2015 (9) TMI 715 - AT - Customs

Computation of actual cost of 4 ADPA Imposition of ADD Authority found that exports from Korea were being made below their normal value and domestic industry had suffered material injury and thereby imposed anti-dumping duty Authority constructed cost of production for 6PPD by considering international price of major raw material, 4 ADPA, instead of actual procurement cost of said raw material from China Whether Authority was right in constructing cost of production of 6PPD, disregarding cost of 4ADPA Held that - cost of production of both 4ADPA and 6PPD was affected by non-market considerations In such scenario, Authority rightly rejected export price for 4ADPA as not reliable Act and Rules, envisage determination of normal value, which reflects true cost of production. In determining normal value, sales of like product in domestic market of exporting country at prices below per unit (fixed and variable) costs of production plus SGA costs will be treated as not being in ordinary course of trade by reason of price when major input imported from non-market economy country, sale price reflected in record will have to be scrutinized to detect and correct distortion resulting from non-market economy price of input used, cost of which is required to be worked out in order to correct distorted cost of production of article Authority is justified in rejecting domestic sales price shown as record when input in question was produced within non-market economy country, because price for such input would be distorted, as they do not reflect normal market economy purchase price Apex Court in case of Reliance Industries 2006 (9) TMI 180 - SUPREME COURT OF INDIA , held that normal value is country specific not exporter specific, and hence accounts of exporter are to be considered only, where they reflect normal or ordinary cost of inputs. Authority rightly rejected price of 4ADPA and opted for construction of normal value, based on international price of 4ADPA Domestic industry had brought on record evidence of import prices of 4ADPA from Germany to India, but Authority before recording Final Findings, did not give opportunity to comment on acceptability / appropriateness of such evidence Authority has not observed due process and violated principles of natural justice Designated Authority therefore directed to make disclosure of international price of 4ADPA adopted by Authority as well as methodology used for fixation of normal value, export price and dumping margin Domestic industry and other interested parties, shall also be allowed to participate in such post-decisional hearing Application allowed.

Summary

Issues Involved:
1. Whether the Authority was right in constructing the cost of production of 6PPD, disregarding the cost of 4ADPA.
2. Whether due process has been followed by the Designated Authority, with regard to disclosure of relevant information to the affected parties.

Detailed Analysis:

1. Construction of Cost of Production:

The appeals were filed against the imposition of anti-dumping duty on imports of rubber chemicals including PX 13 (6PPD) from Korea and China. The primary contention from the exporter and importer was that the Designated Authority did not appropriately determine the normal value for 6PPD by rejecting the actual cost of 4ADPA sourced from Sinorgchem, China. The exporter argued that the actual procurement cost should have been considered since Korea is a market economy. They cited that the actual cost of 4ADPA was reflected in their books and should be adopted for normal value determination as per Para 3 of Annexure 1 to the Rules. They also highlighted that the source of procurement is immaterial and only the actual cost of production is relevant under Section 9A(1)(c) of the Act. The exporter further argued that the international price adopted for 4ADPA was not disclosed, violating principles of natural justice.

The domestic industry countered that the cost of 4ADPA from Sinorgchem was unreliable as it did not reflect the intrinsic cost due to non-market economy conditions. They referred to Annexure 1 to the Rules, emphasizing that the cost elements should reflect the cost associated with production and sale. The Designated Authority had rightly concluded that Sinorgchem's cost and price did not represent fair market value. The domestic industry supported their argument with various WTO Panel Reports and EU Regulations that allowed adjustment of raw material prices based on international prices due to distortions in non-market economies.

The Tribunal found that Sinorgchem was operating under non-market economy conditions, affecting the cost of production of 4ADPA and 6PPD. The Authority was justified in rejecting the export price of 4ADPA from Sinorgchem as it did not reflect the true cost of production. The Tribunal referred to the WTO Panel Report in the case of Broiler and the judgement of the General Court (European Union) in the matter of Acron OAO, which supported the adjustment of costs when prices are distorted due to non-market economy conditions. The Tribunal concluded that the international price of 4ADPA from a market economy country to India was a fair basis for ascertaining the actual value of 4ADPA.

2. Due Process and Disclosure:

The exporter and importer argued that the Authority did not disclose the basis for adopting an alternate value of 4ADPA and did not provide adequate opportunity to address arguments on the selection of alternate values. The domestic industry pointed out that the international price of 4ADPA had been disclosed to the parties by a letter dated 06.02.2008, which was not rebutted by the exporter. They also argued that adequate disclosure had not been made on the methodology adopted by the Authority for computation of costs, including interest cost, steam cost, SGA expenses, and captive inputs.

The Tribunal found that the Authority did not give the other interested parties an opportunity to comment on the acceptability/appropriateness of the evidence of international prices before recording the Final Findings. This violated the principles of natural justice and adversely affected the rights of the Korean exporter. The Tribunal also found merit in the domestic industry's submission that the methodology for fixation of export price, normal value, and dumping margin was not disclosed in sufficient detail.

The Tribunal directed the Designated Authority to disclose the international price of 4ADPA adopted and the methodology used for fixation of normal value, export price, and dumping margin. The Authority was instructed to grant a post-decisional hearing to the parties and re-determine the export price, normal value, and dumping margin for 6PPD. The domestic industry and other interested parties were also allowed to participate in the post-decisional hearing. Any modifications made in the Final Findings would be considered by the Government for amending the anti-dumping notification. This process was to be completed expeditiously, preferably within six months, with status quo maintained in the meantime.