Anti-dumping duty on HP—a case study

Pakistan has imposed anti-dumping duty on hydrogen per oxide (HP) manufactured and exported from Bangladesh. The move has been taken after an investigation in line with the country's Anti-Dumping Act, 2015. Most of the signatory countries have their own laws on anti-dumping with regard to the General Agreement on Tariffs and Trade (GATT). The investigating authorities as per Article 3.2 of the GATT, signed in 1994, with regard to the volume of dumped imports shall consider whether there has been a significant increase in dumped imports, either in absolute terms or relative to production or consumption in the importing member country.

Dumping means selling of product in other markets at a price below the cost of production. Anti-dumping duty is imposed after due investigation into alleged dumping of product from one country to another. Such investigation is conducted to determine the effect of reported imports on the sales price of domestic producers' items i.e., prices of products in importing country are examined to determine as to whether there has been significant price undercutting (the extent to which the price of the imported product is lower than the price of the domestic producers), price depression (the extent to which the domestic producers experienced a decrease in its selling prices over time), and price suppression  (the extent to which increases in the cost of production could not be recovered in selling price by the domestic producers).

The investigation considered the price of 2012 as base price and also considered the prices of 2013 and 2014 and drew a conclusion that price depression has been done to the tune of 3.74 per cent. The year 2014 was taken as period of investigation (PoI). Such comparison ranging only two years was not sufficient to prove depression. The price depression for the year 2013 was not done on the basis of the base year 2012 and the reason was not explained in the report. The reported depression of price at 3.74 per cent does not seem significant.

In fine, many weaknesses were found in Pakistan's report on Bangladesh's HP. It was noted that the weighted average ex-factory price of Pakistan's domestic product marked a rise in 2013. However, it decreased in 2014 due to dumped imports. It was concluded that domestic industry experienced price depression during PoI for dumping. The industry, therefore, was affected materially due to price depression. It was not considered that such change in ex-factory price was also reflected in the export price that came closer to 9.54 per cent difference in the year 2014.

The report evaluated the applicants' sales of domestic products, which were made during the PoI, and observed that the domestic industry's sales of domestic-like products increased from 2012 to 2013 and it marked further increase in 2014. A conclusion was, however, drawn that the country's domestic industry did not go through such a bump due to sales.

     STUDY ON THE PROFIT AND LOSS FIGURES OF THE APPLICANTS DURING THE POI. The applicants faced net loss on domestic sales in 2012 that turned into profits in 2013, but again incurred loss in 2014. The profit and loss are not reflecting the reasons behind allegations of dumping of HP from Bangladesh.

Statistics of production and the capacity utilised on the domestic industry during the PoI are given in the report with an observation that the installed capacity of the applicants remained constant throughout the PoI. Moreover, the production of the applicants increased over the three years and the level of capacity utilisation increased from 82 per cent in 2012 to 87 per cent in 2013, which further increased to 95 per cent in 2014. On the basis of the above information and analysis, a Pakistani Commission concluded that the domestic industry was not affected due to production and capacity utilisation during the PoI.

The data used in the report show that the market share of the domestic industry was 81.48 per cent in 2012, which decreased to 79.38 per cent in 2013 and then increased to 87.61 per cent in 2014. Whereas, the market share of dumped imports decreased from 5.29 per cent in 2012 to 2.69 per cent in 2013 and then increased to 3.49 per cent in 2014. The market share of imports from other sources decreased from 17.93 per cent in 2013 to 8.90 per cent in 2014. The data do not reflect the allegation of dumping of HP from Bangladesh.

The report on the basis of the above analysis observed that the domestic industry did not lose market share during the PoI due to increased imports of investigated product from Bangladesh. It can, therefore, be concluded that the domestic industry did not suffer due to imports from dumped sources.

Other data in the report show that the return on investment (RoI) of the domestic industry increased from 1.45 per cent in 2012 to in 9.01 per cent in 2013 and then decreased to 4.03 per cent in 2014. Their conclusion was that the domestic industry suffered due to the reduction in RoI, which affected its ability to invest.

The information mentioned in the report shows that the cash generated by the domestic industry improved in 2013, which later slumped in 2014. The report concluded that as a result, the applicant suffered on account of cash flow during the PoI for dumping. The observation seems to be confusing with the sales and production of local industries.

The production of domestic industry increased over the PoI, whereas the sales also show a positive trend. The inventory level of the domestic-like product increased in 2013 and then decreased in 2014. On the basis of the above analysis, the Commission concluded that the domestic industry did not suffer on account of changes in inventories level during the PoI.

The domestic industry in Pakistan also exports and the export proceeds of the domestic industry remained stagnant at around 9,000 MT during the PoI. Hence, the domestic industry did not suffer due to the export performance of the industry during the PoI.

The employment data of local industries show that the number of employees increased from 2012 in 2013, which further increased in 2014. During the same period, salaries and wages increased both in 2013 and 2014. The productivity per worker increased from 2012 to 2013, but marked a fall in 2014.

Based on the facts mentioned above, it can be concluded that the domestic industry in Pakistan suffered on account of productivity, salaries and wages during the PoI. The report also failed to establish the allegations of dumping of HP in the market.

The local installed production capacity of the domestic industry was 60,000 MT, which is more than the domestic demand of around 55,000 MT. However, the domestic demand of HP marked an increase by 7.0 per cent from 2012 to 2014. If the growth in domestic demand increases by 7.0 per cent in the coming years, then the domestic industry needs to invest to increase the production capacity in the coming years. Based on above facts and analysis, the Commission concluded that the domestic industry suffered on account of growth and investment. This is an assumption made in the report regarding a possible suffering of the domestic industry.

The most important part of the investigation is the determination of ex-factory price of exported products at the exporting country and standard sales price. The investigators visited Bangladesh to find out whether domestic market of an exporting country or sales to a third country at prices below per unit, fixed and variable, cost of production plus administrative, selling and other costs are in  normal course of trade with regard to fair pricing. The report observed that one exporter failed to provide information of all domestic sales, audited reports for the year 2012, 2013 and 2014, and vital requisite information about required cost of production. They gave further chance, but the reply from the Bangladeshi exporter was not convincing enough.

During on-the-spot investigation, the Commission obtained information about domestic sales from the sales ledger and revised cost to make and sell from the books of accounts. One exporter could make available only three transactions done in the months of January, May and October of the investigated time. The spot investigation was marked by deficiency in information and the determination of ex-factory price was questionable.

The calculated dumping margin ranges from 10.67 per cent to 12.14 per cent and anti-dumping duty was imposed on HP from Bangladesh to Pakistan market despite the fact that the investigation report could not establish such a case on the basis of relevant data and figures.

The investigation observed that the weighted average landed cost of the investigated product was lower than the weighted average ex-factory price of the domestic-like product during the PoI. On the basis of the above, Pakistani authorities have concluded that the prices of the investigated product undercut the prices of domestic-like product during the PoI. Pakistan's domestic industry suffered on account of price undercutting due to dumped imports. The price difference with domestic HP was 8.68 per cent to 13.83 per cent during the year 2012 and 2013, but the authority did not take note that the price of imported Bangladeshi HP came down to 9.54 per cent higher than the local HP.

Although the Pakistan's designated authority determined a PoI, the same authority did not follow the PoI with regard to price of the product. Also, the authority did not consider other reasons for ups and downs of prices in case of both the local and imported HP.

Section 41(3) of Pakistan's Anti-dumping Law regarding the volume of dumped import stipulates that the volume of such imports shall normally be regarded as negligible if dumped import volume of an investigated product is found to account for less than 3.0 per cent of total imports of similar product. The investigation report confirmed that the PoI (January 01, 2014 to December 31, 2014) shows that volume of dumped imports of HP from Bangladesh was above the negligible threshold set out in Section 41(3) of the Act.

Against this backdrop, exporters from Bangladesh should do their homework and get information from Pakistan about production, sales price and financial position provided by those filing complaint.

M S Siddiqui is a Legal Economist.

[email protected]