2023 (11) TMI 1135 - AT - Customs

Levy of anti-dumping duty on the imports of MEG from Kuwait, Saudi Arabia and United States of America (subject countries) - Validity of Notification dated 27.10.2022 - domestic industry suffered material injury in terms of the provisions contained in the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 or not - HELD THAT - It can be seen that there has been a significant increase in imports from the subject country in the period of investigation, in excess of the demand supply gap. Further, since financial year 2019-20, the imports have started coming at dumped prices and the landed value of such imports has been even below the raw material prices. Thus, evidently there has been a significant increase in dumped imports from financial year 2019-20 onwards. It needs to be noted that though in the period of investigation there was a slight decline in subject imports as compared to financial year 2019-20, such decline was on account of Covid-19 pandemic and, therefore, cannot undo the previous increase - it can be concluded that there has been an increase in dumped imports in the period of investigation as compared to 2017-18 and 2018-19. The accepted position on record is that even in the absence of volume injury to the domestic industry during the period of investigation, the price effect of dumped imports by itself would be a sufficient factor for examining whether the dumped imports are causing material injury to the domestic industry. It is seen that with respect to the factors relevant for assessing the price injury of the domestic industry, the designated authority has relied only on the increase in profit and return on investment in the period of investigation as compared to 2019-20, and has ignored the fact that the profit and return on investment has remained significantly below 2017-18 and 2018-19 level. The designated authority, in the present case, has exclusively relied upon the marginal improvement in the period of investigation as compared to 2019-20 and has ignored the trends over the years before that. Such selective examination, particularly in the present facts where the domestic industry itself has claimed injury since 2019-20, may defeat the entire purpose of injury assessment. The inevitable conclusion, therefore, is that the designated authority would have to re-examine the matter in the light of the observations made above. For this purpose, the designated authority shall give an opportunity to both the appellant and the respondents for submitting their written submissions and after examination of the submissions and after considering the observations made, give its final findings. The final findings of the designated authority contained in the Notification dated 27.10.2022 are, accordingly, set aside and the matter is remitted to the designated authority to give final findings - Appeal allowed.

Issues Involved:
1. Whether the domestic industry suffered material injury due to dumped imports.
2. Examination of price effect and impact of dumped imports on the domestic industry.
3. Determination of injury as per WTO Agreement and 1995 Rules.
4. Assessment of profitability and return on investment of the domestic industry.
5. Examination of the ability of the domestic industry to raise capital.
6. Consideration of threat of injury and post-period investigation data.

Summary:

1. Material Injury to Domestic Industry:
The appellant, a domestic producer of Mono Ethylene Glycol (MEG), challenged the Notification dated 27.10.2022, which concluded that the domestic industry had not suffered material injury and thus did not recommend the imposition of anti-dumping duty on MEG imports from Kuwait, Saudi Arabia, and the USA. Despite acknowledging dumping, the designated authority found no material injury due to improvements in some performance parameters during the investigation period (January 2020 to December 2020).

2. Examination of Price Effect and Impact:
The appellant argued that the imports at dumped prices caused price injury, forcing them to sell at non-remunerative prices, resulting in significant profitability decline. The designated authority noted price undercutting but did not find it significant enough to establish material injury. The Tribunal emphasized that price undercutting alone could establish price effect, as per the WTO Panel report in United States - Anti-Dumping and Countervailing Duties on Ripe Olives From Spain.

3. Determination of Injury as per WTO Agreement and 1995 Rules:
The Tribunal highlighted that injury determination involves an objective examination of both the volume of dumped imports and their effect on domestic prices and producers. The designated authority's findings were scrutinized under Article 3 of the WTO Agreement and Annexure II of the 1995 Rules, which outline the principles for determining injury.

4. Assessment of Profitability and Return on Investment:
The appellant contended that the designated authority excessively relied on profits while ignoring low return on investment, crucial for a capital-intensive industry. The Tribunal noted that return on investment is a more pertinent criterion for assessing financial viability. The designated authority's reliance on profits as a percentage of cost was deemed inappropriate for the appellant's capital-intensive nature.

5. Examination of Ability to Raise Capital:
The designated authority concluded that the domestic industry's ability to raise capital was not hampered, as it had already increased capacity. The Tribunal found this reasoning flawed, emphasizing that the ability to raise future investments should be considered, especially given the appellant's low return on capital employed.

6. Consideration of Threat of Injury and Post-Period Investigation Data:
The appellant argued that the designated authority ignored submissions regarding the threat of material injury and post-period investigation data showing continued injury. The Tribunal directed the designated authority to re-examine these aspects and provide a holistic assessment of the domestic industry's condition.

Conclusion:
The Tribunal set aside the final findings of the designated authority and remitted the matter for re-examination in light of the observations made, directing the designated authority to provide an opportunity for both parties to submit their written submissions and consider them before issuing final findings.

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