the establishment of the industry Though at the "nascent industry" i e M/s Daurala Organics Ltd has recently started production the industry is finding it difficult to get the due place in the market due to dumped imports by the exporters from subject countries Domestic Industry is unable to achieve a satisfactory level of capacity utilisation and to find its place in the market because at the nascent stage itself the domestic industries is being threatened with material retardation by imports at dumped prices from the subject countries

^JSTCf/dS 7

I CAUSAL LINK:

22 In determining whether injury (materiai/threat/material retardation) to the domestic industry was caused by the dumped imports, the Authority took into account the following facts¹ -

(I) Substantial imports of subject goods from China PR and Singapore at dumped prices forced the domestic industry to reduce its selling prices to un-remunerative level which has resulted in a situation of price undercutting in the Indian market

(n) The imports from China PR and Singapore 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

23 Tne Authority, therefore, notes from the above that the imports from the subject countries have been at a price below the selling price of the domestic industry Further the imports into India have been at a price lower than the non-injurious price for the Domestic Industry As a consequence thereof thp Domestic Industry is suffering financial losses The petitioner was also prevented from attaining a reasonable level of capacity utilisation These parameters collectively and cumulatively indicate that the petitioner has suffered material injury due to the dumpeo imports

J. INDIAN INDUSTRY'S INTEREST:

24 The purpose of anti dumping duties in general 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 it in the general interest of the country

25 The Authority recognizes that the imposition of anti dumping duties might affect the price levels of the products manufactured usmq subject goods and consequently might have some influence on 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

26 The Authority notes that the imposition of anti dumping measures would not restrict imports from China PR and Singapore in any way and therefore,51 would not affect the availability of the product to the consumers The consumers could still maintain two or even more sources of supply

K. CONCLUSIONS:

27 The Authority has after considering the foregoing come to the conclusion that

(I) D (-) Para Hydroxy Phenyl Glycine Base has been exported to India from China PR and Singapore below its normal value

(n) The Indian industry has suffered material injury and facing threat of further injury

(in) The Domestic Industry on account of the injury being suffered is suffering material retardation in the establishment of new industry to manufacture D (-) Para Hydroxy Phenyl Glycine Base

(iv) The injury has been caused cumulatively by the imports from the subject countries

28 The Authority considers it necessary to impose an anti dumping duty on all imports of D (-) Para Hydroxy Phenyl Glycine Base 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 price of the petitioner company determined for the period of investigation 29 Accordingly the Authority recommends that definite anti dumping duties be imposed on all imports of D (-) Para Hydroxy Phenyl Glycine Base also known as D (-) Alpha Para Hydroxy Phenyl Glycine D (-) Alpha Para Hydroxy Phenyl Glycine Base D (-) Para Hydroxy Phenyl Glycine Para Hydroxy Phenyl Glycine Base Para Hydroxy Phenyl Glycine D (-) P - Hydroxy Phenyl Glycine Base D (-) P - Hydroxy Phenyl Glycine falling under Custom Heading 2942 originating in or exported from Peoples Republic of China and Singapore pending final determination. The Anti- Dumping duty shall be the difference between the amount mentioned in column 3 of the following table and the landed value of imports per Kg to be52^ THE GAZETTE OF INDIA: EXTRAORDINARY [PART I—SEC. 1] imposed on all the imports of subject goods falling under Chapter 29 of the Customs Tariff, originating in or exported from the countries mentioned below: -

30. 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.

31 Subject to the above, the Authority confirms the Preliminary Findings dated 3 1st December, 2001

32. An appeal against this order shall lie before the Customs, Excise and Gold (Control) Appellate Tribunal in accordance with the Act, supra

L V. SAPTHARISHI, Designated Authority rimlL-cJ h> Hie Miinager, Cinvt ol India Press. Ring Road, M.ivtipuri New Delhi-1 I()()(i4

,uul Published by [he Controller nt Publications. Delhi-I |(I(H4